Contracts 101: Second Circuit Holds That Black Letter Contract Law Precludes Revocation of Consent Claims under the TCPA

The explosion of litigation under the Telephone Consumer Protection Act (“TCPA”) has continued through the second quarter of 2017. Businesses have been anxiously awaiting a ruling from the D.C. Circuit in the appeal of the Federal Communications Commission’s (“FCC”) July 2015 Declaratory Ruling and Order as well as reforms from the FCC itself. As the wait continues, promising developments have been emerging from the courts. On June 22, 2017, the Second Circuit—in a common sense and practical opinion in Reyes v. Lincoln Auto. Fin. Servs., No. 16-2104 (2d Cir.)—acknowledged that contract is king and that a party cannot unilaterally modify its terms. In affirming summary judgment in favor of the defendant, the court cited the Restatement (Second) of Contracts and explained that “[i]t is black letter law that one party may not alter a bilateral contract by revoking a term without the consent of a counterparty.” Its opinion in this TCPA action has significant implications for businesses that have standard contracts with their customers. And it is a welcome step in the right direction.

In this action, the plaintiff’s car lease application for a Lincoln MKZ sedan included a clause, as a condition of the agreement, in which he consented to receive automated calls from the defendant. The defendant subsequently called the plaintiff after he defaulted on his lease payments and continued to do so after the plaintiff allegedly revoked his consent to receive them. The plaintiff then filed a lawsuit seeking to recover statutory damages (which range from $500 to $1500 per call) from the defendant under the TCPA. The United States District Court for the Eastern District of New York granted summary judgment in favor of the defendant based primarily on the plaintiff’s failure to prove that he had, in fact, revoked his consent.

Although the Second Circuit affirmed the trial court’s entry of summary judgment, it disagreed with the trial court’s reasoning and instead grounded its opinion in the notion that the TCPA “does not permit a consumer to revoke his consent to be called when that consent forms part of a bargained-for exchange.” It acknowledged that the TCPA is silent as to whether a consumer can revoke her consent and concluded that, “absent express statutory language to the contrary, we cannot conclude that Congress intended to alter the common law of contracts. . . .” The court noted that this case presented a novel question that “has not been addressed by the FCC or . . . by any federal circuit court of appeal,” specifically “whether the TCPA . . . permits a consumer to unilaterally revoke his or her consent to be contacted by telephone when that consent is given, not gratuitously, but as bargained-for consideration in a bilateral contract.” The court found that it does not. Because the plaintiff had provided his consent to be called as an express provision of his lease agreement with the defendant, such consent was irrevocable. The court explained that “[t]he common law is clear that consent to another’s actions can ‘become irrevocable’ when it is provided in a legally binding agreement.”

The court recognized that, while consent clauses in consumer contracts might render “revocation impossible in many instances,” any related public policy considerations are “for the Congress to resolve—not the courts.” Thus, businesses would be well-advised to include such language in their consumer agreements.

Michael P. Daly

About the Author: Michael P. Daly

Mike Daly has spent two decades defending, counseling and championing clients that interact with consumers. His practice focuses on defending class actions, handling critical motions and appeals, and maximizing the defensibility of marketing and enforceability of contracts. Clients large and small have trusted him to protect their businesses, budgets and brands in complex cases across the country.

John S. Yi

About the Author: John S. Yi

John Yi represents clients in civil and criminal litigations in federal court, as well as investigations and enforcement actions by the Federal Trade Commission (FTC), the U.S. Department of Justice (DOJ), the Securities and Exchange Commission (SEC), and other federal and state regulatory bodies. For clients in health care and other sectors, he handles a full array of antitrust issues. John has helped secure merger clearances from federal regulators and defended clients’ interests in suits alleging a variety of anticompetitive conduct. He has assisted companies with internal investigations and compliance strategies. John also has experience handling all aspects of civil litigation, including discovery, settlement, dispositive motions, trial advocacy and appellate work. John also defends a number of class action cases with a wide variety of claims, including issues arising under federal and state antitrust laws, the Telephone Consumer Protection Act (TCPA) and the Fair Credit Reporting Act (FCRA).

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