Redial: 2014 TCPA Year In Review – Analysis Of Critical Issues And Trends

In this Analysis:

– New TCPA Rules Take Effect for Telemarketing Calls

– Just the Fax: Recent TCPA Developments on Liability for Unsolicited Faxes and Fax Opt-Out Notices

– TCPA Best Practices: Consent, Compliance, Communication

– TCPA Hot Issues: Is the Scope of Consent Unlimited?

– TCPA Hot Issues: If Consent is Not Forever, What Constitutes Revocation?

– Multi-Million Dollar Settlements Prompt Record Filing of TCPA Lawsuits

– Eleventh Circuit Reverses Outlier Decision on TCPA Prior Express Consent Standard

– TCPA Hot Issues: TCPA Restricts Autodialed Calls, but Courts Split on Meaning of Autodialer

– My Brother’s TCPA Keeper? Recent Cases Highlight Third-Party Risk Under the Telephone Consumer Protection Act

– TCPA Risks Increase for the Financial Services Industry

– For Whom the Ring Tones: TCPA Litigation and the Insurance Industry

– TCPA Class Action Against Insurance Agent Not Covered by Professional Liability Insurance

– Excerpt from New TCPA Rules Take Effect for Telemarketing Calls:

Significant regulatory changes took effect under the Telephone Consumer Protection Act (TCPA) on October 16, 2013, due to a revision of the Federal Communications Commission’s (FCC) TCPA rule. The amended rule requires that consent be in writing for autodialed or prerecorded telemarketing calls to cell phones. The amended rule also eliminates the exception for prerecorded telemarketing calls to landlines where there is an established business relationship. Instead, under the new rule, written consent is required for prerecorded telemarketing calls to landlines.

Please see full Analysis below for more information.

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STRENGTH in knowing our clients’ businesses

STRENGTH in advising and counseling our clients on TCPA compliance

STRENGTH as trial lawyers in efficiently and zealously representing our clients
in state and federal courts across the country
Sutherland is pleased to present REDIAL, an in-depth analysis of key TCPA
issues and developing trends. REDIAL also reports on the industries that are
regularly and increasingly facing TCPA class action liability.
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CONTENTS
Regulatory Developments
New TCPA Rules Take Effect for Telemarketing Calls 4
Just the Fax: Recent TCPA Developments on Liability for Unsolicited
Faxes and Fax Opt-Out Notices 6
Compliance Issues
TCPA Best Practices: Consent, Compliance, Communication 8
TCPA Hot Issues: Is the Scope of Consent Unlimited? 10
TCPA Hot Issues: If Consent is Not Forever, What Constitutes Revocation? 13
Significant Cases
Multi-Million Dollar Settlements Prompt Record Filing of TCPA Lawsuits 16
Eleventh Circuit Reverses Outlier Decision on TCPA Prior Express
Consent Standard 20
TCPA Hot Issues: TCPA Restricts Autodialed Calls, but Courts Split
on Meaning of Autodialer 22
My Brother’s TCPA Keeper? Recent Cases Highlight Third-Party Risk
Under the Telephone Consumer Protection Act 24
Industry Focus
TCPA Risks Increase for the Financial Services Industry 28
For Whom the Ring Tones: TCPA Litigation and the Insurance Industry 31
TCPA Class Action Against Insurance Agent Not Covered by Professional
Liability Insurance 36
INTRODUCTION
NEW TCPA RULES TAKE EFFECT
FOR TELEMARKETING CALLS
Significant regulatory changes took effect under the Telephone
Consumer Protection Act (TCPA) on October 16, 2013, due to
a revision of the Federal Communications Commission’s (FCC)
TCPA rule. The amended rule requires that consent be in writing
for autodialed or prerecorded telemarketing calls to cell phones.
The amended rule also eliminates the exception for prerecorded
telemarketing calls to landlines where there is an established business
relationship. Instead, under the new rule, written consent is required
for prerecorded telemarketing calls to landlines.
REGULATORY DEVELOPMENTS
the caller has an established business
relationship with the call recipient.2 The
rule does not apply to non-telemarketing
calls to landlines, or to calls that are
manually dialed using an in-person caller.
The amended rule that took effect on
October 16, 2013, requires “prior express
written consent” for many telemarketing
calls.3 Specifically, “prior express written
consent” is required for autodialed or
prerecorded calls or texts to cell phones.
The new “prior express written consent”
requirement also applies to prerecorded
telemarketing calls to landlines, and
there is no longer any exception for
established business relationships. For
non-telemarketing calls to cell phones,
the standard remains “prior express
The FCC’s TCPA Rule and Revision
The TCPA regulates certain telemarketing
and informational calls, texts, and faxes
that are made using an automatic dialer
or prerecorded message.1 The FCC
adopted a rule under the TCPA that
generally prohibits making telephone
calls to cell phones using an automatic
dialer or prerecorded message without
the “prior express consent” of the party
receiving the call. This rule applies to both
telemarketing calls and non-telemarketing
calls such as debt collection calls or
informational calls. The rule also prohibits
telemarketing calls to landlines using
a prerecorded message without prior
express consent, except that prior express
consent has not been required where
SUTHERL AND ASBILL & BRENNAN LLP • WWW.SUTHERL AND.COM
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consent” and does not introduce the requirement that the consent be in writing.
As before, the new rule does not cover non-telemarketing calls to landlines or
calls that are manually dialed using a live operator.
For purposes of the new rule, the term
“prior express written consent” means an
agreement in writing, with a “signature”
that “clearly authorizes” the seller to
make telemarketing calls or texts using
an autodialer or prerecorded voice. The
agreement must contain the specific
telephone number or numbers to which
calls can be made, and the person
giving consent cannot be required to
give consent as a condition of purchase.
Significantly, consent obtained pursuant to the E-SIGN Act satisfies the
requirement of the revised rule.4 Therefore, consent obtained via an email,
a website form, a text message, a telephone keypress or a voice recording
is sufficient under the new rule.
Developments in TCPA Class Action Settlements
The TCPA provides a private right of action and continues to spawn class
action litigation and settlements. The TCPA provides for minimum statutory
damages of $500 per violation without any total damages cap in a class
action.5 There have been a number of large TCPA settlements in recent
months. At the end of September 2013, Bank of America agreed to settle
a putative class action under the TCPA for a reported amount of $32 million,
which was reported as the largest TCPA settlement to date.6 Another pending
settlement this year includes a class action against Papa John’s, in which
the parties announced a $16.5 million settlement in May.
With the new FCC rules and ongoing litigation risk, companies will need
to adopt procedures to obtain written consent where appropriate and to
maintain adequate records of the specific details of that consent.
147 U.S.C. § 227.
2 47 C.F.R. § 64.1200.
3 47 C.F.R. § 64.1200; see also Federal Register, Vol. 77, No. 112.
4 Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 (2000).
5 47 U.S.C. § 227(b)(3) (A court may award up to $1500 per violation for willful or knowing violations.).
6 The settlement resolved several pending cases, including Rose v. Bank of America, No. 11-CV-2390
(N.D. Cal.).
THE TCPA ESTABLISHES A PRIVATE RIGHT OF
ACTION FOR CONSUMERS TO BRING CLAIMS FOR
$500 PER VIOLATION ($1500 IF WILLFUL) CAUSED
BY CERTAIN AUTODIALED CALLS, PRERECORDED
CALLS AND FACSIMILES RECEIVED WITHOUT
CONSENT. THE STATUTE ALSO CREATES A
PRIVATE RIGHT OF ACTION FOR UP TO $500 PER
VIOLATION FOR CERTAIN TELEMARKETING CALLS
MADE IN VIOLATION OF A CONSUMER’S STATUS
ON THE FEDERAL DO NOT CALL LIST.
REGUL ATORY DEVELOPMENTS
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JUST THE FAX: RECENT TCPA
DEVELOPMENTS ON LIABILITY
FOR UNSOLICITED FAXES AND
FAX OPT-OUT NOTICES
The end of October 2014 saw two significant developments
for Telephone Consumer Protection Act (TCPA) rules
governing facsimile transmissions, fax opt-out notices
and liability for faxes sent by third parties.
On October 30, 2014, the Federal Communications Commission (FCC)
ruled that opt-out notices, giving the recipient the right to decline receipt
of further fax communications, are required on facsimile advertisements
regardless of whether the recipient provided prior consent.1 The FCC’s
order was in response to petitions seeking a declaratory ruling that opt-
out notices are not required on fax advertisements sent with the recipient’s
prior express consent. In denying the Application for Review and numerous
other petitions on the same issue, the FCC confirmed its prior position
that senders of any fax advertisement must include instructions that
clearly and conspicuously explain to recipients how to opt out of future
communications, “even if [recipients] previously agreed to receive fax ads
with the recipient’s prior express consent.”
In addition to clarifying the opt-out rules for faxes, the FCC also acted
on several individual requests for waivers, granting retroactive relief to
parties that were reasonably uncertain about whether the opt-out notice
requirement applied to faxes sent with the recipient’s prior permission.
The FCC provided a six-month window starting on October 30, 2014, for
the waiver recipients to come into full compliance with the order. Lastly,
the FCC noted that parties similarly situated may apply for waiver requests,
which must be filed by April 30, 2015. If a waiver is not received, however,
full compliance is expected, and past or future failure to comply with the
order could subject entities to private litigation or enforcement sanctions,
such as forfeitures and fines.
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REGUL ATORY DEVELOPMENTS
On the same day, in Palm Beach Gold Center of Boca, Inc. v. John G. Sarris, D.D.S.,
P.A., 13-14013 (11th Cir. 2014), the U.S. Court of Appeals for the Eleventh Circuit
issued a decision regarding the standard for liability when a fax transmission is sent on
behalf of a defendant by a third-party marketer. In 2005, plaintiffs received a one-page
unsolicited fax advertisement promoting the defendant’s dental practice. The fax was
sent by a hired marketing manager with “free rein” to market the defendant’s practice.
Plaintiffs filed suit under the TCPA. The district court granted the defendant’s motion
for summary judgment on the ground that the fax was sent by a third party and not by
the defendant. The district court reasoned that per the FCC’s 2012 declaratory ruling
in In Re Dish Network, LLC (Dish Network), direct liability exists under the TCPA only
by the “person actually transmitting the fax itself.” And although vicarious liability can
exist against a person who delegates to another, the district court determined that the
plaintiffs had failed to plead “a theory of vicarious liability in its
complaint, a heightened pleading requirement under Florida
law,” such that the “claim was defective.”
In reversing and remanding the trial court’s decision, the
Eleventh Circuit set a broad standard that direct liability for an
unsolicited fax can be applied to a company on whose behalf an
advertisement is sent, even if the company did not send the fax
itself. In so holding, the court agreed with plaintiffs’ argument
that Dish Network did not apply because it did not specifically
“construe the TCPA provision related to” faxes. The court also relied on an FCC letter
brief, filed at the court’s request, which argued that Dish Network should not be extended
to fax cases. And the court held that an advertisement sent on behalf of a company
whose services are advertised in an unsolicited fax transmission can lead to direct liability
of the company under the TCPA.
The FCC’s fax order and the Eleventh Circuit’s decision in Palm Beach Gold Center
highlight two of the significant TCPA issues in fax cases: required opt-out notices on
faxes and the potentially broad standard for direct liability for fax transmissions sent
by third parties. As TCPA litigation continues to increase, it is essential for companies
transmitting fax messages to maintain a focus on TCPA compliance.
1 See Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991; Junk Fax Prevention Act of
2005; Application for Review filed by Anda, Inc.; Petitions for Declaratory Ruling, Waiver, and/or Rulemaking Regarding the
Commission’s Opt-Out Requirement for Faxes Sent with the Recipient’s Prior Express Permission, CG Docket Nos. 02-278,
05-338, Order, FCC 14-164 (Oct. 30, 2014).
SENDERS OF ANY FAX
ADVERTISEMENT MUST
INCLUDE INSTRUCTIONS
THAT CLEARLY AND
CONSPICUOUSLY EXPLAIN
TO RECIPIENTS HOW TO
OPT OUT OF FUTURE
COMMUNICATIONS.
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TCPA BEST PRACTICES:
CONSENT, COMPLIANCE,
COMMUNICATION
CONSENT: Understand and obtain
the appropriate consent
Get written consent for marketing
communications
For automated marketing calls, obtain
written consent. Under TCPA regulations,
“prior express written consent” requires
a written agreement, signed by the
consumer, that includes, among other
things, the telephone number, that
specifically authorizes telemarketing by
automatic dialing/texting or prerecorded
voice, and that is not required as a
condition of purchase.
Get consent for non-marketing
communications
A consumer has generally consented to
receive non-marketing communications
if they have given their number for a
specific purpose or in connection with
a specific transaction.
• The scope of the consent extends
to communications related to the
transaction or purpose for which the
consumer provided the number.
COMPLIANCE ISSUES
What is the TCPA?
The Telephone Consumer Protection
Act of 1991 (TCPA) protects consumers
from unwanted telemarketing calls,
prerecorded or autodialed calls, fax
transmissions, and text messages.
What are the penalties for violating
the TCPA?
Violations of the statute can lead to
significant financial consequences:
a $500 penalty per communication
(or $1,500 if willful).
How can a company protect itself
from TCPA lawsuits?
Sutherland’s Three Cs approach
provides an overview of best practices
for reducing litigation risk.
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Sutherland’s Three Cs: Consent, Compliance, Communication
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Check the Do Not Call registry
Consumers who do not want to receive
telemarketing calls can register their
numbers on the National Do Not
Call registry.
• Maintain written procedures for
checking the Do Not Call registry.
• Also maintain a company-specific do-
not-call list for consumers who have
requested not to be contacted.
COMPLIANCE: Strict compliance with
TCPA regulations is essential
Maintain a record of consent
Keep a current record of consumers
who have consented to receiving
communications and the type of
communications to which they have
consented.
• Create internal procedures for
referring to the record before initiating
communications.
Offer an opt-out
Include an opt-out mechanism for
consumers who do not wish to receive
further marketing communications.
• Ensure that opt-out notices meet the
specific and detailed requirements set
forth in TCPA regulations, which vary
by the type of communication.
Honor requests to stop calling
Maintain a procedure for ceasing calls
to a number at recipient’s request.
COMMUNICATION: Best practices
Limit the number of repeat calls
A consumer who receives only a few calls
is much less likely to complain or bring suit.
• Avoid making multiple calls or leaving
multiple pre-recorded messages on the
same day, and limit the total number
of calls to the same number.
• Most TCPA litigation is initiated
by consumers who have received
numerous automatic calls.
Avoid calling at inconvenient hours
This is a best practice for all types of
communications.
• TCPA regulations expressly prohibit
telemarketing calls before 8 a.m. or
after 9 p.m. (local time at the called
party’s location).
Be respectful of the consumer
Even if a consumer has consented to the
communications, use common sense, and
be courteous to the called party.
This outline does not constitute legal
advice. The best practices listed above
provide only a general overview of TCPA
requirements and do not reflect all
details needed for compliance.
COMPLIANCE ISSUES
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TCPA HOT ISSUES: IS THE SCOPE
OF CONSENT UNLIMITED?
In an amicus brief filed in the Second
Circuit on June 30, 2014, in support of
a plaintiff-appellant, the FCC has taken
the position that a consumer’s consent
to be contacted by cell phone is not
unlimited. The Second Circuit ultimately
followed the FCC’s view and reversed
the district court’s decision, which took
a broader view of the scope of consent.
Nigro v. Mercantile Adjustment Bureau,
LLC, 769 F.3d 804 (2nd Cir. 2014). In
Nigro, the plaintiff contacted the power
company to request termination of electric
service in the apartment of his recently
deceased mother-in-law, and he provided
a cell phone number where he could
be contacted. More than a year later, a
collection agency made several calls to the
plaintiff’s cell phone using an autodialer
in an effort to collect on the mother-in-
law’s delinquent account. The plaintiff
claimed that he had not consented to
the collection calls. The district court
disagreed and granted summary judgment
in favor of the defendant. The district court
relied on the FCC’s statement in its 1991
Rulemaking Order for the proposition
that “persons who knowingly release their
phone numbers have in effect given their
invitation or permission to be called at the
number which they have given, absent
instructions to the contrary.” 7 FCC Rcd
at 8769 (¶ 30). The district court reasoned
that the plaintiff “consented to calls
regarding the subject of the transaction,
namely the termination of [the] account,”
which included any effort to collect on any
account delinquency.
The FCC, however, has taken a narrower
view of consent and disagrees with the
lower court’s analysis. In its amicus brief
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What constitutes valid consent under the Telephone Consumer
Protection Act? A hot issue in TCPA litigation is the scope of
consent necessary to place automated calls to consumers, where
the consumer has provided a cell phone number to a company
in connection with a specific transaction or application. Guidance
from the Federal Communications Commission (FCC) and several
recent court decisions emphasize that a consumer’s consent is
not unlimited; where a consumer provides a cell phone number in
connection with a specific transaction, thereby giving consent to be
contacted, the FCC and some courts take the position that the scope
of the consent is limited to communications directly related to the
specific transaction for which the consent was provided.
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COMPLIANCE ISSUES
filed in support of the plaintiff’s appeal, the FCC’s position is that although
the plaintiff “presumably consented to receive calls regarding the termination
of service… by providing his cell phone number,” the scope of that consent
“did not extend to debt collection calls with respect to debts that did not arise
‘during the transaction’ in which [the plaintiff] provided his number.” The
FCC emphasized that consent is “not unlimited.”1 Where a consumer has
provided a cell phone number “for a limited purpose,” such as for “service
calls only,” the scope of consent, according to the FCC, does not go “beyond
that limited purpose.” The FCC relied principally on a 2005 Administrative
Order regarding debt collection in which it ruled that prior express consent
to be contacted by a creditor or a debt collector was deemed granted only
if the number was provided “during the transaction that resulted in the debt
owed.” ACA Order, 23 FCC Rcd at 563 (¶ 8) (2005). The FCC appears to
be taking the position that a similar limitation on scope should apply in other
circumstances as well.
Several lower courts have adopted the FCC’s position and have held that
consent is context-limited. For example, in Kolinek v. Walgreen Co., 2014
WL 3056813 (N.D.Ill. 2014), a federal district court in Illinois reconsidered
its earlier dismissal of a TCPA case and stated that the scope of a
consumer’s consent “is dependent on the context in which it is given.”
In that case, the plaintiff provided his cell phone number to a pharmacy
for “identity verification purposes.” The court found that this did not
constitute consent to receive automated calls regarding prescription refills.
Id. In so holding, the court relied on the FCC’s ruling in In re Group Me/
Skype Communications S.A.R.L. Petition for Expedited Declaratory
Ruling, FCC Rcd. 14–33, 2014 WL 126074 (Mar. 27, 2014) (GroupMe).
In that Order, the FCC stated that a consumer gives “prior express consent”
when she provides her cell phone number to the private organizer of a text
messaging group “agree[ing] to receive associated calls and texts.” While
this constituted consent to receive text messages from both the provider
and the group members, the scope of the consent was limited to texts
“only regarding that particular group.” Id. Based on GroupMe, the court in
Kolinek concluded that “the scope of a consumer’s consent depends on its
context and the purpose for which it is given” and that “[c]onsent for one
purpose does not equate to consent for all purposes.”
THE TYPE OF CONSENT REQUIRED UNDER FEDERAL LAW—EXPRESS
WRITTEN CONSENT OR PRIOR EXPRESS CONSENT—WILL VARY
DEPENDING ON THE TECHNOLOGY USED, THE TYPE OF DEVICE
RECEIVING THE CALL AND THE MESSAGE CONTENT.
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Where a customer has given a phone number as contact information for a particular
account, a number of courts have held that providing the phone number constitutes consent
to be contacted for all purposes regarding that account. That is not to say the consent is
unlimited for any and all purposes, but that the consent is not limited to a specific purpose
and applies more broadly to calls made in relation to the account or transaction at issue.
In Sartori v. Susan C. Little & Associates, P.A., 2014 WL 3302588 (10th Cir. July 9, 2014),
the Tenth Circuit affirmed the lower court’s dismissal of TCPA allegations where the evidence
established that the plaintiff provided a creditor with his cell phone number as a contact
number for his account. According to the court, this scenario falls cleanly within the FCC
rule that automated or prerecorded calls are permissible when made “to wireless numbers
provided by the called party in connection with an existing debt.” In re Rules & Regulations
Implementing the Telephone Consumer Protection Act of 1991, 23 FCC Rcd. 559, 564
(2008) (2008 Order). The court also rejected the plaintiff’s argument that consent for
collection calls must be in writing.
Similarly, a plaintiff was deemed to have consented to receive automated calls from a debt
collector when he provided a cell phone number to a hospital in connection with medical
services. Penn v. NRA Group, LLC, 2014 WL 2986787 (D.Md. 2014). The court rejected
the plaintiff’s argument that he did not consent to debt collection calls when he provided
the number to his doctor. Instead, the court relied on the FCC ruling stating that providing
a cell phone number to the service provider/doctor is the same as providing it to a third-
party collector working on behalf of the service provider. 2008 Order, 23 FCC Rcd. 559.
The plaintiff’s provision of his cell phone number in conjunction with patient registration,
therefore, constituted prior express consent for the debt collector operating on the hospital’s
behalf to contact the plaintiff on his cell phone in an effort to collect on the related debt.
Conclusion
Is consent unlimited? According to the FCC, the answer is no. According to some courts,
the answer is broader but depends on the facts. The issue of consent has and will continue
to develop in TCPA litigation and before the FCC. The cases highlighted above illustrate that
the scope of any consent will continue to be a contested issue and is largely fact-dependent.
Another unresolved issue is the question of the consumer’s right to revoke consent. (See
Sutherland’s Legal Alert: If Consent is Not Forever, What Constitutes Revocation.) More
broadly under the TCPA, companies are continuing to adjust to new FCC rules that went
into effect in late 2013, which set a high standard for the type of consent required for
marketing calls made to cell phones. With the new FCC rules and ongoing litigation risk,
companies should obtain written consent where appropriate and maintain adequate records
of the specific details of that consent.
1See also Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, SoundBite Communications,
Inc. Petition for Expedited Declaratory Ruling, 27 FCC Rcd 15391, 15397 (¶11) (2012) (consent “not unlimited”).
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COMPLIANCE ISSUES
TCPA HOT ISSUES: IF CONSENT
IS NOT FOREVER, WHAT
CONSTITUTES REVOCATION?
Can Prior Express Consent Be Revoked?
There is a split in authority on whether consent can be revoked under the TCPA.
A number of courts are trending toward the conclusion that consent is revocable.
The Third Circuit was the first federal appellate court to address this issue. In Gager v.
Dell Fin. Servs., LLC, 727 F.3d 265, 270-72 (3d Cir. 2013), the court held that a
consumer has a right to revoke consent notwithstanding the absence of a statutory
provision specifically authorizing revocation. The court reasoned that the common law
concept of consent should be applied, and that a right to revoke is not inconsistent with
prior Federal Communications Commission (FCC) decisions. Accordingly, silence in the
statute should be interpreted in favor of consumers, consistent with the overall judicial
trend toward interpreting the TCPA in consumers’ favor. The court also stated that there
should not be a temporal restriction on the right to revoke. After Gager, most courts
appear to be following the Third Circuit’s lead.
Prior to Gager, however, a number of courts issued decisions holding that the lack of a
revocation provision in the TCPA meant that the right to revoke does not exist, and these
cases remain good law in other jurisdictions. See Kenny v. Mercantile Adjustment Bureau,
LLC, 10-CV-1010, 2013 WL 1855782 (W.D.N.Y. May 1, 2013); Saunders v. NCO Fin.
Sys., Inc., 910 F. Supp. 2d 464, 468-69 (E.D.N.Y. 2012).
One of the hot issues in pending litigation under the Telephone
Consumer Protection Act (TCPA) is whether a consumer can revoke
consent to receive calls on a cell phone. A number of courts have
recently held that a consumer can revoke consent to be contacted by
cell phone. Generally, the TCPA requires prior express consent before
a consumer can be contacted on a cell phone using an automatic
dialer or prerecorded message, but the statute is silent on the right
to revoke. If consent is not forever, that begs the question: what
constitutes valid revocation? Several courts have recently addressed
this issue under a variety of scenarios.
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What Constitutes Revocation?
If a consumer has a right to revoke consent, what must the consumer do to exercise
that right? In Gager, the plaintiff sent a letter attempting to revoke her consent in writing.
While the parties disputed whether there was a right to revoke, there was no factual
dispute about whether the written letter was sufficient to trigger the alleged right. Courts
following the Gager rule on revocation are now confronting a variety of factual situations
where the consumer’s exercise of the right to revoke is less clear cut.
The Eleventh Circuit recently addressed revocation in a case that presented a factual
issue for a jury on the issue of the sufficiency of oral revocation. Osorio v. State Farm
Bank, F.S.B., 2014 WL 1258023 (11th Cir. Mar. 28, 2014). The case involved automated
debt collection calls made by a creditor’s agent. On the legal question of whether there
is a right to revoke consent, the court followed Gager and reasoned that “the TCPA’s
silence regarding the means of providing or revoking consent [implies] that Congress
sought to incorporate the common law concept of consent.” The court also stated that
“[c]ommon-law notions of consent generally allow oral revocation.” The case presented
a factual issue for a jury to to decide, however, because the plaintiff claimed that he told
the defendant to “stop calling” twice, while the defendant said he did no such thing.
The court held that “[t]his is exactly the kind of factual dispute that cannot properly be
resolved on summary judgment.” The Eleventh Circuit remanded the case to the district
court for further proceedings.
A Wisconsin federal district court, facing a different set of
facts, recently granted summary judgment in favor of a TCPA
defendant, holding as a matter of law that the plaintiff had not
revoked his consent through a generalized voicemail greeting.
Andersen v. Harris & Harris, Ltd., 13-cv-867, 2014 WL
1600575 (E.D. Wis. Apr. 21, 2014). The defendant allegedly
made 163 autodialed collections calls to the plaintiff’s cell
phone and left prerecorded voicemail messages. The plaintiff
claimed that he revoked his consent to be contacted by cell
phone through his voicemail greeting, which stated that “any
and all automated calls and automated voicemail messages to this cell phone are strictly
forbidden and any and all consent…has been and is hereby revoked.” The court held
that “even if consent is revocable, [the plaintiff’s] voicemail is not enough to have done
so,” reasoning that the plaintiff’s argument would create a “totally unworkable rule”
that would “undermine” the entire notion of consent by creating a “trap” for all debt
collectors that use autodialers.
In a third case, a Florida district court held that a plaintiff adequately pleaded a violation
of the TCPA by alleging that he sent a text message revoking consent, which the entity
sending the text messages failed to honor. According to the complaint, the plaintiff
received instructions to send the message “STOP ALL” if he wished to stop receiving
SUTHERL AND ASBILL & BRENNAN LLP • WWW.SUTHERL AND.COM
THE ISSUE OF REVOKING
CONSENT ARISES
FREQUENTLY, AND
SUTHERLAND CONTINUES
TO MONITOR THE EVOLVING
STANDARD FOR WHAT
CONSTITUTES REVOCATION.
– 14 –
COMPLIANCE ISSUES
text messages from the defendant. He further alleged that he sent the message
“STOP ALL” and thereby “took the steps [the defendant] had established for
consumers to communicate a desire to stop receiving messages.” On these facts,
the court denied a motion to dismiss, holding that the plaintiff had adequately alleged
that he revoked his consent to receive text messages and that messages postdating
the revocation were sent without his consent. Legg v. Voice Media Grp., Inc.,
13-cv-62044, 2014 WL 29594 (S.D. Fla. Jan. 3, 2014).
Conclusion
The issues of consent and revocation will continue to develop in TCPA litigation.
The issue of revocation arises frequently, and there is still a split in authority on whether
consent can be revoked. More broadly under the TCPA, companies are continuing to
adjust to new FCC rules that went into effect in late 2013, which set a high standard
for the type of consent required for marketing calls made to cell phones. With the new
FCC rules and ongoing litigation risk, it would be prudent for companies to attempt
to obtain written consent where appropriate and maintain adequate records of the
specific details of that consent.
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MULTI-MILLION DOLLAR
SETTLEMENTS PROMPT RECORD
FILING OF TCPA LAWSUITS
SIGNIFICANT CASES
Below is a summary of recent class action settlements under the TCPA. Given the
large potential exposure in TCPA cases, and particularly in light of 2013 amendments
to FCC rules heightening the standards for consumer consent, companies engaging
in automated communications with consumers will need to be increasingly focused
on TCPA compliance to mitigate the potential litigation risk.
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High-dollar settlements of class actions filed under the Telephone
Consumer Protection Act appear to have prompted the filing of a
record number of new TCPA cases in federal courts nationwide.
In the largest TCPA settlement announced to date, on July 29,
2014, a federal court in Illinois preliminarily approved a $75 million
settlement in a case against Capital One alleging the company made
automated calls to cell phones without first obtaining the recipients’
consent. Because the TCPA provides for statutory damages of
$500 per violation (and up to $1,500 per willful violation) with no
maximum cap on recovery, potential exposure in a TCPA class
action can quickly escalate into the millions. As highlighted below,
there have been a number of recent seven- and eight-figure TCPA
settlements. The trend of high-dollar TCPA settlements may spur a
further uptick in TCPA class actions and related individual cases.
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SIGNIFIC ANT C ASES
In Re: Capital One TCPA Litigation, No. 1:12-cv-10064 (N.D. Ill.)
Settlement: $75.5 million.
Date: July 29, 2014 (Preliminary Approval)
This is the largest settlement to date under the TCPA. This multidistrict class action litigation,
combining three complaints, asserted that the defendants violated the TCPA when they used
an automatic telephone dialing system (ATDS) to call customers’ cellular telephones without
prior express consent. The defendants argued that the terms of its customer agreement
constituted prior express consent, making the calls permissible. In addition to money damages,
the defendants agreed to change their practices for cold calling customers’ cellular telephones.
On July 29, 2014, the court granted preliminary approval of the parties’ nearly $75.5 million
settlement ($75,455,098.74). The final Approval Hearing was scheduled for December 9, 2014.
Benzoin v. Vivint Home Security, Inc., No. 12-cv-61826 (S.D. Fla.)
Settlement: $6 million
Date: June 9, 2014 (Preliminary Approval)
Plaintiffs alleged that the defendant violated the TCPA when it used an ATDS to call cellular
phone numbers that were registered on the National Do Not Call Registry for the purposes of
generating sales leads for a home security company. Defendant Vivint maintained that it was
not liable for the alleged violation because it was not the entity that made the calls. The parties
settled for a reported $6 million plus injunctive relief. If finally approved by the court, each of
the possible 602,810 class members may receive up to $500. The court granted preliminary
approval of the settlement agreement on June 9, 2014, and the final fairness hearing was
scheduled for August 25, 2014.
Rose v. Bank of America, No. 11-cv-2390 (N.D. Cal.)
Settlement: $32 million
Date: April 4, 2014 (Final Approval Hearing)
This settlement resolved six separate TCPA lawsuits against Bank of America. At the time, it was
reported as potentially the largest cash payment for settlement of a TCPA class action. In total, the
complaints alleged that Bank of America made unauthorized ATDS and prerecorded voice collection
calls to 7.7 million mortgage loan and credit card customers. The court preliminarily approved the
parties’ $32 million settlement on December 6, 2013 and held a final approval hearing on April 4,
2014. The plaintiffs filed unopposed motions for final approval on August 1, 2014.
Steinfeld v. Discover Financial Services, et al., No. 3:12-cv-1118 (C.D. Cal.)
Settlement: $8.7 million
Date: March 31, 2014 (Final Approval)
Plaintiffs alleged that the defendant violated the TCPA when it called the class members on
their cellular telephones using an ATDS and/or using an artificial or prerecorded voice without
obtaining their prior express consent. The named plaintiff was a cardholder and provided the
defendant with his phone number. Despite defendant’s defenses, the parties settled the claims
for monetary damages and injunctive relief. On March 31, 2014, the court granted final
approval of the parties’ $8.7 million settlement.
– 17 –
Hanley v. Fifth Third Bank, No. 1:12-cv-1612 (N.D. Ill.) Settlement: $4.5 million
Date: December 23, 2013 (Final Approval)

The plaintiff’s class action complaint alleged that defendant Fifth Third violated the
TCPA when it placed calls to cellular telephones using an ATDS or using an artificial or
prerecorded voice after the plaintiff and putative class members revoked consent for such
calls. Fifth Third denied the allegations. On December 23, 2013, the Court granted final
approval of the parties’ $4.5 million settlement agreement.
Toni Spillman v. Domino’s Pizza LLC and RPM Pizza, LLC, No. 10-cv-349 (M.D. La.)
Settlement: $9.75 million
Date: May 24, 2013 (Final Approval)
The plaintiffs alleged that the defendants caused the transmission of multiple unsolicited,
pre-recorded advertising telephone calls and text messages to their home and cellular
telephones over a four-year period without prior consent and in violation of the TCPA.
The $9.75 million settlement covered customers in Louisiana, Alabama and Mississippi,
and settlement payments were to be in the form of cash and merchandise vouchers.
On May 24, 2013, the court granted final approval of the parties’ settlement.
Ellison v. Steve Madden Ltd, No. 2:11-cv-05935 (C.D. Cal.)
Settlement: $10 million
Date: May 7, 2013 (Final Approval)
The nationwide class action complaint alleged violations of the TCPA when class
members received unsolicited text message advertisements. The texts were allegedly sent
to more than 203,000 consumers advertising the defendant’s products and events. The
court granted final approval of the settlement on May 7, 2013. The defendant was to pay
up to $10 million into a settlement fund, beginning with an initial funding of $5 million
and contributing additional $1 million increments as needed to pay claims up to the
$10 million cap.
Meilleur v. AT&T Inc., No. 2:11-CV-01025 (W.D. Wash.)
Settlement: $4 million
Date: March 13, 2013 (Final Approval)
The plaintiff brought this class action alleging that an automated call from AT&T to
his residential phone violated the federal Do Not Call regulations and, therefore, the
TCPA. The automated call notified the plaintiff that someone in his household made an
international call, for which he would be billed. The plaintiffs alleged that this type of
automated call, using an artificial or prerecorded voice, was made to an estimated class
of 15,000 people. AT&T took the position that the calls did not violate the TCPA or state
law because it was not soliciting business but merely notifying a customer of the call and
the charges incurred. The court denied a Motion to Dismiss on February 3, 2012, and
the case was settled several months later. On March 13, 2013, the Court granted final
approval of the parties’ $4 million class action settlement.
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– 18 –
In re Jiffy Lube International Inc., No. 3:11-MD-02261 (S.D. Cal.)
Settlement: $35 million to $47 million
Date: February 20, 2013 (Final Approval)
According to the complaint, defendant Heartland Automotive Services, Inc., a Jiffy Lube
franchisee, and its telemarketing vendor allegedly violated the TCPA with a text-message
promotional campaign that was transmitted to more than 2.3 million consumers’ cellular
telephones without their consent. The defendants unsuccessfully moved to dismiss based
on First Amendment and vicarious liability grounds, and were also unsuccessful on a
motion to compel arbitration. The settlement, reportedly valued at $35-$47 million in
cash and customer discounts, also included an injunctive relief component prohibiting
the defendants from sending further commercial text messages without written consent
from the recipient, the proof of which the defendants must maintain for two years. The
court granted final approval of the parties’ settlement on February 20, 2013.
Addison Automatics, Inc. v. Precision Electronics Glass, Inc. and Philip Rossi,
No. 1:10-cv-06903 (N.D. Ill.)
Settlement: $16 million
Date: December 14, 2012 (Final Approval)
The plaintiffs claimed that, during a six-month period, they received 31,751 unsolicited
fax advertisements from the defendants, with whom they had no established business
relationship. The plaintiffs alleged that the faxes violated the TCPA and state law. The
defendants’ commercial general liability insurance and umbrella policy providers denied
coverage and refused to defend under the various policies. The parties settled the matter
for nearly $16 million ($15,875,500). The court granted final approval of settlement on
December 14, 2012.
Arthur et al. v. SallieMae et al., No. 10-cv-00198 (W.D. Wa.)
Settlement: $24 million
Date: September 17, 2012 (Final Approval)
Plaintiffs alleged that SLM Corp., the parent company of Sallie Mae Inc., violated
the TCPA when it called or texted approximately eight million borrowers’ cellular
telephones using an ATDS and seeking to collect debt payments. In addition to the
monetary settlement, the parties agreed to injunctive relief restricting future calls
to class members. On September 17, 2012, the court granted final approval of the
parties’ $24.15 million nationwide class action settlement. At the time, this was the
largest TCPA settlement ever approved.
SIGNIFIC ANT C ASES
– 19 –
ELEVENTH CIRCUIT REVERSES
OUTLIER DECISION ON TCPA
PRIOR EXPRESS CONSENT
STANDARD
The case arose out of automated debt collection calls made to the plaintiff on behalf
of a hospital-based radiology provider in an effort to collect payment for medical
treatment. At the time of his admission to the hospital, the patient’s wife completed
and signed admission forms on his behalf and provided his cell phone number. After
the plaintiff failed to pay for the treatment, the hospital and its debt collector made
several dozen automated calls to the cell number in an effort to collect payment for the
unpaid bills. The plaintiff filed a putative class action alleging that the automated calls
violated the TCPA because he had allegedly not consented to the communications.
The hospital and the debt collector moved for summary judgment on the affirmative
defense that the calls did not violate the TCPA because they had received “prior express
consent” when the wife provided the plaintiff’s cell phone number on the hospital
admission forms. The defendants relied on a 2008 FCC ruling, which concluded
The U.S. Court of Appeals for the Eleventh Circuit has clarified the
standard for “prior express consent” under the Telephone Consumer
Protection Act (TCPA) in a September 29, 2014 decision reversing
an outlier ruling by a lower court. In Mais v. Gulf Coast Collection
Bureau, Inc., 13-14008 (11th Cir. Sept. 29, 2014), the appellate
court held that the district court erred in diverging from the standard
set by the Federal Communications Commission (FCC) in a 2008
ruling. The FCC ruling stated that providing a cellular phone number
to a creditor as part of a credit application constituted prior express
consent to be contacted at that number regarding the debt. The
decision in the lower court, which rejected the FCC standard in a
case involving a medical debt, had created significant uncertainty
over the appropriate standard for determining what constitutes prior
express consent.
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– 20 –
that “the provision of a cell phone number to a creditor, e.g., as part of a credit
application, reasonably evidences prior express consent by the cell phone subscriber
to be contacted at that number regarding the debt.” In re Rules and Regulations
Implementing the Telephone Consumer Protection Act of 1991, 23 FCC Rcd. 559,
564. Prior to Mais, district court decisions had uniformly followed the FCC standard.
The district court in Mais, however, rejected the FCC standard and granted summary
judgment to the plaintiff. Mais v. Gulf Coast Collection Bureau, Inc., 944 F. Supp.
2d 1226 (S.D. Fla. 2013). The district court stated that the FCC interpretation was
not entitled to deference because, from the court’s perspective, it was inconsistent
with the TCPA statutory language. According to the district court, implying consent
from the provision of a cell phone number to a creditor impermissibly expanded
the statutory exception to cover prior implied consent, when the statutory language
required express consent. Id. at 1239.
On appeal, the Eleventh Circuit reversed. The Eleventh
Circuit held that the issue was resolved by the Hobbs
Act, which delegates exclusive jurisdiction to the courts of
appeals to determine the validity of FCC orders. 47 U.S.C.
§402(a); 28 U.S.C. §2342. Under the Hobbs Act, the district
court exceeded its powers by refusing to apply the FCC
interpretation. Accordingly, the FCC standard was controlling
and should have been applied by the district court.
This Eleventh Circuit decision, which reverses the most prominent outlier case on
the standard for prior express consent, may help to bring much needed clarity to this
area of the TCPA. Although most courts have rejected the district court’s decision in
Mais, a few courts have followed Mais and have diverged from the FCC standard. See
Zyburo v. NCSPlus, Inc., 12-CV-6677, 2014 WL 4536932 (S.D.N.Y. Sept. 15, 2014)
(agreeing with district court in Mais). A number of plaintiffs had relied on the district
court’s decision in Mais in support of their argument that the FCC’s interpretation
was not entitled to deference.
The issue of consent will continue to develop in TCPA litigation and before the
FCC. Another contested issue is the scope of the consent provided by the consumer.
More broadly under the TCPA, companies are continuing to adjust to new FCC
rules that went into effect in late 2013, which set a higher standard for the type
of consent required for marketing calls made to cell phones. For marketing calls,
unlike the collection calls at issue in Mais, the FCC rules now require prior express
written consent.
THE ISSUE OF CONSENT
WILL CONTINUE TO DEVELOP
IN TCPA LITIGATION AND
BEFORE THE FCC. CLIENTS
LOOK TO SUTHERLAND FOR
CONTINUED ANALYSIS ON
THIS ISSUE.
SIGNIFIC ANT C ASES
– 21 –
TCPA HOT ISSUES:
TCPA RESTRICTS AUTODIALED
CALLS, BUT COURTS SPLIT ON
MEANING OF AUTODIALER
To autodial or not autodial, that is the question. The Telephone
Consumer Protection Act (TCPA) defines autodialer as “equipment
which has 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. § 277(a)(1). Courts have split on the
meaning of the term “automatic telephone dialing system” (ATDS)
under the TCPA, and the Federal Communications Commission
(FCC) has yet to rule on several pending petitions seeking clarification
on this issue. The uncertainty over the definition of ATDS creates
uncertainty over the scope of the TCPA and makes it difficult for
businesses using automated communications to ensure compliance
and manage litigation risk.
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The FCC and some courts have taken an expansive view of the term ATDS. The
FCC has stated that the definition “covers any equipment that has the specified
capacity to generate numbers and dial them without human intervention
regardless of whether the numbers called are randomly or sequentially generated
or come from calling lists.” In re Soundbite Communications, Inc. Declaratory
Ruling, CG Docket No. 02-278 (Nov. 29, 2012).
According to the FCC, the definition of ATDS encompasses a predictive dialer
where “hardware, when paired with certain software, has the capacity to store or
produce numbers and dial those numbers at random, in sequential order, or from
a database of numbers.” Id.
– 22 –
PARTIES HAVE CHALLENGED THE MEANING
OF AUTODIALER IN THE COURTS, AND
SOUGHT GUIDANCE AND CLARIFICATION
THROUGH PETITIONS TO THE FCC
Some courts have appeared to go beyond
the FCC’s expansive view, focusing on the
equipment’s capacity to store numbers
rather than its capacity to actually dial
the numbers at random. In one recent
case, a Massachusetts district court
found that a calling system was an ATDS
based on its capacity to store numbers.
Davis v. Diversified Consultants, Inc.,
CV13-10875, 2014 WL 2944864 (D.
Mass. June 27, 2014). The court made
the decision as a matter of law, even
though there was disputed testimony over
whether the system had the capacity to
generate random or sequential numbers.
In the court’s view, the capacity to
generate random or sequential numbers
was irrelevant as long as the system had
the capacity to store numbers and dial
them from a list.
Other courts, however, have taken a
narrower view of what constitutes an
ATDS. For example, in March 2014 a
federal court in Pennsylvania held that a
text message system did not constitute an
ATDS where the plaintiff had not offered
any evidence to show that the company’s
message system had the capacity to
randomly or sequentially generate
numbers. Dominguez v. Yahoo!, Inc.,
CV13-1887, 2014 WL 1096051 (E.D.
Pa. Mar. 20, 2014). It was not sufficient
that the system in question could store
numbers and send text messages to a list.
Therefore, the court granted summary
judgment in favor of the defendant.
The lingering uncertainty over the
meaning of ATDS, and with it the broader
issue of the scope of the TCPA, creates
uncertainty and compliance burdens on
companies that want to send automated
communications to their customers. At
least six petitions have been filed with
the FCC seeking clarification on these
issues. The FCC has accepted comments
on several of these petitions but has yet
to rule. Disputes over the meaning of
ATDS are likely to continue until the FCC
provides some clarity on this issue.
SIGNIFIC ANT C ASES
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MY BROTHER’S TCPA KEEPER?
RECENT CASES HIGHLIGHT
THIRD-PARTY RISK UNDER
THE TELEPHONE CONSUMER
PROTECTION ACT
U.S. Supreme Court Declines to Review Defense Win Regarding
“On Behalf Of” Liability Under the TCPA
The Supreme Court declined to review an Illinois appellate court’s decision that a
company is not vicariously liable for spam faxes sent by its third-party advertising agent,
where the company had not given the agent permission to send faxes specifically to
the plaintiff. On February 24, 2014, the U.S. Supreme Court denied certiorari in Uesco
Industries, Inc. et al. v. Poolman of Wisconsin, Inc., No. 13-771, a case in which the
plaintiff alleged that the defendant was vicariously liable under the TCPA for spam faxes
that a third-party advertising firm had allegedly sent to the plaintiff. The defendant had
hired the advertising firm to send advertising faxes; however, it had not granted the
firm permission to send faxes specifically to the plaintiff. The lower court denied class
certification on the grounds that the advertising firm had acted outside the scope of its
agreement with the defendant. Therefore, under the TCPA, the firm could not have sent
the faxes “on behalf of” the defendant.
Early 2014 produced a series of court decisions highlighting third-
party liability issues under the Telephone Consumer Protection Act
(TCPA). In February 2014, the U.S. Supreme Court declined to
hear a case about liability for junk faxes made by an alleged agent,
and other recent cases have addressed third-party issues, such as
vicarious liability for third-party contractors, the extension of consent
from primary parties to independent contractors, indemnification
agreements, and the role of VoIP providers. These cases serve as
reminders that companies must be alert to the indirect ways in which
they could be pulled into TCPA litigation.
– 24 –
SIGNIFIC ANT C ASES
In its petition to the Supreme Court, the plaintiff argued that the lower court’s decision
was in conflict with the Federal Communications Commission’s (FCC) interpretation
of “on behalf of” under the TCPA. The plaintiff contended that the FCC has not
differentiated between grants of permission when determining vicarious liability and did
not require proof of authority or agency for liability to attach. Thus, the plaintiff argued
that the lower court did not have jurisdiction to interpret the TCPA differently from the
FCC and that the Supreme Court should review the decision. The lower court rejected
that argument, and the Supreme Court has now declined to review it.
While the FCC has issued a Declaratory Ruling on this issue, the ruling leaves some room
for interpretation with respect to informal agency relationships. In re Dish Network, LLC,
FCC 13-54 (FCC Decl. Ruling May 9, 2013). Specifically, in its ruling, the FCC explained
that the phrase “on behalf of” means that sellers may be held vicariously liable for calls
made through third-party telemarketers. However, the agency also explained that “on
behalf of” liability does not require a formal agency relationship and could also rely on
principles of ratification and apparent authority. Thus, the FCC interpretation appears to
have left some flexibility in the application of vicarious liability principles, depending upon
the facts of a given case.
products. In In re Monitronics Int’l, Inc.,
Tel. Consumer Prot. Act Litig., 5:11-CV-
90, (N.D. W. Va. Jan. 28, 2014), the
plaintiff sued the marketing company
making the allegedly unauthorized
calls as well as the seller companies for
which the calls were made. The plaintiff
asserted that despite the fact that the
seller companies had not placed the
calls, the seller companies could still
be vicariously liable to the plaintiff if
the marketing company had made
the calls “on their behalf.” The court
agreed that the seller companies could
be sued under the TCPA, noting that
both companies had agreements with
the marketing company that allowed
the marketing company to hold itself
out as an “authorized dealer” of their
products. While the court initially
made this determination in a previous
summary judgment order, the seller
companies again challenged the
court’s finding in the discovery motion.
Other Cases Highlight Third-
Party Issues
Other decisions issued in early 2014
have also illustrated how TCPA issues
can flow both upstream and downstream
between third-party advertising agencies
and underlying companies initiating
marketing campaigns or other customer
communications.
• Vicarious Liability for Authorized
Third-Party Dealers
Despite the defense win in Uesco,
companies must still be cognizant of
the risk of vicarious liability under the
TCPA for actions of their “authorized
dealers.” In a discovery order issued on
a January 28, 2014, a federal district
court in West Virginia found that the
seller-company defendants could face
TCPA liability on behalf of a marketing
company that they had allowed to
be an “authorized dealer” of their
– 25 –
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The court responded by reiterating its
previous holding and explaining that
where the seller companies had agreed
that the marketing company could hold
itself out as an authorized dealer, the
seller companies may also be vicariously
liable for calls made by the marketing
company in violation of the TCPA.
The court did not address whether the
marketing company had acted inside
or outside the scope of the authorized
dealer relationship that it had with the
seller companies.
• Protecting Third-Party Independent
Contractors Through Express Consent
to Primary Contracting Party
It is not only liability but also consent
that can pass between parties. For
example, independent contractors
can be protected by consents given
to primary contracting parties. Under
this principle, a federal district court
in California granted an independent-
contractor defendant’s motion for
summary judgment, dismissing a
plaintiff’s TCPA challenge on the
grounds that the plaintiff had consented
to receiving the text messages. In Shaya
Baird v. Sabre Inc., et al., No. 2:13-cv-
00999 (C.D. Cal. Jan. 28, 2014), the
plaintiff sued an independent contractor
for receipt of an unsolicited text
message regarding flight notifications.
Prior to the suit, the independent
contractor had contracted with an
airline to provide flight notification
services to the airline’s passengers.
Despite the fact that the independent
contractor was a wholly distinct entity
from the airline, the court found that
by consenting to be contacted by the
airline, the plaintiff, in turn, consented to
be contacted by the airline’s independent
contractors. While the court’s decision
ultimately turned on its interpretation
of what constituted consent—i.e., the
plaintiff’s provision of her phone number
to the airline—the court’s extension of
that consent to the airline’s independent
contractor provides an important defense
potentially available to independent
contractors’ facing TCPA litigation.
• Seeking Indemnification from Third
Parties in TCPA Suits
Companies can also sometimes seek
indemnification from third parties in
TCPA suits depending on who had
responsibility for obtaining consent.
This was illustrated by a decision
granting class certification in a TCPA
case in California. In Stern v. DoCircle,
Inc., No. 12-2005 (C.D. Cal. Jan. 29,
2014), the plaintiff sued the defendant,
an online service provider that allowed
customers to send text messages via
its online platform, for violation of the
TCPA. The plaintiff argued that the
defendant failed to properly monitor
the numbers that it was texting and, as
a result, sent multiple text messages to
numbers on the do-not-call list. While
the defendant denied the plaintiff’s
allegations, it also filed a third-party
complaint, seeking indemnification from
the company on whose behalf it sent
the text messages in the event that the
plaintiff’s allegations were successful.
The defendant alleged that the third-
party defendant contracted with it to
send text messages, and that under the
terms of the contract, the third-party
defendant was responsible for ensuring
that the proper consents were obtained
prior to the text messages being sent.
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SIGNIFIC ANT C ASES
Thus, the defendant argued that to the
extent that the plaintiff is able to show
any violation of the TCPA, the third-
party defendant must indemnify it.
• Court Tosses TCPA Suit Against
Third-Party VoIP Provider
In contrast, a federal district court
in Texas rejected the theory of
secondary TCPA liability against
telecommunications carriers in a case
against a VoIP (Voice over Internet
Protocol) provider. In its January 28,
2014, decision, the court granted the
VoIP provider’s motion to dismiss,
on the basis that “Congress did not
intend to allow secondary liability on
telecommunications carriers based on
an allegation of conspiracy.” In Clark
v. Avatar Technologies Phl, Inc., No.
13-2777 (S.D. Tex. Jan. 28, 2014),
the plaintiff sued both the company
making the calls and its VoIP provider
for violation of the TCPA when an
allegedly unauthorized call was placed
to the plaintiff’s cell phone. The plaintiff
alleged that the defendant company
made the call using the defendant VoIP
provider’s services and that, as a result,
both of the defendants had violated the
TCPA. The plaintiff asserted that the
VoIP provider had conspired with the
other defendant to violate the TCPA
by virtue of allowing the company to
use its VoIP services. The plaintiff also
alleged that the VoIP provider had
transmitted misleading information
about the identification of the caller
to the plaintiff’s cell phone in violation
of the TCPA. The court found that
there was no precedent for holding a
telecommunications carrier, such as a
VoIP provider, liable under the TCPA
simply for transmitting a call. Further,
the court found that the plaintiff had
also failed to allege its TCPA claim
that the VoIP provider had transmitted
misleading information, noting that
there was no indication that the VoIP
provider had intended to defraud or
harm the plaintiff, which were necessary
elements for this claim. Thus, the court
dismissed the plaintiff’s claims against
the VoIP provider under the TCPA
(although the court allowed the plaintiff
the opportunity to replead certain state
law claims).
Conclusion
As the TCPA continues to spawn class
action litigation and settlements, third-
party liability issues will continue to
play out in courts across the country.
Companies are also continuing to adjust
to new FCC rules that went into effect
in late 2013, which set a high standard
for the type of consent required for
marketing calls made to cell phones.
With the new FCC rules and ongoing
litigation risk, companies should
consider obtaining written consent
where appropriate and maintain
adequate records of the specific details
of that consent. Companies should
also be cognizant of TCPA compliance
when working with third parties to
conduct campaigns using texts or
automated calls.
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INDUSTRY FOCUS
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TCPA RISKS INCREASE FOR THE
FINANCIAL SERVICES INDUSTRY
Enacted in 1991 to protect consumers from
receiving unsolicited telemarketing calls and
faxes, the TCPA regulates and restricts the
manner in which a business may advertise
its products and services to consumers’
cell phones (including via text), residential
phone lines, and fax machines. Among
other things, the TCPA prohibits the use of
an “automated telephone dialing system”
or an “artificial or prerecorded voice” to
make calls to cell phones without the prior
express consent of the called party. This
rule applies to both telemarketing calls and
non-telemarketing calls, including debt
collection or informational calls. Following a
change in TCPA regulations that took effect
in October 2013, written consent is now
required for most automated telemarketing
communications.
Of particular significance for companies
in the financial services industry, in 2008
the Federal Communications Commission
(FCC) found that in the context of a
creditor-debtor relationship, a customer
is deemed to have provided prior express
consent for collection calls when the
consumer provided the creditor with his or
her number “during the transaction that
resulted in the debt owed.”1 The 2008
FCC ruling explained that “the provision
of a cell phone number to a creditor, e.g.,
as part of a credit application, reasonably
evidences prior express consent by the cell
phone subscriber to be contacted at that
number regarding the debt.” Creditors bear
the burden of proving that such consent
was obtained.
Companies in the financial services industry are being targeted in
lawsuits brought under the Telephone Consumer Protection Act (TCPA).
Record-setting class action settlements like the recent $75 million
settlement involving Capital One have captured the headlines. Moreover,
unsettled law concerning the scope of consent creates uncertainty
and places a compliance burden on financial services companies that
communicate with their customers by phone or text using an automated
telephone dialing system. This article provides an overview of recent
TCPA cases against financial services companies, analyzes the critical
issue of consent and discusses strategies to avoid TCPA class actions.
– 28 –
INDUSTRY FOCUS
Despite the FCC’s ruling, the U.S. Court
of Appeals for the Second Circuit, in
Nigro v. Mercantile Adjustment Bureau,
LLC, No. 13-1363 (October 14, 2014),
recently noted that the timing of receipt
of the consent could be important, and this
question has not been expressly resolved.
Nigro, No. 13-1363, at 7, n.4 (“Whether
a subsequently given phone number is
given as part of a continuing ‘transaction,’
or a transaction separate from the initial
one that ‘resulted in the debt owed,’ is a
question for future courts.”). Consequently,
in some cases, the uncertainty over
whether valid consent has been obtained
has created TCPA risk for financial services
companies. Because the TCPA provides for
statutory damages of $500 per violation
(and up to $1,500 per willful violation) with
no maximum cap on recovery, potential
exposure in a TCPA class action can
quickly escalate.
Issues regarding the ambiguity surrounding
the validity of consent factored prominently
in the then-record $24 million settlement in
Arthur et al. v. SallieMae et al., No. 10-cv-
00198 (W.D. Wa. 2012). The same issues
and questions regarding consent have
played out more recently in Wilkins v. HSBC
Bank Nevada, N.A., No. 14-cv-190 (N.D.
Ill., settlement preliminarily approved July
25, 2014) and in In Re: Capital One TCPA
Litigation, No. 1:12-cv-10064 (N.D. Ill.,
settlement preliminarily approved July 29,
2014). Together, the combined settlements
in these cases exceeded $115 million.
In SallieMae, plaintiffs sued SLM Corp.,
the parent company of Sallie Mae Inc.,
alleging that it violated the TCPA when,
to aid its collection efforts, it called or
texted approximately eight million student
loan borrowers’ cellular telephones using
an automated telephone dialing system.
Plaintiffs alleged that some of these borrowers
(including the named plaintiff) did not provide
defendants with their cell phone numbers
when the loans were initiated and, therefore,
did not give their consent to receive the calls.
Defendants took the position that while consent
may not have been obtained at the outset of
the parties’ relationship, it was subsequently
and validly obtained. Despite their defense
based on the 2008 FCC ruling, and facing
substantial potential exposure under the
TCPA, in September 2012 defendants agreed
to a $24.15 million nationwide class action
settlement as well as injunctive relief restricting
future calls to class members.
More recently, in HSBC, plaintiffs filed a class
action alleging that the defendant-bank violated
the TCPA by placing unsolicited calls to cell
phones using an automated telephone dialing
system or by prerecorded voice without first
obtaining the proper consent. The named
plaintiffs, both credit card customers of the
defendant, alleged that they repeatedly received
calls from the defendant on their cell phones,
despite never having provided the numbers or
consent. The defendant denied the allegations,
arguing that in the context of a debtor-creditor
relationship, consent could be obtained at any
time. Plaintiffs asserted that consent could
only be provided validly at the relationship’s
inception. Despite the defendant’s arguments,
in June 2014 the parties agreed to a nearly
$40 million class action settlement, pending
the court’s approval.
FOR COMPANIES IN THE FINANCIAL SERVICES
SECTOR, ONE POSSIBLE LINE OF DEFENSE
AGAINST TCPA CLASS ACTIONS MAY BE FOUND
IN ARBITRATION AGREEMENTS EXTANT IN
MANY CONSUMER CONTRACTS. COURTS HAVE
ENFORCED INDIVIDUAL ARBITRATION PROVISIONS
WITH CLASS ACTION WAIVERS IN TCPA CASES,
BARRING PLAINTIFFS FROM BRINGING OR
PARTICIPATING IN CLASS ACTIONS.
– 29 –
In July 2014, the highest TCPA settlement
to date was reached in In Re: Capital
One TCPA Litigation, a case which again
showcases the consent issue and serves
as a clarion call to others in the financial
services industry who communicate with
their customers by cell phone or text. Rather
than continue to oppose the plaintiffs’
arguments on consent, defendants opted
to settle for approximately $75 million. The
motion for preliminary approval indicates
that the estimated settlement class includes
individuals throughout the United States who
possess 21.2 million unique cellular phone
numbers. The settlement reflects the heavy
statutory penalties potentially available under
the TCPA, the absence of a cap on statutory
damages, the burden placed on creditors to
prove that they received timely consent, and
the FCC’s lack of clear guidance governing
creditor consent.
For companies in the financial services
sector, one possible line of defense against
TCPA class actions may be found in
arbitration agreements extant in many
consumer contracts. Courts have enforced
individual arbitration provisions with class
action waivers in TCPA cases, barring
plaintiffs from bringing or participating in
class actions.
In Cayanan v. Citi Holdings, Inc., 928 F.
Supp. 2d 1182 (S.D. Cal. 2012), borrowers
filed a putative class action, alleging that
the defendant violated the TCPA by placing
debt collection calls. The defendant moved
to compel arbitration pursuant to an
arbitration clause in customer agreements
signed by each plaintiff. Plaintiffs argued
against enforcement of the arbitration
agreement on the grounds that without a
class action remedy, they would be unable
to fully vindicate their statutory rights
under the TCPA. The court analyzed each
arbitration agreement under the law of each
plaintiff’s domicile and upheld the validity of
the respective arbitration agreements. Further,
the district court found that the plaintiffs failed
to explain how the arbitration agreements
prevented them from vindicating their rights
under the TCPA. The court also noted that the
arbitration agreements did not limit the type
or amount of recovery under the TCPA.
Another case highlights the nexus that must
exist between the subject of the allegedly
unlawful communication and the underlying
contract or agreement between the parties
necessary to enforce an arbitration agreement
and class action waiver. In Delgado v. Progress
Financial Co., No. 1:14-cv-00033 (E.D. Cal.),
the plaintiff entered into a loan agreement
that had an arbitration clause. The
plaintiff argued that the arbitration clause
was unenforceable because the calls he
received fell “outside the scope of the
arbitration agreement.” The arbitration
agreement required that “any and all claims,
controversies, or disputes arising out of or
related in any way” to the loan agreement
must be arbitrated. The court rejected the
plaintiff’s argument that the collection calls
were not related to the loan agreement, and
enforced the arbitration agreement and class
action waiver.
Recent high-dollar settlements by companies
in the financial services industry, combined
with the lack of clear guidance from the FCC
on the consent issue, among others, continue
to drive a trend of new TCPA filings. Financial
services companies engaging in automated
communications with consumers will need to
be increasingly focused on TCPA compliance
to mitigate their potential litigation risk.
1Rules and Regulations Implementing the Telephone Consumer
Protection Act of 1991, 23 FCC Rcd. 559, 564-65 (2008)
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– 30 –
INDUSTRY FOCUS
FOR WHOM THE RING TONES:
TCPA LITIGATION AND THE
INSURANCE INDUSTRY
TCPA Background
The Telephone Consumer Protection Act was enacted in 1991 to protect consumers
from unsolicited advertisements via telephone and fax. The TCPA regulates and
restricts the manner in which a business may market its products and services to
consumers’ cell phones (including via text messages), residential phone lines, and
fax machines. Specifically, the TCPA prohibits the use of an “automated telephone
dialing system” or an “artificial or prerecorded voice” to make calls to cell phones
without the prior express consent of
the called party. For marketing calls,
the consent must be in writing, and
the prohibitions apply to both calls and
text messages. With more and more
households abandoning traditional hard-
wired landlines in favor of cell phones for
their principal means of communication,
TCPA risk has increased substantially.
In addition, the TCPA prohibits
artificial or prerecorded voice calls to
residential telephone lines (without prior
express consent) and unsolicited fax
advertisements.
Insurance companies are increasingly the subject of Telephone
Consumer Protection Act (TCPA) lawsuits. Any insurance company
that communicates with its customers, job applicants and others
by phone or text using an automated telephone dialing system—or
that has independent or semi-independent agents engaging in such
automated communications—faces potential litigation risk under
the TCPA. This article provides an analysis of some of the key issues
facing insurers in TCPA cases.
– 31 –
BECAUSE THE TCPA PROVIDES FOR
STATUTORY DAMAGES OF $500 PER
VIOLATION (AND UP TO $1,500 PER
WILLFUL VIOLATION) WITH NO MAXIMUM
CAP ON RECOVERY, AND GIVEN THE
TECHNOLOGICAL CAPACITY OF
AUTOMATED DIALING SYSTEMS THAT CAN
MAKE HUNDREDS IF NOT THOUSANDS
OF CALLS AT THE PUSH OF A BUTTON,
POTENTIAL EXPOSURE IN A TCPA CLASS
ACTION CAN QUICKLY ESCALATE TO
MILLIONS OF DOLLARS.
Agent Marketing and Vicarious Liability Issues
Insurance companies often market their products through the use of independent and
semi-independent sales forces. Where an agent or agency has allegedly violated the
TCPA, the insurer may also be drawn into the litigation on a theory of vicarious liability.
This risk was evidenced in a decision in which an Illinois federal court found that a
vicarious liability claim could be raised against an insurance company for the actions
of its agents and the agents’ third-party marketer. The plaintiffs sued three insurance
companies, alleging that they received prerecorded, unsolicited calls regarding car
insurance policies on behalf of the respective companies. The calls were allegedly made
by a third-party telemarketing company through the use of an automated dialing system.
If a person answered the call, the telemarketing company would then join the call,
take the individual’s information, and pass it along to the insurance company’s local
agent. If the call was not answered, then the telemarketing company left a prerecorded
voice message. The complaint acknowledged that the agents, and not the insurance
companies, were the ones who had contracted directly with the marketing company.
In its decision, the district court first addressed the question of whether the insurance
companies could be held directly and/or vicariously liable for the calls placed by the
marketing company and the agents. Although the court determined that the insurance
companies could not be found directly liable since they did not physically place the calls,
the court concluded that one of the companies might be subject to vicarious liability for
the actions of the agents. Specifically, the court held that nothing in the TCPA directly
prohibits the principles of common law vicarious liability from applying. Noting Congress’
intent to protect individuals from receiving certain calls without providing prior consent,
the court opined that the actual sellers—i.e., the insurers—were in the best position to
monitor and police third-party telemarketers’ compliance with the TCPA. Otherwise, in
the court’s view, there would be a disincentive to monitor telemarketers, and consumers
would not have an effective remedy under the TCPA. Applying this rationale to the
complaint, the court dismissed the complaints against several insurers but found that
plaintiffs had alleged sufficient facts to support a basis for holding at least one of the
insurance companies liable for the marketing company’s actions under a subagency
theory, where plaintiffs had alleged that the insurance agents who had hired the
marketing company were legally agents of the insurance company.
Vicarious liability has also been asserted where a third-party contractor is making the
calls. In 2013, a federal district court in California granted class certification to plaintiffs
who allegedly received unsolicited text messages on their cell phones on behalf of a life
insurance company in violation of the TCPA.
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– 32 –
INDUSTRY FOCUS
In that case, the plaintiffs alleged that the defendant insurance company entered into
a marketing agreement with a third-party marketing group to promote its life insurance
products. The plaintiffs alleged that they received text messages sent by the marketing
group encouraging them to call a toll-free phone number to claim a gift card voucher,
which, according to plaintiffs, did not exist. Rather, plaintiffs alleged that the number
connected callers to a call center operated by the marketing group that pitched the
insurance company’s products and services, as well as the products and services of
the marketing group’s other clients. Of particular importance to the issue of third-party
liability, the insurance company specifically argued that neither it nor the marketing
company had actually caused the text messages to be sent, but rather that third-party
contractors actually carried out the operation. The court expressed its skepticism of that
defense, stating that it was “unlikely to be viable,” and certified the plaintiff class. The
case was later settled on a class basis. Note, however, that more recent case law in the
Ninth Circuit may provide additional support for a defense against vicarious liability
where a company lacks control over a third party that sends the communications. See
Thomas v. Taco Bell Corp., No. 12-56458 (9th Cir. July 2, 2014) (holding that Taco Bell
Corp. was not vicariously liable for text messages sent by a company that a third-party
advertiser had hired to assist with a product promotion campaign).
Insurer Communications and Consumer Consent
Several cases against insurance companies and their affiliates have raised issues of
“prior express consent,” which can be a defense to claims under the TCPA. (Since
October 2013, “prior express written consent” from the called party is required for
marketing calls and texts).
In a case against an insurer’s affiliate, the Eleventh Circuit examined the question of
who constituted the “called party” for purposes of consent and held that the “called
party” was the person actually called even if the intended recipient was someone
else. In the case, the insured took out a car insurance policy and opened a credit card
with the insurer and its affiliate and, as part of the application process, provided her
housemate’s cell phone number as a contact.
In a subsequent attempt to collect past-due payments, the company allegedly called
the housemate’s cell phone number. The housemate sued under the TCPA and
took the position that the calls were made without consent. The court found that
under the TCPA, the “called party” is not the intended recipient of the call (in this
case the insured) but rather the actual party that is called (the cell phone subscriber/
housemate). To constitute valid consent, the company would have had to obtain
consent either directly from the cell phone subscriber/housemate or from someone with
the authority to provide consent on the cell phone subscriber’s behalf. In this instance,
the court stated that consent could be established if the plaintiff was in an agency
relationship with her housemate, and the case was therefore remanded for further
factual determination on that issue.
– 33 –
More broadly, however, the court’s holding on the meaning of the term “called party”
creates TCPA risk any time the actual recipient of a call is different from the intended
recipient. Several courts have held that consent runs with the person and not with the
phone number. Even where a caller has consent from the intended recipient of the
call (a former subscriber), some courts have held that there can be a violation of the
TCPA where the caller does not have consent from the current subscriber to whom the
number has been reassigned, even if the caller is unaware of the reassignment. See
Soppet v. Enhanced Recovery Co., LLC, 679 F.3d 637 (7th Cir. 2012). For companies
that make a significant number of automated calls, this fact pattern can arise with
some frequency, given that there is a regular churn of cell phone numbers being
assigned to new subscribers on an ongoing basis.
Several insurance companies have been drawn into TCPA litigation as a result of junk
fax advertisements allegedly sent by insurance agents. The issue of consent is central
to these cases. In one case against a life insurer, a federal district court granted the
plaintiff’s motion for class certification in a case alleging that a third-party agent
sent unsolicited fax advertisements for low-cost life insurance. The plaintiff further
alleged that the faxes lacked the required opt-out that would allow recipients to opt
out of future messages. In arguing against class certification, the insurer asserted that
determining whether each recipient consented was an individual issue that precluded
certification. The court rejected that defense and stated that “no individual inquiry
is necessary and [the] established relationship or voluntary consent defenses are
unavailable where, as here, the opt-out requirement [of the TCPA] is alleged to have
been violated.” The case was recently settled on a class basis.
Recruiting Calls
In at least one case, a plaintiff unsuccessfully sued an insurance company under the
TCPA for making recruiting calls in an effort to hire new agents. There, the plaintiff had
sued an insurance company for allegedly using an automatic dialing system to leave
messages on his residential landline phone (not cell phone) requesting that the plaintiff
attend a recruiting webinar to learn about the insurer’s products and services as part of
the insurer’s hiring efforts. Because the case involved allegations of calls to a landline
rather than to a cell phone, a key threshold issue was whether the recruiting calls
constituted marketing or non-marketing, because non-marketing calls to landlines
are not covered by the TCPA.
The federal court agreed with the insurer and dismissed the case, holding that the
alleged calls did not constitute advertisements or solicitations. The court reasoned that
under the TCPA, the insurer’s calls did not constitute a solicitation because they were
not made for the purpose of encouraging the purchase of property, goods or services.
Rather, the company’s calls were made for the purpose of promoting an employment
and/or independent contractor opportunity. To the extent that the calls mentioned the
company’s products, the court explained that the intent was not to sell the products
SUTHERL AND ASBILL & BRENNAN LLP • WWW.SUTHERL AND.COM
– 34 –
INDUSTRY FOCUS
to the recipients of the call, but rather to encourage the call recipients to contract with
the company to sell those products to others. Thus, the court found that the complaint
failed to state a claim. The key distinction in this case was that the calls were made
to a landline rather than to a cell phone. A risk to any company making recruiting
or other non-marketing calls is that the company may not always know whether it is
calling a landline or a cell phone, and consumers more and more are relying on cell
phones as their only number.
TCPA Insurance Coverage Issues
In addition to cases brought directly against insurance companies for alleged TCPA
violations, a growing number of cases have been brought by commercial liability
insurers seeking declaratory judgments that they do not have to provide coverage for
their insured’s alleged TCPA violations. These cases often turn on the specifics of the
exclusions in the commercial liability policy at issue. Some commercial liability policies
have express exclusions for TCPA claims, while others may contain more general
exclusions that may exclude TCPA claims.
Conclusion
The trend of high-dollar TCPA settlements has spurred a large increase in TCPA
filings over the past few years, including an increase in complaints filed against the
insurance industry. The issues facing insurers in these cases are similar to the issues
facing companies in other industry segments: consent and the scope of that consent,
vicarious liability issues arising from the acts of agents and third-party marketers, and
large potential exposure due to TCPA statutory damages. Companies are continuing
to adjust to new Federal Communications Commission rules that went into effect in
late 2013, which set a high standard for the type of written consent required for
marketing calls made to cell phones. With the new FCC rules and ongoing litigation
risk, companies should obtain written consent where appropriate and maintain
adequate records of the specific details of that consent.
– 35 –
TCPA CLASS ACTION AGAINST
INSURANCE AGENT NOT
COVERED BY PROFESSIONAL
LIABILITY INSURANCE
As class action filings under the Telephone Consumer Protection Act
(TCPA) have continued to rise, so too have the number of disputes
with commercial liability insurers over coverage for their insureds’
alleged TCPA violations. Whether TCPA defendants can seek
coverage from liability insurers to defend and indemnify them for
TCPA-related exposure often depends on the specific language of the
policy at issue, including the policy’s stated coverage exclusions. In
one recent decision, an Illinois appeals court ruled that a professional
liability insurer has no duty to defend or indemnify an insurance
agent in a class action alleging that the agent sent thousands of
prerecorded telephone messages advertising the agent’s services
for selling life, accident and health insurance. The court affirmed the
lower court’s decision that telephone solicitations did not constitute
negligent acts, errors or omissions “rendering services for others,”
as required for coverage under the policy. Margulis v. BCS Insurance
Co., No. 1-14-0286 (Ill. App. Nov. 26, 2014).
The case arose in 2008 when the plaintiff filed a class action complaint in Missouri
state court against an insurance agent and broker that allegedly transmitted automated
telephone solicitations to more than 180,000 unique telephone numbers. The complaint
alleged that the defendant’s automated marketing calls violated the TCPA because
they were made without the recipients’ prior express consent. At the time of the original
action, the defendant sought coverage from its professional liability insurer, which
was denied. In 2011, the Missouri state court approved a class action settlement of
$4,999,999. As part of the settlement, the parties agreed, and the court approved, that
the plaintiff would attempt to collect on the judgment “only from the proceeds of the
insurance policies and claims against Defendant’s insurer(s).” Shortly thereafter, the
plaintiff filed a declaratory judgment action in Illinois against the defendant’s professional
liability insurer, seeking an order that the insurer had a duty to pay the judgment.
SUTHERL AND ASBILL & BRENNAN LLP • WWW.SUTHERL AND.COM
– 36 –
INDUSTRY FOCUS
The trial court granted the insurer’s motion for summary judgment, and the appeals
court affirmed. Both courts held that there was no coverage because “the automated
telephone calls at issue did not constitute negligent acts, errors or omissions by [the
insurance agent] arising out of the conduct of [the agent’s] business in ‘rendering
services for others’ as a licensed insurance agent, general agent or broker.” The appeals
court agreed with the professional liability insurer that the insurance agent’s solicitation
of business from members of the general public did not involve the provision of services
as a licensed life, accident and health insurance agent and therefore did not fall within
the scope of coverage.
The plaintiff argued that the lower court impermissibly construed ambiguous policy
language narrowly, rather than broadly, and asked the court to find a duty to defend
and indemnify. The insurer countered that the plaintiff was “ignoring the key passage”
in the policy, i.e., that the action arise out of the conduct “in rendering services for
others.” The court held that the policy was unambiguous and that the insurance agent
“was not rendering services for the call recipients as an agent or broker where, as here,
the recipients were not [the insurance agent’s] clients or customers.” The lack of an
established business relationship was therefore fatal to the plaintiff’s claim for coverage
under this policy. The court distinguished several other cases involving professional and
commercial liability policies with dissimilar language to the policy at issue in this case.
See Landmark American Insurance Co. v. NIP Group, Inc., 2011 Ill. App (1st) 101155
(2011); Valley Forge Insurance Co. v. Swiderski Electronics, Inc., 223 Ill. 2d 352 (2006).
Insurance coverage issues for underlying TCPA claims continue to generate litigation,
and these cases are yet another outgrowth of the ongoing wave of TCPA class action
filings. Commercial liability insurers often file declaratory judgment actions against their
insureds seeking a declaration that there is no coverage for underlying TCPA claims. In
other situations, as in the case discussed above, plaintiffs in underlying TCPA litigation
may pursue claims against commercial and professional liability insurers after agreeing
to settlements that are to be satisfied exclusively from the proceeds of a defendant’s
insurance policies.
The policy language at issue in these cases can vary significantly. Increasingly,
commercial liability policies may contain a specific exclusion for TCPA claims. See
James River Ins. Co. v. Med Waste Mgmt., No. 1:13-cv-23608, 2014 WL 4749551
(S.D. Fla., Sept. 22, 2014) (denying coverage based on a TCPA exclusion). Other
commercial liability policies may have more general exclusions that can preclude
coverage for TCPA claims. See Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Papa
John’s Int’l, No. 3:12-cv-00677, 2014 WL 2993825 (W.D. Ky., July 3, 2014)
(finding no coverage where the policy contained an exclusion for any loss resulting
from a violation of a “statute, ordinance or regulation of any federal, state, or
local government”). With TCPA class actions continuing to be filed at a record
pace, there will be ongoing issues over the scope of commercial liability coverage
for these claims.
– 37 –
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