Last week, the U.S. Court of Appeals for the Third Circuit concluded that the TCPA’s definition of “automatic telephone dialing system” (or “ATDS”) includes all dialing equipment with the present ability to generate random or sequential phone numbers and dial those numbers, regardless of whether the equipment’s owner actually uses those “ATDS functionalities.” But, importantly, a caller must actually use such functionalities in order to violate the statute’s prohibition on making autodialed phone calls, the Court further held.
In other words, a dialing system’s status as an ATDS turns on the system’s present capabilities, not how it is used. But whether a defendant is liable for using an ATDS turns on how the system is used, not just what it can do. Thus, the Court read the ATDS definition broadly but the liability provision narrowly, in a ruling that will give some comfort to companies that use their dialing equipment to contact customers or prospects from set lists, rather than to randomly generate phone numbers to be called indiscriminately.
Recently, on May 20, 2022, the Federal Communications Commission (“FCC”) issued a Report and Order (“Order”), as well as a Further Notice of Proposed Rulemaking (all available here), with a plain objective: to “take further steps to stem the tide of foreign-originated illegal robocalls and seek comment on additional ways to address all such calls.” Order ¶ 1. As stated by the FCC, “reducing illegal robocalls that originate abroad is one of the most vexing challenges we face in tackling the problem of illegal robocalls.” Id. The Order was adopted by a unanimous, 4-0 vote by the FCC after it had received comments over the last nine months on various topics, including whether so-called “gateway providers” should be required to authenticate caller identification information and implement other efforts to reduce the number of illegal prerecorded and/or artificial voice “robocalls” originating overseas.
A “gateway provider” is a U.S.-based provider that acts as an intermediary for an international call by receiving a call directly from a foreign provider before transmitting that call downstream to other U.S.-based providers for termination. Order ¶ 25. This definition is not static but rather one that applies on a call-by-call basis, i.e., a provider is a gateway provider—and subject to the FCC’s new Order—only for those calls in which it acts as a gateway provider. Id. ¶ 28. Per the FCC, commenters “overwhelmingly” supported the imposition of additional requirements on gateway providers in order to “stop the flood of foreign-originated illegal calls.” Id. ¶ 21.
Reacting quickly to a joint request by the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) (collectively, the Health Agencies) last Thursday, the FCC released a Public Notice on May 3, 2022, inviting comments about how it should clarify “that certain automated calls and text messages or prerecorded voice calls relating to enrollment in state Medicaid and other governmental health coverage programs are permissible under the Telephone Consumer Protection Act (TCPA).” Recognizing the time-sensitive nature of the Health Agencies’ request, the FCC established a short cycle for public comment – comments are due in 14 days on May 17, 2022, and any reply comments are due on May 24, 2022.
Earlier this month, the U.S. District Court for the Southern District of Ohio clarified that a TCPA defendant need not maintain an internal do-not-call list and policies in order to invoke the “established business relationship” defense for telemarketing calls to numbers on the national DNC registry.
By way of background, the TCPA prohibits businesses from making “telephone solicitations” to phone numbers on the national DNC registry. 47 U.S.C. § 227(c); 47 C.F.R. § 64.1200(c). However, telemarketing calls and messages can be sent to such numbers where the caller has an “established business relationship” with the recipient. 47 U.S.C. § 227(a)(4); 47 C.F.R. § 64.1200(f)(15)(ii). The FCC has defined an “established business relationship” (“EBR”) as a “relationship formed by a voluntary two-way communication” regarding a telephone subscriber’s recent purchase of or inquiry about a product sold by the caller. 47 C.F.R. § 64.1200(f)(5). A subscriber can terminate the EBR at any moment by making a clear and specific request for the calls and/or messages to stop. Id. § 64.1200(f)(5)(i). Separately, 47 C.F.R. § 64.1200(d) requires entities who place telemarketing calls to keep an internal list of individuals who have requested not to receive calls and to maintain policies to ensure that the list is honored.
The FCC’s TCPA dockets did not witness many developments from the beginning of 2022 until February. However, beginning in February and into March, Chairwoman Rosenworcel’s office and the Enforcement Bureau were busy negotiating new robocalling partnerships with state regulators and issuing enforcement orders against suspected or apparent violations. Those activities expanded in April by the issuance of new guidance and a new pricing structure for the Reassigned Numbers Database. We cover each of these topics below.
State-Federal Partnership on Investigations
Since Chairwoman Rosenworcel’s confirmation as the FCC Chair in December 2021, she has put on the top of her agenda building a partnership with state regulators – attorneys general and enforcement agencies. During February, March, and April 2022, Chairwoman Rosenworcel signed memoranda of understanding (MOUs) designed to allow greater cooperation and sharing of information and other investigation intelligence with regard to illegal robocalls and telephone scams. These MOUs also reflect the intention of close collaboration to enforce consumer protection laws concerning robocalls. The FCC currently has MOUs in place with twenty-eight (28) states and more could be in the offing.
In an ever-growing string of losses, the Seventh Circuit affirmed the Northern District of Indiana in denying class certification to serial TCPA plaintiff Gorss Motels, Inc. in Gorss Motels, Inc. v. Brigadoon Fitness, Inc., — F.4th —, 2022 WL 872639 (7th Cir. 2022).
The fact pattern in the present matter is consistent with the other cases Gorss Motels has filed, and the basic fact pattern can be found here. In the present case, Gorss Motels sued a franchisor-approved vendor, Brigadoon Fitness, Inc., for sending a fax advertisement for deals on fitness equipment. Gorss Motels was denied certification for a class of all recipients of this fax, Gorss Motels, Inc. v. Brigadoon Fitness, Inc., 331 F.R.D. 335 (N.D. Ind. 2019), which was denied again on reconsideration, Gorss Motels, Inc. v. Brigadoon Fitness, Inc., No. 1:16-CV-330-HAB, 2019 WL 5692168 (N.D. Ind. Nov. 4, 2019).