Not to be outdone by its sister-agency, this month, the FTC announced two significant revisions to the Telemarketing Sales Rule (TSR) and one proposed expansion that will increase the Rule’s reach and impact.

No Deceptive B2B Telemarketing. The FTC finalized a TSR update that will expand the Rule’s prohibition on misrepresentations and false or misleading statements in business-to-business (B2B) telemarketing calls. The original TSR exempted B2B calls (other than those selling office and cleaning supplies), focusing instead on calls to individual consumers. The FTC claims the expansion is warranted due to the rise in B2B scams, which are often carried out through telemarketing.

DNC Rules Not Extended to B2B. Notably, the rule change does not extend any other provisions of the TSR to B2B calls, such as recordkeeping, DNC Registry, or DNC fee access requirements. (With that said, practitioners should be mindful both that (a) many consumers use their wireless phones for business and personal use, providing ambiguity on when a call is B2B vs. B2C), and (b) there are still TCPA autodialer rules and a number of state telemarketing laws that more broadly regulate B2B telemarketing).

B2C Do Not Call (DNC) Recordkeeping. The FTC announced new affirmative recordkeeping requirements for telemarketers, most of which are necessary to support a DNC safe harbor. These records now must be maintained for 5 rather than 2 years. Given that the civil penalty statute of limitations is 5 years, the timing update may not change many businesses’ current practices. Affirmatively requiring retention of all outbound telemarketing records though may require some companies to closely evaluate sales personnel outbound calling practices, separate from a dialing platform, that also need to be taken into account. Records that telemarketers must maintain include, among others:

• call detail records of telemarketing campaigns, such as calling number, called number, time, date, and duration of the call, disposition of the call, whether the call was to an individual or business consumer, and whether the call utilized a prerecorded message (although the rule provides an exemption for calls made by an individual telemarketer who manually enters a single telephone number to initiate a call; for these, records of the calling number, called number, date, time, duration, and disposition of the telemarketing call are not required) [NOTE: The FTC is not requiring compliance with the call detail records retention requirement until 180 days after publication of the rule in the Federal Register to give affected businesses time implement new systems, software, or procedures necessary to comply];
• customer information, including name, last known telephone number and physical or email address, the goods or services purchased, the date of purchase, and the date the goods or services were shipped or provided, and the amount paid by the customer (the rule acknowledges that for “offers of consumer credit products subject to the Truth in Lending Act,” compliance with the recordkeeping requirements under that statute and corresponding Regulation Z would be sufficient to constitute compliance with this provision of the TSR);
• for calls made based on an established business relationship, records sufficient to show a seller has an established business relationship with a consumer, including the name and last known phone number of the consumer, the date the consumer submitted an inquiry or application, and the goods or services inquired about;
• where consent is relied upon, sellers or telemarketers must maintain records of that consumer’s name and phone number, a copy of the consent requested in the same manner and format that it was presented to that consumer, a copy of the consent provided, the date the consumer provided consent, and the purpose for which consent was requested and given. For consent provided orally, the seller or telemarketer must retain a recording of the consent requested, the consent provided, and the recording must make clear the purpose for which consent was provided;
• records of opt-out requests, including the name of the person, date of the request, telephone number associated with the request, and the seller from which the person does not want to receive calls (as well as the goods or services offered by that seller).
• records of which version of the National Do Not Call Registry a seller or telemarketer used by keeping records of: (1) the name of the entity which accessed the registry; (2) the date the DNC Registry was accessed; (3) the subscription account number that was used to access the registry; and (4) the telemarketing campaign(s) for which it was used;
• records of all service providers that a telemarketer uses to deliver outbound calls, including contracts with them (and, as applicable, requiring telemarketers to enforce the record retention requirements for any of its applicable service providers). The FTC makes clear that “service providers” includes “any entity that provides ‘digital soundboard’ technology,” such as those that “sellers use to mimic or clone the voice of an individual to deliver live and prerecorded outbound telemarketing calls.” Further, where the seller has allocated responsibility of recordkeeping to a telemarketer, the seller will be required to ensure their telemarketers are abiding by the TSR’s recordkeeping provisions and retain access to their telemarketer’s records of telemarketing activities on the seller’s behalf;
• a copy of each unique prerecorded message;

Narrow Safe Harbor. The Rule also clarifies that failure to maintain records in a complete and accurate manner constitutes a violation of the TSR subject to civil penalties, but builds in a safe harbor of 30 days from the date of discovery, allowing companies a short grace period to cure inadvertent errors and deficiencies. Based on past FTC TSR enforcement, however, businesses should prioritize steps to confirm retention practices are in place, rather than rely on the discretion of the agency in its application of the safe harbor.

Timing. The updated Rule will become effective 30 days after publication in the Federal Register, except as noted above for retention of call detail records.

Further Proposed TSR Amendments. The FTC announced a proposal to amend the TSR to cover inbound telemarketing calls involving technical support services, which are broadly defined as “any plan, program, software, or service that is marketed to repair, maintain, or improve the performance or security of any device on which code can be downloaded, installed, run, or otherwise used, such as a computer, smartphone, tablet, or smart home product.”

The proposal would exclude tech support services involving an entity taking physical possession of the device being repaired, and the TSR’s requirements would only be triggered if the company disseminated advertisements that resulted in the inbound customer calls. (Separately, the FTC has taken the position that inbound calls involving upsells are already covered by the TSR’s requirements.)

The proposed tech support services exemption would join several other enumerated business activities of concern to the FTC, including debt relief services, investment opportunities, and business opportunities. Comments on the new proposal will be due 60 days after publication in the Federal Register.

Monetary Exposure. As a reminder, a violation of the TSR can result in civil penalties of up to $51,744 (and the FTC can seek this amount on a per call basis).

***

In light of these and other announced telemarketing updates and revisions, companies engaged in activities that may be covered under the revised TSR and TCPA rules should review these new requirements carefully, including through consultation with counsel, and modify internal processes as appropriate to ensure compliance. For example, all TSR-covered entities will need to review and update, as applicable, their recordkeeping processes and training materials to ensure retention of new record categories, and perhaps their contracts and auditing processes with their service providers supporting telemarketing. Similarly, entities engaged in B2B telemarketing will need to develop new processes for ensuring that all messages are truthful and non-misleading.

If you have any questions about how these changes may affect your business, or are interested in filing comments, please reach out to Alysa Hutnik, Ioana Gorecki, or Jennifer Rodden Wainwright.

Case Background

Allan came before the Sixth Circuit on appeal of the district court’s entry of summary judgment for plaintiffs. Plaintiffs alleged that defendant had placed 353 calls to them using an ATDS after they had each revoked consent. The district court held that defendant’s system qualified as an autodialer. It was undisputed that the system did not randomly or sequentially generate numbers. It would place calls to a daily-created list based on a stored list of a numbers in connection with collection of specific individual’s private education loan debt. By a 2-1 majority, the Sixth Circuit concluded that equipment may be an ATDS if it has the capacity to store numbers to be called, or to produce numbers using a random or sequential number generator, and to dial such numbers.

Majority Opinion

The majority opinion found that the ATDS definition is facially ambiguous. The TCPA defines an ATDS as “equipment which has the capacity to store or produce telephone numbers to be called, using a random or sequential number generator” (and the capacity to dial those numbers automatically). The opinion engaged in a grammatical analysis of the statutory text to resolve the definition’s latent ambiguity, which interpretation it then confirmed with reference to relevant statutory and administrative history.

The Sixth Circuit concluded that a predictive dialer or system that dials from a stored list could qualify as an ATDS under the TCPA. The Court relied on the existence of exceptions to help establish the rule. For example, the Court confirmed that the “prior express consent” exception permits calls made using an autodialer if the recipient has given his or her prior express consent to receiving those calls. Thus, it reasoned, “[a]n exception for consented-to calls implies that the autodialer ban otherwise could be interpreted to prohibit consented-to calls. And consented-to calls by their nature are calls made to known persons, i.e., persons whose numbers are stored on a list and were not randomly generated.” Ergo, the Court held that the definition of an ATDS must broadly sweep in stored-number systems and predictive dialers, not just calls to unknown individuals via random or sequential number generation.

Delving into the TCPA’s legislative history, the Court highlighted Congress’s intent to crack down on pervasive and intrusive telemarketing practices. Rather than regulate certain types of technology used to place calls, the TCPA was meant to curb the calls themselves – particularly the near-daily, multiple calls that formed the Allan plaintiffs’ cause of action.

Consistent with every other Circuit to have addressed the issue, the Sixth Circuit reached this decision without administrative guidance, holding that prior guidance from the FCC, including those pre-2015, was invalidated by the D.C. Circuit in its 2018 decision ACA International v. FCC. While some District Courts have relied on those prior FCC orders, the Circuit Courts, with the exception of the Second Circuit, have held that the prior orders were set aside.

Importantly, the Court affirmatively declined to comment on the potential impact of human intervention on dialing because, it found, the defendant failed to present a legal basis for that argument in this case.

Dissent

The dissent disagreed with the majority’s conclusion and methodology, putting forth a third interpretation of the statutory language. Rather than modifying the verbs “store” and/or “produce,” the dissent maintained that the language “using a random of sequential number generator” should be read to modify the entire phrase “telephone numbers to be called.” In the instant case, because the telephone numbers dialed were not generated randomly or sequentially, the dissent would have held that the equipment at issue did not qualify as an ATDS.

The dissent gave four reasons why its interpretation was the “best” reading among the three possible interpretations. First, it does not require a judicial rewrite of the statute as does the definition of an ATDS that includes stored-number systems: even if unartfully drafted, it is grammatically correct. In contrast, the majority’s definition requires a grammatically incorrect reading of the statute. Second, it avoids the problem of superfluity associated with a definition of ATDS that excludes stored-number systems (thereby rendering the term “store” in the statute’s definition surplusage). Third, the dissent concludes that the interpretation is consistent with the FCC’s early orders interpreting the TCPA. The FCC’s early definitions of an ATDS define it “as a device that uses a random or sequential number generator.” And fourth, the dissent argues that Congress’s intent was in fact to curb the use of machines that dialed randomly or sequentially generated numbers, pointing out language from an early congressional hearing to that effect. (KDW note: This argument is similar to the argument made by then-Commissioner Ajit Pai in dissent to the 2015 FCC decision that was overturned in ACA International v. FCC.)

What Comes Next

The Sixth Circuit’s position only further deepens the divide between the Circuits with six, evenly split Circuits having offered their positions. In the short term, the Allan decision expands the definition of an ATDS for callers and litigants in the Sixth Circuit; thus, increasing the potential risks and exposure.

The Allan decision is not likely to have lasting effect, however, because the United States Supreme Court has accepted a case to address the ATDS definition. The Sixth Circuit’s reasoning in Allan closely tracks the Ninth Circuit’s decision in Duguid v. Facebook, 926 F.3d 1146 (9th Cir. 2019). That decision has been accepted for review by the Supreme Court and will be argued in the fall. The resolution of the appeal should settle the question of what is an ATDS, providing (we hope) consumers and businesses alike with clear guidance on permissible autodialing systems.

Interestingly, the defendant in Allan had opposed a motion to stay the pending appeal until the Supreme Court reached a decision in Facebook. With this unhelpful ruling in hand, the defendant in Allen may file its own petition for certiorari, and/or seek further review by the Sixth Circuit en banc.

[1] These circuits stand opposite to the Seventh and Eleventh Circuits, which hold that an ATDS must use a random or sequential number generator. Although the Third Circuit has also weighed in Dominguez v. Yahoo, Inc., 894 F.3d 116 (3d Cir. 2018), the Allan court took the position that it did not expressly construe the definition. “The Third Circuit has not expressly addressed this question, but it did assume (without providing any analysis) that an ATDS must use a random or sequential number generator.” Allan at 5, n.3; but see Dominguez v. Yahoo, Inc., 629 F. App’x 369 (3d Cir. 2015) (considering “the definition of ‘random or sequential’ number generation” and confirming “the phrase refers to the numbers themselves rather than the manner in which they are dialed.”)

States of Emergency: Two states, New York and Louisiana, prohibit certain telemarketing calls during declared states of emergency.

• New York: The prohibition applies to any unsolicited telemarketing sales call to any person under a declared state of emergency. Calls made (1) in response to an express written or verbal request, or (2) in connection with an existing business relationship, are not “unsolicited” and are therefore permissible. Importantly, it is ambiguous as to whether this prohibition also covers business-to-business telemarketing calls. The provision applies to unsolicited telemarketing sales calls made to any person during a declared state of emergency. The statute defines “person” to include businesses, but the other telemarketing provisions in the statute are limited to business-to-consumer calls.
• Louisiana: The prohibition applies to all telemarketing calls to consumers, except those made (1) within six months of an express request, or (2) pursuant to an existing business relationship or a prior business relationship that has lapsed within six months.

These are difficult times, but we are happy to help, so please do not hesitate to reach out to us or to check out the Kelley Drye COVID-19 Resource Center.

For additional information see the Ad Law Access blog posts:

• Taking Stock of the TCPA in 2019: What is an “Autodialer”?
• FCC Reaffirms Potential TCPA Liability for Text Message Platforms

For a deeper focus on TCPA-related issues at the FCC, listen to the “Inside the TCPA” series on Kelley Drye Full Spectrum.

The Ad Law Access podcast is available now through Apple Podcasts, Spotify, Google Podcasts, SoundCloud, and other podcast services.

Generally speaking, and among other restrictions, the TCPA makes it unlawful to call or text a cell phone using an automatic telephone dialing system (ATDS) or artificial or prerecorded voice without the prior express consent of the called party. As part of the Bipartisan Budget Act of 2015, Congress created a content-specific exemption that allowed ATDS calls to be placed if they were to collect a government-backed debt (the “debt-collection exemption”). In other words, a debt collector calling to collect on certain government backed mortgages or student loans were exempt from the act, but the same debt collector would not be exempt if calling to collecting on a non-government backed loan.

Content-based laws must satisfy the strict scrutiny test of the First Amendment. This means that content-based exemptions, such as the debt-collection exemption, are presumptively unconstitutional and may be justified only if the government can show that the restriction is narrowly tailored to serve a compelling state interest. The Fourth Circuit Court of Appeals, in overturning the District Court’s decision, held that the debt-collection exemption does not meet that standard, and is therefore unconstitutional.

This decision was announced in the case of American Association of Political Consultants, Inc. (AAPC) et. al v. Federal Communication Commission (FCC). The Fourth Circuit agreed with the AAPC that the debt-collection exemption was content based, and consequently that strict scrutiny test was appropriate. As explained by the Court:

Under the debt-collection exemption, the relationship between the federal government and the debtor is only relevant to the subject matter of the call. In other words, the debt-collection exemption applies to a phone call made to the debtor because the call is about the debt, not because of any relationship between the federal government and the debtor… In these circumstances, the debt-collection exemption to the automated call ban constitutes a content-based speech restriction.

The Court also concluded that the debt-collection exemption fails strict scrutiny because it is under-inclusive as it authorized many of the calls that the TCPA was enacted to prohibit. They also found that there was no compelling government interest, as the exemption cut against the privacy interests that Congress sought to safeguard by the TCPA.

Although the Court held that the debt-collection exemption was unconstitutional, it did not invalidate the entire statute as the appellant and many defendants in pending lawsuits had hoped. Instead, it determined that the appropriate remedy was to sever the exemption, leaving the rest of the statute intact.

Despite the Fourth Circuit’s decision, the battle over the constitutionality of the TCPA continues. The Ninth Circuit is currently considering a similar constitutional challenge to the TCPA in Gallion v. Charter Commc’ns Inc., in which oral argument was held on March 11.

The Fourth Circuit’s opinion in AAPC highlights the ongoing struggle over the scope and application of the TCPA. As we’ve blogged about before, the FCC is believed to be on the cusp of issuing a new order on the definition of ATDS under the Act, which definition has been a hotbed of litigation and regulatory challenges. We will continue to monitor developments and post updates on this site.

In this post, we revisit the relevant details of the Court’s decision in ACA International, and prior statements of FCC Chairman Ajit Pai concerning the ATDS definition to assess how history may be a guide to how the FCC approaches this issue.

D.C. Circuit Found FCC’s 2015 Definition of ATDS Was Too Broad

Under the statute, an ATDS is defined as a device with the capacity “to store or produce telephone numbers to be called, using a random or sequential number generator” and “to dial such numbers.” 47 U.S.C. § 227(a)(1)(A)-(B). The D.C. Circuit unambiguously concluded that in 2015 the FCC adopted an overly expansive and unreasonable view of this definition. In its 2015 Declaratory Ruling and Order, the FCC defined equipment as an autodialer if it contained the potential “capacity” to dial random or sequential numbers, even if that capacity could be added only through specific modifications or software updates (so long as the modifications were not too theoretical or too attenuated). Under this revised interpretation, any equipment that could be modified to dial numbers randomly or sequentially would be an ATDS – and therefore subjected the caller to potential liability under the statute. The FCC also made contradictory statements about the capabilities that an autodialer must possess – reaffirming and then appearing to disclaim its prior rulings on predictive dialers, and offering contradictory statements regarding the level of human intervention that would preclude a call from being auto-dialed. These statements further compounded the uncertainty surrounding autodialers.

The D.C. Circuit Court was troubled by the “eye-popping” reach of the 2015 Order’s interpretation, which could be applied to any smartphone, and found that such a reach could not be squared with Congress’ findings in enacting the TCPA. The Court observed that the FCC’s interpretation was “utterly unreasonable in the breadth of its regulatory [in]clusion.” It rejected the FCC’s justification that a broad reach was necessary to encompass “modern dialing equipment,” concluding that Congress need not be presumed to have intended the term ATDS to apply “in perpetuity” and citing paging services as an example of TCPA provisions that have ceased to have practical significance.

Although the Court did not clarify the requisite “capacity” needed—present or future—to be an ATDS, it declared that “the TCPA cannot reasonably be read to render every smartphone an ATDS subject to the Act’s restrictions.” The Court also found that the confusion over the term “capacity” as it relates to the ATDS definition was multiplied by the FCC’s insufficient explanation of the requisite features that the covered ATDS equipment must possess. Specifically, the 2015 Declaratory Ruling and Order fell short of reasoned decision making in “offer[ing] no meaningful guidance” as to the seminal questions of whether a device (1) must itself have the ability to generate random or sequential numbers to be dialed, (2) must dial numbers without human intervention or (3) must “dial thousands of numbers in a short period of time.”

By setting aside the prior interpretation, the D.C. Circuit handed the issue back to the FCC for further analysis and explanation. The FCC sought comment on how to respond to the D.C. Circuit’s ruling and appears to be close to issuing a decision on the remanded issues.

Is Commissioner Pai’s 2015 Dissent a Harbinger of the Decision on Remand?

When the FCC’s 2015 omnibus TCPA Declaratory Ruling and Order was issued, then-Commissioner Pai (now Chairman of the FCC) authored a highly critical dissent, including a direct challenge to the interpretation of an autodialer. In his view, the ruling improperly expanded the definition of an ATDS beyond the legislative mandate, and needed to be reigned back in.

Chairman Pai’s dissent took issue with the ATDS definition as overbroad and over-inclusive. He posited that only equipment that has the capability to dial sequential numbers or random numbers should qualify as an ATDS. “If a piece of equipment cannot do those two things—if it cannot store or produce telephone numbers to be called using a random or sequential number generator and if it cannot dial such numbers—” Chairman Pai asked, “then how can it possibly meet the statutory definition? It cannot.” The principal issue addressed in the 2015 order was whether the statute’s reference to the “capacity” of ATDS equipment referred to the potential capabilities of the equipment. On this front, Chairman Pai’s view was clear: he believed that the statutory definition of an ATDS was limited to the equipment’s “present capacity,” not to its potential or theoretical capacity, and his dissent focused largely on why the concept of potential capacity was a bridge too far.

Chairman Pai’s interpretation of the statute closely hues to the specific capabilities listed in the text of the TCPA—the ability to store or produce numbers using a random or sequential number generator, and to dial such numbers. The FCC’s interpretation, Chairman Pai charged, “transforms the TCPA from a statutory rifle‐shot targeting specific companies that market their services through automated random or sequential dialing into an unpredictable shotgun blast covering virtually all communications devices.” Chairman Pai was willing to claim victory for the “rifle‐shot” set, stating that if today’s callers have abandoned random or sequential dialers due to the TCPA’s prohibition, then the TCPA has “accomplished the precise goal Congress set out for it” and, if parties want to address more modern types of abusive dialing equipment, they should go to Congress for action.

Given Chairman Pai’s previous statements and the D.C. Circuit’s criticism of the prior order’s scope, it appears likely that the FCC will look only to the present capabilities of particular equipment, rather than its potential or future capacity. However, this alone does not answer the question before the agency. In 2015, Chairman Pai seemed ready to declare the autodialer definition to have achieved its goal, but now that he leads the agency, will he hold to that position?

Notably, since assuming the leadership of the Commission, Chairman Pai has made multiple statements about the need to address the “scourge” of robocalling. The FCC has taken several actions aimed at reducing abusive calls, better detecting spoofing and unlawful activity, and empowering carriers to block illegal calls and consumers to block illegal and unwanted calls. Much of these actions were detailed in an FCC Bureau report on illegal robocalls released on February 14. While it eschews any recommendations for future actions, the report details ongoing FCC and industry efforts to combat illegal robocalls, and identifies some of the challenges to FCC enforcement activities. The Commission also recently adopted a database for number assignment changes that aims to reduce misdirected calls to the wrong telephone number. Will these robocall reduction efforts give the Pai-led FCC the “cover” to narrow the definition of an ATDS, and, if so, by how much will it be narrowed?

Some narrowing of the prior definition is inevitable. Few argue that ordinary smartphones should be subject to the TCPA restrictions. But even advocates of a broad interpretation disagree on how to get there: some have argued that the FCC should maintain the prior definition but exempt smartphones, while others argued for standards that would exclude “ordinary” or unmodified smartphones. Some in the industry, on the other hand, are asking the FCC to focus more narrowly on equipment prominent in the early 1990s, when the TCPA was passed, and be less likely to include equipment that solely calls from pre-loaded lists of numbers. This would be consistent with Chairman Pai’s dissent – provided he has the other votes to achieve it. An interpretation along this line would appear to be good news for predictive dialing equipment and various dialers that involve differing levels of human intervention to complete calls.

Given the divergent interpretations in Marks and Dominguez, the FCC’s interpretation of the ATDS definition is almost certainly headed back to the courts for confirmation that the FCC’s revised definition (whatever it is) lies within the agency’s delegated powers and is sufficiently clear to pass judicial muster. Moreover, a restrictive interpretation of the legislative mandate for what can be regulated would leave to Congress the question of whether a broader definition must be considered, including how to address modern dialing equipment and other modern technologies. Several anti-robocall bills aimed at expanding the reach of the ATDS definition are already under consideration in both houses of Congress. Thus, even if the FCC adopts a narrower interpretation, we’re likely to see the ATDS issue shift to other forums in the second half of 2019.

With that in mind, and given the continual cycle of TCPA lawsuits, companies placing calls or texts and those designing calling or texting platforms should consider how participating in the FCC and subsequent proceedings can further their interests. They also would benefit from determining how the clarified ATDS definition is likely to affect their business, and whether any proactive adjustments would be helpful to prevent disruption to the business or to manage TCPA risk exposure, including evaluating whether the consent they obtain is sufficient. Kelley Drye will continue to follow these issues and provide updates through its monthly TCPA Tracker. Please contact us to join our list or if you have any questions concerning these issues.

Future episodes of “Inside the TCPA” will tackle reassigned numbers, consent, and other topics raised before the FCC. This is a companion to Kelley Drye’s comprehensive list of petitions before the Commission available in our monthly TCPA Tracker newsletter. Please contact us if we can assist you with any of the FCC proceedings.

Kelley Drye’s Full Spectrum is available on iTunes. To subscribe, and keep up to date on the latest trends and topics in communications, simply find the built-in and undeletable podcast app, search “Kelley Drye Full Spectrum,” look for our logo, and hit “subscribe.”

You can also access the podcast through our website, SoundCloud, and Stitcher.

*Audio files may load faster through Google Chrome

According to the complaint, Charter had entered into contracts with third-party telemarketers to place telemarketing calls on its behalf to numbers on Charter-provided lists. These third parties allegedly used autodialers, identified themselves as Charter, and received a commission based on sales to phone numbers on the lists provided by Charter. The complaint, which was filed in the U.S. District Court for the Eastern District of Missouri, alleges that these third-party telemarketers made calls to thousands of consumers whose phone numbers were on applicable Do Not Call lists and did not lawfully honor consumers’ requests to be added to DNC lists, and that such calls were made without an applicable Established Business Relationship exemption or consent to be called. The complaint states that Charter is liable for these third parties’ calls, which allegedly violate the Telephone Consumer Protection Act, Telemarketing Sales Rule, and Missouri Merchandising Practices Act’s “No-Call Law” and “Telemarketing Law.”

While we have seen an influx of consumer class action lawsuits alleging TCPA violations in recent years, state Attorneys General have the authority to investigate and seek civil penalties for violations of both federal and state telemarketing laws. Attorney General Koster is seeking, in addition to permanent injunctive relief, civil penalties of at least $500 for each violation of the TCPA, up to $16,000 for each violation of the TSR, and up to $5,000 for each violation of the Missouri Merchandising Practices Act.

Yesterday my litigation partner Lauri Mazzuchetti and I teamed up with Ken Sponsler of CompliancePoint to cover the latest developments and hot topics related to TCPA compliance and litigation, and strategies to consider when defending such matters. If you missed this 2-hour deep dive into the issues, you can listen to the recording here. And if you would like to stay up to date on this topic, you may also wish to sign up for our TCPA Tracker newsletter so you can receive monthly updates on the latest happenings related to TCPA litigation and compliance.

The Navy hired Campbell-Ewald to develop and execute a multimedia recruiting campaign and the parties agreed that, as part of the marketing campaign, Campbell-Ewald would send text messages to cellular users that had consented to receive the recruitment solicitation. Campbell-Ewald outsourced the text message dialing to a company called Mindmatics which was responsible both for generating the list of phone numbers to be dialed and for physically transmitting the text messages. In the suit, the plaintiff claimed that he did not consent to receipt of the message and alleged that Campbell-Ewald violated the TCPA. The plaintiff did not name the Navy or Mindmatics as a defendant.

Although it conceded that the FCC recognizes vicarious liability under the TCPA, Campbell-Ewald argued that vicarious liability only extends to the merchant whose goods or services are being promoted by the telemarketing campaign. The Ninth Circuit rejected that argument, explaining that the FCC has never stated that vicarious liability is only applicable to these entities and,

[a]s a matter of policy it seems more important to subject the consultant to the consequences of the TCPA infraction. After all, a merchant presumably hires a consultant in part due to its expertise in marketing norms. It makes little sense to hold the merchant vicariously liable for a campaign he entrusts to an advertising professional, unless that professional is equally accountable for any resulting TCPA violation.

Under the TCPA, prior express consent is required for any non-telemarketing call – such as a debt collection call – made to a mobile phone using an ATDS and/or an artificial prerecorded voice. (A higher standard – prior WRITTEN express consent – is required to make calls to cell phones using an ATDS or a prerecorded voice for any telemarketing).

In addition to alleging that the companies never received prior express consent, certain plaintiffs alleged that (1) their cell phone was called concerning another person’s Capitol One account; (2) Capitol One was repeatedly asked to stop calling, but calls continued nonetheless; and (3) Capitol One obtained plaintiffs’ cell number from a third party via skip tracing.

The settlement is a good reminder of the repercussions that may follow when a company has not closely reviewed and ascertained the sources from which it obtains phone numbers, whether any are cellular phone numbers and the likelihood that such numbers still belong to the customer (or have since been disconnected and reassigned), and are matched with the correct type of consent to be called. Even slight oversights in this area are exposing a number of companies to claims of potential violations (and massive financial exposure) under the TCPA.