On March 16, 2018, the D.C Circuit issued a decision invalidating portions of the FCC’s 2015 TCPA Omnibus Declaratory Ruling and Order. Notably, the decision overturns as “arbitrary and capricious” the FCC’s definition of an automated telephone dialing system (“ATDS”) and the one-call safe harbor for calling a phone number that has been reassigned to a non-consenting person. The decision was not a complete victory for businesses as the D.C. Circuit sustained the FCC’s order on both consumers’ ability to revoke consent and the scope of the “time-sensitive healthcare call” exemption.

The FCC’s Definition of ATDS is Arbitrary and Capricious

In the 2015 Order, the FCC defined an ATDS as equipment that contained the potential “capacity” to dial random or sequential numbers, even if that capacity could be added only through specific modifications or software updates, so long as the modifications were not too theoretical or too attenuated. In crafting this definition, the FCC noted that smartphones could be included within the definition and only categorically ruled out a rotary-dial telephones.

In striking down the 2015 Order, the court made it clear that under the current definition of an ATDS, anyone with a smartphone, which the court estimates to be 80% of the population, is at risk of violating the TCPA because “all smartphones, under the Commission’s approach, meet the statutory definition of an autodialer.” Under the FCC’s interpretation, if a person sent a group text message to ten acquaintances without obtaining their express consent, he or she would be liable for ten distinct violations of the TCPA, with a minimum damage recovery of $5,000. In sum, the court held that “[i]t cannot be the case that every uninvited communication from a smartphone infringes federal law, and that nearly every American is a TCPA-violator-in-waiting, if not a violator-in-fact.” The D.C. Circuit held that, if the 2015 Ruling does not encompass smartphones, then the FCC failed to “articulate a comprehensible standard.”

In striking down the FCC’s sweeping definition of an ATDS, the court ordered the FCC going forward to take into account whether a system actually used autodialer functionality or whether it was merely possible to download software to convert a telephone into an ATDS. Additionally, the court held that the FCC must determine whether the definition of an ATDS requires that a system “must itself have the ability to generate random or sequential telephone numbers,” or whether it is “enough if the device can call from a database of telephone numbers generated elsewhere.” Finally, the court left open the issue of human intervention. Based on the decision, if the FCC departs from the statutory requirement of using a random or sequential number generator, it must also tackle the issue of human intervention.

In light of Chairman Ajit Pai’s expression of support for business-friendly reforms to the TCPA, it is likely that the D.C. Circuit’s ruling may result in real change in this area of the law.

The FCC’s One-Call Safe Harbor and Definition of “Called Party” are Arbitrary and Capricious

The court then turned its attention to the distinct challenges raised by the reassignment of cell phone numbers. Under the 2015 Order, a caller could place only a single call to a reassigned number before running afoul of the TCPA. Per the 2015 Order, a “called party” was the current subscriber, i.e. the consumer assigned the number and billed for the call.

The D.C. Circuit rejected both the one-call safe harbor for calling reassigned numbers and the definition of “called party.” The court held that issues related to calls or texts to reassigned numbers where the prior owners had provided consent to be contacted, present a looming challenge because “there is no dispute that millions of wireless numbers are reassigned each year.”

The court set aside the FCC’s post-reassignment interpretation on the ground that a one-call safe harbor is “arbitrary and capricious.” In reaching this result, the court focused on the FCC’s own determination that callers must be able to reasonably rely on the consent provided by former subscribers when calling or texting. Based on the record before it, the court held that it was not reasonable to hold that placing a single call to a reassigned number was likely to afford a caller reasonable notice that the number was one of the millions of numbers reassigned each year. By striking down the one-call safe harbor and the definition of “called party,” the court provided defendants with a potential defense to avoid liability for calling reassigned numbers if a defendant can establish that its reliance on the former subscriber’s consent was reasonable at the time it placed calls to the new subscriber.

Critically, in addition to striking down the one-call safe harbor, the court set aside the definition of “called party” as the “current subscriber” on the grounds that it would impose strict liability for calls to reassigned numbers. Thus, it appears that defendants may once again argue that “called party” means “intended recipient” when defending against TCPA claims based on calls or texts to reassigned numbers.

Consumers May Still Revoke Consent in Any “Reasonable” Manner

In upholding consumers’ right to revocation of consent, the court set limits. As an initial matter, a consumer may only revoke consent using “reasonable” means. The reasonableness of the revocation is governed by a totality-of-the-circumstances test. Thus, if a consumer uses creative revocation techniques or declines to follow reasonable revocation procedures set forth by the caller, the revocation may not be reasonable or permissible. Moreover, the D.C. Circuit emphasized that the FCC’s ruling “does not address revocation rules mutually adopted by contracting parties,” meaning that callers and consumers may contractually agree to revocation mechanisms.

TCPA Consent Standards for Healthcare Calls Upheld

The D.C. Circuit declined to expand the scope of calls placed to wireless numbers without express consent “for which there is exigency and that have healthcare treatment purposes.” Under the 2015 Order, calls placed to consumers for certain purposes, including, appointment reminders, pre-operative instructions and lab results do not require consent. In upholding the contours of the 2015 Order, the court declined to except “advertisements, solicitations and post-treatment financial communications” from the consent requirements. The court held that billing communications are not made for “emergency purposes.”

Conclusion

As of now, the state of the TCPA is in flux. Under Chairman Pai, we are cautiously optimistic that the new FCC regime will likely advance more business-friendly rules. We will continue to monitor changes to the law and provide timely updates.

WebinarOn Thursday, September 10 at 12:00 p.m. Central, Seyfarth attorneys Michael Burns, Robert Milligan and Jason Stiehl will present the second installment of our 2015 Class Action Webinar Series. Presenters will discuss the climate to help retailers avoid becoming targets of litigation. This webinar will provide an overview of the current class action lawsuit landscape complete with discussion of recent cases, hot areas, and valuable takeaways to inform strategy. In addition, the panel will explain business practices that retailers should implement to reduce their risk of becoming a defendant in a class action lawsuit, including class action waivers.

Topics will include:

  • Telephone Consumer Protection Act (TCPA);
  • Song Beverly Consumer Warranty Act and similar state statutes;
  • Call Recording;
  • False Advertising and Comparative Pricing Fraud; ‘
  • Gift Cards/Loyalty Programs; and
  • Data Privacy.

register

If you have any questions, please contact events@seyfarth.com.

*CLE Credit for this webinar has been awarded in the following states: CA, IL, NJ and NY. CLE Credit is pending for GA, TX and VA. Please note that in order to receive full credit for attending this webinar, the registrant must be present for the entire session.

 

We are pleased to let you know that the webinar “Avoiding Liability and Limiting Exposure Under California’s Call Recording and Monitoring Privacy Laws” is now available as a podcast and webinar recording.

In Seyfarth’s first installment of its 2014 Class Action Webinar series, attorneys discussed how plaintiffs’ attorneys are increasingly filing class actions in California seeking to apply the state’s privacy laws to routine telephone communications between businesses and their customers.

As a conclusion to this well-received webinar, we compiled a list of key takeaway points, which are listed below.

  • CIPA applies to both in-bound and outbound calls. In some cases, companies may have compliant in-bound call procedures with appropriate disclaimers but lack such procedures with respect to outbound calls. Prudent companies will ensure that they have appropriate disclaimers for both in-bound and outbound. They should also look for opportunities to notify their customers of monitoring and call recording for quality assurance in other communications with customers, such as billing and on their website.
  • The use of a standard, nonbypassable disclaimer advising callers that their calls may be monitored or recorded is imperative.  Be sure callers hear the disclaimer before any recording or monitoring commences, ensure that the disclaimer plays for each call your company places or receives, and provide multilingual versions of the disclaimer where appropriate.  Consider using the sample language included in the presentation materials.
  • The recent trend is for consumer plaintiffs to bring CIPA claims under Section 632.7 as opposed to Section 632 to avoid the “confidential communication” requirement that may likely involve individualized inquiries that impede the ability to obtain class certification.

This blog recently reported on developments in California regarding potential liability for businesses under California’s Call Recording and Monitoring Privacy Laws for recording or monitoring inbound and outbound telephone calls with customers or employees as well certification pitfalls to such cases.  Other states, such as Illinois, have similar criminal statutes related to the recording or monitoring of such calls.  In Illinois, for example, it is a crime for any person to record any conversation or electronic communication unless done so with the permission and consent of all parties to the communication.  See 720 ILCS 5/14-2.  While recent California opinions have curtailed the ability for plaintiffs to bring class action complaints under California’s privacy laws, the Illinois Supreme Court has gone even further.  In a pair of opinions recently released by the Illinois Supreme Court, People v. Clark and People v. Melongo, the Illinois eavesdropping law was declared unconstitutional as violating the overbreadth doctrine under the First Amendment of the United States Constitution.

The Decisions in Clark and Molongo

In Clark, a Kane County man was charged with violating the eavesdropping law when he recorded judicial proceedings relating to a child support matter because there was no court reporter present.  People v. Clark, 2014 IL 115776 (March 20, 2014).  The Illinois Supreme Court recognized that while protecting “[a]udio recordings of truly private conversations are within the legitimate scope of the statute,” innocent conduct is also prohibited.  By way of example, the court explained that the statute criminalizes “(1) a loud argument on the street; (2) a political debate in a park; (3) the public interactions of police officers with citizens” … and “(4) any other conversation loud enough to be overheard by others whether in a private or public setting.”  None of these examples implicate privacy concerns – the interest which the law was designed to protect, but would subject the recorder to criminal prosecution.  The court reasoned that the statute burdens substantially more speech than is necessary to serve the interests the statute may legitimately serve and, therefore, is unconstitutional.
In Melongo, a Cook County woman was charged for recording three phone conversations with a court employee and then posting those recordings to her website.  See People v. Melongo, 2014 IL 114852 (March 20, 2014).  Melongo raised a slightly different issue than  the defendant in Clark.  The defendant was charged with not only recording communications without all parties’ consent, but also publishing audio recordings of those communications to her website, which violated the “publishing provision” of the statute.  Relying on the analysis in Clark, the Illinois Supreme Court held that because it had determined that the statutory provision criminalizing defendant’s recording of conversations was unconstitutional, the publication of those conversations can likewise not be unconstitutional because it would amount to a “naked prohibition against disclosure.”  In other words, as applied, the publishing provision makes it illegal to publish all manner of recorded communications, irrespective of any legitimate interest the publisher or public may have.

Conclusion

We expect the Illinois legislature to respond by drafting an updated statute that reflects the ubiquity of small, portable electronic devices in today’s world and responds to the overbreadth concerns raised in the Clark and Melongo opinions.  The impact of any future legislation will be addressed in future posts.