Caller ID spoofing—the act of using commercially-available technology or services to alter the name and telephone number that appear on the called party’s caller ID display—is pervasive. It presents significant risk not only to recipients (of being duped into thinking a call is from someone it is not) but also to the person or business whose name and telephone number the spoofer appropriates. An unknowing recipient of a spoofed call could initiate legal proceedings against a completely innocent person or business whose information has been spoofed, causing that party unwarranted reputational harm. Although federal and state governments have attempted to legislate against illegitimate caller ID spoofing, such legislation has struggled to counteract the problem. Recently, however, legislators at both levels of government have undertaken new efforts to curtail harassing and deceptive use of spoofing.
Last week a New Jersey federal district court dismissed a putative Telephone Consumer Protection Act (“TCPA”) class action against Kohl’s Department Stores Inc. (“Kohl’s”), Viggiano v. Kohl’s, Case No. 17-0243-BRM-TJB, because plaintiff Amy Viggiano failed to unsubscribe from Kohl’s text messages in the matter in which Kohl’s instructed.
In her putative class action, Viggiano admitted that she had consented to receiving text messages initially, but claimed that she changed her mind and relayed this message to Kohl’s. Viggiano alleged that she sent multiple messages to Kohl’s expressing that she no longer wanted to receive any messages, including messages like “I don’t want these messages anymore.” However, she acknowledged that she never texted the word “STOP” to the defendant, a point which was the focus of Kohl’s motion to dismiss.
Kohl’s argued that it provided a direct opt-out mechanism for customer messaging in compliance with FCC requirements. The terms and conditions to Kohl’s mobile sales alerts instruct customers to respond with one of several words in order to opt-out of future messaging. The opt-out mechanism is triggered by words like STOP, CANCEL, and UNSUBSCRIBE. Viggiano did not text any of the single-word commands that Kohl’s instructed would terminate the text alerts, but instead sent several sentence-long messages. Kohl’s demonstrated that Viggiano received an automated text in reply to her messages which stated “Sorry we don’t understand the request! Text SAVE to join mobile alerts . . . Reply HELP for help, STOP to cancel.” Even accepting the facts in the complaint as true, the court found that Viggiano did not plausibly allege that she had a reasonable expectation that by sending the messages in question, she effectively communicated a request for revocation. Further, Viggiano did not allege that Kohl’s had “deliberately design[ed] systems or operations in ways that make it difficult or impossible to effectuate revocations.” In fact, the court found that the facts in the complaint suggested Viggiano herself adopted a method of opting out that made it difficult or impossible for defendant to honor her request. In dismissing the case, the court rejected Viggiano’s argument that her messages were “unequivocal written withdrawals of consent.”
This decision follows a case with similar facts from the Central District of California, Epps v. Earth Fare, Inc., No. 16-8221, 2017 WL 1424637, at *6 (C.D. Cal. Feb. 27, 2017), which resulted in dismissal on the same grounds. Taken together, these cases suggest that where subscribers to text message alerts are provided with clear instructions on how to revoke consent, a plaintiff’s failure to follow those instructions may provide an effective defense to a claim under the TCPA.
A district court recently decertified a class of plaintiffs seeking damages after the judge ruled that recent changes in the Telephone Consumer Protection Act (the “TCPA”) warranted decertification. In particular, the court ruled that under the “Solicited Fax Rule,” the question of consent required individualized analysis, and rejected the plaintiff’s argument that solicited faxes require the specific opt-out language required by TCPA regulations.
Plaintiff Lawrence S. Brodsky, an insurance wholesaler, filed a lawsuit against HumanaDental Insurance Company (“HumanaDental”) following the receipt of two identical one-page fax messages sent by Humana Specialty Benefits. Plaintiff has “market agreements” with numerous insurance companies in which he sells those companies’ products through various insurance agents and independent contractors. Plaintiff entered one such contract with Humana Insurance Co. “and all of their affiliates,” which stipulated that Plaintiff agreed that Humana Insurance Co. and all of its affiliates “may choose to communicate with [Plaintiff] through the use of . . . facsimile to the . . . facsimile numbers of” Plaintiff. In connection with this agreement, Plaintiff provided Humana Insurance Co. with his facsimile number.
Following the denial of HumanaDental’s motion for summary judgment, the court granted HumanaDental’s motion for class certification in part and certified a class of entities who received one or more faxes between May 2007 and September 2008 that named Humana Specialty Benefits or HumanaDental on the bottom of the fax and, among other items, contained an “opt out” notice that stated “If you don’t want us to contact you by fax, please call 1-800-U-CAN-ASK,” or “If you don’t want us to contact you by fax, please call 1-888-4-ASSIST.” Plaintiff argued that these faxes violated the TCPA because they did not contain the proper “opt out” language.
The Solicited Fax Rule
The TCPA prohibits sending “unsolicited advertisements” via fax, and a fax is “unsolicited” if the recipient has not given its prior expression invitation or permission to receive the fax. The TCPA provides select exceptions to the ban on unsolicited faxes if, among other things, the fax contains an “opt-out notice” that meets various statutory requirements. In 2006, the Federal Communications Commission (the “FCC”), pursuant to its authority to prescribe regulations to implement the requirements of the TCPA, promulgated the “Solicited Fax Rule,” which required both solicited and unsolicited faxes to include the opt-out notice described in the TCPA. In other words, the FCC’s 2006 rule mandated that senders of solicited faxes comply with a statutory requirement that applied only to senders of unsolicited faxes.
In October 2014, the FCC granted certain non-party petitioners retroactive waivers of the Solicited Fax Rule in light of inconsistencies between the Solicited Fax Rule and other FCC guidance (the “2014 Order”). The FCC also explicitly invited “similarly situated” parties to apply for other retroactive waivers. (Prior discussion on this blog regarding the Solicited Fax Rule waivers can be found on this blog here.)
HumanaDental applied for and received such a waiver. The waiver explicitly excused HumanaDental for any failure “to comply with the opt-out notice requirement for fax advertisements sent with the prior express invitation or permission of the recipient prior to April 30, 2015.”
Following the 2014 Order, several fax senders filed petitions for review of the FCC’s decision in multiple circuit courts. These petitions were consolidated into an action pending in the District of Columbia Circuit. In March 2017, a split panel of the D.C. Circuit struck down the Solicited Fax Rule in Bais Yaakov v. FCC, No. 14-1234 (D.C. Cir. Mar. 31, 2017) holding it “unlawful to the extent that it requires opt-out notices on solicited faxes.” The majority found that the TCPA only applies to unsolicited fax advertisements, such that the FCC lacked the authority to promulgate a rule governing solicited faxes.
HumanaDental’s Motion to Decertify Class
Following HumanaDental’s receipt of a waiver from the FCC and the D.C. Circuit’s decision in Bais Yaakov, HumanaDental moved to decertify the class, arguing that individual questions defeat the superiority and predominance requirements of Rule 23, such that the class must be decertified. The court agreed that the presence of the FCC waiver led to the conclusion that issues of individualized consent predominated, finding that: (1) a substantial portion of the certified class were not a parties to the same contract that Plaintiff entered into with Humana Insurance Co.; (2) select members of the class may have revoked their consent even after entering into such a contract; and (3) the “scope” of a particular consent in the contract might not extend to other “affiliated” class members offering insurance at the same location. The court noted by way of example that while Plaintiff was a party to the contract, at least seven other individuals had his permission to use his fax machine during the time period at issue; questions regarding whether those other individuals had consented to receiving faxes from HumanaDental would “consume and overwhelm” trial.
In so holding, the court rejected Plaintiff’s argument that the waiver, while insulating HumanaDental from an administrative enforcement action with the FCC, had no effect in a private TCPA action. Plaintiff relied on a single authority for its position, but the Court rejected that decision’s analysis and noted that the case had been “called into question by a number of authorities cited by Defendant” and sided with the caselaw cited by Defendant.
With regard to the application of Bais Yaakov, the Court also declined to adopt Plaintiff’s argument that the case was inconsistent with the Seventh Circuit’s decision in Holtzman v. Turza. Specifically, the court found that, at best, dicta from that decision could be read to expand the TCPA’s requirements relating to opt out notices to cover solicited as well as unsolicited faxes, but declined to afford Turza “a reading that would improperly expand the TCPA.”
The Court concluded that the waiver and Bais Yaakov bring the question of consent back into the picture. This decision provides defendants with a stronger argument for defense against motions to certify classes in instances where the communications in question include solicited communications.
Plaintiff has appealed this decision to the Seventh Circuit.
The Northern District of Illinois recently refused to certify a class in a case brought under the Telephone Consumer Protection Act, 47 U.S. Code § 227 (“TCPA”), on the grounds that the class could not include members who lacked Article III standing, and that determining whether individual class members had standing would lead to a multiplicity of mini-trials. See Christopher Legg et al. v. PTZ Insurance Agency LTD, et al., Case No. 14-C-10043. The decision was based in part on the Court’s finding that class members could not have suffered a concrete injury under Spokeo v. Robins (previously discussed here) if they consented to the calls, irrespective of the TCPA’s requirement that “advertising” calls require express written consent. Thus, the Court granted the defendants’ motion to strike class allegations and denied plaintiffs’ cross-motion to certify a class. Read More
Last week, a bi-partisan coalition of political groups and the federal government completed briefing cross motions for summary judgment in American Association of Political Consultants, Inc., et al. v. Sessions, Case No. 5:16-cv-00252-D (E.D.N.C.). The case challenges the constitutionality of a portion of the Telephone Consumer Protection Act (“TCPA”). The plaintiffs contend that the TCPA’s prohibition on making auto-dialed calls or texts to cell phones without the requisite consent, 47 U.S.C. § 227(b)(1)(A)(iii) (the “cell phone ban”), imposes a content-based restriction on speech that fails to pass strict scrutiny and is unconstitutionally under-inclusive (the plaintiffs’ complaint is discussed here). The government is defending the statute’s constitutionality (previously discussed here).
In their summary judgment briefing, the plaintiffs argued that content-based exemptions to the TCPA’s cell phone ban, such as an exemption for debt collection calls made on behalf of the government, render the cell phone ban unconstitutional. According to the plaintiffs, these exemptions produce outcomes where certain speech is privileged in violation of the First Amendment. In particular, the plaintiffs asserted that the exemptions fail to withstand strict scrutiny because they are not narrowly tailored to further a compelling governmental interest by the least restrictive means available. Further, the plaintiffs rejected the government’s suggestion of severing the disputed exemptions because such action would not curb the power of Congress or the Federal Communications Commission (“FCC”) to promulgate future content-based exemptions.
The government responded to the plaintiffs’ arguments by asserting that the TCPA’s cell phone ban is a content-neutral “time, place, and manner regulation” concerned with restricting the method of calling cell phones, but not the content of those calls. Alternatively, the government asserted that even if the TCPA was found to be a content-based restriction on speech, it would nonetheless survive strict scrutiny because it serves a compelling governmental interest in protecting consumer privacy, is narrowly tailored, and lacks a comparable alternative. The government also argued that the court should not consider certain FCC orders providing exemptions to the TCPA’s cell phone ban because such orders do not call into question the constitutionality of the TCPA itself. Finally, the government argued that should there be a finding that the government-debt exemption is unconstitutional, the court should sever that provision from the cell phone ban and leave the remainder of the TCPA intact.
Although we cannot predict how the court will decide the cross motions for summary judgment, it is significant that the court is set to rule on a broad challenge to the TCPA’s constitutionality. K&L Gates LLP will continue to monitor the case and post developments as they occur.
On June 22, 2017, the Second Circuit affirmed summary judgment for a defendant in a case of first impression, holding that under the Telephone Consumer Protection Act, 47 U.S.C. § 227 (“TCPA”), consent to be contacted by telephone cannot be unilaterally revoked by one party when that consent is provided as bargained-for-consideration in a bilateral contract.
In Reyes v. Lincoln Automotive Financial Services, the plaintiff Alberto Reyes, Jr. (“Reyes”) leased a new Lincoln MKZ luxury sedan from a Ford dealership, defendant Lincoln Automotive Financial Services (“Lincoln”). The lease agreement itself provided “express consent” by Reyes for Lincoln to contact him “by manual calling methods, prerecorded or artificial voice messages, text messages, emails and/or automatic telephone dialing systems…. regardless of whether you incur charges as a result.” After the lease agreement was finalized, Reyes ceased making required payments under the agreement. After Lincoln placed multiple calls (using both live and pre-recorded voice messages) to Reyes cellular phone, Reyes allegedly sent a letter to Lincoln revoking his consent to be contacted by Lincoln at that telephone number.
Reyes filed a complaint against Lincoln in the Eastern District of New York, alleging violations of the TCPA and seeking $720,000 in damages. On June 20, 2016, the Eastern District of New York granted summary judgment to Lincoln, holding in part that “the TCPA does not permit a party to a legally binding contract to unilaterally revoke bargained-for consent by telephone.”
In affirming the district court’s ruling regarding revocation of consent, the Second Circuit acknowledged that the Third Circuit and Eleventh Circuit have previously ruled that a party can revoke consent under the TCPA–rulings that were the basis of the FCC’s 2015 Ruling that prior express consent is revocable under the TCPA (discussed here). However, the Second Circuit held that the question presented by the Reyes appeal was different. Unlike the plaintiffs in those cases who gave consent “gratuitously,” in the context of an application process, Reyes’s consent was included as an express provision of his lease agreement with Lincoln.
The Second Circuit rejected Reyes’s argument that under common law, the term “consent” is revocable at any time. While the Second Circuit agreed that the common law definition of “consent” applied to consent in the context of the TCPA, it held that “common law is clear that consent to another’s actions can ‘become irrevocable’ when it is provided in an legally binding agreement.” In such circumstances, any modification to consent must receive the “’mutual assent’ of every contracting party in order to have legal effect.” The Court reasoned “[i]t is black-letter law that one party may not alter a bilateral contract by revoking a term without consent of a counterparty.”
The Second Circuit further deemed “meritless” Reyes’s contention that his consent could be revoked because it was not an “essential term” of his lease. Instead, the Court reasoned that terms of a contract are enforceable even if they are not “essential.” “A party who has agreed to a particular term in a valid contract cannot later renege on that term or unilaterally declare it to no longer apply simply because the contract could have been formed without it.”
The Second Circuit also declined to accept Reyes’s argument that such an interpretation of consent under the TCPA would not further the statute’s remedial purpose of protecting consumers from unwanted telephone calls. Finding “no lack of clarity in the TCPA’s use of the term ‘consent,’” the Court rejected application of the remedial rule of statutory interpretation. In doing so, the Second Circuit recognized that businesses may insert consent clauses into standard sales contracts “thereby making revocation impossible in many instances,” but held that this “hypothetical concern” would be for Congress to resolve, not the Courts.
This ruling may provide a strong defense to revoked-consent claims brought against defendants by those in contractual relationships with those defendants. It remains to be seen whether the reasoning set forth by the Second Circuit will be adopted by other courts.
In a 475-page opinion issued earlier this week, the United States District Court for the Central District of Illinois ordered Dish Network Corp., to pay $280 million to the United States government and four states, marking what the government says is a record fine for telemarketing violations, including violations of the Telephone Consumer Protection Act (“TCPA”), the Telemarketing Sales Rule and the laws of California, Illinois, North Carolina, and Ohio, through what the Court called “millions and millions” of calls.
In March 2009, the states and the Federal Trade Commission (“FTC”) sued Dish Network after the company settled with 46 states for purported violations of “do not call” rules and rules governing robocalling. The Court found that Dish Network and its contractors made millions of illegal calls by calling numbers listed on the national Do Not Call Registry and by placing telemarketing calls that deliver prerecorded messages to live consumers, in violation of the TCPA and the states’ laws governing telemarketing.
Plaintiffs sought damages in the amount of $2.1 billion, but the Court determined that the amount requested, approximately 150 percent of Dish Network’s annual profits, “could materially affect Dish’s ability to continue operations.” Although the Court declined to interpret the TCPA as allowing an award “up to” $500 per violation rather than $500 per violation, as Dish Network requested, the Court exercised its discretion in awarding an amount less than $500 per violation. An award of $500 per violation would have incurred a penalty of $8.1 billion; instead, the Court awarded $280 million, or twenty percent of Dish Network’s 2016 profits, an amount it determined to be “proportionate and reasonable” and “a miniscule fraction of maximum possible penalties and damages.” The Court determined the reduced award to be appropriate given that Dish Network “made some efforts to avoid violations in its direct marketing and took some actions” to monitor third-party contractors while substantial enough to reflect “[t]he injury to consumers, the disregard for the law, and the steadfast refusal to accept responsibility.”
The Court further prohibited the company from violating do-not-call laws moving forward and imposed a 20-year plan for supervision of Dish Network’s telemarketing.
This is the second judgment against Dish Network issued in 2017 for violations of the TCPA (the prior judgment, issued by a federal court in North Carolina, is discussed here and here). As the cases against Dish Network demonstrate, companies may face substantial liability based on the actions of third-party contractors.
A New York U.S. District Court recently granted summary judgment in favor of defendant Rite Aid Headquarters Corporation in a putative Telephone Consumer Protection Act (“TCPA”) class action, holding that calls reminding customers about the flu vaccine were “health related” and therefore Rite Aid was not required to obtain prior express written consent before making the calls. Though the opinion was filed under seal on March 30, 2017, it was made public last week. Read More
By Stephen J. Matzura and Marty Stern
On the heels of a consent decree with a services provider imposing a $750,000 penalty for its Wi-Fi management practices at convention center venues, the FCC slammed another services provider earlier this week for allegedly blocking Wi-Fi access at the Baltimore Convention Center. In a Commission-level Notice of Apparent Liability (“NAL”), the FCC proposed a $718,000 penalty against M.C. Dean, Inc. for allegedly blocking access to third-party Wi-Fi hotspots during at least 26 days in November and December 2014 at the venue, “apparently” in violation of Section 333 of the Communications Act.