SEPTEMBER 2017

Federal Communications Commission

The Federal Communications Commission (“FCC”) is reporting alleged illegal prerecorded calls notifying victims of hurricane Harvey that flood insurance premiums are past due. 

Comment: Fraud taking advantage of emergency damage is particularly egregious, and the FCC will likely respond with aggressive lawsuits.

The FCC’s Net Neutrality proceeding has received nearly 1.8 million comments in the past 30 days.  The next nine topics in the FCC’s “Top Ten” filings total fewer than 2,000, with Telephone Consumer Protection Act (“TCPA”) Rules and Regulations coming in eighth on the list with 55 filings in the past 30 days.

Comment: Many of these TCPA comments oppose direct to voicemail messages.

A colleague recently received documents in response to a Freedom of Information Act request to the FCC regarding enforcement of the TCPA’s unsolicited fax rules.  Those documents show that consumer complaints have decreased almost 90 percent since their peak in 2009, likely because fax transmission currently is not a commonly used means of document transmission.  From May 1, 2016 through April 30, 2017, for example, the FCC received 4,176 junk fax complaints, a 93 percent decline from the highest level during 2007 through 2008.

Federal Trade Commission

The Federal Trade Commission (“FTC”) has obtained a default judgment against Peruvian companies and individuals banning them from telemarketing or selling any goods or services.  United States v. ABC Hispania, Inc., et al.  The complaint was first filed in April, at which time the FTC obtained a preliminary injunction freezing assets.  The FTC alleged in the complaint violations of the Telemarketing Sales Rule (“TSR”) including misrepresentation that the sellers were affiliated with the government.

The FTC has obtained a permanent injunction against a marketer of cooking and golf-related products sold through infomercials.  FTC v. AAFE Products Corp.  Included in the restrictions, the order requires the defendants maintain an unedited voice recording of each telemarketing transaction for a period of three years.

The FTC acting Chairman Maureen K. Ohlhausen released a summary of the FTC’s major accomplishments in the six months she has been the Chairman.  During these six months, the FTC filed or settled 44 consumer protection matters in federal court, many of which related to enforcement of the TSR.

A settlement between the FTC and an office supply company requires the company to pay $7 million to settle claims of making deceptive representations when selling office supplies to various entities.  FTC v. Telestar Consulting, Inc.  The companies allegedly did not disclose the total cost, quantity, and terms of sale.

Comment: Unlike many of these settlements, it does not appear that any portion of the $7 million was suspended based on inability to pay.  Although business-to-business calls are exempt from many telemarketing laws, they are not exempt from rules against deceptive or unfair trade practices.

U.S. Congress

A bill has been proposed in the House (HR 5053) which would ban the Internal Revenue Service from requiring any tax exempt organization to include the name, address, or other identifying information concerning its contributors in the organization’s tax returns.

Comment: All too often attorneys general and other regulators will demand contributor lists, customer lists, and other sensitive information from the companies they regulate.  These persons have a strong and clear privacy interest in preventing that disclosure in commercial and nonprofit settings.  Although the Supreme Court long ago recognized a charity’s duty to protect that information from disclosure in NAACP v. Button, regulators still make these request.

Sixth Circuit

The Sixth Circuit Court of Appeals has agreed with the D.C. Circuit’s ruling in Bais Yaakov of Spring Valley, et al v. FCC, et al. that the FCC does not have authority to regulate solicited faxes. 

Comment: This brings this appellate court in line with most other courts which have ruled that the disclosures required on unsolicited faxes are not required on solicited faxes and the FCC had no authority to attempt to make that ruling.

Seventh Circuit

The Seventh Circuit has tossed an injunctive settlement in nine consolidated lawsuits that claimed some Subway foot long sandwiches were not actually 12 inches long.  In Re Subway Footlong Sandwich Marketing and Sales Practice Litigation.  The court noted that a settlement that provides fees for class counsel but no meaningful relief for the class “is no better than a racket.”  Judge Diane Sykes explained that the settlement “enriches class counsel” and injunctive relief “is utterly worthless.”

Comment: One of the plaintiffs’ attorneys, Thomas Zimmerman Jr., said he intended to continue to pursue the cases and attorneys’ fees of more than $525,000.

Ninth Circuit

The Ninth Circuit has ruled in Robins v. Spokeo that Robins did suffer a “concrete injury” when a search engine reported his status as divorced even though he could show no harm from the error.  It gave hypothetical examples which would not give rise to a concrete injury, such as errors which did not result in publication of an inaccurate report or minor inaccuracies, like an inaccurate zip code.

Comment: It may be the latter exemption which protects businesses which make minor errors in TCPA disclosures.

A recent TCPA case involving the Los Angeles Lakers is not a good sign for entities seeking insurance coverage for TCPA actions.  Los Angeles Lakers v. Federal Insurance Company.  Because the policy had an invasion of privacy exclusion, the appellate court ruled the TCPA case was excluded from coverage as the statute nominally is a privacy law.

California

A California court has certified a TCPA class action brought against a debt collector.  McMillion v. Rash Curtis & Associates.  The defendant used an automatic telephone dialing system (“ATDS”) to place calls but argued that individualized issues regarding consent would cause the court to have to conduct “mini-trials” for each class representative.  The court disagreed and certified a class involving persons whose numbers were skip-traced by the debt collector and persons who were called in error and did not have a debt with the defendant.

Comment: “Prior express consent” involves many elements, at a minimum that the consumer provided that number to the caller.  Skip-tracing or obtaining the number from a third party source is not prior express consent.

A California court denied a TCPA plaintiff the ability to proceed “in forma pauperis” after it reviewed his litigation history and determined he had sufficient assets to pursue the case.  Tuck v. PACER.  Tuck had filed more than a dozen TCPA cases against various creditors and debt collectors.

A California court has reduced the attorneys’ fee in a fax class action settlement from $300,000 to $106,000 after only 314 people made claims resulting in a total payout to consumers of $125,000.  Progressive Health & Rehab Corp. v. Anesthesia.  The court found hours billed by the plaintiffs’ attorneys to be excessive.  The court also reduced the “incentive award” for the named plaintiff from $15,000 to $1,000. 

Comment: By reading between the lines, it is clear that the judge thought the settlement had little value to consumers and was intended mostly to enrich the plaintiffs’ attorneys.

Illinois

A federal court has dismissed a claim brought by a plaintiff who alleged he was called on his cell phone using an ATDS without his prior express consent.  Arora v. Transworld Systems, Inc.  The defendant used a web-based dialing program which was “human initiated and human controlled” requiring an agent manually initiate every call.  One employee would click on each number which would then transfer the call to a “closer agent.”  The plaintiff argued that this system was an ATDS because it had the “potential capability” to be an ATDS.  The court disagreed.  The judge rejected plaintiff’s argument that the system could be modified to become and autodialer.

Comment: This is a very good case for defendants facing arguments that a manual web-based system is an ATDS.  Plaintiffs will often argue, and retain experts to argue, that the system could be modified with additional software.  After all, a web-based system is software alone, but this opinion rejects that tenuous argument giving businesses some measure of confidence that a web-based system requiring a human initiate each call is not an ATDS.  Further, the judge allowed one human to initiate the call and transfer it to another, a system that sometimes can be more efficient than each agent initiating his or her own calls.  The judge approved this means, as well, as non-ATDS.

A federal court has decertified a TCPA fax class action.  Brodsky v. HumanaDental Ins. Co.  Plaintiff claimed that Defendant’s faxes did not comply with the TCPA’s opt-out notice requirement.  The judge held that the D.C. Circuit’s decision in Bais Yaakov v. FCC struck down the Solicited Fax Rule holding it “unlawful to the extent that it requires opt-out notices on solicited faxes.”  Thus, the court held that to determine whether any member of the proposed class had a TCPA claim, it would first be required to determine whether that proposed class member “solicited” the faxes it received.  Individual consent issues defeated the predominance and superiority requirements to maintain a class action and class treatment was no longer appropriate under Rule 23.

Comment: This case is consistent with a growing number of district court decisions and a Sixth Circuit decision that have held that Bais Yaakov is binding outside of the D.C. Circuit.

An Illinois court has ruled that the new exemption in the TCPA for calls for debts owed to or guaranteed by the government does not apply retroactively from enactment.  Gentleman v. Mass. Higher Education Assistance Corp.  The defendants called the plaintiff in an attempt to collect a government-guaranteed student loan.  Since the calls occurred prior to 2015, the court ruled that the new exemption for government-guaranteed loans did not apply to the call.

Indiana

A judge has denied certification for a tech class of persons who received texts after sending various messages to the defendant (e.g. “stop text”, “stop callin”, “step sendin”, etc.).  Lanteri v. Credit Protection Association, LP.  The judge ruled that the plaintiff’s claim was not typical of the rest of the class because her message simply said “stop”.  The judge ruled the various messages were distinct from each other and did not have the same essential characteristics and thus would each need to be reviewed to whether they constituted a revocation of express consent.  The judge also ruled she was not an adequate representative because she was not a member of the class she defined.

Massachusetts

The Massachusetts House is considering a bill (HB 2828) which would ban prerecorded calls to mobile telephone numbers.  It would exempt, however, informational calls.  The Massachusetts Attorney General and individuals who received unsolicited calls could both sue receiving not less than $10,000 for each knowing violation.

Michigan

A court has ruled that there is no individual liability under the TCPA for persons acting on behalf of a corporation unless they had direct personal participation in or personally authorized illegal conduct.  Compressor Engineering Corp. v. Manufacturers Finance Corp.  The court also ruled that corporate defendants could not be held liable for illegal faxes simply because their goods or serviced may have been advertised in the fax (by a third party sender).  The court then reviewed whether the faxes were “sent on behalf of” the defendants and ruled they were not and dismissed the case.

Comment: This is an important case regarding individual liability as well as “vicarious” liability for entities whose products may have been mentioned in other entities’ faxes or communications.

A bill has been proposed in the Michigan House (HB 4947) which would require prompt disclosure of the entity on whose behalf the call is made and that the entity is available to answer any inbound calls at a number provided at the time of the outbound call.

Missouri

Missouri has settled a lawsuit with Charter Communications which alleged violations of state and federal no-call and telemarketing laws.  The settlement involved the payment of $225,000 and an agreement to quickly remedy potential future violations.  Missouri v. Charter Communications, Inc.

A Missouri court has ruled that the TCPA’s damages provision allowing for $500 per call resulted in a “unreasonable and wholly disproportionate” penalty which would have exceeded $1.6 billion based on more than three million calls.  The court reduced the damages award to $32.4 million.  Golan v. Veritas Entertainment LLC.

Comment: The court noted that the damages provision did not amount to a violation of the constitution’s protection of due process but it seems likely that $32.4 million also would be catastrophic to the defendant.  This case is not good news for TCPA defense as huge damages awards have not often been won by plaintiffs after a trial.  Sometimes plaintiffs will win such awards with default judgments, but this result after a contested trial will likely make plaintiff’s attorneys bolder.

Mississippi

Mississippi has renewed its Telemarketing Registration and Solicitation Act which expires every four years.  The law will now be in force through September 1, 2021.

Nevada

A federal court has refused to dismiss a TCPA class action brought against a debt servicer which continued to call plaintiff on her cell phone after her debt had been discharged in bankruptcy.  Marino v. Ocwen Loan Servicing.  The judge found the calls could have injured plaintiff by affecting her privacy and therefore refused to dismiss the case.

New York

A New York judge has ruled that a defendant which deposited more money with the clerk of the court than a TCPA plaintiff could obtain in damages effectively made the case moot such that it could not proceed.  Geismann v. Zocdoc, Inc.

Comment: In Campbell-Ewald, Co. v. Gomez, the Supreme Court ruled that an unaccepted offer of judgment did not make a case moot, but left open the question of whether the defendant could deposit the money with the clerk of the court and thereby render a TCPA claim moot.  The argument is that if all the damages potentially available have already been paid, the plaintiff no longer has a claim and therefore is not typical of the remainder of the class.  The case will almost certainly be appealed.

A New York court has approved a TCPA class action settlement against American Eagle Outfitters consisting of 618,000 persons who received a text message from American Eagle but did not provide prior express consent.  Melito v. American Eagle Outfitters, Inc.  Plaintiff’s class counsel were awarded $4.3 million in attorneys’ fees and a total award of $14.5 million to the class.  Individuals in the class were entitled to make a claim for the amount on a prorated basis.

Comment: This relatively large settlement will fund many of these attorneys’ future TCPA class actions.

Ohio

An Ohio judge had denied class certification in a case brought against a vending machine company which sent faxes to plaintiff.  Siding & Insulation, Co. v. Alco Vending, Inc.  The fax vendor deceived the defendant by claiming the business relationship with the entities to be faxed.  The defendant ultimately spent $188 to send over 7,000 faxes.  The court denied certification based on “individualized questions of consent” which needed to be answered for each potential class member.

Comment: Although the court allowed the individual plaintiff to proceed, this is a huge defeat for the plaintiffs’ attorneys bringing the case.  The judge appears to me to be hostile to claims brought against innocent businesses who were deceived by fax vendors.  The plaintiffs’ attorneys can obtain a customer list from these fax vendors and sue each of these innocent businesses, and that seems unfair to me.

An Ohio court has enforced an arbitration clause a plaintiff signed as part of a loan agreement.  Treinish v. Borrowers First, Inc.  After she defaulted on the loan, the lender called her cell phone regarding the debt.  The plaintiff claimed she revoked consent and sued under the TCPA after she received more calls.  The judge ruled that the arbitration clause in her contract was valid and she could not sue for the purported TCPA violations. 

Comment: You may want to review arbitration clauses you could include on your consent forms or contracts, especially in light of TCPA class actions.

An Ohio court has held that a plaintiff who claimed an insufficient opt-out notice on a fax it received did state a claim for injury such that the case could proceed.  Progressive Health and Rehab. Corp. v. Strategy Anesthesia, LLC. 

Comment: This plaintiff received unsolicited faxes, however, so it is unclear whether this case would apply to solicited faxes.

Pennsylvania

A TCPA class action involving texts has settled.  Brown v. Rita’s Water Ice Franchise Company.  The company continued to send texts to persons even after they sent “STOP” and also allegedly used insufficient consent language on its webpage.  The settlement totaled $3 million.