The District of Nevada recently applied the D.C. Circuit’s decision in ACA International v. FCC and granted summary judgment in favor of the defendant on plaintiff’s Telephone Consumer Protection Act claim.  Specifically, the Court held in Marshall v. The CBE Group, Inc. that CBE’s phone system does not qualify as an automatic telephone dialing system, commonly referred to as an “ATDS.”

Plaintiff Gretta Marshall filed suit against CBE, a third-party debt collector, alleging that it violated the TCPA and the Fair Debt Collection Practices Act through its collection efforts related to her outstanding bill.  Marshall alleged that CBE’s agents used an ATDS to contact her in violation of the TCPA.  CBE places calls using a Manual Clicker Application (“MCA”), requiring the call agent to click a bullseye on a computer screen to place a call.  When a CBE agent clicks the bullseye, a call is sent through a cloud-based connectivity pass-through, LiveVox, and then the CBE agent is connected with the person to whom the call is placed.

In analyzing CBE’s “communication infrastructure,” the Court stated that in light of the ACA v. FCC decision, it would apply the statutory language defining an ATDS, resulting in a focus on whether CBE’s phone equipment has the capacity to produce or store phone numbers to be called using a random or sequential number generator.  The Court noted that the overwhelming authority held that “point and click” dialing systems, used in unison with cloud-based pass-through services, did not qualify as ATDSs due to the human intervention required to place the call.  Applying this rationale, the Court found that CBE agents who were required to click the bullseye were “integral to initiating outbound calls.”  This finding weighed in favor of finding that the MCA, used with LiveVox, was not an ATDS.

Further, the Court dismissed Marshall’s allegations that LiveVox, the cloud-based pass-through, placed the calls and qualified as an ATDS.  Marshall argued that because LiveVox could perform call progress analysis (such as maintaining call logs), it actually initiated the call, not CBE.  Ultimately, the Court found that Marshall had not presented any evidence or legal authority sufficient to create a genuine dispute of material fact as to LiveVox’s alleged qualification as an ATDS.  Specifically, Marshall did not show that LiveVox’s ability to track calling information meant that LiveVox has the capacity to produce or store telephone numbers to be called, using a random or sequential number generator, and to dial the numbers.

Given the human intervention necessary to place calls using MCA and Marshall’s failure to create a genuine dispute of material fact regarding LiveVox’s role, the Court held that CBE did not use an ATDS to place calls to Marshall.

The District of Nevada is one of the first courts to apply the decision from ACA International v. FCC when interpreting the definition of an ATDS.  The decision in Marshall v. CBE indicates that courts will be able to simplify their analysis of whether a telephone system qualifies as an ATDS under the TCPA by eliminating the need to determine “potential functionalities” of a calling system and instead focusing on the calling systems’ “capacity to store or produce telephone numbers to be called, using a random or sequential number generator.”

Please join us on Tuesday, April 17th from 2:00 – 3:00 PM ET for a complimentary webinar with speakers Chad Fuller, David Gettings, Alan Wingfield and Virginia Bell Flynn.

So often the defense of consumer class actions focuses on the substance of the law. Was my consumer report accurate? Was my collection letter misleading or deceptive? Did I have consent to place a call using an ATDS?

Please join Troutman lawyers for a discussion of some recent developments in procedure that could be game-changers. These are legal developments that do not turn on the substance of the claim, but could raise effective defenses if used appropriately. We will discuss the impact the Bristol-Myers Squibb decision has had on personal jurisdiction in nationwide class actions, the tolling effect of pending class actions on future lawsuits, and the impact of Spokeo arguments in practice. For good measure, we will also discuss the impact that the D.C. Circuit’s landmark ruling in ACA v. FCC has had on Telephone Consumer Protection Act individual lawsuits and class actions in the first month since the decision.

Click here to register.

On March 12, Judge Eldon E. Fallon of the U.S. District Court for the Eastern District of Louisiana tossed a plaintiff’s putative class action lawsuit against the American Heart Association (“AHA”), Anthem Foundation, Inc., and Anthem, Inc. under the Telephone Consumer Protection Act relating to text messages sent to a consumer following her attendance at a CPR training course. This decision provides some additional clarity for health care companies in distinguishing between informational and telemarketing outreach under the TCPA.

The underlying facts are straightforward. The plaintiff attended a CPR training event and provided her cellular telephone number to the AHA to receive content including “monthly CPR reminders” and “healthy messaging information.” She subsequently received “more than 20 text messages” from AHA, such as “AHA/Anthem Foundation: Memorize your work address. You may need to recite it to a dispatcher should you have to call 9-1-1 from the office.” Each of the roughly two dozen text message included “AHA/Anthem Foundation” at the beginning of the message. Although the text messages generally provided health-related informational content, one text message provided a link to the AHA’s website to find available CPR courses in a specific geographic area—some of which were free, and others available for a fee.

The plaintiff’s theories of liability were that (1) the messages were telemarketing, and thus the prior express consent she provided to AHA was not sufficient for the at-issue text messages; (2) nonprofit Anthem Foundation was vicariously liable for text messages sent by AHA because “Anthem Foundation” was included in the body of the message; and (3) Anthem, Inc. was vicariously liable because the inclusion of Anthem Foundation in the text messages was a “purely commercial plug” of its corporate parent. The defendants jointly moved to dismiss the complaint, claiming that the consent provided to AHA was sufficient for the whole of the communications with the plaintiff, and submitted the entire text-message log between the plaintiff and AHA.

The lawsuit attempted to broaden the TCPA in two key ways: (1) expanding vicarious liability to brands allegedly affiliated with the communications, and (2) applying the TCPA’s prior express written consent standard for telemarketing to text messages providing information about local CPR classes—neither of which Judge Fallon was willing to indulge. On the vicarious liability point, the Court found that “although the text messages reference Anthem Foundation, this is irrelevant because the sender was, in fact, AHA.” The Court further noted the lack of any authority suggesting that “a nonprofit’s association with a donor or another charitable entity—i.e., Anthem Foundation—gives rise to a TCPA claim when she voluntarily sought to receive certain communications and information.”

As to the content of the messages, Judge Fallon examined the text message relating to CPR courses, which contained a link to a search function allowing users to find nearby classes. The Court visited the link and provided screenshots of the website in its ruling. It observed that “[t]o sign up for a CPR class—whether for-pay or free—a visitor must click on one of the providers, in which the [visitor] is taken to the provider’s Website.” The Court wrote, “[I]n this case, common sense tells the Court that the information in which Plaintiff labels as ‘commercial’ is undoubtedly informational. Defendants AHA and Anthem Foundation provide individuals with a public resource to seek CPR training. This resource is the type of communications Plaintiff wanted and signed up to receive: information about CPR and healthy living. Her complaint is thus unwarranted.”

With this dismissal and others like it, health care companies can be heartened that multiple courts have taken a “common sense” approach interpreting the TCPA to permit beneficial, health-related outreach to their members and consumers. However, this area of law remains murky, and thus companies are reminded of the importance of maintaining accurate records to minimize litigation risks.

The defendants were jointly represented by Covert J. Geary of Jones Walker LLP in New Orleans, Louisiana. Anthem Foundation, Inc. and Anthem, Inc. were also represented by Chad R. Fuller, Virginia Bell Flynn, and Justin M. Brandt of Troutman Sanders LLP.

 

Please join us on Tuesday, March 20th from 3:30 – 5:00 ET, as Troutman lawyers who have been on the front lines offer their take on the implications for litigation and compliance arising from the new appeals decision regarding the scope of the Telephone Consumer Protection Act (TCPA).

On March 16, 2018, the U.S. Court of Appeals for the District of Columbia Circuit struck down key portions of the Federal Communications Commission’s (FCC) expansive readings of the Telephone Consumer Protection Act (TCPA). These expansive rulings have fueled many class actions and individual lawsuits against companies that use modern telephony systems to keep in contact with consumers.

While in broad brush this complex, 51-page decision is clearly good news for calling parties, the ruling raises many practical questions for litigation and compliance. This webinar will focus on practical takeaways, in addition to providing a precise description of key parts of the ruling. One hour of CLE credit is pending. 

To register, click here.

A federal judge recently ruled that online auto retailer CarGurus, Inc. did not violate the Telephone Consumer Protection Act after a class action suit was filed against the company, alleging CarGurus sent unsolicited text messages to individuals via their website.

CarGurus operates a website that allows users to search for vehicles based on make, model, and other criteria. If a user of the website comes across a car that piques their interest, the user can click on a link to enter their phone number into the website. The vehicle listing is then sent as a link to the user’s phone via text message.

The suit alleged that in 2016, a woman received a vehicle listing text message from CarGurus, even though she had never been on the site or otherwise done business with the company. The plaintiff claimed this violated a provision of the TCPA that prohibits the use of an automatic telephone dialing system, or “ATDS,”  to call or send text messages to an individual without the individual’s prior consent.

CarGurus moved for summary judgment, arguing that they did not violate the TCPA because the company did not make or initiate the “unsolicited” messages. Instead, the company argued, it is the user of the website who initiates the message when they request to have a link to the listing sent to their phone via text message.

Judge Sara Ellis of the U.S. District Court for the Northern District of Illinois agreed with CarGurus and granted the motion for summary judgment. The Court ruled that the extent of the consumer’s involvement in the sending of the text dictated that the consumer, not CarGurus, must be deemed the initiator of the text. Even though CarGurus controls the content of any text messages sent from the site, the consumer must request the text message and must manually enter their phone number for the text to be sent. CarGurus’ only action is executing the request of the consumer.

In the plaintiff’s case, an unsolicited text message was sent when another user of the CarGurus website with a similar phone number entered the class representative’s number by mistake.

A copy of the opinion can be found here.

State in the House: Bill Passed Committee, but Vote Not Scheduled

Introduced by Rep. Virginia Foxx (R-N.C.), the Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act cleared the Committee on Education and the Workforce of the United States House of Representatives on December 13, 2017. It did so despite claims by Democrats—and the Association of Public and Land-grant Universities—that they had been shut out of the process.

Among other pertinent provisions, the PROSPER Act:

  • adopts a single definition of “institution of higher education,” eliminating for most purposes the distinctions between public and private nonprofit institutions and proprietary institutions;
  • effectively requires the Department of Education to treat programs that are not correspondence courses and that satisfy the current definition of “distance education” programs the same as traditional brick-and-mortar programs;
  • prohibits the DOE from defining any term in the Higher Education Act of 1965 (“HEA”), through regulation or otherwise;
  • repeals the borrower defense regulations promulgated by the DOE on November 1, 2016;
  • bars the DOE from developing, administering, or creating a ratings system for institutions of higher education;
  • expands the ways by which institutions may show that they are financially responsible for purposes of Title IV program participation;
  • forbids the DOE from prescribing the specific standards that an accreditor is required to implement and defers such standards to the discretion of each accrediting agency;
  • simplifies the Free Application for Federal Student Aid (“FAFSA”);
  • eliminates loan origination fees for all student borrowers;
  • eliminates the Public Service Loan Forgiveness Program for new borrowers; and
  • caps annual loan limits for various categories of students.

According to its supporters, the PROSPECT Act would improve higher education in at least two major ways. First, it focuses resources on helping Americans with the greatest financial need. Second, it expands the choices for students who need financial aid rather than steering them overwhelmingly towards community colleges.

While opponents have praised certain aspects of the bill, from its simplification of the FAFSA and linking of accreditation with outcomes for students, they have also criticized its limitations on student financial aid, removal of protections for students, and failure to incorporate rigorous data collecting requirements. Opponents also cite a February 7 report by the Congressional Budget Office that claimed that college students would lose $15 billion in federal student aid over the next decade if the PROSPER Act becomes law.

As of March 8, the full House has not voted on the PROSPER Act.

The text, as well as other legislative resources, including speeches from both sides, can be found here.

State in the Senate: Hearings and Debates

In contrast to the House, the process in the Senate has involved somewhat more give-and-take in considering the companion bill to the PROSPER Act. The Senate version was proposed by Health, Education, Labor and Pensions Committee Chairman Sen. Lamar Alexander (R-Tenn.), a former Secretary of Education. By February 6, his Committee had held four hearings on the problems posed by the rising cost of higher education and the nation’s increasingly troubled borrowers.

As in the House, partisan fault lines quickly emerged. However, unlike the House committee, a more robust debate has occurred. Like his House colleagues, Alexander has endorsed the “Bennett hypothesis” (named after former Secretary of Education William Bennett), which faults growing federal student aid for mounting college costs. For Alexander, the bottom line is simply, “How can we get the Federal Government out of the way so that we can meet our students’ needs?”

Alexander has urged his colleagues to focus on revisions to simplify the student aid process and redirect money to Pell Grants for low-income students.

In response, Committee Democrats expressed approval of streamlining grants and loans, but with the caveats that the total amount of aid must be preserved and that quality protections must be put in place for students and taxpayers.

Alexander, who has long worked with the Committee’s Democratic leader, Sen. Patty Murray (D-Wash.), saw a consensus emerging over the need for “simpler, more effective regulations to make it easier for students to pay for college and to pay back their loans; reducing red tape so administrators can spend more time and money on students; making sure a degree is worth the time and money students spend to earn it; and helping colleges keep students safe on campus.”

While Alexander is aiming for an April markup of the bill, which would allow Senate Majority Leader Mitch McConnell (R-Ky.) to bring legislation to the Senate floor in the first part of the year, observers are less optimistic. “The likelihood of it passing before 2020, I would put at very minimal,” said Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities. “I’d put it as close to zero as I would any likelihood.”

Nassirian’s viewpoint is representative of that of many observers: Although everyone seems to agree that the current state of student lending is a problem, no one can agree on a solution. Meanwhile, disagreements about gatekeeping, costs, and quality continue to fester.

The Federal Communications Commission announced on March 6 that it would vote at a March 22 meeting on a proposal to create a database of phone numbers that have been reassigned. Reassigned phone numbers are those numbers initially belonging to an individual that are given up or relinquished (usually through account inactivation) and are then assigned by the carrier to another individual.

Currently, a company placing outbound calls and/or text messages is in violation of the Telephone Consumer Protection Act if it calls a number at which an individual had previously provided prior express consent to receive the call but which has since been reassigned to another consumer. The company placing the call is liable even if it is unaware of this reassignment.

While the FCC has created a one-call exception – that is, a calling party is not liable for the first call that reaches a reassigned number – the potential risk to calling parties has proven to be difficult to manage given the challenges of identifying numbers that have been reassigned. A database of reassigned numbers would allow calling parties to filter or “scrub” numbers to detect those that have been reassigned.

The FCC seeks comment on how such a database should be created and used. In its proposal, the FCC expressed some support for the creation of a single source of record for reassigned numbers, noting that a single database would be “more efficient and cost-effective.”

In a new article detailing its Stats for December 2017 and Year in Review, WebRecon presented data showing a slight decrease in the number of consumer litigation lawsuits filed in 2017 compared to other years. We previously reported on WebRecon’s consumer litigation statistics for May of 2017, where we found the number of new consumer finance lawsuits filed in 2017 were on pace with 2016.

Despite what the May 2017 numbers suggested, the overall number of new Fair Debt Collection Practices Act and Telephone Consumer Protection Act lawsuits decreased from 2016. There were 9,788 FDCPA lawsuits filed in 2017, a 5.7% decrease since 2016 and a 20% decrease since 2011, the most active year for FDCPA lawsuits. This is the second straight year the number of FDCPA lawsuits has decreased. However, it is worth noting that FDCPA lawsuits still represented almost 53% of the consumer litigation lawsuits filed in 2017. Similarly, there were 4,392 TCPA lawsuits filed in 2017, representing a 9.2% decrease since 2016 and the first year the filing of TCPA lawsuits has decreased since 2002.

In contrast to actions filed under the FDCPA and TCPA, lawsuits under the Fair Credit Reporting Act increased by 9% since 2016, with a total of 4,346 lawsuits filed in 2017. Overall, there were just under 3% fewer consumer litigation lawsuits filed in 2017 when compared to 2016. In addition, complaints filed with the Better Business Bureau and Consumer Financial Protection Bureau were up 1.3% and 18.5%, respectively.

The data for the month of December also reflects that the same jurisdictions continue to receive the majority of consumer litigation lawsuits as in months previous. The Eastern District of New York led the way in December 2017, with 148 new lawsuits. The next closest jurisdiction was the Northern District of Illinois with 77 new lawsuits.

Troutman Sanders will continue to monitor and report on emerging trends in consumer finance litigation.

On February 21, the Ninth Circuit affirmed a district court’s dismissal of an action brought under the Fair and Accurate Credit Transactions Act (“FACTA”), finding that the plaintiff had not demonstrated Article III standing.  Plaintiff Steven Bassett alleged that ABM Parking Services and its affiliated businesses repeatedly printed the expiration date of his credit card on sales receipts.  Bassett argued that the failure to withhold this information from the credit card receipt could lead to identity theft, but the Western District of Washington dismissed his case for failure to plead injury.

In an opinion that included a step-by-step analysis of the Supreme Court’s reasoning in the landmark Spokeo decision, the Ninth Circuit affirmed the district court’s finding that Bassett had not alleged a concrete injury-in-fact to confer standing.  “We need not answer whether a tree falling in the forest makes a sound when no one is there to hear it,” wrote Judge M. Margaret McKeown for the panel.  “But when this receipt fell into Bassett’s hands in a parking garage and no identity thief was there to snatch it, it did not make an injury.”  Bassett’s credit card information was not disclosed to anyone but Bassett himself, the panel concluded, and his complaint failed to allege a risk of harm, “given that he could shred the offending receipt along with any remaining risk of disclosure.”

The court contrasted Bassett’s claims to those recently before the court in a Telephone Consumer Protection Act (“TCPA”) case.  In Van Patten v. Vertical Fitness Group, LLC, the Ninth Circuit held that a consumer who received unsolicited text messages in violation of the TCPA alleged an injury because “unrestricted telemarketing can be an intrusive invasion of privacy and is a nuisance.”  While a credit card receipt that has not been divulged to anyone but the credit card’s holder may not cause harm or present the material risk of harm, “unconsented text messages and consumer reports divulged to one’s employer necessarily infringe privacy interests and present harm.”

The decision unites the Ninth Circuit with the Second and Seventh circuits, which both affirmed dismissals of similar FACTA cases in Crupar-Weinmann v. Paris Baguette America, Inc. and Meyers v. Nicolet Restaurant of De Pere, LLC, which we covered here.

On December 28, ACA International, a trade association representing the credit and collection industry, filed its amicus, or “friend of the court,” brief in the Ninth Circuit Telephone Consumer Protection Act case Epps v. Earth Fare, Inc. The plaintiff, Jalen Epps, is appealing the district court decision, which held that although there was 12(b)(1) standing, she failed to state a claim due to her failure to use reasonable means to revoke consent to receive messages from Earth Fare, a health and wellness retailer.

Earth Fare asserted that Epps ignored repeated reminders that she could opt out by simply texting “STOP” at any time. Instead, she sent five text messages taking the form of complete sentences. For example, one stated: “I’m simply asking for texts to stop. I would appreciate that.” Earth Fare argued that these verbose “revocation requests” were designed to frustrate the company’s automated revocation mechanism.

Moreover, the Court took judicial notice of Epps’s multiple similar TCPA suits: “Plaintiff filed four TCPA lawsuits in district court between November 3, 2016 and December 6, 2016.” In addition to Earth Fare, Epps sued Office Depot, Dunkin’ Brands, and Walgreen Co.

Looking at the totality of these facts and circumstances, the Court concluded that Epps did not plausibly allege a reasonable method of revocation, as she did not explain why she did not follow Earth Fare’s clear instruction to text “STOP.”

In its amicus brief, ACA agrees with the district court holding that Epps had failed to state a claim, but goes further and argues that she also lacked 12(b)(1) standing, contrary to the district court’s view. The district court quoted the standard from Van Patten v. Vertical Fitness Group: “[A] violation of the TCPA is a concrete, de facto injury.” ACA argues for a stricter test for standing than the current one under Van Patten. ACA seeks an exception to Van Patten for a case brought by a plaintiff who “has procured the alleged violation of which she is complaining,” i.e., a bad-faith plaintiff bringing a “manufactured” lawsuit.

Many would agree with ACA that this case is a classic example of the TCPA abuse that results from its provisions allowing for substantial recovery amounts, calculated on a per-call basis, without any cap. Because the facts of this case are damaging to the plaintiff, ACA has found a good opportunity to use this case to set limits against rampant TCPA abuse. The decision in this case could, in turn, support a favorable decision in its own pending D.C. Circuit case, ACA Int’l, et al. v. Federal Communications Commission. In that case, ACA seeks to reduce the broad scope of the TCPA as the FCC has interpreted it. The outcome will be highly influential in subsequent TCPA cases. Notably, many courts have stayed TCPA cases pending the outcome in order to use the decision as guidance.

Troutman Sanders LLP has substantial industry-leading expertise on the TCPA, with experience successfully defending clients in court nationally and advising top companies regarding compliance strategies. We will continue to monitor regulatory and judicial interpretation of the TCPA in order to identify and advise on potential risks.