Telephone Consumer Protection Act Continues to Be Hot Topic

By Paula Bernier August 23, 2013

Stricter enforcement related to the Telephone Consumer Protection Act takes effect next month due a recent ruling from the Federal Communications Commission. And if your company is discovered to not comply with the rules, it could cost you big.

“Any business using autodialers must collect express written consent when calling a wireless consumer, and verify that the wireless number still belongs to that consumer, regardless of whether there is an established business relationship,” explains Becky Burr, deputy general counsel and chief privacy officer at Neustar, which sells the On-Demand Verification solution to help companies address this requirement.

Fines can run up to $16,000 per violation and any consumer can bring a statutory damages claim of up to $500 per call without having to show any harm, according to

Burr, who adds that one recent case settled for $47 million after the business concluded that having a customer’s phone number on an invoice did not constitute prior express consent to receive text messages.

There’s been a lot of recent action around the Telephone Consumer Protection Act, which prohibits not only the above-described practices, but also such telemarketing practices as placing calls to phone numbers on the do not call list.

As of August 2012, TCPA filing increased 54 percent from the prior year, according to insideARM.com. And a Bloomberg Law piece by James G. Snell and Carlos P. Mino titled “Telephone Consumer Protection Cases Are on the Rise,” says: “Originally, the TCPA was viewed as a statute that could be enforced through small claims actions. However, it has been used by plaintiffs to assert class actions, and the courts and the FCC have in some instances interpreted broadly the prohibitions under the TCPA. Courts and regulators are also grappling with the application of the TCPA to technologies developed after the Act was passed.”

In response to rising concerns within the industry about all of this – part of which was fueled by two federal cases in which plaintiffs tried to hold sellers liable for violations of the Telephone Consumer Protection Act (and for which the court referred both cases to the FCC) – the Federal Communications Commission in May issued a declaratory ruling saying businesses using third parties for telemarketing are not automatically liable for violations of the Telephone Consumer Protection Act, but that the businesses may still be liable under federal common law principles of agency. It should be noted, however, that there was some dissent within the FCC about this ruling, and that some believe the commission’s ruling is fuzzy as it relates to cases brought under Section 227(c)(5).

Paul Bond and Henry Pietrkowski, attorneys with ReedSmith, in an Aug. 6 article opine that part of the reason for the explosion in TCPA litigation in the past three years is that the formula for plaintiff recovery is so simple.

“Did the defendant send the plaintiff a text message, or call the plaintiff and/or leave a message using a prerecorded voice? Did the defendant use an ‘automatic telephone dialing system’ to send that text or make that call?” they write. “If so, unless the message was for emergency purposes or the defendant had the plaintiff's prior express consent, the plaintiff will demand $500 in statutory damages per call or text. For willful violations, the TCPA provides a recovery of up to $1,500 per call or text. Because there is no statutory cap, class action damages under the TCPA can quickly mount to catastrophic levels.”

However, there is an interesting twist to all of this in that evolving technology could help redefine or, probably more correctly, displace, legacy definitions on which some regulations on this front are now based.

Bond and Pietrkowski propose the boom in mobile phones with SMS texting capabilities has put what could be considered an automatic telephone dialing system into the hands of virtually every consumer.

“Virtually no consumers had previously owned autodialers capable of storing, producing and leaving messages, but sending group text messages today is a common occurrence,” they write. “Smartphones and mobile devices can send group texts by downloading widely available applications. Any desktop or laptop computer can do the same by using web applications. Are all of these computers, smartphones and mobile devices therefore ‘automatic telephone dialing systems’ because they have the capacity to text random or sequential numbers?”

They go on to note that this is more than mere conjecture.

“The FCC currently is considering the petition of GroupMe Inc./Skype Communications S.A.R.L. because of putative class action litigation on this very point. The GroupMe application allows users to send text messages to groups of friends. The app is free to download and free to use. Users agree to use the application only for noncommercial purposes and they agree that they obtained prior express consent from the individuals they add to the group to receive text messages from GroupMe and from other group members.

“Nevertheless, one individual group member sued GroupMe Inc. in a putative nationwide class action alleging that GroupMe violates the TCPA when it sends one or more emails to members of a group either when they join a group or if they do not respond to the group creator's invitation to join a group. The first amended complaint alleges that marketers in general use bulk SMS to send mass texts without consent, but does not specifically allege that is the purpose of GroupMe's app or that GroupMe's app is used by marketers as such. (This claim has not been tested in discovery — as GroupMe notes in its petition, "Mom" and "Dad" are the most common group names on GroupMe's servers.)

 

Bond and Pietrkowski go on to say that GroupMe has challenged the idea that computers, smartphones and devices used to send text messages are "automatic telephone dialing systems" under the TCPA.




Edited by Rich Steeves

Executive Editor, TMC

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