TCPA Connect

SPECIAL FOCUS: FCC Issues Long Awaited TCPA Declaratory Ruling and Order

On July 10, 2015, the Federal Communications Commission (FCC) issued its omnibus Declaratory Ruling and Order (Ruling) addressing 21 petitions filed with the agency by various companies and trade associations seeking relief or clarification regarding the Telephone Consumer Protection Act of 1991 (TCPA). The Ruling was adopted almost a month earlier on June 18, 2015, by a 3-2 vote.

The Ruling, which became effective upon issuance, addresses several issues, the most concerning of which is a broader definition of "autodialer" and liability for calls that are made to recipients of telephone numbers that have been reassigned. Despite the Ruling being generally unfavorable to industry, there are some positive rulings for healthcare and financial companies, service providers and platforms that do not themselves initiate calls and messages, and companies providing on-demand text messages.

1. Definition of "Autodialer"

Of all issues covered by the Ruling, the definition of an "automatic telephone dialing system" (ATDS or autodialer) is of the greatest concern to industry, as it applies to all entities that use an automated system to place calls and transmit text messages.

First, the Ruling states that all predictive dialers (however named) constitute autodialers under the TCPA, given their "capacity" to autodial, and are "not limited to any specific piece of equipment and [are] without regard to the name given the equipment for marketing purposes."

Second, the Ruling provides that any dialing equipment that "has the capacity to store or produce, and dial random or sequential numbers" or to call from a list of phone numbers is an ATDS, even if calls are not presently being made using autodialing functions. If a system could be made to autodial through a software fix, then it is an autodialer. However, the Ruling leaves open the possibility that not all dialers with the capacity to autodial are necessarily covered, noting that "there must be more than a theoretical potential that the equipment could be modified" into an autodialer.

Third, the Ruling declares that parties cannot circumvent the TCPA by dividing ownership or functions of equipment among multiple entities. In other words, companies may not avoid liability when one piece of equipment used to dial numbers that is owned or operated by one party is connected to and used in concert with another device that only stores numbers to be called that is owned or operated by another party.

Unfortunately, the Ruling does not provide specific guidance as to what types of systems are covered by the definition (other than to note that it does not consider speed dialing and rotary phones to be autodialers). Key issues in determining whether a system is an autodialer under the Ruling will be its potential functionality and how easily it could be made to function as an autodialer.

The basic definition of autodialer still remains the same—the capacity to make calls without human intervention. But whether a piece of equipment that requires some element of human intervention can be found to be an autodialer will be "specific to each individual piece of equipment, based on how the equipment functions and depends on human intervention," and determinations will need to be made on a case-by-case basis. Perhaps most troubling is that the Ruling suggests rather inconsistently that calls that are manually dialed from equipment that has the capacity to autodial might still be considered to be autodialed calls, even though a manual call would—by definition—require some type of human intervention. The clear import of this Ruling is that the autodialer issue will continue to be vigorously litigated in the courts, and to what extent courts will afford the Ruling deference.

2. Reassigned Calls to Wireless Numbers

The FCC made clear that parties are liable for making calls to reassigned wireless numbers. Rejecting arguments that "called party" means the intended recipient of the call, the Ruling clarifies that the definition of a "called party" means "the [current] subscriber, i.e., the consumer assigned the telephone number dialed and billed for the call, or the non-subscriber customary user of a telephone number included in a family or business calling plan." However, the Ruling allows callers one free pass to make a call to a reassigned number before liability will attach under the TCPA (but no free pass is permitted for wrong or misdialed phone numbers). To qualify for the one free pass exemption, callers have the burden of showing that they reasonably believed they had consent to call and did not have actual or constructive knowledge of reassignment.

The one free call is to allow callers the opportunity to receive actual or constructive knowledge of reassignment before assuming liability. However, the Ruling states that even if the one call does not connect to a live person or voicemail or yield information regarding a reassignment, the caller will be deemed to have constructive knowledge of the reassignment. Even more, only a "single caller" gets a free pass, which is defined as "any company affiliates, including subsidiaries." In other words, affiliated entities get one call total, not one call each.

Despite the apparent absurdity of this position, the FCC provided various measures that it believes "make compliance feasible," most of which are wholly impractical and "demand the impossible." For example, callers may subscribe to one or more databases that monitor and compile mobile reassignments, though even the FCC acknowledges that these solutions are imperfect. Additional suggestions include market solutions that attempt to verify a telephone number's current subscriber, automated solutions that can identify disconnected numbers (e.g., triple-tones), carrier solutions that may be developed in identifying reassigned numbers, and implementing very tight policies and procedures across various platforms (and entities) to address and handle reassigned phone numbers. Perhaps the most absurd and offensive suggestion was for callers to contractually require customers to update their contact information and sue for breach of contract should they fail to do so.

Particularly disappointing was the FCC's rejection of any "bad faith" defense. The FCC places sole responsibility on identifying reassigned telephone numbers on the called party and none on the current subscriber, such that a subscriber who receives a reassigned telephone number may knowingly continue to receive violative calls or text messages—thereby accruing statutory damages of at least $500 a call/text—without having any burden or obligation to inform the caller that they are calling the wrong number. Reassigned wireless telephone numbers will continue to be a going concern for companies, promulgate TCPA litigation and will undoubtedly be challenged in the courts.

3. Maker of a Call/Text Messaging Platforms

The Ruling addresses petitions filed by messaging app providers YouMail, Glide, TextMe in regard to determining who makes a call or sends a text message. In one of the more favorable rulings, the Ruling makes clear that under a variety of circumstances it is the user and not the provider of a messaging app that makes the call for TCPA purposes. The FCC addressed three different scenarios presented by the petitions.

First, the Ruling clarified that a messaging app provider does not make or initiate a text message when it merely provides its users with the ability to set up auto-replies to incoming voicemails. In granting YouMail's petition, the FCC noted that the system was "reactive" and "tailored" in that it was the user who elected when and how reply messages were sent in addition to their content.

Second, the Ruling clarified when an app provider would be deemed to be the initiator of a text message. In denying Glide's petition, the FCC addressed a scenario in which Glide automatically sent invitation texts of its own choosing to every contact in the app user's contact list with little or no obvious control by the user.

Third, the Ruling suggests that an app provider does not make or initiate a call when one of the app users sends an invitational message to contacts, even though the app provider may control its content. In granting TextMe's petition, the FCC found TextMe's control over the invitational message to be "a reason for concern" but was ultimately persuaded that TextMe was not the initiator of the text message because the app user must affirmatively decide whether, when and to whom the user will send invitational messages.

In determining who is responsible for making a call, the FCC emphasized the importance of "some 'direct connection between a person or entity and the making of a call'" either by (1) taking steps necessary to physically place a call or (2) being "so involved in the placing of a specific telephone call as to be deemed to have initiated it." However, persons and entities "that might merely have some role, however minor, in the causal chain that results in the making of a telephone call" will not be found to have made or initiated the call.

In addition, the FCC indicated that other issues will be taken into consideration when determining who makes or initiates a call. For example, the agency will consider factors such as whether the platform provider willfully enables fraudulent spoofing of telephone numbers, assists callers in blocking caller ID, or knowingly allows its clients to use the platform for unlawful purposes.

Also of importance in addressing these petitions, the FCC made clear that "the fact that a consumer's wireless number is in the contact list on another person's wireless phone, standing alone, does not demonstrate consent to autodialed or prerecorded-calls, including texts."

4. Revocation of Consent

The Ruling declared that a called party may revoke consent at any time and through any "reasonable means," and callers may not limit the manner in which revocation may occur. The FCC, however, did make clear that porting a telephone number from wireline to wireless does not revoke prior express consent and that it is the consumer's "responsibility to revoke consent." Also, there is no TCPA violation when an individual who is not the subscriber or customary user of a phone answers it due to his or her proximity to the subscriber or customary user (e.g., passengers, houseguests).

In addressing what methods of revocation may be "reasonable," the FCC offered three examples: a consumer-initiated call, a response to a caller-initiated call, and "at an in-store bill payment location." The FCC will consider "the totality of the facts and circumstances," including whether the consumer could reasonably expect to "effectively communicate" his or her request via that method, and whether the caller could implement mechanisms to effectuate the request "without incurring undue burdens."

Importantly, the FCC will expect companies to implement and maintain "proper business records tracking consent," so good compliance policies and recordkeeping will be essential.

5. Exemptions for Particular Time-Sensitive Financial and Healthcare Messages

The FCC granted petitions submitted by various financial and healthcare trade associations regarding the ability of their members to transmit beneficial and time-sensitive non-marketing information to consumers without first obtaining their consent, subject to certain conditions. This ruling is consistent with other rulings issued by the FCC in recent years for messages and calls that are "expected and desired" by consumers, such as delayed package deliveries.

With respect to time-sensitive financial communications, the FCC exempts from the TCPA consent requirements calls or messages concerning (1) fraud and identity theft, (2) data security breaches of consumers' personal information, (3) steps taken to prevent or remedy the harm of identity theft or a data breach, and (4) money transfers. The FCC ruled that these communications present exigent circumstances in which a quick, timely message to a consumer is required to mitigate or prevent significant harm.

Similarly, the Ruling exempts various healthcare-related communications where there is an "exigency" and the message has a "healthcare treatment purpose," including appointment and exam confirmations and reminders, wellness checkups, hospital preregistration instructions, preoperative instructions, lab results, post discharge follow-up intended to prevent readmission, prescription notifications, and home healthcare instructions.

The Ruling exempts these communications from the TCPA's consent requirements, provided they meet the following conditions:

  • They must be "free-to-end-user," which means that the calling party must ensure that consumers are not charged in any way for the communication (including counting towards plan limits);
  • They are sent only to the wireless telephone number that the customer provided to the calling party;
  • They state the name and contact information of the caller (these disclosures must be made at the beginning of a voice call) and the purpose of the communication;
  • They do not contain any telemarketing, cross-marketing, solicitation, debt collection or advertising content;
  • They are short (one minute or less for voice calls and 160 characters or less for text messages);
  • They provide customers with an "easy" means to opt-out of receiving the communication (i.e., an interactive voice or key press-activated opt-out mechanism for voice calls); and
  • The calling party must immediately honor opt-out requests.

The Ruling also places limits on the number and frequency of these communications. No more than three financial communications (voice calls or text messages) may be made per event over a three-day period and only one healthcare communication may be sent per day, with a maximum of three communications per week per healthcare provider.

In addition, the Ruling notes that the exemption does not extend to healthcare communications pertaining to account communications, payment notifications or Social Security disability eligibility and further clarifies the interplay between the TCPA and the HIPAA Privacy Rules, stating that prior express consent can be given to a HIPAA-covered entity or business associate acting on the covered entity's behalf without running afoul of the TCPA, so long as calls are made within the scope of the consent granted. Consent may also be provided by a third party in cases where a patient is medically incapacitated (as that term is legally defined).

6. Text Messages and Internet-to-Phone Technology

The Ruling reiterates prior FCC interpretations that a text message is a "call" for purposes of the TCPA. The FCC also addressed the issue of Internet-to-phone text messages, which are typically sent first as emails with a combination of the recipient's telephone number and wireless provider's domain name or from a carrier's web portal and are then converted by the wireless carrier to text messages (e.g., 5555551111@sprint.messaging.net). The FCC found that such equipment used to send Internet-to-phone text messages qualifies as an autodialer under the TCPA and requires consumer consent. Similarly, other types of text messages sent from interconnected text messaging services also require consumer consent.

7. On-Demand Text Messages

A big win for retailers and others, the Ruling permits companies to respond to consumer-initiated text messages (e.g., text "discount" to shortcode to receive a coupon) without liability, holding that these are "fulfillment messages, not telemarketing." These messages may be sent in response to a consumer request pursuant to a call to action, provided the reply text (1) was requested by the consumer, (2) is sent one-time only, (3) is sent immediately in response to the consumer's request, and (4) contains only the information requested by the consumer, with no other marketing or advertising information.

8. Prior Express Written Consent

In 2012 the FCC adopted amended regulations to its rules, which require "prior express written consent" to use an ATDS or prerecorded voice to make telemarketing calls to consumers' cell phones or place prerecorded telemarketing messages to landlines. To obtain this consent under the amended regulations, a caller must obtain a written agreement from the called party that discloses that the telemarketing calls will be made with an ATDS (for cell phones) and that providing consent is not a condition of purchase, among other requirements. These rules went into effect on October 16, 2013.

Several petitioners requested clarification that any written consent received prior to October 16, 2013, should remain valid even if the mandatory disclosures were not provided when the consent was obtained. The FCC denied this request, but granted the petitioners and their members (1) a retroactive waiver from October 16, 2013, to the date of the Ruling (July 10, 2015), and (2) a waiver for 89 days following the release of the Ruling. After that date, any call made without the appropriate consent—as defined in the amended regulations—will be deemed a TCPA violation.

No waiver was provided for entities that did not petition the FCC on this issue (except to the extent that such entities were members of a petitioning association on the date the Ruling was released).

9. Call Blocking Technology

Lastly, the FCC clarified that there is no legal barrier prohibiting carriers or VoIP providers from implementing call-blocking technology that consumers and businesses can use to block individual calls or categories of incoming calls. However, carriers that offer this service must adequately disclose the risk of inadvertently blocking desired calls, including the approximate magnitude of the risk, where ascertainable. The FCC encourages carriers to provide features that will allow customers to check what calls have been blocked and to easily report and correct blocking errors.

Why it matters: Given the drastic nature of certain aspects of the Ruling, there will likely be significant confusion and uncertainty by businesses seeking to comply with its terms. We also anticipate industry challenges to the Ruling, which has already begun in the form of several trade associations and companies filing Petitions for Review in various appellate courts, including the Seventh and D.C. Circuits of Appeal. Until the dust settles, businesses that communicate with customers and prospects by telephone and/or text message or have vendors that do so on their behalf should consider how the Ruling impacts their consumer outreach.

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Manatt Hosts Webinar on FCC's New TCPA Ruling, July 30

Last week, the FCC issued its long-awaited Declaratory Ruling and Order on the Telephone Consumer Protection Act which went into effect immediately. The Ruling is not favorable to the industry and will significantly impact how companies in all business sectors communicate with customers and prospects via telephone and text message. It also addresses liability for actions that are beyond a calling party's control. Given the many concerns raised by the Ruling, Manatt, Phelps & Phillips, LLP, is hosting "Call to Action: Understanding and Complying with the FCC's New TCPA Ruling," a webinar to report on the Ruling, examine its implications and provide valuable guidance on how to stay compliant and avoid pitfalls. Join Christine Reilly and Marc Roth, co-chairs of the firm's TCPA Compliance and Class Action Defense Group, to learn firsthand how to structure programs and develop strategies to mitigate risk and avoid liability while remaining competitive in the marketplace. To register or learn more about Manatt's webinar, click here.

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Plaintiffs Don't Have to Hear Calls to Bring TCPA Class Action, Eighth Circuit Rules

The Eighth Circuit Court of Appeals brought a Telephone Consumer Protection Act (TCPA) class action against presidential candidate Mike Huckabee and a group of marketing companies back to life, by ruling that even though the plaintiffs did not hear the prerecorded message, they could still bring suit.

In September 2012, Ron and Dorit Golan received two prerecorded messages on their home phone line. Each message stated: "Liberty. This is a public survey call. We may call back later." The Golans filed suit against a film company, its marketing companies, and various individuals, as well as Huckabee, alleging violations of the TCPA and Missouri's Do Not Call law.

The calls themselves came about as a result of a film titled Last Ounce of Courage. To promote the movie, numerous companies and individual investors hired Mike Huckabee, who taped a script that was transmitted to 4 million residential phone lines.

If a call was answered, the script began: "Hello, this is Governor Mike Huckabee, with a 45-second survey. Do you believe in American freedom and liberty? … Would you, like me, Mike Huckabee, like to see Hollywood respect and promote traditional American values? I am an enthusiastic supporter of a new movie called Last Ounce of Courage. It is a film about faith, freedom, and taking a stand for American values. May I tell you more about why I recommend that you … see the movie?"

Recipients who indicated "yes" heard more about the movie. If the recipient did not answer the call, the message the Golans heard was terminated.

A federal court dismissed the suit, ruling that the Golans had not suffered an injury in fact because none of the messages they received contained an advertisement. In addition, the judge said the Golans were subject to a "unique defense" because they did not hear the entire script of the call and were therefore inadequate class representatives.

On appeal, the Eighth Circuit reversed on both issues.

While the panel agreed that the messages heard by the Golans were not advertisements prohibited by the TCPA because they did not mention property, goods, or services, as defined by the statute's implementing regulations, the messages did meet the definition of telemarketing.

The TCPA's implementing regulations for "telemarketing" at 47 C.F.R. section 64.1200(f)(12) define the term as the "initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services, which is transmitted to any person."

Examining the purpose of the defendants' call, the court said the content of the call was irrelevant. "Neither the TCPA nor its implementing regulations 'require an explicit mention of a good, product, or service' where the implication of an improper purpose is 'clear from the context,'" the panel wrote. "Congressional findings indicate that consumers consider 'prerecorded calls, regardless of the content [of the] message, to be a nuisance and an invasion of privacy.' Even when the intended content of a message is not conveyed, the intrusion into the home and the 'seizure' of the phone line is the same."

Content may be instructive, the court added, but it is not dispositive.

Although the campaign appeared to survey whether recipients had "traditional American values," the defendants were more concerned with getting viewers to see Last Ounce of Courage than gathering information about them. The script explained where recipients could watch the trailer and when the film would open.

"Here, the context of the calls indicates they were initiated for the purpose of promoting Last Ounce of Courage," the panel said, and qualified as "telemarketing" even though the messages never referenced the film.

The court also found that the Golans were adequate class representatives because their TCPA claims were typical of putative class members under Federal Rule of Civil Procedure 23(a).

"Because the purpose of the calls is the critical issue in this case, the Golans were not subject to a unique defense," the panel wrote. "Nor did they suffer a different injury than class members who heard the entire message. What matters for all class members, including the Golans, is that each call was initiated for the purpose of promoting Last Ounce of Courage."

The court reversed the dismissal and remanded the case for further proceedings, including consideration of whether some of the defendants—including Huckabee—could be held vicariously liable for the calls.

To read the opinion in Golan v. Veritas Entertainment, click here.

Why it matters: The Eighth Circuit panel took a broad reading of the TCPA's implementing regulations, particularly the definition of "telemarketing" found in 47 C.F.R. section 64.1200(f)(12). By focusing on the purpose of the call—and not the content—the court also left open the potential for liability, even where recipients like the plaintiffs only heard an introductory message and not the entire script.

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In Response to FCC, Lawmakers Objection, PayPal Updates User Policy on Calls, Texts

PayPal's recent amendments to its User Agreement regarding its ability to make robocalls to consumers drew the attention the Federal Communications Commission and federal lawmakers for potentially violating the Telephone Consumer Protection Act (TCPA).

In June, PayPal posted an updated User Agreement that included consent to receive autodialed and prerecorded calls and text messages from the company. Section 1.10, titled "Calls to You; Mobile Telephone Numbers," provided that PayPal could place such calls or texts to provide notifications about an account, troubleshoot problems, resolve a dispute, collect a debt, poll users' opinions through surveys and questionnaires, contact users with offers and promotions, or "as otherwise necessary" to service an account or enforce the User Agreement, PayPal's policies or any other customer agreement.

The policy applied not just to the phone numbers provided by users, but any telephone number "we have otherwise obtained," and allowed PayPal to share such phone numbers with affiliates and service providers, such as billing or collections companies. PayPal gave users until July 1 to agree to the new terms or forfeit use of the site.

PayPal's mailbox immediately filled up in response to the proposal, including a letter from the FCC. "If PayPal plans to make autodialed, prerecorded, or artificial voice calls or text messages to its customers, please be aware that federal law places strict limits on such communications," Travis LeBlanc, chief of the FCC's Enforcement Bureau, wrote.

PayPal's amendments to its User Agreement "raise serious concerns for the Enforcement Bureau," LeBlanc added.

"FCC requirements directly prohibit requiring a consumer to consent to receive autodialed or prerecorded telemarketing or advertising calls as a condition of purchasing any property, good, or service, and the company must give consumers notice of their right to refuse to give such consent," he wrote. PayPal's amended User Agreement does not give consumers notice of this right, LeBlanc said.

"If PayPal fails to include this required notice and/or fails to allow its users to refuse such consent, we are concerned that consent is in fact a condition of purchase of PayPal's service and thus violates the Telephone Consumer Protection Act and could subject PayPal, its affiliates, and its service providers to penalties of up to $16,000 per call or text message," the FCC warned.

The FCC letter also noted that the TCPA requires that the written agreement providing consent to receive such calls must identify the specific telephone number(s) for which the consumer is providing consent to be called or texted. "A blanket User Agreement that purports to apply to 'any telephone number that [consumers] have provided us or that we have otherwise obtained' does not meet the level of specificity required by law," LeBlanc wrote. "Consumers have the right to choose on which line(s) they wish to receive telemarketing or advertising calls, if they elect to receive such calls at all."

A few days later, Sens. Ed Markey (D-Mass.), Al Franken (D-Minn.), Ron Wyden (D-Ore.), and Robert Melendez (D-N.J.) followed up with a missive of their own. "We share the FCC's perspective and believe consumers should not have to agree to submit themselves to intrusive robocalls in order to use a company's service," the legislators wrote.

In response, PayPal announced that it would revise the policy to remove the offensive language. A June 29 blog post by Louise Pentland, PayPal's Senior Vice President and General Counsel, indicated that "We value our relationship with our customers and work hard to communicate clearly. Recently, however, we did not live up to our own standards." The post continued, "In sending our customers a notice about upcoming changes to our User Agreement we used language that did not clearly communicate how we intend to contact them. Unfortunately, this language caused confusion and concern with some of our customers."

Pentland noted that PayPal would modify the section at issue to make clear that PayPal will only use autodialed or prerecorded calls to help detect, investigate and protect customers from fraud, provide customers with notices about their account and to collect debts owed. Further, the post indicated that PayPal would not use autodialed or prerecorded calls or texts for marketing purposes without first obtaining the consumer's prior express written consent, that such consent is not required as a condition of using the company's products and services, and that a consumer's consent may be later revoked.

That same day, the FCC's LeBlanc issued a statement praising PayPal's commitment to improve its user agreement, "I commend PayPal for taking steps to honor consumer choices to be free from unwanted calls and texts. The changes to PayPal's user agreement recognize that its customers are not required to consent to unwanted robocalls or robotexts. It clarifies, rightly, that its customers must provide prior express written consent before the company can call or text them with marketing, and that these customers have a right to revoke their consent to receive robocalls or robotexts at any time."

LeBlanc's statement concluded, "These changes, along with PayPal's commitments to improve its disclosures and make it easier for consumers to express their calling preferences, are significant and welcome improvements."

To read the FCC's June 11 letter, click here.

To read the letter from the lawmakers, click here.

To read PayPal's Blog post click here.

To read the FCC's June 29 statement, click here.

Why it matters: In response to pressure from the FCC and several influential lawmakers, PayPal revised its User Agreement to clarify any confusion that may have arisen from proposed changes to the agreement regarding its ability to call and text its customers. This reaction brings the User Agreement into conformance with the FCC's TCPA regulations. While the company had not violated the TCPA or any other law, it nevertheless agreed to revise a policy that, if acted on, would have run afoul of the law.

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Sixth Circuit: No Ads, No TCPA Liability

Two unsolicited faxes that listed drugs available to health clinics did not constitute "advertisements" under the Telephone Consumer Protection Act (TCPA) and were therefore not actionable under the statute, a panel of the Sixth Circuit Court of Appeals has ruled.

Medco Health Solutions acts as an intermediary between health plan sponsors and prescription drug companies, by providing services to plan sponsors so that they can offer more informed and less expensive prescription drug benefits to their members. The "formulary"—a list of medicines available through a given plan—is sent to plan sponsors and healthcare providers to inform them which medications are covered by the plans.

In June 2010, Sandusky Wellness Center received a fax from Medco. Titled "Formulary Notification," the fax stated that "The health plans of many of your patients have adopted" Medco's formulary and asked Sandusky to "consider prescribing plan-preferred drugs" to "help lower medication costs for [Sandusky] patients." Other than listing some of the drugs, and stating Medco's name and number, the fax did not promote Medco's services and did not solicit business from Sandusky.

Medco sent a second fax three months later with a "Formulary Update," referencing a certain respiratory drug brand that was preferred over another. Again, the fax did not ask Sandusky to consider purchasing Medco's services.

Sandusky filed suit, alleging that the two faxes violated the TCPA. Medco filed a motion for summary judgment, arguing that the faxes were not "advertisements" under the statute because their primary purpose was informational, not promotional. A district court agreed, characterizing the lawsuit as borderline "frivolous litigation."

Undeterred, Sandusky appealed to the Sixth Circuit.

The federal appellate panel began with the TCPA's definition of "advertisement" at Section 227(a)(5) as "any material advertising the commercial availability or quality of any property, goods, or services." Based on this definition, the court emphasized that the fax must advertise something to the public as for sale and be commercial in nature. "So to be an ad, the fax must promote goods or services to be bought or sold, and it should have profit as its aim," the court explained.

Medco's faxes failed to meet this definition, the panel concluded. "Under the Act's definition, and in everyday speak, these faxes are therefore not advertisements: They lack the commercial components inherent in ads."

"They call items (medications) and services (Medco's formulary) to Sandusky's attention, yes. But no record evidence shows that they do so because the drugs or Medco's services are for sale by Medco, now or in the future. In fact, the record shows that Medco has no interest whatsoever in soliciting business from Sandusky," the court said. "The record instead shows that the faxes list the drugs in a purely informational, non-pecuniary sense: to inform Sandusky what drugs its patients might prefer, based on Medco's formulary—a paid service already rendered not to Sandusky but to Medco's clients."

This conclusion also allowed the panel "to avoid wading into another dispute: determining the effect (if any) of the Federal Communications Commission's interpretations on this case." Circuits are split on the level of deference appropriate for the FCC's definition of "advertisement," although the Sixth Circuit said reliance on that interpretation would only bolster its decision.

Under the Commission's analysis, if the primary purpose of the fax at issue is informational rather than promotional, the TCPA does not apply. "That aptly describes the faxes here," the court said. "They contain only information—parts of the formulary—and do not seek to promote products or services to make a profit."

The panel rejected Sandusky's arguments that the TCPA requires a broader interpretation of the term "advertisement" as a remedial statute and that a look outside the four corners of the faxes would show the court that the faxes were ads. The court also distinguishes a decision from the Seventh Circuit Court of Appeals where the sender of the fax conceded it was a promotional device.

To read the opinion in Sandusky Wellness Center v. Medco Health Solutions, click here.

Why it matters: The Sixth Circuit decision provides a much-needed victory for TCPA defendants, particularly in the wake of major changes to the FCC's interpretation of the statute, including hot-button issues like the definition of an autodialer and reassigned numbers. The Sandusky court recognized that not every fax constitutes an advertisement under the statute—instead, an advertisement must promote the sale of any property, goods, or services available to be bought or sold so some entity can profit.

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"Dual Purpose" Calls to Cellphone Trigger TCPA Liability

Calls made to a cellphone offering free goods and services can trigger liability under the Telephone Consumer Protection Act (TCPA) when they cross the line into marketing as "dual purpose" calls, according to a decision from a federal court in Alabama.

In his complaint, Jason Bennett claimed that he received multiple prerecorded messages on his cellphone from defendant Boyd Biloxi, the owner of a local casino, in violation of the TCPA. The messages stated:

"Hello, this is IP Casino, Resort and Spa calling to invite you to enjoy 2 free tickets to see the Kenny Wayne Shepherd Band. If you wish to opt out of future calls, please dial 877-388-5999 and mention the opt out number 5822. Jason Bennett, join us and enjoy 2 free tickets to see the Kenny Wayne Shepherd Band on Saturday, July 5th. Tickets are limited so reserve your tickets today. To take advantage of this great offer now, please call 1-888-946-2847 x. 5152 and have your BConnected card ready to reserve your tickets, or visit BConnected online to view all of your offers. Thank you and we look forward to your visit here at IP Casino, Resort and Spa."

The casino filed a motion to dismiss the suit, arguing that the calls were neither an "advertisement" nor "telemarketing" under the statute. U.S. District Court Judge William H. Steele said Biloxi failed to address the "advertisement" definition and turned to "telemarketing," defined by the Federal Communications Commission regulations as "the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services, which is transmitted to any person."

Biloxi told the court the calls at issue only sought to provide complimentary tickets to Bennett and simply informed him of his two free tickets to an event. But the court disagreed.

"Had its emissary merely notified the plaintiff he was entitled to free tickets and then stopped talking, the defendant might have an argument," Judge Steele wrote. "But the voice went on, suggesting that the plaintiff 'visit BConnected online to view all of your offers.' The second amended complaint alleges that this site 'offered discounts on room reservations, coupons/discounts for food purchases,' as well as ostensibly 'free play' on the casino floor. That is, the online 'offers,' or at least some of them, were offers to sell—not to give away with no strings attached—various goods and services. The defendant's calls patently encouraged the plaintiff to visit this site and see what goods and services the defendant had for sale."

Biloxi's calls served a "dual purpose," the court said, with an informational component as well as a marketing angle. Despite the information about the free tickets provided in the calls, they were not inoculated from liability, however.

"Thus, any customer service or information aspect to the defendant's notification that the plaintiff was entitled to free show tickets does not insulate the defendant from liability for any advertisement or telemarketing contained elsewhere in the same message," the judge said.

Neither the TCPA nor the implementing regulations require an explicit mention of a good, product, or service and the caller's purpose does not have to be an immediate sale, the court added.

"As noted, the defendant patently encouraged the plaintiff to view online all its offers for sale," Judge Steele wrote. "Employing common sense, what possible purpose could the defendant have for such an encouragement other than that of obtaining future sales to the plaintiff of the goods and services being offered? The defendant suggests none."

The court rejected the casino's argument that the FCC has only regulated dual purpose calls that contain an "advertisement" and not "telemarketing" and that liability for such calls is limited to residential recipients and not cellphones.

Judge Steele acknowledged that the FCC has only discussed dual purpose calls in the context of an advertisement, "but that appears to be only because the examples presented to it involved advertisement," he wrote. "The defendant has not attempted to support the improbable idea that the FCC considers dual purpose calls to be prohibited if the objectionable purpose is advertisement but considers them to be permissible if the objectionable purpose is the equally restricted one of telemarketing."

As for the type of phone that received the call, the court was not persuaded that the FCC's failure to make provisions of the regulations applicable to cellphones subject to its 2003 report and order finding dual purpose calls violate the TCPA, In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, alleviated the casino from liability.

"[I]t seems clear the purpose was not to limit the scope of the dual purpose prohibition to residential lines," Judge Steele concluded. "On the contrary, the 2003 Report expressly confirms the FCC's 'belie[f] that wireless subscribers should be afforded the same protections as wireline subscribers.'"

To read the order in Bennett v. Boyd Biloxi, LLC, click here.

Why it matters: The decision offers one court's analysis of what constitutes a "dual purpose" call and how it can trigger liability under the TCPA, regardless of whether the call was placed to a residential line or a cellphone. Callers should keep in mind that some courts will take a broad reading of the call's purpose to find that it violates the statute even with no explicit mention of goods, products, or services, or intent of an immediate sale.

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