Contract Termination Doesn’t End EBR for TCPA Purposes

TCPA Connect

The termination of a contract didn’t end the established business relationship (EBR) between a consumer and the provider of a vehicle service agreement, according to a New Jersey district court.

Nathan Rowan purchased a vehicle service agreement in July 2020 administered by Palmer Administrative Services. He canceled the policy in August 2020, but his letter did not contain a do not call request.

Roughly five months later, US Dealer Services (USDS)—a company authorized to market and sell vehicle service contracts administered by Palmer—made five phone calls to Rowan. USDS characterized the calls as “win-back calls,” and Rowan did purchase a second Palmer vehicle service agreement during the fifth call.

Rowan then canceled the second contract by letter, which included a formal do not call request.

Although he didn’t receive any phone calls after canceling his second policy, Rowan filed suit against USDS, alleging USDS called his telephone number that was registered on the National Do Not Call Registry in violation of the Telephone Consumer Protection Act (TCPA) based on the five phone calls he received after canceling the first vehicle service agreement.

After conducting limited discovery, USDS moved for summary judgment, arguing that it had an EBR with Rowan based on his first vehicle service agreement with Palmer.

Rowan countered that the EBR was terminated by his cancellation of the first policy in August 2020.

Siding with USDS, U.S. District Court Judge Kevin McNulty granted the motion for summary judgment.

The TCPA’s implementing regulations define an EBR as “a prior or existing relationship formed by a voluntary two-way communication between a person or entity and a residential subscriber with or without an exchange of consideration, on the basis of the subscriber’s purchase or transaction with the entity within the 18 months immediately preceding the date of the telephone call or on the basis of the subscriber’s inquiry or application regarding products or services offered by the entity within the three months immediately preceding the date of the call, which relationship has not been previously terminated by either party.”

The parties did not dispute that Rowan’s purchase of the first vehicle service agreement created an EBR between the parties, and the court held that the letter canceling the first agreement did not terminate the EBR.

“[A]bsent the consumer providing the seller with a do-not-call request, or the functional equivalent of such a request, the termination of an underlying commercial relationship is not sufficient to terminate an EBR and cut off the otherwise-applicable eighteen-month deadline for calls,” McNulty wrote.

The court found support for this interpretation from the Federal Communications Commission (FCC). The FCC’s 2003 Final Rule provides that a company’s prior relationship with a consumer entitles the company to call that consumer (1) 18 months “from the date of the last payment or financial transaction, even if the company does not currently provide service to that customer” or (2) until the “customer asks to be placed on that company’s [DNC] list.”

In addition, an FCC order issued in 2005 states that once a contract has terminated, a company has “an additional 18 months from the last transaction to contact the consumer before the EBR is terminated for purposes of telemarketing calls.”

“The FCC’s 2003 Final Rule and 2005 Final Order make two principles patently clear: (1) a company may call a customer for eighteen months after the termination of the commercial relationship; and (2) a customer may extinguish the EBR at any time by sending the company a do-not-call request,” the court explained.

In the case at hand, Rowan canceled his vehicle service agreement on August 21, 2020, but the letter did not explicitly request that USDS stop calling him. As a result, McNulty said USDS was entitled to call Rowan for an additional 18 months or until he provided USDS with a do not call request.

As all five of USDS’ win-back calls to Rowan occurred within 18 months of his termination of the first vehicle service agreement and before he sent the second cancellation letter—which included a do not call request—no reasonable jury could find that USDS violated the TCPA, the court concluded, granting USDS’ motion for summary judgment.

To read the opinion in Rowan v. US Dealer Services, click here.

Why it matters: The court provided clarity on the scope of an EBR, relying on the FCC to hold that a company may call a customer for 18 months after the termination of the commercial relationship or until the customer explicitly makes a do not call request.



pursuant to New York DR 2-101(f)

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