Reaching customers with personalized mobile messaging is an invaluable business tool due to the ubiquity of cell phones and the relatively low cost of the mobile platform. Most cell phone users are familiar with this practice: Your bank requires your phone number for security purposes and months later you receive a text because your balance is low; you send a text to a favorite restaurant or bar to receive a special promotion and the next day the drink specials beckon you to happy hour; two days before your dentist appointment, you receive a text saying “Text YES to confirm your apt with Dr. Clean at 10:00 am Friday.”
But sending these messages might violate the Telephone Consumer Protection Act (TCPA), leaving businesses liable for $500 or $1,500 in statutory damages per attempted call or message.1 A recent decision of the Third Circuit Court of Appeals, with facts common to many TCPA cases, illustrates the potential pitfall.
Recent Telephone Consumer Protection Act Developments
Bill Dominguez bought a new cell phone in December 2011. The previous owner of the number had it linked to his Yahoo email account, to receive a text message each time he received an email. Despite Dominguez’s repeated efforts to stop them, Yahoo continued texting Dominguez email alerts and Dominguez received more than 27,000 texts in 17 months. Dominguez filed a class action under the TCPA seeking statutory damages of $500 per call. Although the district court initially granted summary judgment to Yahoo, the company now faces more than $13 million in damages after the U.S. Circuit Court for the Third Circuit vacated the judgment and remanded the case to the district court in October 2015.2
This is an egregious example, of course, but the court of appeals did not merely disagree with the district court on a question of law; instead, the law had effectively changed during the appeal process.
The TCPA forbids making any call to a cell phone, without the prior express consent of the called party, using an automated telephone dialing system (ATDS).3 The TCPA defines an ATDS as “equipment which has the capacity (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.”4 The Dominguez district court found that Yahoo texted from a compiled (as opposed to random or sequential) set of numbers and therefore did not use an ATDS. The court of appeals viewed the same definition through a dramatically different lens.5
The shift resulted from the Federal Communications Commission’s (FCC’s) Declaratory Ruling and Order, released on July 10, 2015.6 While nominally providing clarity in the interpretation of the TCPA’s statutory language, the FCC arguably expanded the scope of the TCPA itself.7 More important for this discussion, the Ruling placed the burden of TCPA compliance squarely on the shoulders of businesses contacting their customers. As a point of clarification, the remaining discussion is limited to informational calls to consumers; telemarketing-only calls are subject to more scrutiny.
The most significant facets of the FCC’s Ruling are the following:
A standard text message falls within the definition of a “call.”8
Resolving a contentious issue in cases across the country, the FCC made clear that the “called party” is the party who received a call or text, regardless of whether that person was the intended recipient.9
Prior express consent to be called can be granted either orally or in writing and can be granted through an intermediary. Consent can be revoked, however, using “any reasonable means.”10
Dialing equipment meets the definition of an ATDS if it has the potential ability to store, produce, and dial random or sequential numbers, even when not being used that way. The FCC added “human intervention” as a determinant in whether dialing equipment is an ATDS.11
Additional Current Issues Under the TCPA
In addition to the consent and capacity issues discussed in the main article, issues under the TCPA and the FCC’s 2015 ruling including the following:
The FCC is granting an exemption for certain emergency medical calls;
granting an extension for certain banking notifications; and
creating a one-call safe harbor for a calling party to discover whether a phone number may have been reassigned to a new user.
There are distinctions between informative and telemarketing calls.
Courts have read into the TCPA a good-faith-reliance defense in recent cases.
As yet undetermined is liability for calls made to certain landlines for which the called party is charged a fee.
Ramifications of the FCC’s Ruling for Business Clients
Lawyers counseling businesses of any size should focus on the repercussions of the clarifications on consent and capacity.
Consent. Consider a hospital: Patients arriving for treatment receive a handful of compulsory forms asking for medical history, family history, symptoms, pain, and so on. Many times these forms will ask for the patient’s contact information and include language to the effect of “by giving us your cell phone, you consent to be called for billing or other purposes. You may revoke this consent in writing delivered to the hospital.” Most patients never notice these terms, yet they are vital for hospitals using call centers to reach patients.
The FCC stated that a person who knowingly releases phone numbers gives consent to be called at any such number but declined to specify a method by which a caller must obtain prior express consent.12 In this respect, the Ruling follows the notion that a consumer’s consent can be obtained as part of the consumer enrollment process, and that consent can be used for varied reasons.13
A general best-practice habit is to obtain consent at the outset of the consumer’s relationship to the business and to reaffirm the consent as often as possible. Creating layers of consent reminds the consumer of the consent and creates factual distinctions that might be helpful when defending class actions. Once a business obtains a number, the business and its downstream vendors are deemed to have consent to call that number until they receive instructions to the contrary.14
In the example above, the hospital’s method for obtaining consent would clearly align with the FCC’s vision of TCPA compliance, but what happens when the patient does not want to be called anymore? In the past, the hospital could invoke varying precedent to argue that the patient could only revoke consent with a written notice and be reasonably assured of a fighting chance in court.15
The Ruling completely upended this notion. A consumer can now revoke his or her consent to be called at any time and through “any reasonable means.”16 The calling party cannot limit the manner in which revocation may occur and will always bear the burden to prove it had consent for every call or text.17 The FCC noted that, despite the breadth of revocation options now available, “callers typically will not find it overly burdensome to implement mechanisms to record and effectuate” a revocation of consent, and the evidentiary value of business records means callers have reasonable ways to carry their burden of proving consent.18
It remains to be seen whether a patient telling his nurse, for example, “my name is John Doe and my phone number is (414) 123-4567 and I don’t want to be called” is a reasonable means of revocation. What is clear is that any business that contacts its customers with calls or texts to a cell phone must adjust its practices dramatically to account for the new revocation rules.
Prudent businesses should obtain consent at the outset of service and reaffirm consent as often as possible. Apart from recording and saving a customer’s consent and the manner in which it was obtained, businesses must maintain procedures to track revocation of consent. In the absence of guidance regarding the reasonableness standard, nearly every company employee or agent must be aware of these procedures to cover any method a customer could possibly use to contact the company. Any method of revocation should be immediately noted and any phone number associated with that customer should be permanently removed from the applicable dialing system.
Capacity. Turning to the “capacity” side of the Ruling, lawyers and their clients must be aware that almost any phone dialing system will now be considered an ATDS. The FCC cleared away case law by stating any equipment that has the present or potential capacity to dial random and sequential numbers is subject to TCPA regulation.19 Even when the equipment is dialing from a set list of numbers, if the hardware and software could be reprogrammed to dial randomly or sequentially, the system has the requisite capacity to be an ATDS.20
The Ruling and subsequent challenges have raised sufficient cause for concern that the U.S. District Court for the Eastern District of Wisconsin has stayed at least one TCPA case until the FCC and the courts hearing the challenges can sort out the matter.21 The language of the decision suggests the court disagrees with the FCC’s definition of capacity and would therefore not be entitled to deference upon appeal.22
Perhaps recognizing the effect of its Ruling, the FCC left room for interpretation in two ways. First, the FCC noted that a basic function of an ATDS is to dial numbers without human intervention.23 Although “human intervention” is not found anywhere in the text of the statute, litigants are already focusing defense strategies on proving a system fully depends on it.24
Second, dialing equipment cannot be an ATDS if it would only achieve capacity with the “theoretical” addition of software. The FCC offered a safe harbor here, explaining that although a rotary phone could (in theory) be modified to perform ATDS functions, the antiquated device would not be deemed to have the requisite TCPA capacity.25 Callers using modern cloud-based or VOIP calling systems featuring built-in, programmable software components will find this example unavailing, and the FCC and courts therefore must assess similar systems on a case-by-case, fact-specific basis.
Liability and Outside Vendors
Counsel should also advise corporate clients that TCPA liability cannot be handed off to a third-party messaging vendor. The FCC specifically stated that businesses cannot circumvent the TCPA by dividing their dialing equipment; if the sum of the parts of the equipment could be considered an ATDS, then each component (and each related party) can be subject to liability.26
Businesses contracting with outside vendors should examine and carefully draft indemnification language and require certain representations and warranties to avoid unnecessary risk. Considering the expansive definition of an ATDS, the vetting process should focus on the degree to which human intervention is used when making calls or texts, and this process should reflect the case law that will surely develop as motions to dismiss or for summary judgment are heard.
Furthermore, outsourcing businesses also face liability through common-law vicarious liability principles.27 The FCC has said that the common-law concepts of agency, apparent agency, and ratification can be considered in this realm, indicating callers should pay close attention to their degree of control over vendors.28 Businesses must carefully tailor vendor agreements to give oversight of the messaging process while avoiding the temptation to dictate operations. Counsel should prescribe the bounds of business control and specify only necessary access to vendor systems or records.
Reaching customers directly is a 21st-century blessing for businesses of all sizes. Unfortunately, the risks involved in reaching a customer who revoked consent or reaching a reassigned phone number should make businesses hesitant to engage in mobile messaging. This discussion covers only a fraction of the FCC’s recent Ruling, and corporate counsel will need more detailed review of all TCPA regulation to properly advise clients.
1 47 U.S.C. § 227(b)(3)(B). The fallout from the Supreme Court’s decision in Spokeo Inc. v. Robins, 578 U.S. __, 2016 WL 2842447 (2016), as applied to TCPA cases, has yet to be seen.
2 Dominguez v. Yahoo Inc., 629 F. App’x 369 (3d Cir. 2015).
3 47 U.S.C. § 227(b)(1)(A)(iii). The statute also exempts calls made for emergencies.
4 47 U.S.C. § 227(a)(1)(A), (B).
5 Dominguez, 629 F. App’x at 372-73.
6 In re Rules & Regulations Implementing Telephone Consumer Protection Act of 1991, 2015 WL 4387780 (FCC July 10, 2015) [hereinafter 2015 TCPA Ruling].
7 Petitions for review of the FCC’s Ruling were filed and TCPA cases have been stayed pending the outcome of these petitions. See ACA Int’l v. FCC, No. 15-1211 (D.C. Cir. filed July 10, 2015); Consumer Bankers Ass’n v. FCC, No 15-1304 (D.C. Cir. filed Sept. 1, 2015); Professional Ass’n for Customer Engagement Inc. v. FCC, No. 15-2489 (7th Cir. filed July 14, 2015); Gensel v. Performant Techs. Inc., No. 13-C-1196 (E.D. Wis. Oct. 20, 2015).
8 2015TCPA Ruling, supra note 6, ¶ 107.
9 Id. ¶¶ 74, 75.
10 Id. ¶¶ 49, 64.
11 Id. ¶¶ 13, 14.
12 Id. ¶ 52.
13 Mais v. Gulf Coast Collection Bureau Inc., 768 F.3d 1110, 1122-23 (11th Cir. 2014).
14 See Baird v. Sabre Inc., No. 14-55293, 2016 WL 424778, at *1 (9th Cir. Feb. 3, 2016). See also Baisden v. Credit Adjustments, Inc., 813 F.3d 338 (6th Cir. 2016) for an example of a health care intake form providing consent.
15 See Starkey v. Firstsource Advantage, No. 07-cv-772A(Sr), 2010 U.S. Dist. Lexis 60955 (W.D.N.Y. Mar. 11, 2010); Saunders v. NCO Fin. Sys. Inc., 910 F. Supp. 2d 464 (E.D.N.Y. 2012).
16 2015TCPA Ruling, supra note 6, ¶ 64.
17 Id. ¶ 70.
18 Id. ¶¶ 64, 70.
19 Id. ¶ 15.
20 Id. ¶¶ 16, 17.
21 See Gensel, No. 13-C-1196.
23 2015 TCPA Ruling, supra note 6,¶¶ 14, 17.
24 See Luna v. Shac LLC, 122 F. Supp. 3d 936 (N.D. Cal. Aug. 19, 2015).
25 2015 TCPA Ruling, supra note 6,¶ 18.
26 Id. ¶¶ 23, 24.
27 See Gomez v. Campbell-Edwald, 768 F.3d 871 (9th Cir. Oct. 22, 2014).
28 See Joint Petition filed by DISH Network LLC, United States of America, & States of Calif., Ill., N.C., and Ohio for Declaratory Ruling Concerning Telephone Consumer Protection Act (TCPA) Rules, CG Docket No. 11-50, Declaratory Ruling, 28 FCC Rcd 6574 (2013).