In February, a Florida District Court denied Obama for America’s motion to dismiss a suit brought by Lori Shamblin claiming Obama’s campaign violated the Telephone Consumer Protection Act (TCPA) when her number was autodialed on behalf of the campaign.
The TCPA was enacted in 1991 to counter the sharp increase in telemarketing when efficient telemarketing methods became more readily available. Since the rise of mobile, courts have begun to enforce the law more strictly in a very plaintiff-friendly way. A few recent cases exemplify that and indicate the need for a sharp knowledge of the rules.
What Is the TCPA?
The primary provisions of the TCPA include restrictions on prerecorded telemarketing messages, the use of autodialers or faxing advertisements. The original legislative purpose of the act was to balance individuals’ privacy rights with commercial freedoms of speech in a way that protects consumer privacy but still permits legitimate telemarketing practices.
Stricter TCPA Enforcement in Response to Mobile Privacy Apprehensions
In 2012, Berkeley professors authored “Mobile Phones and Privacy,” which cites empirical data evidencing that most individuals believe their mobile devices to be private. Accordingly, the balance between the typical volume of aggregation on a mobile device and the perception of the average consumer created a situation where consumers needed the law to protect their privacy. As a result, we saw judiciaries and lawmakers adjusted their interpretation of the TCPA to provide consumers with the security they needed.
In 2013, the Federal Communications Commission (FCC), the agency with the authority “to prescribe regulations to implement the requirements of” the TCPA, made revisions to its TCPA rule, including the need for an interactive opt-out mechanism for prerecorded telemarketing calls and prior express written consent for telemarketing calls to cell phones. The FCC’s stated purpose for making amendments was to harmonize itself with measures taken by other agencies, such as the Federal Trade Commission.
Mobile privacy is more recently on the mind of the nation’s highest court, too. This year, the Supreme Court made this clear in Riley v. California. The Riley court held that a search warrant is necessary to search an arrestee’s mobile device, the implication of this holding being that mobile privacy can be valued even over a potential threat to officer safety.
Many courts interpreting the TCPA have expressed similar sentiments to Riley. The Ninth Circuit required a company to pay damages for text messages sent by third-party marketers on their behalf in Gomez v. Campbell-Ewald Co. The 11th Circuit in Breslow v. Wells Fargo Bank, N.A., called the TCPA a strict-liability statute, meaning a business can be strictly liable when intending to call a consumer who consented to a Wells Fargo call and the number was then transferred to a new party.
In September, Paradise, a Pennsylvania District Court case, had a similar result. Not all courts hold the TCPA is a strict liability statute, but when guiding clients, it is important to plan for such a prospect.
No matter how many degrees of separation between your client and a third party, it is unwise for anyone to breathe easy in the face of the TCPA. However, the less control exerted over third parties, the less likely it is that a court will hold your client responsible for the gaffes of third parties.
Plaintiff-Friendly
There are many reasons the TCPA is an attractive option for plaintiffs. One commonly cited example is the lack of a cap on damages, so it's unsurprising when a company like Capital One agrees to a $75 million settlement as they did in June.
Courts in 2014 reestablished that the legality of a TCPA class-action suit depends on jurisdiction, as a Maryland Federal Court favored it and a Michigan Federal Court disagreed. Nevertheless, the potential for a class-action is enough to encourage TCPA plaintiffs and attorneys to bring suit, especially considering that a Kansas federal judge in the 2011 Taranto decision asserted that the potential for the TCPA to act as a “horrendous, possibly annihilating punishment” to the defendant was insufficient motivation to reject plaintiffs' request to sue as a class.
Other 2014 cases have only encouraged plaintiffs further. The Los Angeles Clippers agreed to a $5 million settlement in a case where plaintiffs knowingly texted their information to the team but the Clippers failed to disclose their intention to store the messages and spam-text customers.
Solutions
While this piece has focused on the difficulties created by the TCPA, there are common-sense solutions that can help prevent TCPA setbacks. Contracts can be a great source to preempt TCPA “annihilating punishment." A few specific antidotes were certified by 2014 courts:
- Arbitration
In July 2014, Rent-A-Center was sued in a California District Court for harassing a debtor. The court found that the separate arbitration agreement the debtor signed at the initiation of her relationship with Rent-A-Center was sufficiently broad as to encompass even the TCPA claims asserted. Thus, any potential TCPA claim was sent to arbitration.
Evaluating whether TCPA claims can be arbitrated is murky and is usually very fact-specific. The Rent-A-Center case relied on 2013 precedent that involved Citi Holdings being sued in the same court. The Citi Holdings court found that arbitration language analysis is often crucial in establishing the scope of the agreement. For example, the agreements in the Citi case required arbitration of any claim, which included without limitation, “Claim,” which includes, “without limitation, anything related to ... [a]ny dispute about closing, servicing, collecting, or enforcing a Credit Transaction”. The quoted language compelled the court to send many claims, even those not directly related to the agreement at hand, to arbitration.
- Third-Party Contracts
Don’t shoot only the messenger is a growing trend in all categories of privacy law. Gomez extended this mantra to the TCPA and has justifiably instilled fear in those who may have previously believed that they instituted sufficient TCPA precautions.
No matter how many degrees of separation between your client and a third party, it is unwise for anyone to breathe easy in the face of the TCPA. However, the less control exerted over third parties, the less likely it is that a court will hold your client responsible for the gaffes of third parties. Companies obviously must screen third parties to ensure they will not become liabilities. If the screening shows the third party is trustworthy, the company should simply request a completed task and remove themselves from the means to that task to the extent possible. Tell your client not to over-supervise, pay the third party hourly or take any action suggestive of treatment that is typical of an employee. In contracts, make clear that the third party’s business is their business.
- Draft Your Contract Like It’s Your Contract
In February, Car2go, a car-sharing service, was sued by a registrant who claimed that receiving a text message confirming his membership violated the TCPA. The judge took a “common-sense approach” to the TCPA, which focused on the importance of context and highlighted many of the clauses that influenced his support of the defendant.
For example, one clause stressed the “self-initiated” registration process, which would negate TCPA claims; another informed registrants that their personal information would be validated, meaning there would be further contact, and one stated it would confirm registration, again meaning another contact. Additionally, the privacy policy mentioned another need for contact later on. The privacy policy was required reading before Car2go would allow any new registrations.
Relatedly, the 11th Circuit this year ruled in Mais that a debtor who gave his express written consent to be contacted by a hospital could not later allege that consent did not extend to a collections agency that purchased the debt from the hospital.
If you are the drafter, confirm business will not be affected unless the new customers read all you want them to read and insert all terms necessary to protect your client. Remember, though, to have the capacity to do exactly as you say—no more, no less. Obviously, do not insert clauses with which you cannot comply and never exceed the scope of consent. Do not attempt to circumvent risk by omitting crucial information; be straightforward. Ensure all employees and third parties know what the policies say and will comply accordingly.
Be warned that the TCPA today is extremely pro-plaintiff; there is no ceiling on monetary damages, and class-action suits can be certified under this statute.
And there are subtle risks. For example, clients may find themselves accountable to an individual whose phone number used to belong o a customer who did, in fact, legally consent to contact from your client. Clients can still be held accountable for third-party actions.
Much must be undertaken to educate our clients on the dangers of the TCPA. One thing is for sure: Mistakes can be prevented early at the contract level. Get express written consents as soon as possible; delegate to arbitration all that can be arbitrated; avoid micromanaging third parties, and draft contracts with exactitude.