The FCC issued a Declaratory Ruling yesterday (available here), holding that prior express consent to autodialed or prerecorded calls under the TCPA can be conveyed by a consumer through an intermediary.  

The petitioner at issue, GroupMe, Inc., offers a group text messaging service.  An individual who wants to create a text messaging group using GroupMe must agree to its terms of service, which require the group organizer to represent that each individual added to the group has consented to be added and to receive text messages.  After the group organizer provides the cell phone numbers of each group member to GroupMe, the application then sends up to four text messages to each member's cell phone for what it claims are administrative, non-telemarketing purposes.  

The Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, prohibits making any call to a cell phone using an autodialer or an artificial or prerecorded voice, except in cases of an emergency or where the call (or text message) was made with the “prior express consent” of the called party.  In its Declaratory Ruling, the FCC clarified that “where the consumer has agreed to participate in a GroupMe group, agreed to receive associated calls and texts, and provided his or her wireless telephone number to the group organizer for that purpose, the TCPA’s prior express consent requirement is satisfied with respect to both GroupMe and the group members regarding that particular group, but only regarding that particular group.”  

Thus, a consumer can provide his or her prior express consent to autodialed or prerecorded calls through an intermediary.  However, consent is only specific to the actual consent given—after obtaining a consumer’s express consent to autodialed text messages in relation to a particular group, GroupMe would be prohibited from then text messaging the consumer with advertisements or in relation to another group for which express consent had not been provided.  It is also important to note that a sender of autodialed or prerecorded calls or text messages like GroupMe will still be liable under the TCPA if it did not actually have the prior express consent of the called party, such as where the intermediary provided incorrect information or never had the consent of the consumer to begin with.  Therefore, a business should be very wary about obtaining “prior express consent” through an intermediary—if the consumer never actually consented to a company’s autodialed or prerecorded calls or texts, it risks opening itself up to liability under the statute.

The Third Circuit has held that, under the Telephone Consumer Protection Act (“TCPA”), consumers have the right to revoke prior express consent to be contacted on their cell phones using an autodialer or prerecorded voice, and (2) there is no temporal limitation on that right.

In Gager v. Dell Financial Services, LLC, No. 12-2823, — F.3d — (3d Cir. Aug. 22, 2013), the plaintiff alleged that she provided her cell phone number to Dell as part of a credit application and that, upon default, Dell proceeded to use an autodialer to leave prerecorded voice messages on her cell phone in an attempt to collect the debt.  As alleged, even though the plaintiff sent Dell a letter directly asking it to stop calling her phone, Dell continued to call her an additional 40 times using an autodialer and prerecorded voice, in violation of the TCPA.

The TCPA provides for a minimum of $500 (and up to $1,500) per call made to a cell phone using an autodialer and/or artificial or prerecorded voice without the prior express consent of the called party.  47 U.S.C. § 227(b).  However, the statute does not contain a provision expressly providing for the right to revoke consent previously given to be called.  In Gager, the lower court granted Dell’s motion to dismiss on the basis that, among other things, (1) the lack of specific revocation language in the TCPA suggested that no right to revoke exists, and (2) while a consumer can instruct a party to whom she provides her cell phone number as to whether an autodialer or prerecorded voice can be used in calls to her phone, such instruction is only effective if given at the time the number itself is provided.

The Court of Appeals for the Third Circuit disagreed, basing its reversal on (1) the common law principle that consent is revocable, (2) a recognition that, as a remedial statute, the TCPA should be construed to the benefit of consumers, such that its silence as to revocation at any time should not be seen as limiting a consumer’s right to revoke prior express consent, but as evidence that such right exists, and (3) the FCC’s Soundbite ruling—which dealt with the permissibility of a company sending one-time confirmatory texts to consumers who opt-out of future text messages to which they had previously consented—indicating that the FCC already endorses the view that a consumer may revoke consent previously given, without any time limitation.  

The Court also rejected Dell’s argument that the plaintiff’s contractual relationship with Dell exempted it from the TCPA’s requirements, in essence affirming that despite any contractual provision otherwise, a consumer retains the right to revoke prior express consent under the TCPA.

Gager is a great decision that supports the true intent of Congress in enacting the TCPA—to protect consumers from intrusive and unwanted phone calls.

Read the full opinion here.

In a May 23, 2013 order in the case of Mais v. Gulf Coast Collection Bureau, Inc., a Southern District of Florida judge recently denied a defense motion for reconsideration of a ruling rejecting arguments that prior express consent existed under the Telephone Consumer Protection Act ("TCPA") for a third-party healthcare provider’s debt collector to make autodialed calls to a consumer’s cell phone, where the healthcare provider obtained the phone number called from information provided by the consumer's wife to hospital admissions staff during a trip to the emergency room.

Among other things, the TCPA prohibits making autodialed or artificial/prerecorded voice calls to a cell phone without prior express consent, and provides for a minimum of $500 statutory damages per call made in violation of the statute.  47 U.S.C. § 227(b).  Thus, the existence of “prior express consent” to make such calls is an affirmative defense to a claim under the TCPA.  The FCC—the regulatory body charged with adopting rules implementing the TCPA—issued a declaratory ruling in 2008 holding that, in the debtor/creditor context, “the provision of a cell phone number to a creditor, e.g., as part of a credit application, reasonably evidences prior express consent by the cell phone subscriber to be contacted at that number regarding the debt.”  In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 23 F.C.C.R. 559, 564 (2008) (“2008 FCC Order”).  Based on the 2008 FCC Order, the defendants in Mais moved for summary judgment, asserting that they had the requisite “prior express consent” for the autodialed collection calls because the plaintiff’s wife provided his cell phone number to the hospital on his behalf.

The court found that the 2008 FCC Order's holding that “prior express consent” to receive robocalls exists where a consumer simply provides his cell phone number to a creditor was not entitled to deference, finding that the FCC had incorrectly engrafted a kind of “implied consent” into the TCPA’s requirement that the consent be “express”:

Mais v. Gulf Coast Collection Bureau, Inc., No. 11-61936, 2013 WL 1899616, at *9 (S.D. Fla. May 8, 2013).  Thus, because any consent to be called was, at best, implied, the court found in favor of the consumer with respect to the debt collector lacking the requisite “prior express consent” to use an autodialer to call his cell phone.  Mais, 2013 WL 1899616, at *9.

The Mais decision was not entirely favorable to consumers, however.  The court also rejected the 2008 FCC Order’s holding that “[c]alls placed by a third party collector on behalf of [a] creditor are treated as if the creditor itself placed the call."  Id. at 12 (quoting In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 23 F.C.C.R. 559, 565 (2008)).  Referring to the absence of specific "on behalf of" language in Section 227(b)(1)(A) compared to the relief provided in Section 227(c)(5) for "[a] person who has received more than one telephone call within any 12-month period by or on behalf of the same entity in violation of the regulations prescribed under [Section 227(c)]," the court held that Congress only intended liability to exist under Section 227(b)(1)(A) for those who directly "make" the prohibited calls.  Id. at 13.  As such, the court found that the healthcare provider and its holding company could not be held liable for the illegal calls made by the third-party debt collector on their behalf.  Id.  The court further hedged this result, determining that even if traditional tort rules of vicarious liability were to apply, these particular defendants lacked sufficient control over the third-party debt collector to permit them to be held vicariously liable for the calls.  Id. at 14.

The Mais summary judgment order was issued the day before the FCC’s recent May 9, 2013 declaratory ruling, which affirmed—based on common law principles of agency—that a party can be held liable for autodialed or prerecorded voice calls to cell phones made by others on its behalf.  It will be interesting to see how this recent FCC ruling will be treated by the courts.

Read the Mais summary judgment order here.

The Illinois Supreme Court issued an opinion this past Thursday affirming that damages under the Telephone Consumer Protection Act (“TCPA”) are insurable.  In the case of Standard Mutual Ins. Co. v. Lay, 2013 IL 114617 (2013), a small business brought a class action lawsuit against a real estate agency for violating the TCPA’s prohibition against unsolicited fax advertisements.

The parties reached an approved settlement of $1,737,500 plus costs, affording each of the 3,475 class members who were sent a junk fax the $500 minimum statutory damages provided under the TCPA.  See 47 U.S.C. § 227(b)(3).  As part of the settlement, the parties agreed that the plaintiff would only seek this amount from the defendant’s insurer.  However, the defendant’s insurer subsequently filed a complaint for declaratory relief, seeking a finding that the lawsuit and settlement were not covered under the defendant’s policy.  The circuit and appellate courts both ruled in favor of the insurer, with the appellate court ultimately concluding that the TCPA-prescribed damages of $500 per violation were punitive and thus not insurable as a matter of Illinois law and public policy.

The Illinois Supreme Court disagreed, holding that “[t]he manifest purpose of the TCPA is remedial and not penal.”  Lay, 2013 IL 114617, ¶ 30.  The Court discussed the underlying reasons for the enactment of the TCPA in the first place—that unrestricted telemarketing was regarded as an intrusive invasion of privacy, and that many consumers were outraged by the proliferation of intrusive, nuisance telemarketing calls.  Id. at ¶ 27.  In the case of junk faxes, the Court noted that “Congress clearly identified the animating purpose of the TCPA: to prevent advertisers from unfairly shifting the cost of their advertisements to consumers while simultaneously preventing the use of their fax machines for legitimate purposes.”  Id. at ¶ 31.  Not only are the harms resulting from unsolicited telemarketing and faxing compensable (i.e., for annoyance, inconvenience, loss of paper and ink, etc.), but “Congress intended the $500 liquidated damages available under the TCPA to be, at least in part, an incentive for private parties to enforce the statute.”  Id. at ¶ 32.  The Court held that the treble damages available to consumers of up to $1,500 per violation where the defendant “willfully or knowingly” violates the TCPA was simply “part of the regulatory scheme, intended as a supplemental aid to enforcement rather than as a punitive measure.”  Id. at ¶ 33.  

Punitive damages are generally uninsurable as a matter of Illinois public policy.  However, because the $500 (or up to $1,500) statutory damages afforded to consumers under the TCPA were held by the Illinois Supreme Court to be remedial and not punitive, they can be insurable.  This ruling is particularly beneficial to consumers in cases where unsolicited telemarketing is done by a business that, absent an applicable insurance policy, may not otherwise be able to provide sufficient compensation for violating the Telephone Consumer Protection Act.

Read the full opinion here.

Many businesses use third parties to advertise their goods and services through telemarketing.  But what happens when a third-party telemarketer or lead generator fails to comply with federal telemarketing law?  Is the business off the hook for the illegal calls made on its behalf, simply because it chose to use an independent contractor instead of directly placing the calls, itself? 

In a long-awaited declaratory ruling, the FCC has affirmed that businesses can be vicariously liable for the actions of their third-party telemarketers that violate the Telephone Consumer Protection Act ("TCPA"), a federal statute that protects consumers from unsolicited text messages and autodialed or prerecorded voice calls, junk faxes, and do-not-call violations, and provides for injunctive relief and statutory damages of up to $1,500 per violation.  The FCC clarified that a business can be liable for violations by its representatives under a broad range of agency principles, including not only formal agency, but also based on principles of apparent authority or where the business ratifies the third party's illegal conduct by knowingly accepting its benefits.

The ruling recognizes the reality that legitimate businesses frequently use telemarketers that are judgment-proof, located outside the United States, or simply unable to be identified by the called party, and that the inability to hold a business liable for the illegal calls made on its behalf would, therefore, largely leave consumers without any real means to enforce their rights under the TCPA.  Additionally, as the telemarketing industry itself acknowledges, businesses are in the best position to monitor and police TCPA compliance by their own third-party telemarketers.  Thus, the fact that a business can be liable for the illegal calls of its third-party telemarketer will incentivize companies to ensure that their telemarketers actually comply with federal telemarketing laws, rather than reap the benefits of do-not-call violations or unlawful robocalls.

Read the FCC ruling here.