Few industries have been spared from the recent wave of class actions filed under the Telephone Consumer Protection Act (“TCPA”). The energy sector is no exception. TCPA cases against electricity and natural gas providers are on the rise with more than half a dozen such cases filed in 2015 in federal courts in Texas, New York, Ohio, Florida, California, and other states, in addition to cases already pending. These cases focus principally on companies’ use of automated communications to market their services to potential customers or to collect delinquent accounts.
Enacted in 1991 to protect consumers from receiving unsolicited telemarketing calls and faxes (and more recently text messages), the TCPA regulates and restricts the manner in which a business may advertise its products and services to consumers by phone (cell and landline) as well as by fax. Specifically, the TCPA prohibits the use of an “automated telephone dialing system” or an “artificial or prerecorded voice” to make calls to cell phones without obtaining the recipient’s consent. This rule applies to both telemarketing and non-telemarketing calls, including debt collection or informational calls. Following a change in FCC regulations in October 2013, the TCPA now requires written consent for most automated telemarketing communications.
Class action risk under the TCPA can be considerable. Because the TCPA provides for statutory damages of $500 per violation (and up to $1,500 per willful violation) with no maximum cap on recovery, potential exposure in a TCPA class action can quickly escalate. To put this in context, the top four TCPA settlements in 2014 totaled more than $175 million. See Legal Alert: Multi-Million Dollar Settlements Prompt Record Filing of TCPA Lawsuits.
A series of putative class actions has been filed against electricity and natural gas service providers alleging violations of the TCPA based on the manner in which these companies have marketed their services to potential customers. The cases often involve providers in deregulated markets. In one case, the plaintiff alleged that he received unsolicited, prerecorded telemarketing calls advertising electricity services. The plaintiff claimed the calls violated the TCPA because he had not given prior express consent to the company to call him for marketing purposes.Bank v. Independence Energy, 736 F. 3d 660 (2d Cir. 2013). In another case, the plaintiff alleged the defendant company violated the TCPA by sending unsolicited fax advertisements promoting the sale of natural gas and electricity and also promoting brokering services for other natural gas and electric providers. Saf-T-Gard v. Vanguard Energy Serv., 12-cv-3671 (ND Ill., filed 2012). The complaint alleged that the faxes were sent without the recipients’ consent and without any prior existing business relationship. The complaint further alleged that the faxes did not contain the required opt-out language that would allow the recipient to avoid receiving further solicitations. The court certified a class in late 2013, and the parties entered into a class settlement shortly thereafter.
In other cases, plaintiffs have challenged automated communications used in efforts to collect on delinquent electric and gas accounts. Such communications may be initiated either by an energy company directly or by a third-party debt collector. In one recent case alleging violations of the TCPA following attempts to collect on a debt to an electric company, the defendant successfully obtained summary judgment by establishing that it did not use an autodialer to make the calls at issue. Gelakoski v. Colltech, 12-cv-498, 2013 WL 136241 (D. Minn. 2013).
In another case involving debt collection calls by a utility, the Second Circuit Court of Appeals reversed a ruling for the defendant and took a narrow view of the scope of consent for receiving automated debt collection calls. Nigro v. Mercantile Adjustment Bureau, LLC, 769 F.3d 804 (2014). In that case, the plaintiff contacted the power company to request termination of electric service on behalf of his recently deceased mother-in-law. In connection with that request, he provided his cell phone number. More than a year later, a collection agency made several calls to the plaintiff’s cell phone using an autodialer in an effort to collect on the mother-in-law’s delinquent account. The plaintiff claimed that he had not consented to the collection calls. The trial court disagreed and granted summary judgment in favor of the defendant, reasoning that the plaintiff “consented to calls regarding the subject of the transaction, namely the termination of [the] account,” which included any effort to collect on any account delinquency. The Second Circuit, however, reversed and held that the plaintiff had not provided his number in connection with the debt and therefore had not consented to debt collection calls.
Energy service providers have not been spared from the recent surge in filings under the TCPA, and high-dollar settlements in TCPA cases will likely continue to drive a trend of new filings. The issues facing energy companies under the TCPA are similar to the issues facing companies in other industry segments: consent and the scope of that consent, vicarious liability issues arising from the acts of agents and third-party marketers and debt collectors, and large potential exposure due to TCPA statutory damages. See Legal Alert: TCPA Hot Issues for 2015. Energy companies engaging in automated communications with consumers will need to be increasingly focused on TCPA compliance to mitigate their potential litigation risk.