On June 22, the U.S. Court of Appeals, Second Circuit issued what might be the most business-friendly Telephone Consumer Protection Act (TCPA) decision we have seen in a long time in Reyes v. Lincoln Automotive Financial Services.
The facts of Reyes tell an old, familiar story. Reyes leased a new luxury Lincoln in 2012 and provided his cell phone number in his lease application. The application included a provision that Reyes “expressly consent[ed]” to contact via “prerecorded or artificial voice messages, text messages, . . . and/or automatic telephone dialing systems.” Not long after he signed the lease, Reyes stopped making payments. Lincoln called Reyes many times to cure his default. Reyes claimed he mailed Lincoln a letter demanding that all calls to his cell phone cease, but the calls continued. In 2015, Reyes filed a TCPA lawsuit against Lincoln, seeking $720,000 in damages for the allegedly unlawful phone calls. The district court granted summary judgment in Lincoln’s favor, finding that Reyes failed to prove he revoked consent, and that regardless, the TCPA does not permit a party to a legally binding contract to unilaterally revoke bargained-for consent to be contacted.
Reyes appealed. The Second Circuit disagreed that Reyes failed to prove he revoked consent, but agreed that the TCPA does not permit a consumer to revoke his or her consent to be called “when that consent forms part of a bargained-for exchange.” The court distinguished prior authority by the Federal Communications Commission (FCC) and the Third and Eleventh Circuits, which held that consent under the TCPA can be freely revoked, by narrowing the issue to “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” (emphasis added).
The Second Circuit reasoned that its sister circuits and the FCC “considered a narrow question: whether the TCPA allows a consumer who has freely and unilaterally given his or her informed consent to be contacted can later revoke consent.” In both the Third and Eleventh Circuit cases, the consent to be contacted was “not given in exchange for any consideration,” and was not incorporated into a binding legal agreement. The FCC’s 2015 Ruling relied on those two cases in holding that consent can be revoked at any time in any reasonable manner. By contrast, Reyes’ consent to be contacted was an express provision of his bilateral lease contract. Thus, his consent was not revocable. The Second Circuit found that ruling otherwise would impermissibly “alter the common law of contracts” without evidence Congress intended to do so.
Importantly, the court’s decision is grounded on the difference between “consent” in tort law and contract law. In tort, consent is generally a “gratuitous action,” and its effectiveness is extinguished upon termination. However, in contract, consent to another’s action can become irrevocable when provided in a legally binding agreement.
The decision will likely be appealed. The highly anticipated D.C. Circuit appeal of the FCC’s July 2015 Declaratory Ruling is expected as early as this summer. That appeal is also expected to address the FCC’s broad ruling on revocation of consent.
For now, businesses should consider reviewing their contracts and including a strong “consent to contact” provision. Not only could these provisions allow companies to continue collection efforts in the event of a default, even in the face of a purported revocation, but they also serve more fundamental purposes of ensuring consent is properly obtained in the first instance and in managing consumer expectation.
The TCPA Compliance and Class Action Defense team at Manatt will continue to monitor how this issue develops.