D.C. Circuit Shuts Down Rite Aid’s Challenge to Expand Healthcare Exemptions under the TCPA and HIPAA

On March 16, 2018, the U.S. Circuit Court of Appeals for the District of Columbia issued a groundbreaking decision in ACA Int’l v. FCC, No. 15-1211, 2018 U.S. App. LEXIS 6535 (D.C. Cir. Mar. 16, 2018) (“ACA Int’l“) that raises a number of questions regarding the future of the Telephone Consumer Protection Act (“TCPA”). See “Your Definitive Guide to the ACA Int’l Ruling: The Top 10 Things Every TCPAlander Needs to Know Now.” The ACA Int’l decision, however, left certain healthcare communications intact, while also establishing the test for determining whether a party is an “aggrieved party” for purposes of challenging orders issued by the Federal Communications Commission (“FCC”). Before delving further into the ACA Int’l decision, a brief overview of the TCPA regulatory landscape will be examined to fully assess the implications of ACA Int’l for the healthcare industry.

An Overview of the Telephone Consumer Protection Act, the Healthcare Industry and Damages

The TCPA generally prevents calls to cell phones made using an automated telephone dialing system (“ATDS”) without the prior express consent of the “called party.” 47 U.S.C. § 227(b)(1)(a)—so we think. See“D.C. Circuit Court of Appeals Sets Aside FCC’s Definition of ‘Called Party’ Under the TCPA—What Comes Next?” This means hospitals and healthcare organizations that send communications by telephone, text, or fax to consumers, patients, or other businesses must obtain prior express consent to do so. However, such healthcare organizations must also be mindful of the regulations set forth in the Health Information Portability and Accountability Act (“HIPAA”) that apply to communications pertaining to patient care. Pub. L. 104-191, 110 Stat. 1936 (1996).

Failure to comply with both the TCPA and HIPAA can result in the imposition of significant penalties. For example, the TCPA applies a $500.00 penalty for each violation. In some instances of a willful and knowing violation of the TCPA, the penalty can be trebled, resulting in a $1,500.00 penalty. See Kolinek v. Walgreens, Case No. 1:13-cv-4806 (N.D. Ill. 2015)(settling TPCA class action for $11 million dollars); Lees v. Anthem Insurance Cos., Inc., Case No. 4:13-cv-1411 SNLJ (E.D. Mo. 2015) (settling TCPA class action for $6.25 million dollars). As for HIPAA, a violation can involve both civil and criminal penalties and ranges anywhere from $100.00 to $50,000 per violation depending on the degree of negligence. 42 U.S.C.A. § 1320d-5.

Current Exemptions to Healthcare Communications

In light of these significant penalties and the recognition that certain healthcare communications provide “vital, time-sensitive information patients welcome, expect, and often rely on to make informed decisions,” the FCC—the federal agency that has the administrative authority to interpret and enforce the TCPA[1]—established certain exemptions from TCPA liability. ¶ 144. The FCC based its authority on the fact that section 227(b)(2)(B) allows two types of calls to be exempted: “(i) calls that are not made for a commercial purpose, and (ii) such classes or categories of calls made for commercial purposes as the Commission determines (I) will not adversely affect the privacy rights that this section is intended to protect; and (II) do no include the transmission of any unsolicited advertisement.”

The 2012 Order

In 2012, the FCC specifically exempted “from TCPA requirements prerecorded calls to residential lines made by healthcare-related entities governed by [HIPAA].” In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991 (“2012 Order”), 27 FCC Rcd. 1830, ¶ 57. These exemptions include, but are not limited to, immunization reminders, prescription refills, post-hospital discharge follow-up, medical supply renewal requests, and generic drug migration recommendations. Id. ¶ 60, fn. 176.

The 2015 Declaratory Ruling

In 2015, the FCC issued its Declaratory Ruling in response to a number of healthcare and business entities seeking clarification regarding certain requirements and ambiguities under the TCPA. American Association of Healthcare Administrative Management, Petition for Expedited Declaratory Ruling and Exemption, CG Docket No. 02-278, filed Oct. 21, 2014 (AAHAM Petition); United Healthcare Services, Inc., Petition for Expedited Declaratory Ruling, CG Docket No. 02-278, filed Jan. 16, 2014 (United Petition). More specifically, the 2015 Declaratory Ruling clarified consent requirements and established scenarios and factors in which a telephone call is considered made for exigent or healthcare-related purposes.

With respect to consent, the FCC found that the provision of a phone number by a patient to a healthcare provider constitutes prior express consent. In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991 (“2015 Declaratory Ruling”), 30 FCC Rcd. 7961, 7970 at ¶ 141.The ruling also permits third parties to provide consent for a patient who may be mentally incapacitated. Id. at ¶ 142. However, the consent provision only applies narrowly to healthcare-related messages.

The following demonstrate acceptable situations in which telephone calls made to wireless numbers are exempt for exigent or a healthcare treatment purpose: (1) post-discharge follow-up; (2) prescription notifications; (3) wellness check-ups; (4) lab results; (5) pre-operative instructions; (6) home healthcare instructions; or (7) appointment and exam confirmations and reminders. Id. at ¶¶ 141, 146. The calls must be made by covered entities and their business associates (as defined by HIPAA). Id. at ¶ 141. The FCC also found that HIPAA’s privacy rules will control the content of the informational information where applicable. Id. at ¶ 146.

The FCC also adopted seven conditions for each exempted call, voice call, or text message that is made by or on behalf of a healthcare provider:

  1. The voice call or text message needs to be sent to the wireless phone number that the patient provides. As to text messages, the patient cannot be charged, nor can the text be counted against the limits of a wireless telephone plan.
  2. The name and contact information of the healthcare provider or organization must be stated at the outset of a voice call or prominently noted within a text message.
  3. The voice call or text message must comply with HIPAA privacy rules and cannot include telemarketing, solicitation, or advertising content, nor can it pertain to accounting, debt collection, or other financial information.
  4. The message needs to be concise, e.g., one minute or less for voice calls and 160 characters or less for text messages.
  5. Healthcare providers are limited to one voice call or text message a day, up to a maximum of three combined calls / messages per week per provider.
  6. Recipients need to be offered an easy “opt-out” option within each message, e.g., a press-activated mechanism or a toll-free number for voice calls, and replying “STOP” for text messages.
  7. All opt-out requests must be honored immediately.

Id. at ¶ 147.

ACA Int’l Upholds the Current Healthcare Exemptions under the TCPA and HIPAA

In ACA Int’l, Rite Aid unsuccessfully challenged the scope of the FCC’s exemption regarding certain healthcare-related calls. In particular, Rite Aid argued that the TCPA’s exemption for certain healthcare-related communications is unlawful because it conflicts with HIPAA. Rite Aid then argued that the TCPA exemption for health-related calls is arbitrary and capricious. The D.C. Circuit rejected both arguments, resulting in no change in the law.

The TCPA and HIPAA Coexist Peacefully

The D.C. Circuit found in ACA Int’l that the TCPA and HIPAA regulations exist coextensively with one another, as “[t]he two statutes provide separate protections.” ACA Int’l, 2018 U.S. App. LEXIS 6535, at *62 (quoting Mais v. Gulf Coast Collection Bureau, Inc., 768 F.3d 1110, 1125 (11th Cir. 2014)). Thus, Rite Aid’s argument that the TCPA exemptions violate HIPAA because they do not include communications relating to billing, account information, or payments is simply untenable. The D.C. Circuit further reasoned that if Rite Aid’s position were correct, it would frustrate the purpose of the TCPA—namely, because healthcare providers could contact wireless users to no end using ATDS equipment without being subject to TCPA liability.

Exemptions for Landlines and Wireless Phones are Not Inherently Contradictory

As for the healthcare message exemption being arbitrary and capricious, Rite Aid argued that the FCC acted arbitrarily and capriciously when it provided a broader exemption for healthcare messages to residential phone lines (2012 Order) and a narrower exemption for healthcare-related calls to wireless numbers (2015 Declaratory Ruling). The D.C. Circuit found “nothing inherently contradictory about easing restrictions on certain kinds of calls to landlines, but not to cellular phones.” ACA Int’l, 2018 U.S. App. LEXIS 6535, at *66. In reaching this conclusion, the D.C. Circuit cited to the FCC’s finding that messages that are not critical or vital to an individual’s health “do not justify setting aside a consumer’s privacy interests,” suggesting the FCC affords greater privacy interests in wireless phone numbers than landlines. Id. (citing 2015 Declaratory Ruling, at ¶ 146).

All Healthcare-Related Calls Do Not Satisfy the “Emergency Purposes” Exception

In Rite Aid’s last-ditch effort to have the D.C. Circuit expand healthcare exemptions under the TCPA, Rite Aid argued that the FCC acted arbitrarily when it excluded communications pertaining to billing, account information, and payment information. Rite Aid further argued that these types of communications fall within the TCPA’s exception for “emergency purposes.” The exception states “emergency purposes mean calls made necessary in any situation affecting the health and safety of consumers.” 47 C.F.R. § 64.1200(f)(4). The D.C. Circuit did not find this persuasive, as Rite Aid failed to identify any calls that satisfy the exception that were not already covered by the 2015 Declaratory Ruling. Moreover, the D.C. Circuit found communications regarding accounting, billing, and payment information to be necessary to the continuity of healthcare delivery, but “not critical.” As such, the court rejected this argument as well.

The ACA Int’l Decision Also Establishes an Important Bright Line Procedural Rule for Challenges to FCC Orders

It has long been held that an “aggrieved party” can challenge declaratory rulings or orders issued by an agency. 28 U.S.C. § 2344. Nonetheless, the contours of who precisely qualifies as an “aggrieved party” had not been articulated in the case law. That changed significantly with the ACA Int’l decision. In examining Rite Aid’s challenges, the D.C. Circuit held that Rite Aid fell within the definition of an “aggrieved party” by simply commenting on a petition in agency proceedings that result in a declaratory ruling. Notably, Rite Aid did not author the petition. The court found that “our decisions have recognized that ‘party aggrieved’ means a party who has ‘made a full presentation of views to the agency.’” ACA Int’l, 2018 U.S. App. LEXIS 6535, at *61 (quoting Water Transp. Ass’n v. ICC, 819 F.2d 1189, 1193 (D.C. Cir. 1987)). By merely commenting on another party’s “petition for a rulemaking or declaratory ruling,” the D.C. Circuit found Rite Aid had “‘present[ed] its view to the agency [so as] to qualify as’” an aggrieved party. ACA Int’l, 2018 U.S. App. LEXIS 6535, at *61.

The effect of this procedural rule is significant, as it serves to lower the bar for individuals or entities seeking to obtain “aggrieved party” status in order to challenge final rulemaking or declaratory rulings from agency proceedings.

[1]Leyse v. Clear Channel Broad., Inc., 697 F.3d 360 (giving Chevron deference to FCC’s interpretation of TCPA).

Your Definitive Guide to the ACA Int’l Ruling: The Top 10 Things Every TCPAlander Needs to Know Now

It’s here! It’s here! It’s finally here!

At last, I no longer need to field the question of “when, oh when, is the D.C. Circuit Court of Appeals going to rule on the ACA Int’l appeal of the FCC’s TCPA Omnibus ruling from 2015?” Now we know the answer: right in the middle of March Madness, of course.

Forced, as I am, to look up from the basketball games, I must now face the biggest TCPA questions of all: What is the current state of the law respecting predictive dialers? Can we use contractual revocation provisions to full effect? Who is the called party? Is the TCPA constitutional?

This is my definitive take on these and other TCPA issues arising out of the big D.C. Circuit ruling of ACA Int’l v. FCC, No. 15-1211, Doc. No. 1722606 (D.C. Cir. Mar. 16, 2018). The truth is, however, that for every TCPA question the D.C. Circuit answered, its ruling raises many more. Indeed, Judge Srinivasan’s opinion poses at least a dozen specific questions back to the Commission to consider on remand. Unfortunately, therefore, we are all a long way from having final answers on most issues. I guess that’s not really much of a surprise, however, since nothing is ever simple in TCPAland. That said, with Chairman Ajit Pai at the helm of the FCC, the industry has very good cause to think that real TCPA change is on the horizon.

Before we get into that, some quick background is in order for any reader who isn’t completely conversant with the history here. The Federal Communications Commission (“FCC” or “Commission”) is the government agency responsible for implementing (i.e. interpreting) the Telephone Consumer Protection Act (“TCPA”). The TCPA generally prevents calls to cell phones made using an automated telephone dialing system (“ATDS”) without the express consent of the “called party.” The FCC’s rulings regarding the meaning of vague phrases within the TCPA (like what’s an ATDS?) are binding on courts and private litigants alike. While this sort of arrangement works fine for 99.9% of federal statutes, the TCPA is incomparably vague, regulates a common activity—phone calls—and contains a massive $500.00 per violation minimum statutory penalty that can be privately enforced. This gives the FCC tremendous power to determine the lawfulness of phone calls and, indirectly, the contours of free speech in this country.

More pertinently, whenever the FCC interprets the TCPA in a manner that expands its reach, private lawsuits go through the roof. Prior to President Trump appointing Chairman Pai to lead the FCC—more on him in a moment— the TCPA went through a lengthy expansionary phase under the watchful eye of then-Chairman Tom Wheeler. While Chairman Wheeler seems like a fine fellow, his policies vastly expanded the reach of the TCPA to the point—as the D.C. Circuit points out in the ACA Int’l ruling—that every smartphone in the country became a federally-regulated autodialer. While the FCC’s stated goal in enacting these changes was to give itself the means to aggressively enforce the statute against true bad actors—almost exclusively unscrupulous telemarketers—it turned a blind eye to the explosion of private TCPA lawsuits its policies were enabling against good industry actors, most of whom were just trying to chat with their customers at phone numbers they had been lawfully provided. The crown jewel of the FCC’s former “expand the TCPA so we can go after bad telemarketing guys and we’ll just hope that private litigants don’t abuse it” policy was the Commission’s 2015 TCPA Omnibus ruling. That ruling expanded the reach of the TCPA to regulate virtually any software-enabled dialing device, made the essential express consent defense as fragile as a bubble, and saddled callers with the risk of calling wrong numbers even when a number changed hands without their knowledge. A predictable and instantaneous explosion of private TCPA suits followed—over a quarter of which were class actions seeking capless statutory damage recoveries often ranging into the billions of dollars—prompting some to muse whether TCPA actually stood for “Total Cash for Plaintiff’s Attorneys.”

The 2015 TCPA Omnibus ruling was challenged by a team of Petitioners—lead by the good folks over at ACA International and joined by my friends at CBA—on a duly-authorized appeal to the D.C. Circuit Court of Appeals. Oral argument was held back in October 2016, and ever since then, TCPAland has waited, with baited breath, for the D.C. Circuit’s definitive ruling on the lawfulness of the Omnibus.

So now that the ACA Int’l ruling has been handed down, it falls to me—as the self-declared Czar of the TCPA—to speak definitively as to its impact on the litigation landscape and upon the fate of all who dwell within TCPAland. Accordingly, here are the 10 things you need to know right now:

  1. Chairman Pai is Going to Get His Chance to Make a Mark on the TCPA and I Can’t Wait to See What He Does With It. Since Ajit Pai was elevated by the Trump administration from mere Commissioner to Intergalactic Overlord and Chairman of the FCC, he has set about unwinding most of the work performed by his predecessor, Chairman Wheeler, especially in the net neutrality space. There has been a deafening silence on TCPA-related issues from the Commission, however. Indeed, despite a current glut of petitions that now nearly rivals the count of petitions that had piled up ahead of the Omnibus ruling, the Commission has seemed steadfastly uninterested in unwinding the expansionist policies of the prior administration. Presumably, this was out of due respect for the pending petition before the D.C. Circuit, and a desire not to create havoc in the appellate court system by issuing serial rulings that would wind their way through independent appellate reviews before the same circuit court of appeals that had yet to speak on the Omnibus. Now that the D.C. Circuit has given its nod to the FCC to start over again on a number of key TCPA issues, however, you can bet that Chairman Pai—who once famously called the TCPA a “statutory-rifle shot” when remarking on how limited Congress had intended the statute to be—will take the ball and run with it. Indeed, as shown below, the ACA Int’l ruling is something of a lob pass to the Commission on several key TCPA issues, and we can expect Chairman Pai to finish that alley-oop with a two-handed slam dunk that will get industry onlookers up out of their seats and roaring their applause.
  2. The D.C. Circuit Panel Thinks the Petitioners Missed a Major Issue Regarding the Scope of the TCPA—the Statute Might Only Apply to Calls Made Using a Dialer’s Automatic Capacity! At oral argument back in October 2016, Chief Judge Edwards was heard to forcefully chastise Petitioners’ counsel for conceding that any call made using an ATDS was subject to the statute, even if the call itself was made manually. “Good heavens, that’s your strongest argument and you just conceded it away,” he remarked at the time. The statement was one of a number of remarkable exchanges between bench and bar that played out at the oral argument, and you can read more about the hearing here. It appears that Chief Judge Edwards swayed the panel into his way of thinking, as the ACA Int’l ruling repeatedly makes mention of the Petitioners’ failure to challenge whether calls made without leveraging a device’s “capacity” to operate as an autodialer—more on “capacity” next—are even subject to the TCPA to begin with. As the opinion notes, if not, then “[e]ven if the definition encompasses any device capable of gaining autodialer functionality through the downloading of software, the mere possibility of adding those features would not matter unless they were downloaded and used to make calls.” ACA Int’l at 30-31. The opinion directs the Commission to take this issue into account when reconsidering the petitions. (Notably, however, the Petitioners might have been conceding like a fox—it is precisely because the Court was made to assume that all calls made from an ATDS were subject to the TCPA that it was forced to strike down the TCPA’s interpretation as overly broad, as explained in the next section. Pretty clever, if that was Petitioners’ plan all along.)
  3. The Quibble over “Present” Versus “Future” Capacity was a Complete Red Herring—What Mattered to the Court was the FCC’s Focus on Software-Enabled Dialing Devices.For years now (literally), I’ve had to endure, and sometimes even unwillingly engage in, a more-than-academic debate over whether equipment has current or potential capacity to operate as an ATDS. As the D.C. Circuit points out, however, that entire semantic debate is hogwash: “[v]irtually any understanding of ‘capacity’ [] contemplates some future functioning state, along with some modifying act to bring that state about.” ACA Int’l at 13. But so what? The real issue is whether the FCC’s ruling faithfully tracks Congressional intent with respect to the reach of the statute. And while the D.C. Circuit Court was respectful of the FCC’s authority to delineate those limits, it could not abide by the Commission’s expansion of the statute “several fold” over what Congress intended. As the D.C. Circuit views matters, smartphones are absolutely within the reach of the Omnibus ruling. This is no surprise, as I wrote back in August 2016: “Now, any piece of dialer equipment is governed by the TCPA so long as it can be converted into an autodialer ‘through [future] software changes or updates.’ As demonstrated in the second paragraph of this article, this definition now plainly includes that piece of sophisticated dialing equipment sitting right in your pocket—your smartphone.” Although the D.C. Circuit did not credit me for the analysis, it reached the exact same conclusion and for the exact same reason. The ACA Int’l opinion explains: “[t]he [Omnibus] ruling states that equipment’s ‘functional capacity’ includes ‘features that can be added…through software changes or updates’…[so] ‘a piece of equipment can possess the requisite “capacity” to satisfy the statutory definition of an “autodialer” even if, for example, it requires the addition of software to actually perform the functions described in the definition.’” ACA In’tl at 14-15. It concludes that such a definition necessarily encompasses smartphone technology. And since smartphones are used by hundreds of millions of Americans, but the TCPA—based on the legislative history—was only designed to regulate “hundreds of thousands” of unlawful callers, the FCC’s expansion of the TCPA went far beyond what Congress intended in enacting the statute. On that basis, the FCC’s interpretation of “capacity” was struck down as unreasonable.
  4. The FCC Ran But It Couldn’t Hide on Whether Smartphones Were Within the Scope of the Omnibus Ruling. In its opinion, the D.C. Circuit noted that the FCC refused to concede that smartphones were within the reach of the Omnibus. Its lawyers repeatedly argued that the Omnibus never reached that specific issue, which was reserved for a future petition. The D.C. Circuit was unmoved and determined that the Omnibus ruling’s failure to address the issue was in and of itself an arbitrary and capricious act. Specifically, in the D.C. Circuit’s view, if the Omnibus does not include smartphones, then the ruling fails to “articulate a comprehensible standard.” SeeACA Int’l at 21-23.
  5. The Court Directs the FCC to Clarify Whether the Use of a Random or Sequential Number Generator is a Necessary Feature of an ATDS—and the Fate of Predictive Dialers Hangs in the Balance. And this is where things get very interesting. In the D.C. Circuit’s view, the Omnibus does not answer the crucial question of what capacity is required to make a device an ATDS. Although the Omnibus affirms previous orders suggesting that predictive dialers are within the scope of the ATDS definition, the Omnibus also suggests that a dialer is only an ATDS if it has the capacity to generate random or sequential numbers. These two positions, the Court finds, are irreconcilable because the record plainly demonstrates that not all predictive dialers have the capacity to dial randomly or sequentially. Thus, the D.C. Circuit tees up a crucial issue: “A basic question raised by the statutory definition is whether a device must ” ACA Int’l at 25. But the D.C. Circuit refuses to answer the question for the Commission and instead does exactly the opposite, finding, “It might be permissible for the Commission to adopt either interpretation.” ACA Int’l at 27. Wow! So the D.C. Circuit just handed the keys to defining an ATDS—which sits at the very heart of the application of the TCPA—to Chairman Pai, who is already on record as stating, “In short, we should read the TCPA to mean what it says: Equipment that cannot store, produce, or dial a random or sequential telephone number does not qualify as an automatic telephone dialing system because it does not have the capacity to store, produce, or dial a random or sequential telephone number.” So maybe, just maybe, the final reversal of the TCPA’s application to predictive dialers—and other dialers that call based upon lists of numbers—is in the cards. Then again, the D.C. Circuit made quite clear that if the FCC wishes to depart from the statutory requirement that an ATDS must make use of a random or sequential number generator, then the D.C. Circuit is likely to bless that too! So an epic showdown is set up before the Commission.
  6. What About Human Intervention? The Court Suggests that It Only Matters if the Commission Chooses to Depart from the Requirement of a Random or Sequential Number Generator. In the D.C. Circuit’s view, the FCC’s after-the-fact pronouncement that an ATDS is something that dials without human intervention and can dial thousands of numbers at a time is just not very useful. As the opinion notes, the Commission has never clarified what human intervention is required, and what dialing thousands of numbers at a time really means. The Court also cannot square the Commission’s observation that a lack of human intervention is the hallmark of an ATDS with the Commission’s subsequent denial of a petition seeking clarification that an ATDS must operate without human intervention. The D.C. Circuit also does not understand what weight is to be given to these seemingly invented attributes of an ATDS, and how they correspond to the statutory requirements. On reconsideration of the issue, therefore, the FCC must—if it chooses to depart from the statutory requirement of using a random or sequential number generator—explain how and when a dialer operates without human intervention, and within just how much time must a dialer be able to dial all those thousands of numbers the Commission keeps mentioning. Again, however, these only seem to be questions that the Commission must answer if it wishes to depart from the statutory requirement of random or sequential number generator.
  7. Reasonable Reliance Is Now the Touchstone of Express Consent—and This is a Very Big Deal. Although the ATDS portions of the ruling are going to get top billing, the most important piece of the ruling, from my perspective, is the D.C. Circuit’s adoption of the FCC’s “reasonable reliance” approach to express consent. The ACA Int’l ruling repeatedly—nearly obsessively—references the FCC’s determination that callers must be able to reasonably rely on consent provided by former subscribers. Indeed, it was this loophole—intended by the FCC to justify nothing more than a one-attempt safe harbor—that the D.C. Circuit ultimately used to reverse that portion of the ruling as arbitrary and capricious. Specifically, the ACA Int’l ruling finds that it was arbitrary and capricious for the FCC—at least on the record before it—to conclude that one attempt was likely to afford a caller reasonable notice that a number had changed hands. As a result, the D.C. Circuit sets aside the one-call safe harbor and instructs the FCC to try again. More importantly to companies being sued in reassigned number suits, the D.C. Circuit has blessed the idea that a caller, which leads to the next point…
  8. The FCC’s Definition of “Called Party” Was Set Aside—and “Intended Recipient” is Still in Play! It’s easy to get confused by the opinion with respect to whether the D.C. Circuit approves of the FCC’s definition of “called party.” Some may say that the D.C. Circuit affirmed the FCC’s determination that “called party” does not mean “intended recipient.” But that is just flat not true. What the ruling did was first determine that the FCC was not required to rule that the “called party” was the “intended recipient” on the record before it. But then, after determining that the FCC’s one-call safe harbor could not be squared with its determination that a caller is permitted to reasonably rely on consent provided by a former subscriber, it set aside the FCC’s “called party” determination because that would impose strict liability for reassigned calls, which is a result that the Commission specifically stated it did not want to embrace. The key language appears at pages 39-40 of the opinion: “If we were to excise the Commission’s one-call safe harbor alone, that would leave in place the Commission’s interpretation that ‘called party’ refers to the new subscriber…We cannot be certain that the agency would have adopted that rule in the first instance…[and] as a result, we must set aside the Commission’s treatment of reassigned numbers [including its definition of called party] as a whole.” So, on remand, the issues to be addressed are: (1) who is the called party?; and (2) if it is still the subscriber, then to what extent may a caller reasonably rely on the consent of the former “called party”?
  9. Consumers Can Revoke Their Consent by Any Reasonable Means—but Not “Creatively” and Not if Their Contract Says Otherwise! While the revocation piece of the ACA Int’l ruling is big news, it is hardly surprising. Readers of this blog know that I have been saying for over a year now that contractual revocation clauses are enforceable. Sure enough, the D.C. Circuit affirms that “[n]othing in the Commission’s order [] should be understood to speak to parties’ ability to agree upon revocation procedures.” ACA Int’l at 43. More generally, the Court upholds the FCC’s determination that consumers can revoke consent using “reasonable” means. The D.C. Circuit articulates a totality-of-the-circumstances test. One factor to consider is “whether the caller could have implemented mechanisms to effectuate a requested revocation without incurring undue burdens.”Another is “whether the consumer had a reasonable expectation that he or she could effectively communicate his or her request…in that circumstance.” ACA Int’l at 41. One piece of the ruling that is sure to have industry buzzing is the suggestion that a call recipient’s decision not to take advantage of a reasonable revocation paradigm that is offered by the caller might be evidence that the revocation effort was not reasonable. In particular, the Court suggests that “creative” revocation efforts might not be permissible—a clear shot at the unfortunate tactic of some litigants who manufacture TCPA lawsuits by evading known opt-out mechanisms.
  10. No Mention of the First Amendment or the Constitution Is Made in the Ruling. While others may not find this surprising, I am actually shocked by the panel’s silence on constitutional issues. The TCPA has been subjected to strict scrutiny on five separate occasions now—this means that the statute is unconstitutional unless it is narrowly tailored to further a compelling governmental interest. But given the panel’s finding that the FCC Order literally expanded the TCPA to apply to every smartphone in the country and, alternatively, that any other reading of the Omnibus would fail to “articulate a comprehensible standard,” I don’t see how the statute passes strict scrutiny muster. The TCPA—as applied by the FCC—is necessarily either unconstitutionally overbroad or unconstitutionally vague for want of any discernable scope.

District Court Overrules Magistrate’s Order Compelling Prior Complaint Information and Related Data in TCPA Class Action

Quicken Loans scored a victory earlier this week when Judge Steven D. Merryday sustained its objection to a magistrate judge’s order compelling production of every shred of documentation in any form about every do-not-call request that Quicken received. SeeNece v. Quicken Loans, Inc., No. 8:16-cv-2605-T-23CPT, 2018 U.S. Dist. LEXIS 31346 (M.D. Fla. Feb. 27, 2018).

Quicken was successful in large part because it supplied declarations laying out the extreme burden and cost that a production of this magnitude would place on it. Quicken established that it could only comply with the request by undertaking a manual search of the requested information, which “would ‘cost hundreds of thousands of dollars (and potentially more),’ would ‘consume hundreds of hours of Quicken Loans’ computer and team member hours,’ and would ‘take many months (if not longer) to complete.’” SeeNece, 2018 U.S. Dist. LEXIS 31346 at * 7. The District Court’s decision essentially denied Plaintiff from further discovery and ordered Plaintiff to file its certification motion by mid-April.

Aside from this important holding, in another significant part of the decision – which is hidden in two sentences and a footnote – Judge Merryday alluded that he would likely find that the damages provision of the TCPA violated the Fifth Amendment Due Process clause if it resulted in billions in exposure:

“Nece’s counsel (that is, the prospective class counsel) boldly asserts that the judgment against Quicken in this action “could be multiple billions of dollars.” (Doc. 79 at 10) Of course, several impediments almost certainly foreclose a judgment for “multiple billions of dollars” in this unexceptional TCPA action. See, e.g., U.S. Const. amend V.3

3See also J. Gregory Sidak, Does the Telephone Consumer Protection Act Violate Due Process as Applied?, 68 Fla. L. Rev. 1403 (2016).”

It is telling that the Judge cites to Gregory Sidak’s article. Gregory Sidak is a Stanford-educated economist and attorney who has been working at the intersection of law and economics for over 35 years. In his article, “Does the Telephone Consumer Protection Act Violate Due Process As Applied?,” he estimates that a recipient’s actual harm is “generally to be between 6.8 cents and 70.87 per violating communication [under the TCPA].” His article argues that the “remainder of the TCPA’s statutory damages is purely punitive. Thus, the punitive component of the TCPA’s statutory damages is between 706 and 22,058 times the actual harm that a violating communication imposes on the recipient.”

Sidak concludes by urging lower courts to “take seriously the possibility that the TCPA’s statutory damages violate the Due Process Clause of the Fifth Amendment as applied.” Judge Merryday clearly has taken notice.

This is in line with the recent ruling in Golan v. Veritas Entertainment, LLC, No. 4:14CV000069 ERW, 2017 U.S. Dist. LEXIS 144501 (E.D. Mo. Sept. 7, 2017), in which the Court reduced a TCPA damages award totaling $1.6BB to a “mere” $32MM in reliance on Constitutional due process principles. Dorsey’s TCPA czar Eric Troutman discussed that decision at some length previously here.

Other courts should start taking notice and closely scrutinize the awards given in TCPA actions given the large exposure and the lack of injury.