In American Family Mutual Insurance Company v. Vein Centers for Excellence, Inc. et al., the Court of Appeals for the Eighth Circuit upheld the Eastern District of Missouri’s ruling granting summary judgment in favor of American Family, finding that the insurer did not have to defend and indemnify its client Vein Centers, which had been accused of violating the Telephone Consumer Protection Act in a class action lawsuit.

In the underlying TCPA class action lawsuit, St. Louis Heart Center, Inc. alleged that Vein Centers violated the TCPA by sending fax advertisements. Vein Centers sought indemnification from its insurance carrier under the Businessowners Policy and Commercial Liability Umbrella Policy. Both policies included a provision that excluded the “Distribution of Material in Violation of Statutes.”

Thus, American Family argued that it did not have to cover Vein Centers for TCPA claims. The Court agreed with the District Court’s decision that American Family was entitled to the presumption that Vein Centers received notice of the policy exclusion because no evidence was offered that would indicate Vein Centers never received notice of the exclusion provisions. Missouri law recognizes the presumption that a letter duly mailed has been received by the addressee, and American Family triggered this presumption by offering deposition testimony that American Family mailed the applicable communications that included the policy exclusion provisions to Vein Centers.

Troutman Sanders has a nationwide defense practice representing many companies with insurance carriers. It is important that insurance policies be reviewed carefully to ensure coverage for consumer statutory violations.

 

On December 20, the District of New Jersey granted summary judgment in favor of a defendant in a Telephone Consumer Protection Act case, finding the calling system at issue was not an automatic telephone dialing system because the system required human intervention to initiate calls. 

In Collins v. National Student Loan Program, plaintiff Maurice Collins alleged he received 206 calls from NSLP in a ten-month period, some of which were placed after Collins had requested that NSLP stop calling him, in violation of the TCPA.  The parties submitted cross-motions for summary judgment, focusing on the issue of whether an ATDS was used to place calls to Collins. 

It was undisputed that NSLP uses two LiveVox calling systems—LiveVox HCI and Quick Connect—to place calls to borrowers.  LiveVox HCI is used to call cell phones, while Quick Connect is used to call landlines.  LiveVox HCI requires a caller to “physically click a dialog box to launch the call,” while the “Quick Connect system uses some predictive capabilities to call landline numbers.”   

The parties agreed that only LiveVox HCI was used to initiate the calls to Collins’ cell phone.  However, Collins argued that the LiveVox HCI and Quick Connect systems are “simply different ‘modes’ of operation for the same underlying LiveVox system,” therefore, the system as a whole “has the present capacity without modification to place calls from a stored list without human intervention.”  NSLP put forth evidence that the two systems “are separate and distinct,” each with “its own dedicated separate hardware and software.” 

In assessing whether the calls at issue were placed with an ATDS, the Court relied on the interpretation of ATDS as set forth by the Third Circuit in Dominguez v. Yahoo, Inc., 894 F.3d 116 (3d Cir. 2018), which held that what makes a calling system an ATDS is the “present capacity to function as an autodialer by generating random or sequential telephone numbers and dialing those numbers.”   

First, the Court determined that the LiveVox HCI system alone is not an ATDS.  Collins argued the human intervention required by LiveVox HCI is not “meaningful” because the clicker agent does not have the ability to choose which number to call and has no option to decline or skip calling a number.  The agent’s only option is to click a button to dial the number populated on their screen.  The Court noted that the human intervention may be minimal, but “because the system cannot initiate calls without manual human intervention by a clicker agent” the system is not an ATDS.

Second, the Court determined that the LiveVox HCI system used to call Collins is separate and distinct from the Quick Connect system. In coming to this conclusion, the Court recognized that the systems are operated on separate servers, that LiveVox HCI has its own software and hardware, and that the LiveVox HCI server cannot be modified by NSLP. 

Ultimately, because LiveVox HCI is separate and distinct from Quick Connect, and LiveVox HCI requires human intervention—even if minimal—the Court held Collins failed to provide any evidence that the LiveVox HCI system used to call him had the “present capacity to function as an autodialer,” and it dismissed his TCPA claim. 

This is another example of courts continuing to interpret the definition of an ATDS post-ACA, while we await rulemaking from the FCC regarding the definition of an ATDS.

The decision in ACA Int’l v. FCC, 885 F.3d 687, 701 (D.C. Cir. 2018), invalidated the Federal Communications Commission’s 2015 Declaratory Ruling with regard to what qualifies as an automatic telephone dialing system, or “ATDS,” under the Telephone Consumer Protection Act.  Based on this, the Third Circuit, in Dominguez v. Yahoo, Inc., 894 F.3d 116, 119 (3d Cir. 2018), held that it would interpret the definition of an ATDS as it had prior to the 2015 Declaratory Ruling.  Accordingly, the Dominguez decision focused on whether a particular system had the present capacity to function as an autodialer.  This left open the question of whether a predictive dialer – that is, equipment that dials numbers from a set database and assists in predicting when an agent will be available to take calls – qualifies as an ATDS under the statute.  Recently, two district courts within the Third Circuit have considered this question and have reached opposite conclusions. 

In Wilson v. Quest Diagnostics Inc., No. 2:18-11960, 2018 U.S. Dist. LEXIS 212023 (D.N.J. Dec. 10, 2018), the District of New Jersey determined that, although the FCC’s 2015 Declaratory Ruling had been set aside in ACA International, the FCC’s previous rulings remained in effect.  It therefore held that “a predictive dialer qualifies as an ATDS so long as it has ‘the [present] capacity to dial numbers without human intervention.’”  Id. at *7, quoting In re Rules and Regulations Implementing the Tel. Consumer Prot. Act of 1991, 18 FCC Rcd. 14014, 14092 (2003).  Because the plaintiff alleged facts adequate to show that she received calls placed with a predictive dialer, the Court denied Quest’s motion to dismiss her TCPA claim.   

In contrast, in a decision issued just four days later, the Eastern District of Pennsylvania reached the opposite conclusion.  In Richardson v. Verde Energy USA, Inc., No. 15-63252018 U.S. Dist. LEXIS 212558, at *17 (E.D. Pa. Dec. 14, 2018), the Court determined that, in addition to overturning the 2015 Declaratory Ruling, ACA International invalidated the FCC’s 2003 and 2008 Orders by implication.  Based on the finding that these rulings are no longer in effect, it held that “a predictive dialing device that merely dials numbers from a stored list of numbers – rather than having generated those numbers either randomly or sequentially – is not an ATDS.”  Id. at *22.  Because there was no evidence to show that the predictive dialer at issue could randomly or sequentially generate numbers to be called, the Court granted summary judgment in favor of the defendant to the extent the claims were based on the alleged use of an ATDS. 

The different approaches adopted by the district courts will likely lead to further clarification from the Third Circuit.  Accordingly, Troutman Sanders will continue to keep a close eye on the situation and report as interpretations of the TCPA continue to evolve.   

In what could be seen as an early holiday present to those institutions often entangled in Telephone Consumer Protection Act litigation, a district court in the Eleventh Circuit not only denied certification in a TCPA wrong number class action, but also struck down common methods used by plaintiffs to ascertain class members.  Going further, the Court found that wrong number class actions are fatally plagued by individualized inquiries of consent where a defendant intends to call actual consenting customers, and topped everything off with due process considerations.

In Wilson v. Badcock Home Furniture, the Court began its analysis by finding fundamental problems with ascertainability, noting the difficulties in identifying individuals receiving a “wrong number” call.  Typically a defendant’s records will only show that a wrong number was dialed but nothing further regarding the individual that received the call.  Plaintiffs therefore generally propose using a reverse-number lookup and subpoenas to cell phone carriers for copies of call records.  This method, however, will not identify call recipients who are regular users under a family cell phone plan, and this is where the Court ruled the reverse-lookup method “truly fell apart” (noting that the class plaintiff would not have even been identified using this method) and found that there was “no way to definitively determine who actually answered the call from the defendant … .”

The Wilson defendant also identified multiple instances where more than one customer provided the same phone number.  As is commonly seen in TCPA litigation, the plaintiff proposed the “ask the subscriber” approach, but the Court rejected this method for three reasons.  First, the method “ignores the very purpose of ascertainment and will, in any event, require an individualized inquiry.”  Second, the “ask the subscriber” method could violate a defendant’s due process protections as penalties of up to $1,500 per call could incentivize individuals to improperly enter the class.  Finally, the Court ruled that this method would lead to nothing but inadmissible hearsay, finding that “a call recipient’s statement of ‘wrong number,’ as well as the simple act of Defendant listing a number as ‘wrong number’ may not be admissible as a matter of federal evidence as proof of the matter asserted, even if the number is labeled as ‘wrong’ in Defendant’s business records.  The unknown person answering on the phone was under no business duty to make that declaration, which is likely hearsay to prove the number was in fact wrong.”

Aside from the obvious ascertainability issues, the Court found predominating individualized issues of consent, noting that the defendant only calls numbers in its records thought to have belonged to actual consenting customers which raises possible defenses against many class members.  Again, the Court addressed due process concerns, finding that with the TCPA’s high statutory penalties, due process allows the defendant to inquire “whether the alleged wrong number belonged to a customer by consulting each individual file” and not leave the defendant at the mercy of the prospective class members.

The Wilson decision is significant and sets out a roadmap to defeat common methods used for class certification in wrong number TCPA cases. Importantly, the Court laid out arguments for defeating plaintiffs’ unreliable methods of identifying class members and stressed the importance of individualized inquiries of consent when a defendant simply attempts to call consenting phone numbers.

 

 

U.S. District Judge Brian R. Martinotti recently granted in part and denied in part a motion to dismiss a Telephone Consumer Protection Act class action lawsuit based on unsolicited text messages sent through an automated dialing system.  The ruling illustrates the nuanced approach taken by some courts in analyzing whether individual text messages can form the basis of a TCPA suit.

In Zemel v. CSC Holdings, LLC, Case No. 18-2340-BRM-DEA, plaintiff Daniel Zemel alleged violations of the TCPA based on three text messages allegedly sent by an automatic dialer on behalf of CSC Holdings.  The first text message was a confirmation to Zemel regarding the creation of an account (Zemel contended that this first message was unsolicited).  The first text message invited him to either respond “STOP” to opt out of receiving messages, or “HELP.”  Zemel responded to the first text message with the message “HELP.”  He then received a second text message with information on how to get live support, to which he responded “STOP.”  The third and final text message asked him to identify the messages he wanted to opt out of.

The Court ruled that Zemel had pled sufficient factual allegations to state a TCPA claim based on the first text message.  Specifically, the claim avoided dismissal by alleging that CSC Holdings used an automatic dialer to send the unsolicited first text message.  The Court, however, dismissed the other TCPA claims arising from the second and third texts.  According to the Court, Zemel consented to the second text by texting “HELP” in response to the first text message.  The district court judge ruled that there is no TCPA violation “when an individual sends a message inviting a responsive text.”  The Court further found that the third text message was merely confirmatory and also not in violation of the TCPA, ruling that “not only is this clearly a confirmatory text, not including any marketing material, but it was the only additional text message sent.”

The Court’s ruling in Zemel is based on a close analysis of individual text messages to determine application of the TCPA.  TCPA defendants would be well-advised to perform similar analyses of individual text messages to avoid potential violations.

Troutman Sanders is counsel in numerous TCPA individual and class actions throughout the country and routinely advises clients on potential TCPA issues.

 

On December 17, a federal judge in the U.S. District Court for the District of New Jersey denied a motion to dismiss a lawsuit alleging that Quest Diagnostics violated the Telephone Consumer Protection Act by placing debt collection calls to an individual on her mobile device without her consent.

In his six-page opinion, Judge William J. Martini ruled that plaintiff Judy Wilson had sufficiently alleged that the equipment used to place the call at issue qualified as an automatic telephone dialing system, or ATDS, which is prohibited under the TCPA and is defined under the statute as “equipment which has the capacity to store or produce telephone numbers to be called, using a random or sequential number generator and to dial such numbers.”

Wilson alleged that she received an unsolicited call from Quest, the purpose of which was to collect a debt from someone other than Wilson. This was the first call Wilson ever received from Quest, and she had not previously consented to being contacted by Quest on her cell phone. Wilson also alleged that when she answered the call, she heard a momentary pause before a representative spoke to her, a fact which indicated (to Wilson) that Quest had used a predictive dialer to place the call.

Judge Martini’s ruling noted that a predictive dialer has been considered an ATDS under “binding precedent,” and held that “[d]ead air after answering the phone is indicative that the caller used a predictive dialer.”

The key question in the case was what falls within the TCPA’s definition of “autodialer.”  In 2003, the FCC issued a ruling that found that a predictive dialer, such as “equipment that dials numbers and, when certain computer software is attached, also assists telemarketers in predicting when a sales agent will be available to take calls” fell within the TCPA’s definition of an ATDS.  The FCC reaffirmed this finding in 2008 and again in 2015 in an omnibus order.

In March 2018, the D.C. Circuit ruled in ACA International v. FCC that that the FCC’s 2015 broad interpretation of autodialer was “utterly unreasonable” because under such a broad definition, all smartphones would be considered autodialers.  In June, the Third Circuit agreed and ruled in Dominguez v. Yahoo that ACA International was binding.

Judge Martini’s ruling interpreted Dominguez to mean that ACA International did not strike down the FCC’s 2003 and 2008 orders, but only the 2015 omnibus order.  Citing the 2003 order, Judge Martini concluded that “a predictive dialer qualifies as an ATDS so long as it has the capacity to dial numbers without human intervention.”

Judge Martini’s ruling leaves room for the autodialer issue to be revisited later in the litigation, after the parties have had an opportunity to conduct discovery.

 

 

 

On December 14, the U.S. District Court for the Northern District of California dismissed a proposed Telephone Consumer Protection Act class action against Agoda Company Pte., ruling that the subject text message was not an advertisement for Agoda’s app.

Agoda runs a worldwide hotel reservation service that customers can use through the company’s website or through its smartphone app.  The suit, brought by consumer An Phan, was initially filed in state court but was removed by the defendants.  According to the complaint, Agoda is a subsidiary of Priceline.

Phan alleged that in order to book a hotel room using the service, customers must submit their name, e-mail address, country of residence, and mobile phone number.  Once the booking is complete, customers receive a text message reading: “Good news!  Your Agoda booking [number] is confirmed.  Manage your booking with our free app.”

Judge Beth Labson Freeman agreed with Agoda and ruled that the confirmation texts do not violate the TCPA even though they are sent with an automated dialing system because their purpose is limited to confirming bookings and encouraging customers to manage their bookings via the app.  The texts are sent as part of an “ongoing business transaction.”

In the order granting Agoda’s motion for summary judgment, Judge Freeman wrote: “Here, the context and the content of the messages demonstrate that the purpose of the messages was not to advertise or telemarket, but instead was directly cabined to facilitating and completing an existing transaction.”

Phan argued that Agoda’s inclusion of a link to its app in the confirmation text was “superfluous” advertising for the app.  The Court disagreed, stating that the app is “readily analogized” to Agoda’s website.  According to the ruling, “Though the app may fairly be considered a product or service of Agoda, the messages simply cannot be said to advertise the commercial availability of this product or service under the law.”

Consent Requirement Hinges on Message Content

This decision highlights the importance of the specific content of the communication at issue in a TCPA case, which impacts the type of consent that is required.  According to the FCC in a 2012 ruling, if a call utilizing auto-dialer or prerecorded technology “includes or introduces any advertisement or constitutes telemarketing,” then prior express written consent from the telephone subscriber is required.  In re Rules & Regs. Implementing the TCPA of 1991, 27 FCC Rcd. 1830, 1838-44 (2012) (“2012 Order”); 47 C.F.R. § 64.1200(a)(2).  The FCC regulations define prior express written consent as a written agreement that includes “clear and conspicuous disclosure informing the person signing that by executing the agreement, such person authorizes the seller to deliver or cause to be delivered to the signatory telemarketing calls using an automatic telephone dialing system or an artificial or prerecorded voice.”  2012 Order, 27 FCC Rcd. at 1855.  In July 2015, the FCC reiterated that compliance hinges on whether the consent meets the definitional requirements of “prior express written consent” as set forth in the FCC’s 2012 Order.  In re Rules & Regs. Implementing the TCPA of 1991, 30 FCC Rcd. 7961, 8012-14 (2015).

Here, Phan provided express consent for the text messages when he voluntarily provided his phone number and agreed to Agoda’s Terms of Use and Privacy Policy.  Written consent was not required because of the Court’s ruling that the text message did not contain advertising or telemarketing content.

Practical Implications

While TCPA cases continue to be filed at an increasingly high rate, companies should ensure that the messages they send or calls they place to customers are based upon consent and that they relate to the business transaction(s) for which the contact information was obtained.  In short, consent continues to be viewed contextually, and compliance measures should reflect this mindset.

The lawsuit is An Phan v. Agoda Company PTE Ltd., et al., Case No. 5:16-cv-07243, in the U.S. District Court for the Northern District of California.

On December 12, the Federal Communications Commission adopted new rules that will establish a reassigned telephone number database that companies can use to check their call lists.  As an incentive to use the database, the FCC has provided a safe harbor:  companies will not face liability for calls to reassigned numbers caused by database error.  It appears that under the safe harbor, if a reassignment is not in the database, and the caller used the database and relied upon it, then the caller is not liable for calls placed to the reassigned number. 

According to the Commission, the database will permit callers to verify—before calling a number—whether that number has been permanently disconnected and is available for reassignment.  “Each month, voice providers and the Toll Free Numbering Administrator will report information to the database regarding permanently disconnected numbers,” explained FCC Chairman Ajit Pai in his statement.   

Commissioner Michael O’Rielly stated his preference for using existing commercially-available databases, but applauded the inclusion of “a robust safe harbor” in the order.  “The costs of creating, maintaining, and using the database will be significant, and we simply cannot justify it without providing a corresponding benefit to callers who pay to use it,” O’Rielly stated.  “In all reality, this database will always be imperfect, meaning, despite our action effectively requiring callers to use it, users will still need to be shielded from pointless lawsuits.” 

While this is good news for many companies, the details on the database and safe harbor are still unclear as the FCC has not officially released the order yet.  There is no timetable for the database’s construction, and the Commission plans to select an independent third party to administer the database.   

While the FCC has yet to formally release a copy of the final order with the safe harbor language, a press release announcing adoption of the rule is available here

The district court in the Northern District of Illinois granted summary judgment to the defendant in a TCPA case on the grounds that its dialing system no longer fit the definition of an automatic telephone dialing system (“ATDS”) because it dialed numbers from a stored list.  In doing so, the Court reversed its previous decision on summary judgment and clearly rejected the FCC’s previous guidance on the issue. 

The case is Johnson v. Yahoo!, Inc., No. 14-cv-2028 (N.D. Ill. November 29, 2018).  A copy of the opinion can be found here. 

Plaintiff Rachel Johnson alleged the defendant’s text messaging services caused text messages to be sent to her by pulling her number from its address book and automatically sending text messages to her cell phone, violating the Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq. (“TCPA”).  In first denying the defendant’s motion for summary judgment in 2014, the Court reluctantly relied on FCC decisions from 2003, 2008, and 2012 that interpreted ATDS to include systems that dialed numbers from a stored list without human intervention.  The Court noted its disagreement with this expansive interpretation but concluded that it was bound to follow the FCC guidance. 

However, after ACA International v. FCC, 885 F.3d 687, 695 (D.C. Cir. 2018) overturned the FCC’s 2015 Order, which reaffirmed the previous orders, the defendant filed a motion for reconsideration and the Court jumped at the chance to revisit its previous ruling.  The Court first considered whether ACA International left the previous FCC Orders intact – a question that has divided courts since March.  It found that ACA International had “wiped the slate clean” because the 2015 Order “brought the entire agency definition of ATDS up for review in the D.C. Circuit.”  The court in ACA International “was telling the agency to start over.” 

No longer bound to apply the “more expansive interpretation” of the FCC, the Court turned to the text of the statute.  Finding the statute “is not ambiguous,” the Court determined an ATDS must store or produce numbers using a random or sequential number generator and dial those numbers.   Although the Court relied on the Ninth Circuit’s decision in Marks v. Crunch San Diego, LLC for the proposition that the previous orders no longer had effect, it took a more commonsense approach to its reading of the statute and did not adopt the expansive interpretation in Marks.  Therefore, the Court granted the defendant’s motion for reconsideration and granted summary judgment in its favor because its system did not meet the definition of an ATDS. 

In the wake of ACA International, courts have split on a number of questions, including the effect of the decision on prior FCC Orders and what the proper definition of an ATDS is now.  The Court in Johnson joined a number of courts that have found the prior FCC rulings to be eviscerated.  Likewise, many courts considering the definition of an ATDS have found that a system must have the capacity to dial numbers that have been randomly or sequentially generated to qualify, including published opinions from the Second Circuit in King v. Time Warner Cable, Inc. and the Third Circuit in Dominguez v. Yahoo, Inc.  However, some courts, such as Marks, have read the statute to include the expansive definition previously embraced by the FCC, even though the D.C. Circuit rejected that expansive definition. 

Fortunately, the FCC appears poised to resolve this uncertainty and issue guidance on the definition of what constitutes an ATDS.  Currently before it is a petition for a declaratory ruling on the definition of an ATDS and it has sought comment on the issue.  Most industry insiders expect a ruling from the FCC soon, and many expect it to adopt a similar definition as the court in Johnson.  Troutman Sanders will continue to monitor the TCPA landscape in the meantime.

 

On November 28, Senators Dianne Feinstein (D-Calif.) Richard Blumenthal (D-Conn.), and Amy Klobuchar (D-Minn.) introduced the REAL PEACE Act, short for “Robocall Elimination At Last Protecting Every American Consumer’s Ears.”  The goal of the legislation is to provide the Federal Trade Commission with the power to regulate companies that facilitate robocalls and, of particular importance, end the common carrier exemption in the Federal Trade Commission Act that purports to enable illegal robocalling.

With respect to the REAL PEACE Act, Sen. Feinstein noted in her official press release that, “[i]llegal robocalls are a nuisance to every person with a phone number” and “[t]echnology advances have helped robocallers hide their true identity and location, making it easier for them to relentlessly target and harass Americans.  Our bill will close an FTC loophole so we can finally put illegal robocallers out of business.”

Relatedly, Sen. Blumenthal stated that “[t]his bill would close an outdated loophole that enables scammers and spammers to make intrusive and illegal robocalls to millions of unsuspecting American households, without suffering any consequences.”  Further, Sen. Blumenthal offered that “[t]hese calls are not just unsolicited and disruptive—they are often dangerous and used to defraud consumers.  Telecommunication companies should be doing everything they can to protect their customers from illegal robocalls. The REAL PEACE Act will give long neglected enforcement authority to the FTC that allows them to more aggressively crack down on these calls and finally hold bad actors accountable.”

Based on the comments surrounding the purpose of the REAL PEACE Act, it is clear that lawmakers—specifically, Democratic lawmakers—are focused on trying to find different ways to regulate “robocallers” generally, as well as expand regulatory oversight of various communications that are directed at consumers.