TCPA Connect

D.C. Circuit Hears Argument on FCC Petitions

By Diana L. Eisner

On October 19, Judges Srinivasan and Pillard and Senior Judge Edwards of the D.C. Circuit heard argument in ACA International v. FCC, which addressed several consolidated petitions, including those by the U.S. Chamber of Commerce and Sirius XM, challenging the Federal Communications Commission's (FCC or the Commission) July 2015 Declaratory Ruling and Order (the July 2015 Order). Diana Eisner, a litigation associate in Manatt's Washington, D.C. office and a member of the firm's TCPA compliance and class action defense practice, attended the argument and authored this summary of the proceeding.

The petitioners argue that the FCC exceeded its authority and in essence rewrote the TCPA through its rules regarding prohibited calling and texting methods. The national drugstore chain Rite Aid also participated as an intervenor, arguing the July 2015 Order could be construed as imposing restrictions on healthcare calls, which conflicts with prior FCC guidance and/or the Health Insurance Portability and Accountability Act. The standing-room only argument, which lasted almost three hours (far beyond the 40 minutes allotted), signaled the importance of the issues before the court. The "hot" bench focused on what are widely considered to be the three key issues in the July 2015 Order:

  • The FCC's expansive interpretation of what is an "autodialer,"
  • The FCC's strict liability approach to reassigned numbers, and
  • The FCC's rules regarding revocation of consent.

Autodialers

The Commission's expanded definition of automatic telephone dialing system (ATDS) dominated the argument. All three judges were focused on the fact that under the July 2015 Order, a device, such as a cell phone, would be considered an ATDS if the user downloaded an autodialing app, even if the app is not being used to make calls. Judge Edwards quickly focused on the word "using" in the statutory prohibition of autodialed calls. He repeated this point throughout the argument, suggesting that the FCC's construction of the term "ATDS" to include devices with a potential capacity to autodial, but which capacity is not used to place the call or calls, is overbroad. While the FCC acknowledged that the statute prohibits "using" an ATDS to initiate calls, the Commission relied on the TCPA's purpose as a consumer protection statute. The FCC argued that the broad interpretation provides consumers with greater protection against and an easier way to challenge unwanted calls by relieving them of having to prove that the autodialer functionality was used to place the call. Judge Edwards noted this was really an "evidentiary issue" for plaintiffs to address in their individual cases. Also addressing the FTC's motivation, Judge Pillard questioned what interest Congress has in subjecting businesses to strict liability for making non-autodialed calls, but using a device that has the capacity to do so. The FCC acknowledged the concern is the use of autodialers to autodial.

The panel also appeared concerned with whether technology that dials numbers from a previously compiled list falls within the scope of an autodialer. In particular, the panel questioned whether dialing numbers from a list means the numbers aren't "randomly or sequentially generated" as required by the TCPA's definition of an ATDS. On that, the panel observed that while calling consumers from a predetermined list could potentially fall outside the purview of an ATDS, it also acknowledged that a preselected list could include all people within a geographic area, thus allowing a mass volume of calls.

Reassigned Numbers

The second big issue addressed by the panel was the FCC's ruling on reassigned numbers. Under the July 2015 Order, if a telephone number is reassigned to a new user, she becomes the current subscriber of the number and is thus the "called party" under a TCPA coverage analysis. Thus a call to a number that has been reassigned to a new subscriber, even if the prior owner of the same number consented to be called, would violate the TCPA after a single "safe harbor" call. Petitioners pressed that the "called party" should be the "intended party." The panel seemed concerned with the FCC's imposition of strict liability after the one "safe harbor" call, even if that first call does not reveal that the number had been reassigned. The judges expressed concern with the FCC's imputing constructive knowledge of a reassignment after just one call where no such notice or knowledge exists or is required, for example, when a call to a reassigned number goes to voicemail and the voicemail does not provide the name of the owner.

The FCC focused on the examples provided in the July 2015 Order as to how businesses may avoid liability for calling reassigned numbers, such as by confirming contact information by email or requiring a consumer to provide notice of a new number and suing if she does not. But the panel, in particular Judge Edwards, noted that those solutions, such as suing a consumer, aren't practical in the real world. Judge Srinivasan also raised the issue of good faith: If a business acted in good faith and intends to call someone who wants the call, isn't that what Congress really desired with the TCPA? The FCC countered that "somebody has to bear the risk" and it should be businesses and not consumers. But Judge Edwards was quick to reply that there are business interests at play here that should not be ignored.

Revocation of Consent

Moving to revocation, petitioners opened the argument by claiming that the Commission refused to standardize the revocation process by allowing revocation in any "reasonable" manner and not allowing businesses to dictate the manner of revocation. Petitioners faulted the Commission for leaving revocation open to unwieldy "individualization" and vulnerable to opportunistic plaintiffs. Petitioners offered the example of consumers typing "I do not want to receive these text messages anymore" as an opt-out request despite the text message instruction to simply text "Stop." In these instances, the automated text messaging platform doesn't recognize the consumer's text and continues to send marketing messages. The consumer then sues.

Judge Pillard submitted that the "reasonableness" standard was a way for the Commission to ensure consumers could revoke consent easily and not allow businesses to mandate an overly burdensome mechanism. On the other hand, Judges Edwards and Srinivasan both remarked that individualized methods of consent are impractical and difficult for companies to record. When asked by the panel whether consumers and businesses could enter into an agreement as to how consent may be revoked, the FCC responded that if a company wants an exclusive method of revocation, it has to be negotiated.

Healthcare-Related Restrictions

As to Rite Aid's arguments, the panel appeared to recognize the competing interests of warding off unwanted marketing calls, while at the same time facilitating healthcare-related communications consumers might desire, such as information about potential new products or treatments. The panel appeared interested in whether the FCC has the expertise necessary to make the determination of what types of healthcare-related calls should be exempted over others. Judge Pillard seemed the most interested in this specific area, but the panel's questions did not indicate a proclivity one way or the other.

Why it matters: While impossible to predict how any judge, much less a panel of three, will rule on the petitioners' pleas, this argument revealed genuine and practical concerns by the judges about the FCC's July 2015 Order. In accordance with a 1984 Supreme Court case (Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.), federal agencies are afforded broad deference when issuing rulings and determinations on statutes they administer. However, this panel seemed willing to take a hard look at and ask some pointed questions about the FCC's ruling, suggesting a possibility that the July 2015 Order be vacated, in whole or in part. If so, the FCC could be directed to provide clearer guidance to businesses on how they may permissibly communicate with their customers. However the panel rules, there will be significant implications for countless businesses.

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Key TCPA Ruling Rejects Plaintiff for Lack of Standing

In a positive development for financial institutions and other businesses looking to communicate with customers via phone, a federal district court dismissed a Telephone Consumer Protection Act (TCPA) suit based on the plaintiff's lack of a concrete injury. Manatt represented SQM US, Inc., in this action.

Anton Ewing filed suit in California federal court against Blue Shield of California Life & Health Insurance Co. and SQM US, Inc., alleging that on October 21, 2015, SQM called his cell phone on Blue Shield's behalf using an automatic telephone dialing system (ATDS). Ewing claimed that he did not provide his cell number to the defendants or give them permission to call his cell phone. He also alleged he incurs a charge for all incoming calls on the phone.

Based on this single call, Ewing asserted claims for negligent and willful violations of the TCPA and sought to represent a class composed of other call recipients within a four-year period.

The defendants moved to dismiss the suit, arguing that Ewing lacked standing because he had not suffered a concrete injury caused by the alleged TCPA violation. While the doctrine of Article III standing has multiple components, the defendants focused on the need for plaintiffs to suffer an injury in fact, relying heavily on the U.S. Supreme Court's recent decision in Spokeo v. Robins.

As the Justices explained in Spokeo, a "bare procedural violation, divorced from any concrete harm," does not satisfy the injury-in-fact requirement of Article III. A plaintiff does not "automatically satisf[y] the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right. Article III standing requires a concrete injury even in the context of a statutory violation."

U.S. District Court Judge Cathy Ann Bencivengo agreed with the defendants that Ewing failed to assert a concrete injury based on Spokeo.

"The only allegation in the [complaint] that arguably relates to any injury to Plaintiff is the claim that the cellular telephone Defendants called is 'assigned to a cellular telephone service for which Plaintiff incurs a charge for incoming calls,'" the court said, assuming Ewing actually incurred a charge for the defendants' single survey call to his cell phone.

"Even with this assumption, the [complaint] does not adequately allege standing because it does not, and cannot, connect this claimed charge with the alleged TCPA violation—Defendants' use of an ATDS to dial his cellular telephone number," the judge wrote. "Put differently, Plaintiff does not, and cannot, allege that Defendants' use of an ATDS to dial his number caused him to incur a charge that he would not have incurred had Defendants manually dialed his number, which would not have violated the TCPA. Therefore, Plaintiff did not suffer an injury in fact traceable to Defendants' violation of the TCPA and lacks standing to make a claim for the TCPA violation here."

The court was not persuaded by Ewing's arguments in his opposition that he sustained injury by wasting time answering and addressing the defendants' call and that the call depleted his phone's battery.

"As with the charge Plaintiff allegedly incurred because of the call, these injuries are not connected to Defendants' alleged use of an ATDS to dial his number," the court emphasized. "Here, Mr. Ewing would have been no better off had Defendants dialed his number manually (in which case they would have refrained from violating the TCPA). He would have had to expend the same amount of time answering and addressing Defendants' manually dialed telephone call and would have incurred the same amount of battery depletion. Further, that the use of an ATDS may have allowed Defendants to place a greater number of calls more efficiently did not cause any harm to Plaintiff."

Again relying on Spokeo, Judge Bencivengo concluded that Ewing's "alleged concrete harm … was divorced from the alleged violation of the TCPA," meaning he could not satisfy the standing requirements of Article III. Finding Ewing would be unable to allege harm arising from the single call as a matter of law, the court granted the defendants' motion to dismiss with prejudice.

To read the order in Ewing v. SQM US, Inc., click here.

Why it matters: Financial services companies communicate with their customers frequently as an essential part of their business. Despite the fact that these communications are typically expected and desired by consumers, even the most well-intentioned companies are not shielded from the explosion of TCPA litigation seen the past few years. In this climate, many companies struggle to balance communicating with their customers and warding off litigation. Good compliance is key, but meritless suits still abound. The Ewing decision helps shift the pendulum toward businesses and can be a valuable tool to companies faced with TCPA suits. The decision may also signal the beginning of a shift away from the pro-plaintiff TCPA decisions of the past few years and toward greater judicial skepticism of these claims.

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One Phone Call, Three Class Actions

The same phone call that was the subject of earlier litigation can form the basis of another Telephone Consumer Protection Act putative class action, a New Jersey federal court judge has ruled.

According to the complaint, on March 11, 2005, DialAmerica Marketing allegedly made a call to Genevieve Dutriaux on behalf of Bank of America, in which it marketed a credit card in violation of the TCPA. Dutriaux sued over the call in 2005. Her lawsuit was administratively closed in 2008. Her roommate Mark Leyse—who actually answered the call—followed up with his own complaint in 2009.

Leyse's first complaint was dismissed when a New York federal court judge ruled he was not the "called party" as required by the TCPA and therefore lacked standing to bring suit. The Second Circuit Court of Appeals affirmed dismissal and the U.S. Supreme Court denied Leyse's writ of certiorari.

In 2011, Leyse filed a second complaint in New Jersey federal court. U.S. District Court Judge Susan D. Wigenton dismissed the action with prejudice based on both the statute of limitations and collateral estoppel, due to the dismissal of the first case. A panel of the Third Circuit Court of Appeals affirmed, but after a rehearing the en banc Third Circuit reversed dismissal.

On remand, Judge Wigenton again granted Bank of America's motion to dismiss, this time based on her determination that Leyse lacked statutory standing as a called party under the TCPA. Again, the Third Circuit reversed the district court, holding that Leyse satisfied the statutory standing requirement because "His status as a regular user of the phone line and occupant of the residence that was called brings him within the language of the Act and the zone of interests it protects."

Back in the district court, Bank of America filed a motion for judgment on the pleadings, relying on the U.S. Supreme Court's decision in Spokeo v. Robins. It argued that Leyse failed to meet the requirements for Article III standing. The defendant also argued that the court should exercise its discretion to dismiss Leyse's claim under the first-filed rule.

Judge Wigenton denied the motion, keeping the action alive.

She made quick work of the bank's standing concerns, noting that the Third Circuit "previously held in this matter that because the Complaint alleges that Defendant placed a call 'to Leyse's residential telephone' line, he fits 'squarely within the zone of interest' protected by the TCPA."

"As the Third Circuit explained, 'a regular user of the phone line who occupies the residence being called undoubtedly has the sort of interest in privacy, peace, and quiet that Congress intended to protect [through the TCPA]," the court said. "Therefore, the Third Circuit found that it was error for this Court to hold that Plaintiff lacked statutory standing under the TCPA at the motion to dismiss stage."

The same principle applied regarding Article III standing, the court said. "Although it is true that to succeed on his claim, Plaintiff will be required to prove that he actually answered Defendant's call, at this point this Court may reasonably infer that he did," Judge Wigenton wrote. "As a result, Plaintiff has alleged sufficient factual matter to support his claim that, by using a prerecorded message to initiate a call to Plaintiff's telephone line, Defendant caused Plaintiff to suffer a nuisance and invasion of privacy which is both concrete and particularized."

Bank of America similarly failed to sway the court with its first-filed rule argument. The rule provides district courts with the power to enjoin the subsequent prosecution of proceedings involving the same parties and the same issues already before another district court. Because the Dutriaux action was based on the same legal claim and the same underlying facts, the bank told the court that Leyse's suit should be thrown out.

However, Judge Wigenton found the rule inapplicable, as the cases were not "materially on all fours with the other" and the Dutriaux case did not leave "little or nothing to be determined" in Leyse's dispute.

"[W]hile the parties in this case are similar to those in the Dutriaux Action, the issues to be resolved are sufficiently distinct," she wrote. "The first-filed rule is inapplicable in this instance because, although this matter is related to the Dutriaux Action, a resolution in one matter will not necessarily 'leave[] little or nothing to be determined in the other,'" the court said. "First, if Dutriaux is found not to have answered the call at issue, it does not necessarily follow that Plaintiff did answer the call. Second, even if Dutriaux was found to have answered the call, it does not necessarily follow that Plaintiff did not."

Further, the Dutriaux case was administratively closed eight years ago and "this Court will not hypothesize about whether the Dutriaux Action will ever be reopened," Judge Wigenton added.

To read the court's opinion in Leyse v. Bank of America, click here.

Why it matters: The decision keeps alive the third lawsuit filed over a single call made in 2005 that has been considered by several district courts and multiple federal courts of appeal.

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Lyft Hit With Yet Another TCPA Action

Already facing a consumer class action for allegedly violating the Telephone Consumer Protection Act, Lyft was hit with its second case this year that alleges the ride-sharing company sent texts using an automated telephone dialing system without recipient consent.

Douglas O'Connor sued the company in January, claiming he received multiple texts from Lyft urging him to complete an application to be a driver, despite the fact that he did not provide consent to receive the messages.

In the new lawsuit, Jason David Bodie asserted in California federal court that Lyft sent an unsolicited text message instructing him to download the app on October 10. The defendant followed up with a second text, Bodie alleged, this time with a link to download Lyft's app in the app store.

Bodie's complaint alleged both texts were sent using an ATDS and constituted a "telephone solicitation" within the meaning of the TCPA because they were initiated for the purpose of encouraging the purchase of a good or service. He claimed he did not provide prior express consent to receive the texts and did not have an established business relationship with Lyft.

"Plaintiff was personally affected by Defendant's aforementioned conduct because Plaintiff was frustrated and distressed that Defendant interrupted Plaintiff with an unwanted solicitation text message using an ATDS," according to the complaint. "Defendant's text messages forced Plaintiff and other similarly situated class members to live without the utility of their cellular phones by occupying their cellular telephone with one or more unwanted calls, causing a nuisance and lost time."

Seeking to certify a nationwide class of "several thousands, if not more" text recipients dating back four years, the lawsuit requests damages and injunctive relief based on allegations of negligent and willful violations of the TCPA.

The TCPA has presented numerous challenges for Lyft in recent years, including a third consumer class action in Washington federal court over an advertising campaign that allowed users to send text invitations to their friends, as well as a citation from the Federal Communications Commission for unlawfully conditioning consumers' ability to use Lyft's services on their agreement to receive marketing text messages.

To read the complaint in Bodie v. Lyft, Inc., click here.

Why it matters: Lyft's experience with the TCPA demonstrates the myriad ways a company can be tripped up by the statute. From the FCC citation to consumer class actions based on text invitations, driver applications, and links to the company's app, the lawsuits and regulatory action provide a snapshot of what pitfalls might exist for marketers.

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Texas Court Finds TCPA Complaint Satisfies Spokeo

A Telephone Consumer Protection Act plaintiff who alleged that prerecorded messages "disrupted, inconvenienced, and agitated him" satisfied the standing requirement to avoid dismissal of his putative class action.

Dustin Holderread filed suit against Ford Motor Credit Company in March, claiming the company made multiple calls to his cell phone without consent and left prerecorded messages that indicated the calls were for a third party. Holderread alleged that he spoke with a live agent at least once and requested that the calls stop, but they continued.

According to the complaint, the calls "disrupted, inconvenienced, and agitated" the plaintiff "because (a) they were not for him, and (b) there was no person to speak to when he answered to demand that the calls stop."

Ford responded with a motion to dismiss based on the U.S. Supreme Court's decision earlier this year in Spokeo v. Robins. It argued that Holderread failed to plead a concrete injury caused by the calls and had no standing to maintain his suit.

But U.S. District Court Judge Amos L. Mazzant disagreed.

"A concrete injury must be real and not abstract," he wrote. "But a concrete injury can be tangible or intangible." A TCPA violation can cause intangible, concrete harm, the court added, noting that the harm caused by unwanted phone calls is closely related to an invasion of privacy, "which is a widely recognized common law tort."

By enacting the TCPA, "Congress identified the intangible harm of invasion of privacy as legally cognizable," Judge Mazzant said. "Considering this history and Congress's judgment, the Court finds an invasion of privacy within the context of the TCPA constitutes a concrete harm that meets the injury-in-fact requirements."

The plaintiff's complaint therefore satisfied the standing requirements, the court concluded.

"Holderread has alleged an intangible form of concrete harm under Spokeo," the judge wrote. "Holderread alleges that Ford's calls 'disrupted, inconvenienced, and agitated' him, woke him and disrupted his sleep. He also alleges he did not consent to Ford's calls, stating the calls annoyed him because (a) the calls were not for him, and (b) there was no person to speak to when he answered to demand that the calls stop. Therefore, the Court determines that Holderread has pleaded sufficient facts for his TCPA action to survive a … motion to dismiss."

To read the memorandum opinion and order in Holderread v. Ford Motor Credit Co., click here.

Why it matters: TCPA defendants have seen mixed results from the application of Spokeo. While some courts have taken the "concrete injury" language of the decision to apply a heightened standard of injury in fact (such as a California court that ruled the plaintiff must demonstrate she suffered a concrete injury for each individual call she alleged violated the statute), others have followed a path similar to the Texas federal court, which emphasizes that by enacting the TCPA, Congress affirmed that violations of the statute can cause intangible yet concrete harm.

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