The year 2014 saw a surge in class action filings under the Telephone Consumer Protection Act (TCPA). Record-setting class action settlements captured the headlines. The Federal Communications Commission (FCC) provided guidance on some issues, but unsettled law in other areas placed a compliance burden on companies that communicate with consumers by phone or text. Companies in many industry segments face increased litigation risk under the TCPA heading into 2015. Looking ahead, the five hot issues below set the stage for the TCPA in 2015.
- Will the FCC Provide Clarity?
Although the FCC issued rulings on a number of petitions in 2014, a backlog of more than two dozen petitions remains pending. More than half a dozen petitions seek clarification on the definition of an autodialer (discussed in section 3 below), an issue on which courts were split in 2014 and where clarity would assist companies in complying with the rules. A number of petitions address issues related to prior express consent, such as clarifications to the new standard for “prior express written consent” (effective October 2013), whether consents obtained before October 2013 are still valid, whether consumers can revoke consent, and whether the new written consent standard applies to certain types of calls, such as healthcare messages. Other issues include the rules for fax solicitations and calls to numbers that have been reassigned to new users. In March 2014, FCC Commissioner Michael O’Rielly, stated that the large number of pending petitions reflects a “lack of clarity” in the rules and that “the FCC needs to address this inventory of petitions as soon as possible.” Will 2015 be the year the FCC provides clarity?
- Third-Party Liability Issues
Under the TCPA, defendants face potential liability based on two theories: direct liability and vicarious liability. The plain language of the TCPA assigns civil liability to the party actually making or initiating the unsolicited call or text message. During the fall of 2014, the U.S. Court of Appeals for the Ninth Circuit decided two cases recognizing vicarious liability under Sections 227(b) and 227(c) of the TCPA. See Gomez v. Campbell-Ewald, No. 13-55486, 2014 WL 4654478 (9th Cir. Sept. 19, 2014) (holding that companies are not necessarily protected from TCPA liability by using third-party marketers); Thomas v. Taco Bell Corp., 12-56458, 2014 WL 2959160 (9th Cir. July 2, 2014) (applying agency principles in finding that Taco Bell was not vicariously liable for text messages sent on its behalf by a third- party). The Ninth Circuit decisions demonstrate that certain involvement and interaction between a company and its contractors may establish agency relationships that can ultimately lead to vicarious liability under the TCPA. Because it is common for companies to use third-party vendors to assist with communications, or to market their products and services through semi-independent agents or franchises, the application of vicarious liability principles will continue to be a key issue in many TCPA cases.
- The Definition of “Autodialer”
The TCPA defines autodialer as “equipment which has the capacity to store or produce telephone numbers to be called, using a random or sequential number generator, and to dial such numbers.” 47 U.S.C. § 277(a)(1). Recent court opinions have split on the meaning of the term “automatic telephone dialing system” (ATDS) under the TCPA, and the FCC has yet to rule on several pending petitions seeking clarification of this issue. In 2014 alone, there were as many as half a dozen divergent decisions on the definition of autodialer. For example, in Davis v. Diversified Consultants, Inc., CV13-10875, 2014 WL 2944864 (D. Mass. June 27, 2014), the court broadly interpreted the definition and found that a predictive dialer was an ATDS because it had the capacity to store numbers and dial sequentially. The court stated that it was irrelevant whether the dialer had the capacity to generate random or sequential numbers as long as the system had the capacity to store numbers and dial them from a list. Other courts have defined autodialer more narrowly, focusing on present rather than potential capacity. See Gragg v. Orange Cab Co. Inc., No. C12-0576RSL, 2014 WL 494862, at *1 (W.D. Wash. Feb. 7, 2014). In Gragg, the court held that to fall within the TCPA, a system had to have the “present, not potential, capacity to store, produce, or call randomly or sequentially generated telephone numbers.” (emphasis added.) As courts have struggled to clearly define autodialer, various parties have petitioned the FCC to set a clear standard. Several petitions are currently pending before the FCC on this issue, which creates uncertainty over the scope of the TCPA.
- Revocation of Consent
One of the key issues in pending litigation under the TCPA is whether a consumer can revoke consent to receive calls on a cell phone. Generally, the TCPA requires prior express consent before a consumer can be contacted on a cell phone using an automatic dialer or prerecorded message, but the statute is silent on the right to revoke. Two questions remain: can prior express consent be revoked and, if so, what constitutes valid revocation?
There is a split in authority on whether consent can be revoked under the TCPA, but a number of courts are trending toward the conclusion that consent is revocable. The U.S. Court of Appeals for the Third Circuit was the first federal appellate court to address this issue. In Gager v. Dell Fin. Servs., LLC, 727 F.3d 265, 270-72 (3d Cir. 2013), the court held that a consumer has a right to revoke consent notwithstanding the absence of a statutory provision specifically authorizing revocation. Applying the common law concept of consent, the court reasoned that a right to revoke is not inconsistent with prior FCC decisions. Some courts have followed the Third Circuit’s lead, including the Eleventh Circuit inOsorio v. State Farm Bank, F.S.B., 746 F.3d 1242 (11th Cir. Mar. 28, 2014).
- Insurance Coverage Issues
Another frequently litigated question is whether TCPA defendants may seek coverage from commercial liability insurers to defend and indemnify them for TCPA- exposure. In 2014, some insurance coverage litigation arose from commercial liability insurers filing declaratory judgment actions against their insureds seeking a declaration that there was no coverage for the underlying TCPA claims. In other situations, plaintiffs pursued claims against commercial and professional liability insurers after agreeing to settlements that were to be satisfied exclusively from the proceeds of a defendant’s insurance policies. These coverage issues often turn on the specific language of the policy in question, including the policy’s stated coverage exclusions. Increasingly, commercial liability policies may contain a specific exclusion for TCPA claims. See James River Ins. Co. v. Med Waste Mgmt., No. 1:13-cv-23608, 2014 WL 4749551 (S.D. Fla., Sept. 22, 2014) (denying coverage based on a TCPA exclusion). Other commercial liability policies may have more general exclusions that can preclude coverage for TCPA claims. See Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Papa John’s Int’l, No. 3:12-cv-00677, 2014 WL 2993825 (W.D. Ky., July 3, 2014) (finding no coverage where the policy contained an exclusion for any loss resulting from a violation of a “statute, ordinance or regulation of any federal, state, or local government”). With TCPA class actions continuing to be filed at a record pace, there will be ongoing issues over the scope of commercial liability coverage for these claims.
There was a sharp increase in TCPA filings and high-dollar class action settlements in 2014, and 2015 may continue to follow this trend. With many different industries being targeted by class action plaintiff lawyers, a strong TCPA compliance program is essential to help avoid TCPA lawsuits and potential liability.