|IN THE SEPTEMBER 2016 ISSUE:
FCC Releases New Government Debt Collection Rules
On August 11, the FCC released an order through which the Commission adopted new rules to implement a TCPA exemption for calls related to government debt collection that was enacted as part of the Bipartisan Budget Agreement of 2015. Despite objections from other federal agencies, including the Department of Education and the Consumer Financial Protection Bureau, the new rules include a number of consumer protection-focused provisions, including the following:
- The number of federal debt collection calls is limited to three calls within a 30-day period. However, “federal agencies may request a waiver seeking a different limit on the number of autodialed, prerecorded-voice, and artificial-voice calls.”
- Consumers are permitted to seek to stop federal debt collection calls at any time, and callers must inform consumers of their right to make such a request.
- Artificial-voice and prerecorded-voice calls “may not exceed 60 seconds, exclusive of any required disclosures.”
- Federal debt collection calls or texts are permitted only between 8:00 AM and 9:00 PM (local time at the called party’s location).
- Calls covered under the exception are only permitted for “debts that are ‘delinquent’ at the time the call is made or debts that are at imminent risk of delinquency as a result of the terms of the operation of the loan program itself” and the U.S. must “currently [be] the owner or guarantor of the debt.” (Debts that have been sold in their entirety by the federal government are not covered.)
- Pre-delinquency debt servicing calls are prohibited, except for the following: (1) calls regarding an approaching deadline or a change in status (deferment, forbearance, rehabilitation), (2) calls regarding enrollment or re-enrollment in income-driven or income-based repayment plans, and (3) calls regarding similar time-sensitive events or deadlines affecting the amount or timing of payments due.
- Calls covered under the exception are permitted to the following phone numbers: (1) the wireless telephone number the debtor provided at the time the debt was incurred, such as on the loan application; (2) a wireless phone number subsequently provided by the debtor to the owner of the debt or the owner’s contractor; or (3) a wireless telephone number the owner of the debt or its contractor has obtained from an independent source, provided that the number actually is the debtor’s telephone number.
The Commission adopted these rules by a 3-2 partisan vote. Commissioner Rosenworcel, despite voting in favor of the order, issued a concurring statement suggesting that the new rules were somewhat at odds with the Commission’s previous declaratory ruling in which it found that government contractors are not subject to the TCPA at all, and that this tension could create confusion in TCPA enforcement actions going forward.
FCC Announces Industry “Robocall Strike Force”
On August 19, the FCC hosted the first meeting of the newly minted “Robocall Strike Force,” a group of more than 30 telephone service providers, equipment manufacturers, and others, whose goal according to the FCC is to “develop comprehensive solutions to prevent, detect, and filter unwanted robocalls” and advise the FCC on the role government can play in this effort. The strike force is headed up by AT&T CEO Randall Stephenson. Other carriers, including Verizon, Sprint, T-Mobile and CenturyLink, have also agreed to participate in the Strike Force. During the initial meeting, the participants agreed to meet at least twice weekly and to report back to the Commission with initial proposed solutions by October 19th.
Notably, this group is not a formal federal advisory committee, and does not have the process or procedural requirements that would accompany such a group. It is not clear what the group will address, or how it will operate going forward. Any recommendations, other than those for voluntary industry actions, would require further FCC proceedings, including notice and comment procedures relating to any proposed rule changes.
D.C. Circuit Court Announces Oral Argument Date for Junk Fax Waiver Appeal
On July 25, the U.S. Court of Appeals for the D.C. Circuit announced that it will hear oral arguments in the case of Bais Yaakov et al. v. FCC on Tuesday, November 8, 2016 at 9:30 A.M. The petitioners in this case have challenged the validity of the FCC’s October 2014 TCPA order that ultimately granted a retroactive waiver of the Commission’s fax advertisement rules to hundreds of entities. This appeal actually consists of two different sets of petitioners, who have challenged the decision on separate grounds. First, a group of plaintiffs whose junk faxing class action cases are currently pending in federal district courts appealed to the D.C. Circuit claiming that the FCC did not have the authority to issue the waiver of its rules on a retroactive basis. Second, a group of waiver recipients (many of which are defendants in junk fax class actions) challenged the 2014 order claiming that because the TCPA only explicitly covers unsolicited fax advertisements, the FCC exceeded its authority when it sought to regulate the content of solicited fax advertisements, and therefore the junk fax rules themselves are invalid.
|With the rise in TCPA litigation, numerous parties have sought clarification of the rules. Kelley Drye’s Communications group has compiled this comprehensive summary of the pending petitions.
|Number of Petitions Pending
||New Petitions Filed
|23 (+34 seeking a retroactive waiver of the opt-out requirement for fax ads)
||North American Bancard, LLC (Aug. 16, 2016) – seeking a retroactive waiver of the opt-out notice requirements for solicited faxes pursuant to the October 2014 Order
Cartridge World North America, LLC (Aug. 24, 2016) – seeking a retroactive waiver of the opt-out notice requirements for solicited faxes pursuant to the October 2014 Order
|RingCentral, Inc. – seeking a ruling that fax broadcasters are not “senders” for TCPA purposes and clarification regarding faxes with “ de minimis ” promotional information
(Replies due 9/13/16)
Professional Services Council – seeking reconsideration of the Broadnet declaratory ruling that grants a TCPA exemption for calls by government contractors (Comments due 9/14/16; Replies due 9/29/16)
National Consumer Law Center – seeking reconsideration of the Broadnet declaratory ruling that grants a TCPA exemption for calls by government contractors (Replies due 9/15/16)
North American Bancard, LLC – seeking a retroactive waiver of the opt-out notice requirements for solicited faxes pursuant to the October 2014 Order (Replies due 9/16/16)
Mortgage Bankers Association – exemption to the prior express consent requirement for non-telemarketing mortgage servicing calls required by law under other statutes and regulations
(Replies due 9/19/16)
Anthem, Inc. et al. (July 28, 2016) – seeking clarification that even after the 2015 Omnibus TCPA Order, non-telemarketing healthcare calls allowed under HIPAA are still permissible under the TCPA
(Comments due 9/19/16;
Replies due 10/4/16)
|Report and Order – adopting new rules to implement the government debt collection exemption to the TCPA
(rel. August 11, 2016)
|Court Rejects Claims that ATDS Calls to Cellular Caused Any Injury of Fact
The Southern District of California has issued a post-Spokeo decision favorable to defendants. In Romero v. Dep’t Stores Nat’l Bank, No. 15-CV-193-CAB-MDD, 2016 U.S. Dist. LEXIS 110889 (S.D. Cal. Aug. 5, 2016), Judge Cathy Ann Bencivengo granted defendants’ motion to dismiss for lack of subject matter jurisdiction, finding that plaintiff failed to connect her claimed injuries in fact with any specifically alleged violations of the TCPA.
Plaintiff brought suit under the TCPA and California’s Rosenthal Fair Debt Collection Practices Act, Cal. Civ. Code § 1788 et seq. (“RFDCPA”), alleging that defendants’ conduct in attempting to collect payment on plaintiff’s Macy’s charge account violated both statutes. Plaintiff claimed that defendants called her cellular telephone over 270 times using an ATDS between July and December 2014, and that on three occasions, she picked up the phone and told a representative to stop calling her. After discovery was conducted in the case, defendants obtained summary judgment with respect to plaintiff’s RFDCPA claims. Defendants then filed a motion to dismiss based on plaintiff’s alleged TCPA claims. As discovery had already been conducted, Judge Bencivengo evaluated each of plaintiff’s claims with specificity by dividing the calls into three separate categories: (1) calls that plaintiff did not hear and did not answer; (2) calls that plaintiff heard but did not answer; and (3) calls that plaintiff heard and answered.
With respect to the first category of calls, which plaintiff did not hear and did not answer, the court held that plaintiff had not, and likely could not, present evidence of an injury in fact. The court stated that “[f]or Plaintiff to have suffered ‘lost time, aggravation, and distress,’ she must, at the very least, have been aware of the call when it occurred.” Id. at *13.
With respect to the second category of calls, those that plaintiff heard and did not answer, or dialed back, the court found that plaintiff “must demonstrate that she suffered an injury in fact solely as a result of the telephone ringing for that particular call,” in order to establish a TCPA violation. Id. at *14. The court stated, “[n]o reasonable juror could find that one unanswered telephone call could cause lost time, aggravation, distress, or any injury sufficient to establish standing.” Id. The court further analogized that any individual telephone call, be it from a family member, employer or creditor, dialed manually or via ATDS, is essentially the same in nature. Id.
Finally, the court analyzed the two calls that plaintiff actually heard and answered, and held that merely because the calls were made with an ATDS does not give plaintiff reason to claim injury. The court found that the two answered calls could not have caused the plaintiff greater harm than if they had been manually dialed, which would not have violated the TCPA. Id. at *15.
The court stated that it was unpersuaded by the reasoning of other district court decisions post-Spokeo that found individual plaintiffs to have suffered concrete injuries and therefore established standing under the TCPA. Judge Bencivengo made note that “regardless of Congress’ reason for enacting the TCPA, one singular call, viewed in isolation and without consideration of the purpose of the call, does not cause an injury that is traceable to the conduct for which the TCPA created a private right of action, namely the use of an ATDS to call a cell phone.” Id. at 18. The court ultimately held that any harm suffered by plaintiff was unconnected to the alleged TCPA violations.
Court Rejects Plaintiff’s Class Allegations – Twice
The Northern District of California granted defendant’s motion to strike plaintiff’s class allegations – twice – as fail safe classes. See Dixon v. Monterey Fin. Services, Inc., No. 15-cv-03298-MMC, 2016 U.S. Dist. LEXIS 111687 (N.D. Cal. Aug. 22, 2016) and Dixon v. Monterey Fin. Services, Inc., No. 15-cv-03298-MMC, 2016 U.S. Dist. LEXIS 82601 (N.D. Cal. June 24, 2016). Plaintiff Edith Dixon filed an action against defendant Monterey Financial Services, a third party debt-collector, for alleged violations of the TCPA resulting from calls made by Monterey to Dixon’s cell phone for the collection of money owed on an auto repair bill. Plaintiff filed her complaint on behalf of herself and a proposed nationwide class of individuals who “had not previously consented” to collection calls to their cellular telephones via ATDS or artificial or prerecorded voice. Dixon, 2016 U.S. Dist. LEXIS 111687, at *11.
Defendant filed a motion for summary judgment and to strike plaintiff’s class allegations. Judge Maxine M. Chesney denied defendant’s motion for summary judgment, but granted its motion to strike class allegations. Quoting the Ninth Circuit’s decision in Kamar v. RadioShack Corp., 375 Fed. Appx. 734, 736 (9th Cir. 2010), the Dixon court stated that “the fail-safe appellation is simply a way of labeling the obvious problems that exist when the class itself is defined in a way that precludes membership unless the liability of the defendant is established.” Dixon, 2016 U.S. Dist. LEXIS 111687, at *11. Finding that the certification of such a fail-safe class would be “palpably unfair to defendant” and “unmanageable,” the court granted defendant’s motion to strike the class allegations and granted plaintiff leave to amend her complaint.
Plaintiff fared no better on her second attempt, though. Less than one month later, defendant Monterey again filed a motion to strike class allegations, contending that the proposed class in the newly filed Second Amended Complaint contained a fail-safe class. On this attempt, plaintiff focused not on consent but on revocation, proposing a nationwide class of individuals who received calls to their cellular telephones via ATDS or artificial or prerecorded voice who had “revoked any prior express consent to receiving such calls.” Dixon, 2016 U.S. Dist. LEXIS 111687, at *4. The single difference between the newly proposed class and the previously proposed class was whether the class member revoked any prior express consent, as opposed to not having previously consented, “a distinction without legal significance.” Id.
In striking the class definition, the Court noted that the “determination of whether a person is a member of the class is dependent on whether he/she prevails on the merits of the TCPA claim alleged in the operative pleading,” adding that “it is possible the newly-proposed class would have no members at all. If the trier of fact were to conclude that no person was called after such person had revoked his/her prior consent, defendant would prevail on the merits against a nonexistent class.” Id. at *4-5. Thus, as the court would have to examine the legal merits of each potential class member prior to determine whether they could be a member of the class, the court rejected the proposed class as fail-safe.
Finally, the court rejected plaintiff’s argument that in the event her class definition was stricken, that the court should amend the class definition to remove the revocation and prior consent requirement. Id. at *5. In declining to make such an amendment itself, the Court considered whether the proposed amendment was futile, noting that to proceed on behalf of a class, a plaintiff must be able to show there are questions of law or fact common to the class. While observing that the nature of the common factual and/or legal questions central to the validity of the TCPA claims plaintiff sought to assert was unclear, the court allowed Plaintiff an additional opportunity to amend the class definition.
Point and Click Dialing Software Does Not Have the “Capacity” To Be an Autodialer
Another federal court in Florida has determined that the dialing software used by a defendant was not an ATDS under the TCPA, and did not have the “capacity” to be one under the FCC’s July 2015 Order. As we have previously discussed, the FCC’s expansive definition of an ATDS to include present and potential future capability of the dialing equipment is on appeal to the D.C. Circuit. In the meantime, businesses have grappled with judicial interpretations in pending TCPA litigation for operational guidance.
The court in Eduardo Pozo v. Stellar Recovery Collection Agency, Inc., No. 8:15-cv-929-T-AEP (M.D. Fla. Sept. 2, 2016) held that a cloud-based dialing system by LiveVox, called “Human Call Initiator,” which the defendant utilized, was not an ATDS because it required agents to use an electronic “point and click” function to initiate calls. Furthermore, the dialing system lacked features that would allow the “clicker agents” to enable automated calls or the “capacity” to be an autodialer. Such human intervention negated a necessary element of the plaintiff’s TCPA claim, namely that the debt collection calls to her cell were placed using an ATDS. The court granted the defendant summary judgment on the TCPA claims.