District Court Dismisses TCPA Claims Based on Good Faith Defense

The U.S. District Court for the Eastern District of North Carolina recently adopted a magistrate judge’s recommendation that summary judgment be entered in favor of a defendant because it had a good faith belief that it had consent to call the plaintiff’s number.

In Danehy v. Time Warner Cable Enterprises, Case No. 14-cv-133 (E.D.N.C.), a pro se plaintiff (“Plaintiff”) alleged that Time Warner violated the TCPA by using an automated telephone dialing system (“ATDS”) to call his cellular phone that was registered on the national do-not-call registry. The phone number at issue had previously belonged to a Time Warner customer who had provided the phone number as a secondary contact for Time Warner to use when he could not be reached at his primary phone number. Time Warner had made calls to, and received calls from, the customer using the number numerous times in the past. The number was eventually assigned to Plaintiff in August or September 2013.

On November 25, 2013, the customer requested service at his home, but had not updated his contact information. Time Warner, through a third-party contractor, called the number at issue six times from November 25 through November 26, 2013, attempting to contact the customer about his request for service at his home. Time Warner was unaware that the number no longer belonged to its customer. Plaintiff, who erroneously received the calls, brought TCPA claims under 47 U.S.C. § 227(b) (ATDS claim) and 47 U.S.C. § 227(c) and 47 CFR § 64.1200(c)(2) (do-not-call registry claim).

The magistrate judge held that (1) by providing the number to Time Warner, the Time Warner customer consented to receive calls and texts at the phone number, and (2) Time Warner’s good faith reliance on the fact that it had consent to call the number was a complete bar to Plaintiff’s claims. More specifically, in opposing summary judgment, Plaintiff argued that the requisite express consent under the statute requires Plaintiff’s consent (the called party) and not the customer’s consent (the intended recipient of the call). The magistrate judge discounted this argument, holding that even if the plaintiff were correct about prior express consent, “defendant’s good faith belief that it had consent for the calls precludes liability on [the] plaintiff’s ATDS claim under 227(b)” because “imposition of liability . . . [would be] unjust.” The magistrate judge also dismissed the do-not-call registry claim on the same grounds, noting that “the same equitable considerations that underlay permitting [Time Warner] to rely on [its customer’s] consent with respect to plaintiff’s ATDS claim apply to his do-not-call registry claim.”

The district court accepted the magistrate’s recommendation. Although it noted that the Fourth Circuit has not yet determined whether a defendant may rely on the good faith defense under these circumstances, it reviewed the case law available and found no clear error in the magistrate judge’s determinations and dismissed the claims accordingly.

This case provides a glimmer of hope for defendants that are faced with increasingly draconian, and in some cases unworkable, interpretations of TCPA requirements. All in all, although the Danehy court acknowledged that prior express consent may be required from the called party, not the intended party, it nonetheless dismissed the case on equitable grounds based on the good faith defense. We will have to wait and see if the Fourth Circuit adopts this defense. As of the date of this post, the Danehy opinion has not been appealed.

Ascertainability And TCPA Class Actions

An essential requirement for certifying a class under Rule 23 is a means for presently ascertaining who is or is not a member of the proposed class. A trio of recent district court decisions has applied this ascertainability requirement to proposed TCPA class actions. The cases reach different conclusions as to whether a list of telephone numbers is a necessary or sufficient means of ascertaining class membership.

In Leyse v. Lifetime Entertainment, No. 13-cv-05794-AKH (S.D.N.Y. Sept. 22, 2015), plaintiff alleged that defendant placed 450,000 prerecorded calls in violation of the TCPA. Because neither defendant nor its vendor retained a list of numbers called, the court concluded that there was no objective means of presently identifying whether “any particular individual is a member of Leyse’s proposed class.” On that basis, the court concluded that the class was not ascertainable, and denied certification. Plaintiff has since moved for reconsideration.

The following day, in Sherman v. Yahoo! Inc., No. 13-cv-0041-GPC (S.D. Cal. Sept. 23, 2015), the court also denied certification and rejected the argument that class members could be ascertained through defendant’s own database of mobile numbers, and, if needed, a subpoena to a wireless carrier for customer identifying information associated with the numbers that had received the allegedly improper text messages. The court rejected plaintiff’s methodology on three grounds. First, because mobile numbers were often reassigned to new users, particularly on prepaid plans, the current database of mobile numbers could not be used to determine who had received the text during the proposed one-month class period. Second, because more than 40% of mobile numbers were on group plans, the account holder for a particular number may not be the person who received the alleged prohibited text. Third, discovery of wireless carrier records would infringe on the statutory protections otherwise provided to carrier customer records. See, e.g., Cal. Pub. Util. Code § 2891.

The Court also rejected plaintiffs’ effort to manufacture common classwide issues by narrowing the class to a one-month period. The court found that this proposal offended the purpose of Rule 23, as it would encourage a multiplicity of suits for every other month during which texts were sent, with the concomitant “possibility of inconsistent verdicts, which is precisely what Rule 23 was designed to avoid.”

The next day, certification was granted in Bee, Denning, Inc. v. Capital Alliance Grp., No. 13-cv-2654-BAS (S.D. Cal. Sept. 24, 2015). There, plaintiffs obtained via subpoenas a list of all numbers that had received pre-recorded calls from defendants. Defendants argued only that the list was overbroad, as it encompassed residential numbers, rather than just mobile numbers. While noting that defendant’s “argument has merit,” the court determined to narrow the class definition to persons receiving the calls on mobile numbers. The court did not explain how it would determine whether a number was mobile or residential, or how the person who received the pre-recorded call (as opposed to persons who held the account) could be identified from a mobile number alone.

The assumption underlying the certification decision in Bee, Denning seems to be that a list of numbers remains a static and sufficient means of identifying class members. Defendants should be prepared to challenge that assumption at class certification, and require that plaintiff meet the burden of showing that the proposed class can be ascertained.

Drinker Biddle & Reath’s TCPA Team Sponsors 2015 TCPA Washington Summit

Drinker Biddle & Reath is a proud sponsor of one of the country’s most highly-anticipated conferences addressing key issues related to the TCPA, including the pending appeal of the FCC’s July 10, 2015 Declaratory Ruling and Order.  The PACE TCPA Washington Summit, which runs from September 27-29, 2015, features presentations from FCC Commissioner Michael O’Rielly, FTC Director of Consumer Protection Jessica Rich, and top class action defense lawyers, including our own Seamus Duffy.

More coverage to follow.

Petitioners Coordinate Efforts in Consolidated Appeal of the FCC’s July 10, 2015 Declaratory Ruling and Order

On September 21, 2015, petitioners ACA International, Sirius XM Radio, Inc., Professional Association for Customer Engagement, Inc., salesforce.com inc. and ExactTarget, Inc., Chamber of Commerce of the United States of America, Consumer Bankers Association, Vibes Media, LLC, Rite Aid Hdqtrs. Corp., and Portfolio Recovery Associates (collectively “Petitioners”) filed an unopposed joint motion for briefing format and schedule in their consolidated appeal of the FCC’s July 10, 2015 Declaratory Ruling and Order. See ACA Int’l v. FCC, No. 15-1211 (D.C. Cir. filed Sept. 21, 2015).

The Petitioners state that they “represent a broad array of businesses that operate in widely varying economic sectors, from healthcare services to satellite radio to debt collection …. [and] [g]iven the considerable differences among them, each Petitioner brings a somewhat different focus to this litigation.” Id. at 5-6. Although the various petitions focus on different aspects of the Order, the Petitioners state that they are collaborating and intend to challenge the following three aspects of the Order in one consolidated brief: (1) interpretation of ATDS, (2) treatment of reassigned numbers, and (3) treatments of revocation of consent. Id. at 6-7. Specifically, Petitioners challenge the FCC’s ATDS interpretation of “capacity” to include “potential functionalities” and inclusion of “different, mutually incompatible tests for what an ATDS must be able to do ….” Id. at 6. The Petitioners also challenge the FCC’s interpretation of “called party” as the current subscriber or customary user of the number rather than the intended recipient and argue that the one-call safe harbor provision fails to sufficiently address the problems associated with reassigned numbers. Id. at 7. Finally, the Petitioners argue that the Order’s requirement that callers “accept revocation of consent by any ‘reasonable’ means …. puts impossible, unnecessary logistical demands on businesses.” Id.

Rite Aid intends to separately challenge the Order’s differing treatment of calls delivering protected heathcare-related information to cellular lines with identical calls made to residential lines, as well as the FCC’s exemption of only “a narrow set of exigent treatment-related healthcare calls from the ATDS provision’s restrictions.” Id. at 7-8.

The Petitioners request that they be permitted to file an opening brief of 14,000 words with Rite Aid filing a targeted opening brief of 2,500 words addressing the healthcare-related aspects of the Order. Id. at 8. The Petitioners also propose that the briefing schedule conclude by the end of February 2016 with oral arguments conducted before the end of the 2015-2016 Term. Id. at 9.

FCC Issues Citations To Lyft And First National Bank Due To Alleged TCPA Violations

On September 11, the FCC’s Enforcement Bureau issued two similar citations highlighting telemarketing practices by Lyft, Inc. and the First National Bank (FNB). These Citations stated that each entity had violated the TCPA by failing to allow their respective customers to opt out of receiving telemarketing messages. As we previously reported, the Bureau during the summer had alerted PayPal to similar concerns about its subscription agreement. After the warning, PayPal modified its agreement so as to permit PayPal users to opt out of receiving automated telemarketing messages. These recent citations are shots across the bow at other commercial entities with messaging policies that the FCC views as too restrictive.

Lyft Citation. Lyft provides a “transportation matchmaking service that allows users to either download a mobile application or create an account on the Lyft website.” Consumers seeking to register for service are required to agree to receive texts and calls on their cellphones that may be placed using automatic telephone dialing or delivered via pre-recorded message. While the Lyft user agreement contains instructions for opting out of telemarketing, the agreement further specifies that “opting out of receiving text messages or other communications may impact your use of the Lyft Platform or the Services.” The FCC Citation states that the opt out instructions provided in searching the Lyft website are incomplete as they deal only with text messages, and further, that when an opt out request is made and implemented it is no longer possible to use Lyft services. As a result, the Enforcement Bureau stated that this opt-out opportunity was “illusory” as there is no alternative to agreeing to receive telemarketing calls and texts in order to use Lyft’s services. Noting that it is unlawful to require that a consumer be required to consent to receive telemarketing calls as a condition of purchasing services, the Citation observes that Lyft also circumvented FCC disclosure requirements. Finally, to the extent that Lyft sent telemarketing texts or calls without prior written consent, the FCC Enforcement Bureau determined that each such call or text would be a separate violation of the agency’s rules. Lyft was given 30 days to respond to the Citation in writing or by requesting a meeting with the FCC staff. Because Lyft is not directly regulated by the FCC, the Citation was a warning without monetary penalties; however the Citation stated that continued or future actions the agency finds violate the TCPA rules could be subject to FCC fines. Within days Lyft reportedly modified its disclosure and opt-in policies to allow continued use of Lyft services without any requirement to consent to receive telemarketing texts or calls.

FNB Citation. FNB offers banking and credit card services to consumers in several states. Its online banking services are accessed by its website and in order to activate online banking, a consumer is presented with an Online Banking Services Agreement and is directed to review the disclosures. One such disclosure states “You also consent to receiving text messages and e-mails from us at that number for marketing purposes.” FNB’s Apple Pay terms and conditions contain a similar disclosure, with an added statement that: “If at any time you revoke this consent, we may suspend or cancel your ability to use your Card in Apple Pay.” The FNB Citation observes that any requirement to consent to telemarketing in order to purchase a service violates TCPA rules prohibiting the placement of consent to receive telemarketing as a condition on the ability to access services. Like Lyft, FNB was provided with 30 days to respond either in writing or by requesting a meeting with the FCC staff.

Commissioner O’Rielly Reacts.  FCC Commissioner Michael O’Rielly released a statement concurrent with the Citations that reads: “Today’s Enforcement Bureau action showcases once again the Commission’s complete cluelessness when it comes to the tech economy, missing the point about how these free, popular, and entirely optional services actually work. The Bureau is targeting two innovators who are putting power in consumers’ hands to pay for their groceries or locate a safe ride directly from their mobile phones, for communicating with their customers on mobile phones.” For now, Commissioner O’Rielly’s view is in the minority and the FCC’s Enforcement Bureau is continuing a very public campaign designed to publicize what it views as inadequate disclosures and opt-out implementations by commercial entities. The bottom line of the Lyft and FNB citations seems to be that the Enforcement Bureau sees telemarketing itself as an a la carte option, to be carved out like the dessert course on a menu.

Michigan Federal Court Dismisses TCPA Complaint and Rejects Plaintiff’s Conclusory ATDS Allegations

The U.S. District Court for the Eastern District of Michigan recently dismissed a TCPA complaint upon finding the plaintiff’s factual allegations insufficient to satisfy the pleading standards imposed by both Rule 8(a) and the Supreme Court’s opinions in Twombly and Iqbal. The Court’s order provides useful guidance concerning the oft-litigated issue of whether a complaint contains sufficient facts to plausibly allege a defendant’s use of an ATDS.

In Aikens, Plaintiff alleged that Defendant used an ATDS to place at least 101 calls to her cellular phone over a ten-week period. Defendant moved to dismiss for failure to state a claim, arguing that Plaintiff did not “identify the times of day she received these calls, the content of the calls or anything else to indicate that these calls originated from an [ATDS].” Plaintiff, in response, contended that she alleged the calls were “intended for an individual named Sam,” that Defendant “continued to call [her] cell phone even after being advised that she was not the intended recipient,” and that she received “an average of over 1.4 calls per day” during the time period at issue. Plaintiff added that it was essentially “impossible” for her—or indeed any TCPA plaintiff—to obtain specifics as to a defendant’s telephone dialing system before discovery had commenced.

The Court (Magistrate Judge Patricia T. Morris) disagreed: it found Plaintiff’s conclusory allegation that Defendant used an ATDS could not, by itself, render Plaintiff’s claim plausible because it did not explain “why or how Plaintiff knows that an ATDS was used.” The Court rejected as inapposite several district court decisions relied upon by Plaintiff, in which the complaints, by contrast, were found to contain plausible allegations concerning the defendant’s use of an ATDS. See, e.g., Cunningham v. Kondaur Capital, No. 3:14-1574, 2014 WL 8335868, at *6 (M.D. Tenn. Nov. 19, 2014) (plaintiff alleged the text messages at issue were “repeated within a short span of time and consisted of the same content”); Buslepp v. B & B Entm’t, LLC, No. 12-60089-CIV, 2012 WL 1571410, at *1 (S.D. Fla. May 3, 2012) (plaintiff alleged at least some detail regarding the content of the calls to plausibly suggest the use of an ATDS); De Los Santos v. Millward Brown, Inc., No. 13-80670-CV, 2014 WL 2938605, at *3 (S.D. Fla. June 30, 2014) (same).

Magistrate Judge Morris then recommended to the District Judge that Defendant’s motion to dismiss be granted and that Plaintiff’s complaint be dismissed without prejudice because Plaintiff had not stated a plausible claim for relief under the TCPA. As the Court reasoned: “[T]he Court may not accept an assertion that an ATDS was used simply because Plaintiff states as much…. Plaintiff has not provided any details about the content of the calls she received beyond noting that the caller attempted to reach someone named ‘Sam,’ and that she asserted to the caller (whether pre-recorded or live, Plaintiff does not say) that she was not the ‘Sam’ they were looking for.” The Court continued:

[Plaintiff] has provided no factual allegations regarding the nature and character of the calls. While plaintiffs cannot be expected to provide specific details about the type of dialing systems used to deliver the calls …, it is entirely reasonable to demand that plaintiffs provide sufficient information about the timing and content of the calls they receive to give rise to the reasonable belief that an ATDS was used. Plaintiff has not provided sufficient contextual details to determine whether she spoke to a human or merely heard a recording upon picking up the phone. If she spoke to a human, she has not indicated whether she heard a human voice immediately upon picking up her phone, or whether there was a significant period of “dead air,” which is generally indicative of the use of an automatic dialer. Plaintiff’s allegations permit the Court to infer that she received a great number of calls from Defendant’s number, but no allegations in the complaint permit an inference that Defendants used an ATDS to accomplish these calls. To surmount this threshold, Plaintiff could plead those facts which are likely within her knowledge, but which she has not included in her complaint: the content of Defendant’s calls, whether she spoke to a human, whether there was dead air prior to a human picking up the line, or any other facts which may tend to make the use of an ATDS more likely.

A month after this opinion was issued, the District Judge wholly adopted the Magistrate’s recommendation. See Aikens v. Synchrony Financial, No. 15-cv-10058, 2015 U.S. Dist. LEXIS 115023 (E.D. Mich. Aug. 31, 2015) (noting neither party had objected). Aikens thus serves as a helpful illustration of the baseline pleading requirements for claims brought under the TCPA, particularly with respect to allegations concerning the use of an ATDS.

Portfolio Recovery Associates, LLC Joins the Consolidated Appeal of the FCC’s July 10, 2015 Declaratory Ruling and Order

On September 8, 2015, Portfolio Recovery Associates, LLC (“PRA”) filed its own petition for review of the FCC’s July 10, 2015 Declaratory Ruling and Order with the United States Court of Appeals for the District of Columbia Circuit. PRA states that it participated in the underlying proceedings by submitting comments to ACA International’s Petition for Rulemaking. Id. at 3. PRA contends that while the purpose of the underlying proceedings was to provide clarity to previous interpretations of various TPCA provisions, the Order disregards the TCPA’s language and intent while unlawfully holding callers to unreasonable standards. Id. Specifically, PRA challenges the Order’s: (1) assertion that “equipment can be an ATDS even if it has none of the statutorily required features,” (2) provision allowing a called party to revoke consent at any time through any reasonable means while callers are prohibited from establishing methods for revocation, and (3) provision imposing strict liability for calls made to reassigned numbers after the first call regardless of whether the caller is aware that the number has been reassigned. Id. As relief, PRA asks the DC Circuit to vacate or reverse the unlawful parts of the Order and remand those parts to the FCC for further action consistent with the court’s findings. Id. at 4.

The deadline for submitting petitions for review has passed, and PRA’s petition has been added to the consolidated appeal pending before the DC Circuit.  As it stands now, the consolidated appeal consists of petitioners ACA International, PACE, SiriusXM, Chamber of Commerce, salesforce.com inc. and ExactTarget, Inc., Consumer Bankers Association, Vibes Media, LLC, Rite Aid Hdqtrs. Corp., and Portfolio Recovery Associates, LLC.  The consolidated appeal also consists of intervenors MRS BPO, LLC, Cavalry Portfolio Services, LLC, Diversified Consultants, Inc., Mercantile Adjustment Bureau, Council of Americans Survey Research Organizations and Marketing Research Association.

Parties Continue to Challenge the FCC’s July 10, 2015 Declaratory Ruling and Order

On September 4, 2015, both Vibes Media, LLC and Rite Aid Hdqrtrs. Corporation filed petitions for review of the FCC’s July 10, 2015 Declaratory Ruling and Order with the United States Court of Appeals for the District of Columbia Circuit. See Vibes Media, LLC v. FCC, No. 15-1311 (D.C. Cir. filed Sept. 4, 2015); see also Rite Aid Hdqtrs. Corp. v. FCC (D.C. Cir. filed Sept. 4, 2015). Both petitions have been added to the consolidated appeal.

Vibes Media challenges four aspects of the Order: (1) its interpretation of an ATDS, (2) its treatment of reassigned numbers and provision of an “illusory one-call exemption for calls to reassigned numbers,” (3) its standard for revocation of consent, and (4) its lack of disregard for the distinction between text messages and phone calls. See Vibe Petition at 2-3. As relief, Vibes Media asks the D.C. Circuit to set aside the Order as unlawful. Id. at 3.

Rite Aid challenges the Order’s treatment of HIPAA-protected health care messages made to residential lines versus cellular lines. Specifically, Rite Aid notes that the Order exempts the consent requirement for such calls made to residential lines, but requires prior express consent for the same calls if they are made to wireless numbers. See Rite Aid Pet. at 1-2. Rite Aid also challenges the exclusion of HIPAA-permitted calls from the Order’s carve out for exigent messages that have a healthcare treatment purpose. Id. at 2. Rite Aid contends that the “FCC’s disparate treatment of residential and wireless telephone calls delivering HIPAA-protected health care messages and carve out for ‘exigent’ messages are irrational and unsupported and sure to spawn further confusion and wasteful litigation against legitimate providers ….” Id. As relief, Rite Aid asks the DC Circuit to hold unlawful and vacate the unlawful parts of the Order and remand those parts to the FCC for further action consistent with the court’s opinion. Id.

Stay tuned as we continue to provide updates on developments in the consolidated appeal of the FCC’s July 10, 2015 Declaratory Ruling and Order.

CodeBroker, LLC Filed Consent Motion for Voluntary Dismissal of its Petition for Review

Earlier, we reported that CodeBroker, LLC filed a petition for review of the FCC’s July 10, 2015 Declaratory Ruling and Order with the United States Court of Appeals for the District of Columbia Circuit.  On September 3, 2015, CodeBroker, LLC filed a motion for voluntary dismissal of its pending petition for review. See CodeBroker, LLC Mot. for Voluntary Dismissal, No. 15-1278 (D.C. Cir. filed Sept. 3, 2015).

The Chamber of Commerce of the United States Joins the Consolidated Appeal of the FCC’s July 10, 2015 Declaratory Ruling and Order

On September 2, 2015, the Chamber of Commerce of the United States (“Chamber”) filed its own petition for review of the FCC’s July 10, 2015 Declaratory Ruling and Order with the United States Court of Appeals for the District of Columbia Circuit. See Chamber of Commerce of the US v. FCC, No. 15-1306 (D.C. Cir. filed Sept. 2, 2015). Chamber challenges: (1) the inclusion of equipment that does not have the present capacity to “store or produce telephone numbers to be called, using a random or sequential number generator,” and “to dial such numbers” within the scope of an ATDS, (2) the determination that the term “called party” refers to the current subscriber or customary user of the phone instead of the intended recipient of the call, (3) the one-call exemption before imposing strict liability for calls made to reassigned numbers, and (4) the provision that allows a called party to revoke prior express consent at any time through any reasonable means, while callers are prohibited from limiting the manner in which consent may be revoked. Id. at 2-3.

As relief, Chamber asks the DC Circuit to vacate or reverse the unlawful parts of the Order and remand those unlawful parts to the FCC for an order that is consistent with the court’s findings. Id. at 4.

Stay tuned as we continue to provide updates on developments in the consolidated appeal of the FCC’s July 10, 2015 Declaratory Ruling and Order.