FCC Begins Rulemaking Formalizing Industry Traceback Consortium
On February 5, 2020, the FCC adopted
a Notice of Proposed Rulemaking (NPRM) pursuant to section 13(d) of the Pallone-Thune TRACED Act
. Section 13(d) requires the FCC to formalize an annual registration process for “a single consortium that conducts private-led efforts to trace back the origin of suspected unlawful robocalls.”
Under the proposed rules, the FCC’s Enforcement Bureau (EB) would be in charge of issuing (no later than April 28 every year) a public notice announcing the registration process, reviewing letters of intent, and selecting the consortium. Letters of intent would, among other things, need to address a potential consortium’s ability to meet the TRACED Act’s neutrality and other requirements under § 13(d)(1). In assessing an applicant’s ability to comply with those statutory requirements, the Commission proposes that the EB lean on the work of the well-known USTelecom Industry Traceback Group. In addition, the NPRM suggests that the EB “heavily weight” applicants’ demonstrated expertise and openness to all types of voice providers. Once selected, the incumbent consortium would not be required to reapply each year and would serve until they notify the FCC otherwise.
Initial comments on the NPRM are due on or before February 24, 2020 and reply comments are due on or before March 2, 2020.
FCC Proposed Nearly $13 Million Fine for Illegal Spoofing
On January 31, 2020, the Enforcement Bureau of the FCC issued a Notice of Apparent Liability for Forfeiture (NAL) for $12,910,000 against Scott Rhodes (Rhodes) for allegedly spoofing caller ID information with the “intent to cause harm and wrongfully obtain something of value,” in more than 6,000 prerecorded voice calls, violating the Truth in Caller ID Act.
Although the NAL only alleges violations under the Truth in Caller ID Act, the Bureau notes that Rhodes violated the TCPA as well and that, under new authority provided in the TRACED Act, the Bureau will begin issuing NALs for TCPA violations without first issuing a Citation and Order, as was previously required.
Department of Justice Targets Five Service Providers in Unprecedented Enforcement Action
On January 28, 2020, the Department of Justice (DOJ) filed two complaints
in the U.S. District Court for the Eastern District of New York against five entities and three individuals, alleging that they knowingly carried millions of fraudulent robocalls originating in foreign countries (predominantly India) despite repeated warnings. The DOJ argues that these actions constitute wire fraud.
This is the first time the DOJ has targeted service providers (or “gateway carriers”) in an enforcement action of this type. Previously, the Department’s sole focus was on the individuals and entities initiating fraudulent robocalls. Both complaints seek injunctive relief from the Court that, if granted, would prevent the entities and their owners from providing service to call centers and would suspend their use of toll free numbers issued under the Toll Free Service database.
Federal Trade Commission Reminds 19 VoIP Providers of the Telemarketing Sales Rule
On January 30, 2020, the Federal Trade Commission (FTC) sent 19 unnamed VoIP service providers a letter
reminding them of FTC rules concerning illegal telemarketing and robocalling (i.e.
, the Telemarketing Sales Rule (TSR)), with the specific warning that the FTC can issue civil penalties against companies that “assist and facilitate,” violations of the TSR.
FCC Seeks Anti-Robocall Information from Seven “International Gateways” Believed to be Originating Illegal Robocalls
On February 4, 2020, the Enforcement Bureau of the FCC sent a letter
to seven U.S.-based voice service providers identified by the USTelecom Industry Traceback Group as likely gateways through which illegal robocalls originating in foreign countries are connected to the U.S. telephone network. The letters mention the Traceback NPRM (discussed above) and encourage the companies to join these efforts to trace and prevent unlawful traffic originating outside of the U.S. The letters also request that, by February 17, 2020, each company respond to numerous questions about specific preventative and responsive actions they have taken and their business relationships with foreign clients/callers.
TRACED Act’s Interagency Working Group Focus of Senators’ Letter to Attorney General
On February 6, 2020, Senators John Thune (R-SD) and Ed Markey (D-MA) sent Attorney General William Barr a letter
reminding him of his responsibility to convene an interagency working group under section 5(a) of the TRACED Act. The group’s mission is to conduct a study of government prosecution of violations of section 227(b) of the Communications Act of 1934 and submit it to Congress by September 25, 2020. The working group will include representatives from the FCC, the Department of State, the Department of Commerce, the Department of Homeland Security, the Federal Trade Commission, the Bureau of Consumer Financial Protection, and non-federal stakeholders such as the National Association of Attorneys General.
The TRACED Act requires that the working group to consider a range of new approaches § 227(b) violations, such as increasing state enforcement power, establishing new agreements between the United States and foreign governments, enhancing forfeiture and imprisonment penalties, and regulating entities that work with common carriers “for the specific purpose of carrying, routing, or transmitting a call that constitutes such a violation.”
FCC Petitions Tracker
Kelley Drye’s Communications group prepares a comprehensive summary of pending petitions and FCC actions relating to the scope and interpretation of the TCPA.
Number of Petitions Pending
New Petitions Filed
- 33 petitions pending
- 1 petition for review of the CGB order issued on 12/09/19 granting Amerifactors’ petition for declaratory ruling that faxes sent and received over the Internet are not bound by the prohibitions on junk faxes that apply to "telephone facsimile machines"
- 1 petition for reconsideration of the rules to implement the government debt collection exemption
- 1 application for review of the decision to deny a request for an exemption of the prior express consent requirement of the TCPA for “mortgage servicing calls”
- 1 request for reconsideration of the 10/14/16 waiver of the prior express written consent rule granted to 7 petitioners
- 10 applications for review of fax waiver orders under the Anda progeny (these applications for review were not addressed in the Nov. 14, 2018, Bureau order)
- 1 application for review of the CGB order issued on 11/14/18 eliminating the opt-out language rule for solicited faxes (and 2 oppositions to the application for review)
Click here to see the full FCC Petitions Tracker.
Cases of Note
Eleventh Circuit Court of Appeals Follows Third Circuit’s Lead on ATDS Definition
In Glasser v. Hilton Grand Vacations Company, LLC
, the Eleventh Circuit Court of Appeals held that to qualify as an automatic telephone dialing system (“ATDS”), a telecommunications system must generate random or sequential numbers and then dial them without human intervention. In Glasser
, the Eleventh Circuit reviewed two lower court decisions, which both raised the question of what technology qualifies as an ATDS at the summary judgment stage. In both cases, the plaintiffs alleged that the defendants used an ATDS to contact them. The defendants admitted that they called the plaintiffs and used sophisticated telephone software to do so but contested that their systems qualified as an ATDS. Using tools of statutory interpretation and combing through the legislative history of the TCPA, the Eleventh Circuit reasoned that when drafting the ATDS prohibition “Congress wanted the statute to eradicate machines that dialed randomly or sequentially generated numbers.”
Additionally, the Eleventh Circuit observed that ACA International
wiped the slate clean with respect to the FCC’s 2003 order which ruled that equipment that dialed numbers from a list qualifies as an ATDS. The Eleventh Circuit reasoned that “in the age of smartphones, it’s hard to think of a phone that does not have the capacity to automatically dial telephone numbers stored in a list, giving § 227 an ‘eye-popping sweep.” The Eleventh Circuit also rejected the Ninth Circuit’s interpretation of the ATDS definition from Marks v. Crunch San Diego, LLC
and suggested that the Marks
court engaged in “surgery” to formulate the ATDS definition because it had to rearrange statutory terms in order to do so. The majority reached this conclusion over the partial-dissent authored by Judge Martin, which urged her colleagues to adopt an interpretation of an ATDS similar to Marks
. Separately, the Eleventh Circuit also held that summary judgment in defendant Hilton’s favor should be affirmed because of the level of human intervention required to operate the text platform at issue.
Resultantly, the Eleventh Circuit affirmed the one district court’s decision that granted summary judgment for defendant and reversed the portion of the other district court’s decision that granted summary judgment for plaintiff on the ATDS claim.
Glasser v. Hilton Grand Vacations Co., LLC,
No. 18-14499, 2020 WL 415811 (11th Cir. Jan. 27, 2020)
The Seventh Circuit Adopts the Third and Eleventh Circuit’s Narrow ATDS Definition
In Gadelhak v. AT&T Services, Inc.
, the Seventh Circuit affirmed summary judgment in defendant’s favor on the ground that the text platform at issue did not qualify as an ATDS because it “neither stores nor produces numbers using a random or sequential number generator; instead, it exclusively dials numbers stored in a customer database.” In a unanimous opinion by the three judge panel, the Seventh Circuit analyzed four possible readings of the statutory definition of an ATDS, but ultimately concluded that the interpretation adopted by the Third and Eleventh Circuits was the most logical one – a device must “store” or “produce” telephone numbers “using a random or sequential number generator” to qualify as an ATDS. The Seventh Circuit also considered and rejected the broader definition of ATDS adopted by the Ninth Circuit in Marks, concluding that “it would create liability for every text message sent from an iPhone.”
The Seventh Circuit also joined the Third, Ninth and Eleventh Circuits in concluding that ACA International vacated the prior FCC orders concerning the ATDS definition. Thus, the Seventh Circuit held that it was no longer bound by those orders, nor its own prior precedent interpreting them.
Gadelhak v. AT&T Services, Inc.
, --- F.3d ----, 2020 808270 (7th Cir. Feb. 19, 2020)
Eastern District of California Preliminary Approves Million Dollar Settlement Despite Defendant’s Potential Billion Dollar Liability
In Larson v. Harman-Mgmt. Corp.
, the Eastern District of California approved a four million dollar settlement despite the defendant having a potential total exposure of over a billion dollars stemming from a telemarketing campaign in which the defendant sent out 13.5 million text messages promoting the defendant’s businesses.
When preliminarily approving the parties’ settlement agreement, the Court reasoned that a four million dollar settlement is reasonable because a damages award of a billion dollars could be deemed to violate due process. The Court relied upon the Eighth Circuit’s Golan v. Free Eats
decision, which reasoned that a $1.6 billion dollar TCPA damages award violated due process because it was “severe and oppressive” in relation to the prohibited act and the harm suffered.
Larson v. Harman-Mgmt. Corp.
, No. 116CV00219DADSKO, 2019 WL 7038399 (E.D. Cal. Dec. 20, 2019)
Western District of Michigan Refuses to Certify Fail-Safe Class
In Visser, et al., v. Caribbean Cruise Line, Inc., et al.
, the Western District of Michigan denied a plaintiff’s motion for class certification because the plaintiff failed to meet the requirements of Rule 23. The plaintiff sought to certify a class of all persons in the United States who had received one or more calls that were made by, on behalf of, or for the benefit of, or otherwise related to the defendant; which either: (a) delivered a message using either or both an automatic telephone dialing system or an artificial or prerecorded voice; or (b) either failed to state defendant’s identity, or failed to state defendant’s telephone number or address.
When declining to certify the class, the Court first noted that the class was not ascertainable. The class was not ascertainable because it was not at all clear what it would mean for a call to be made “for the benefit of” defendant. Nor was it clear, how a call was “related” to the defendant. The Court had also reasoned that the plaintiff was trying to certify a fail-safe class because the definition started with a somewhat broad, potentially ascertainable group of individuals, but then excluded from the class all those who would not have a viable claim under the TCPA. That approach, the Court reasoned, was backwards and would have made it difficult for the Court to ascertain the class members until after the case was resolved on the merits. The Court then found that the plaintiff failed to meet the predominance, numerosity, and typicality requirements because the plaintiff did not proffer enough evidence demonstrating that others had received the same type of call as him. Consequently, the Court declined to certify the proposed class.
Visser, et al., v. Caribbean Cruise Line, Inc., et al.
, No. 1:13-CV-1029, 2020 WL 415845 (W.D. Mich. Jan. 27, 2020)
Central District of California Does Not Certify Class Lacking Numerosity
In Derval, et al., v. Xaler, et al.
, the Central District of California declined to certify a proposed class because it found that the class did not meet the numerosity requirement of Rule 23. In Derval
, the plaintiff alleged that the defendant, a cannabis delivery company, had a uniform policy of causing text messages to be sent to consumers' cellular telephones on defendant's behalf without prior express consent.
The plaintiff sought to represent a class of all persons who had received a text message via an ATDS from the defendant. As evidence for numerosity, the plaintiff submitted screenshots of seventy-eight customer reviews of the defendant. When declining to certify the class, the court reasoned that the plaintiff had only submitted evidence of possible class membership not evidence of numerosity. For the Court, the reviews only demonstrated that defendant had 78 customers. It did not support the plaintiff’s arguments that those customers received unwanted text messages, revoked consent to receive messages, or continued to receive messages after revocation. Resultantly, the Court declined to certify the class.
Derval, et al., v. Xaler, et al.
, No. 219CV01881ODWJEMX, 2020 WL 430781 (C.D. Cal. Jan. 28, 2020)