Dial M for Murderous Liability: Maximize TCPA compliance to minimize potentially devastating consequences

When first enacted in 1991, the aim of the Telephone Consumer Protection Act (TCPA) was to address consumer privacy concerns within the context of emerging (at that time) automatic telephone dialing systems (ATDS), which enabled telemarketers to contact many more consumers on their phones and fax machines. Since then, private plaintiffs have invoked the TCPA with potentially devastating financial exposure for corporate defendants. Nearly every company that interacts with consumers via phone, fax or text message should anticipate the possibility of being hit with a TCPA lawsuit, which could subject the company to potentially annihilating liability.

Indeed, as companies increase their use of mobile marketing strategies, mobile delivery platforms and cloud-based technologies to communicate with consumers, the business risks and potential for legal exposure under the TCPA increase in tandem.

This article outlines best practices to minimize TCPA exposure, discusses the increased scrutiny by the Federal Communication Commission (FCC) of service agreements and highlights appeals pending before the D.C. Circuit Court Appeals and the Supreme Court of the United States that could dramatically alter both the requirements for TCPA compliance and related litigation strategies.

Minimizing Litigation Risk

To minimize potential liability, companies should maintain written call-compliance policies and programs that address both internal and third-party risk. Companies should develop this type of call-compliance program in light of, or in conjunction with, their outbound telephone, text and fax campaigns (no matter how small), and they should designate a team (or an individual) responsible for overseeing and updating that compliance program.

An effective call-compliance program should, at a minimum, deploy the following best practices:

Review and categorize messages. The first step in creating a strong call-compliance program is to understand the messages the company is sending (whether by telephone, text or fax), as well as how and to whom they are being delivered. Without this basic information, a company cannot accurately assess its compliance risks and obligations.

Develop a standard TCPA notice and consent. As a practical matter, notice that the company may contact the consumer through the use of an ATDS and consent to that form of contact are often provided in the same document or recorded phone call. The notice language should follow the legal requirements, and any notice should also provide for a legally sufficient method of consent.

Create a contact and tracking database. It is critical to maintain a reliable and documented method for tracking the provision of notice that the company may contact the consumer through the use of an ATDS, including the exact text of the notice and the receipt of the consumer’s consent or opt out. Additionally, the company should develop a method to track the revocation of consent and to determine when contact information becomes stale, for example, when a phone number no longer dials the person who provided consent for that number. (See the October issue of MCC, in which Kelley Drye & Warren LLP summarizes the FCC’s July 10 Declaratory Ruling and Order and lists suggested methods for determining when a number has been reassigned.) While one federal court has endorsed a “good faith” exception for calls to “reassigned” or “recycled” numbers, it is an outlier. Danehy v. Time Warner Cable Enterprise LLC, No. 5:14–CV–133–FL, 2015 WL 5534285 (E.D.N.C. Sept. 18, 2015).

Develop a training program. A compliance program is effective only if the company ensures that its personnel are aware of their compliance obligations. Most telemarketing or autodialing lapses typically occur in conjunction with human error.

Review existing consents. A company cannot rely on consents that do not meet the requirements of the current FCC rules, even if the consents were obtained before the 2013 amendments. To avoid liability, the company should review its pre-2013 consents to assess whether they comply with the current rules.

Develop an audit and review program. Compliance is an ongoing effort. The company should periodically assess whether its programs are working as intended and whether the programs must be updated.

Institute appropriate policies for monitoring vendors. Vendors are a key risk area. In outsourcing outbound telephone calls or its marketing efforts (or supplemental compliance solutions), a company should

  • perform a due diligence review of the proposed vendor’s call-compliance policies and procedures;
  • clearly and explicitly state the vendor’s TCPA, Telemarketing Sales Rule (TSR) and similar state telemarketing compliance obligations in the parties’ contracts;
  • include risk allocation provisions in the parties’ contracts, which, although not dispositive, may be helpful in the event of litigation; and
  • consider contractually requiring vendors to maintain appropriate insurance, while understanding that TCPA litigation has been an area rife with exclusions and coverage disputes [see, e.g., Emasco Ins. Co. v. CE Design Ltd., 2015 WL 1963870, at *3-5 (10th Cir. May 4, 2015)].

Institute distributor accountability programs. When dealing with distributors of its products, a manufacturer should ensure that its contracts include appropriate marketing limitations, obligations and risk allocation provisions as they relate to the TCPA, TSR and similar state telemarketing laws. Additionally, manufacturers should track which distributors are subject to particular permissions, requirements or restrictions, then develop procedures for discipline in the event that distributors breach their obligations.

FCC Citations of Service Agreements

On June 11, the chief of the enforcement bureau of the FCC sent a letter to PayPal, Inc. stating that the company’s then recent amendments to its user agreement did not comply with federal law. Although the letter did not threaten an enforcement action, the FCC has the power to impose fines for TCPA violations after issuing citations to noncarriers, such as PayPal. After PayPal made changes to its policy, the FCC bureau chief expressed approval of the revisions. It’s also notable that PayPal received a similar inquiry from the Federal Trade Commission (FTC) with respect to compliance concerns under the TSR.

On September 11, 2015, the FCC’s Enforcement Bureau issued citations to First National Bank (FNB) and Lyft, Inc. The bureau claimed that FNB violated the TCPA through its online banking services agreement and its Apple Pay terms and conditions, both of which “require[d] consumers to consent to receive marketing texts in order to use” the services. Additionally, FNB allegedly failed to include a “clear and conspicuous disclosure informing the consumer of his or her right to refuse to give such consent” as required by FCC rules. With respect to Lyft, the bureau claimed that its terms of service agreement violated the FCC’s rules because although the agreement contained language that “purport[ed] to recognize the consumer’s right to refuse consent to receive promotional messages as a condition to receiving service,” bureau staff discovered during the investigation of the company that “exercising the option to decline marketing messages made it impossible to use Lyft’s services.”

In addition, as to both FNB and Lyft, the bureau warned that insofar as telemarketing or advertising text messages were sent to consumers after October 13, 2013 (when the FCC’s new regulations requiring prior express written consent went into effect), without properly obtaining each recipient’s consent, then “each such text message also constitutes a separate violation” of the TCPA. In announcing the FNB and Lyft citations, the chief of the Enforcement Bureau “urge[d] any company that unlawfully conditions its service on consent to unwanted marketing calls and texts to act swiftly to change its policies.” A copy of the press release can be found on the FCC’s media page. Following the citation, Lyft amended its terms of service to read: “You may opt out of receiving promotional or marketing texts or calls from Lyft at any time by texting the word END to 46080 from the mobile device receiving the messages.” Additionally, Lyft’s FAQ page now includes clear opt-out guidelines.

The bureau’s letter to PayPal and the citations of FNB and Lyft send a clear signal that the FCC is increasing scrutiny of companies’ consent forms and should serve as a reminder for companies to ensure that their service agreements comply with applicable call/texting laws and regulations, including the TCPA.

Appeals to Watch

ACA International v. FCC. On July 10, 2015, the FCC released its omnibus Declaratory Ruling and Order. In the ruling, the FCC responded to 21 petitions by a number of companies and trade organizations that sought relief or clarification regarding the requirements of the TCPA. (A detailed summary of the ruling authored by Kelley Drye & Warren LLP can be found in MCC’s October issue.)

Appeals of the ruling have been consolidated in the D.C. Circuit for review. The lead case is ACA International v. FCC, D.C. Cir. No. 15-1211. Petitioners are challenging the FCC’s rulings on the definition of “autodialer,” liability for calls to reassigned telephone numbers and the ability of consumers to revoke consent by any reasonable means. The American Bankers Association has filed a petition for reconsideration or modification of the same order but addressing the new exemptions established for financial or healthcare messages.

The briefing is set to close on February 24, 2016, and oral argument is expected to be held in the spring of 2016.

Spokeo, Inc. v. Robins. Currently, the majority view of circuit courts is that the potential entitlement to statutory damages under the TCPA is sufficient to support Article III standing, without otherwise demonstrating actual injury. The U.S. Supreme Court’s recent grant of certiorari in Spokeo, Inc. v. Robins, 2015 WL 1879778 (Apr. 27, 2015), however, could break new ground.

At issue in Spokeo is whether a plaintiff has Article III standing, where he or she can demonstrate statutory damages under the Fair Credit Reporting Act (FCRA) but has not suffered an actual injury. The Ninth Circuit held that when a statutory cause of action does not require proof of actual damages, a plaintiff can suffer a violation of the statutory right without suffering actual damages [see Robins v. Spokeo, Inc., 742 F.3d 409, 413 (9th Cir. 2014) (noting that constitutional limit on standing “does not prohibit Congress from elevating to the status of legally cognizable injuries concrete de facto injuries that were previously inadequate in law”) (internal quotations omitted)].

By granting certiorari in Spokeo, the Supreme Court has signalled that it may resolve this issue, and the resulting decision potentially will have a significant impact on TCPA litigation. Oral argument is scheduled for November 2, 2015.

Campbell-Ewald Co. v. Gomez. In the context of class actions, defendants often rely on FRCP 68 to make precertification offers of judgment to representative plaintiffs in an effort to end the litigation before a class is certified. FRCP 68 is invoked in the context of TCPA litigation because the statutory damage provisions permit a defendant to offer complete monetary relief to the plaintiff and thereby terminate the potential exposure resulting from a class action.

However, there is a circuit court split as to whether an offer that fully satisfies the representative plaintiff’s claim also can serve to moot the class claims. The Supreme Court recently granted certiorari in a putative TCPA class action, which may clarify the proper use of FRCP 68 to end a TCPA litigation before the certification stage and potentially deter plaintiffs’ counsel from bringing these types of cases. Specifically, the Supreme Court will consider both whether

  • a case becomes moot when the plaintiff receives a FRCP 68 offer of complete relief on his claim and
  • an offer of complete relief to a representative plaintiff in a class action before any class is certified moots the putative class claims.

[See Campbell-Ewald Co. v. Gomez, 768 F.3d 871 (9th Cir. 2014), cert. granted, 2015 WL 246885 (May 18, 2015).] Oral argument was held on October 14, 2015.

Given the high stakes involved in government telemarketing investigations and TCPA litigation, companies should be very careful when dabbling in telephone, text message and fax campaigns. Indeed, they should be proactive and confirm that they have appropriate compliance measures in place to address the nuances of this ever-evolving area of law. Lax practices (and lack of awareness as to the extent of obligations and restrictions) can open the door to potentially costly exposure.

Published .