eSignature and ePayment News and Trends

Because of the federal Electronic Signatures in Global and National Commerce Act (ESIGN) and equivalent state laws, companies are delivering important disclosures and other information that traditionally needed to be presented "in writing" electronically instead. In addition, the medium of choice for communicating with consumers electronically is rapidly migrating from email to text messaging. As a result, understanding the requirements of the Telephone Consumer Protection Act (TCPA) are is a must. This edition's Insight looks at the most recent judicial examination of the FCC's interpretation of the TCPA.

On March 16, the US Court of Appeals for the District of Columbia issued its opinion in ACA International v. Federal Communications Commission, which was a consolidated appeal of the Federal Communication Commission's declaratory ruling and order of July 10, 2015. The court considered a challenge to the order from certain entities to four positions taken by the FCC regarding the Telephone Consumer Protection Act:

  • What constitutes automated dialing equipment subject to the TCPA's restrictions on unconsented calls
  • When a caller obtains a party's consent, does a call nonetheless violate the TCPA if, unbeknownst to the caller, the consenting party's wireless number has been reassigned to a different person who has not given consent
  • How may a consenting party revoke consent and
  • The scope of the exemption from the TCPA's consent requirement for certain healthcare-related calls.

The court, with a unanimous three-judge panel, set aside the FCC's interpretation of the definition of automated dialing equipment under the TCPA, as well as its treatment of reassigned numbers. This means that until the FCC releases new guidance on these issues, the applicable guidance reverts back to the rules in effect prior to the order. This also means that any jurisprudence developed on these issues since the order may be of limited effect.

The court, however, upheld the FCC's positions in the order with respect to revocation of consent and the scope of the exemption for healthcare-related calls. Therefore, any jurisprudence developed in these areas since the order will continue to be in effect.

Restricting calls made using an autodialer

The TCPA regulates how telephone calls may be made to "any telephone number assigned to a…cellular telephone service" using an "automatic telephone dialing system" (that is, an autodialer). The TCPA defines an autodialer as equipment with the "capacity" to perform each of two stated functions: (i) storing or producing telephone numbers "using a random or sequential number generator" and (ii) dialing those numbers. The FCC's order adopted an expansive interpretation of "capacity" by concluding that any device having the theoretical capability to store or produce telephone numbers and to dial such numbers constitutes an autodialer, even if the device requires future modifications (eg, software installation) to allow for autodialing functionality.

The court ruled that the practical result of the FCC's order is that virtually all modern telephones, including smartphones, are autodialers and that any call made from such a smartphone may be subject to the TCPA, including its onerous penalties. The court found it untenable that "capacity" could be so capaciously interpreted as to include the significant majority of Americans that own smartphones ("[i]t cannot be the case that every uninvited communication from a smartphone infringes federal law, and that nearly every American is a TCPA-violator-in-waiting if not a violator-in-fact."). Therefore, the court concluded that the FCC's interpretation of what constituted an autodialer was "unreasonably, and impermissibly" expansive.

Next, the court addressed the FCC's inadequate explanation of the functions that an autodialer must possess. The court focused on how the FCC provided competing interpretations as to what devices qualify as autodialers: in some instances, the FCC appeared to state that a device only qualifies if it can generate random or sequential numbers to be dialed, while in other instances (eg, with predictive dialers), the agency stated that the device did not need to have such capacity. The court said that while either interpretation of the autodialer definition may be permissible, espousing both was not consistent with reasoned decision making.

Finally, the court noted that the petitioners did not challenge the FCC's understanding of what it means to "make any call using any" autodialer. This phrase, the court said, may require that the equipment used must be used as an autodialer at the time the call is made. Such an understanding would diminish the significance of an expansive interpretation of "capacity." The court commented that the FCC could choose to address this issue in a future rulemaking or order.

Liability for calls to reassigned numbers

The court concluded that the order's one-call "safe harbor" for reassigned numbers, in which the caller could "reasonably rely" on having the recipient's prior express consent, was arbitrary. The FCC could not explain why this was reasonable reliance, the court said; hence, the "safe harbor" only extended to one post-reassignment call, especially when the call gave no indication that the number had been reassigned.

Because setting aside the one-call safe harbor would lead to strict liability for all calls made to reassigned numbers – as a result of the court upholding the FCC's interpretation of "called party" to mean "current subscriber" rather than "intended recipient" – the court set aside the FCC's treatment of reassigned numbers as a whole. The court did note that the FCC was currently fashioning additional guidance that could better address the issues related to reassigned numbers.

Revocation of consent and healthcare-related calls

The court upheld the FCC's approach to revocation of consent, which allows the recipient to revoke his or her consent at any time through any reasonable means. In so doing, the court rejected the petitioner's request that callers be able to unilaterally prescribe the exclusive means of revocation.

While the court rejected the petitioner's request for setting the exclusive means, it did state that callers could create "clearly-defined and easy-to-use opt-out methods" whereby any attempts by the recipients to side-step such methods for more idiosyncratic approaches might be seen as unreasonable. This holding supports those recent cases that held that the plaintiff did not revoke consent to receive text messages by replying with convoluted messages rather than a simple "STOP" (see, eg, Epps v. Earth Fare, Inc, 2017 WL 1424637 (C.D. Cal. Feb. 27, 2017) and Viggiano v. Kohl's Department Stores, Inc., 2017 WL 5668000 (D. N.J. Nov. 27, 2017)).

The court also said that the order does not address – and therefore does not limit – the ability of parties to contractually agree to revocation procedures. This means that the Second Circuit's decision in Reyes v. Lincoln Automotive Financial Services, whereby the court held that the TCPA did not allow a consumer to unilaterally revoke his or her consent to be contacted by telephone when that consent was given as a "bargained-for consideration in a bilateral contract," remains good law in the Second Circuit.

Finally, the court upheld the order's exemption of certain time-sensitive healthcare calls from the TCPA's prior express consent requirements. The petitioner challenged the FCC's exemption on the grounds that it conflicted with the Health Insurance Portability and Accountability Act (HIPAA) and was arbitrary and capricious. The court ruled that HIPPA does not supersede the TCPA and that there "is no obstacle to complying with both the TCPA and HIPAA." The court also rejected the petitioner's arbitrary and capricious challenges.