Interesting findings from recent FTC case

A recent order out of the Ninth Circuit in an FTC telemarketing case provides some notable new case law. The case involves a magazine subscription seller who allegedly misled customers regarding pricing and other features. The Nevada trial court ruled in the FTC's favor, but only awarded $190,000. On appeal, the Ninth Circuit determined the lower court had not properly calculated the judgment and required the district court to redo the amount.  For the reasons explained below, the total award was then increased to $23 million.  Click here to read the FTC's perspective. Key findings:

Redress as a remedy

The defendant argued that the court lacked authority to order restitution to consumers, but the court held that District Courts have the authority under the FTC Act to "grant any ancillary relief necessary to accomplish complete justice."

Consumer reliance

The defendant also argued that for a court to order redress, there must be proof that each customer relied on the deceptive claims.  The Judge disagreed, finding that "The FTC is entitled to a 'presumption of actual reliance' once it is proven that the defendant made material misrepresentations, that they were widely disseminated, and that consumers purchased the defendant's product."

The legal effect of evidence that some consumers were satisfied

Defendants claimed that some customers were satisfied, and therefore the FTC's entitlement to a presumption of consumer reliance was rebutted. The court rejected that argument, stating, “the fact that some customers were ultimately satisfied with the magazines they purchased does not necessarily mean their original decision to purchase was free from the taint of the defendant's deceptive sales practices."

Calculation of the restitution amount

Although the trial court's original judgement was $190,000, it was based upon an erroneous "net revenue" standard.  On appeal it was held that a two-step burden-shifting framework would be more appropriate for calculating the restitution. This process first requires the FTC to prove the amount it seeks in restitution reasonably approximates the defendant's unjust gains. Then, the appropriate calculation becomes the amount that defendants collected from first-time orders. This two-step analysis ultimately increased the judgement to $24 million. The Ninth Circuit held that the district court applied an incorrect legal standard when it focused on the defendants’ gain rather than the loss to the consumers.

How to spot (and avoid) professional plaintiffs

Ever heard of TCPA plaintiff Melody Stoops?  What about Cunningham, Aronson, Abramson, Childress or Zelma?  Roughly one-third of all TCPA claims are filed by someone who filed one previously.  Serial TCPA litigators continue to pose a significant threat to businesses who strive to comply with the law.

Train your phone agents and lead generators to recognize professional litigators.  Red flags include odd questions, such as: "Can you send me your DNC policy?"; "In what state are you incorporated?"; "Who owns the company?"; "Which company gave you my number?"; "I assume you're recording this?"; and "What sort of dialer are you using?"  Other indicators include any reference by them to the TCPA or if the agent can tell the consumer is recording the call on their own.  Your agent should immediately and politely terminate the call when confronted with evidence that the recipient may be a professional litigator. The lead should be flagged and calls to that number should be paused while management reviews the lead and determines whether it should be transferred to your internal DNC.

What about avoiding professional plaintiffs in the first place?  A number of mitigation strategies exist for reducing the likelihood of calling someone who routinely sues telemarketers. These include only calling with well-documented written consent, performing a "litigator scrub" on your data to remove high risk numbers, performing reassigned number or "call verification" scrubbing to reduce wrong number calls, and resisting the urge to over-dial on you data.  If you never call any one number more than a few times, even if a serial litigator slips through the cracks, they can only come after you for those few calls, rather than hundreds.  Finally, audit or terminate lead generators who claim they are selling "opt ins" but yet who frequently generate complaints and demand letters by individuals who deny they consented.
 

5 States With More Restrictive Wireless Calling Laws

The FCC and TCPA specifically prohibit autodialed calls and texts to wireless phones without prior consent ("express" for non-marketing and "written" for marketing). Some courts have also treated VoIP lines similar to wireless lines under the TCPA and held marketers liable for autodialing VoIP Lines where the recipient was charged for the call.  Regardless whether the company uses an autodialer though, five states have more restrictive cell phone laws that prohibit telemarketing calls to wireless phones, even when calling manually.  These states include Arizona, Louisiana, New Jersey, Texas and Wyoming.

Title 44, Chapter 9, Article 6 of the Arizona Revised Statutes contains many elements of Arizona's regulation of the telemarketing industry. If we zero in on § 44-1278, we discover the following:

“It is an unlawful practice . . . for any seller or solicitor or anyone acting on their behalf who conducts a telephone solicitation in this state to do any of the following: . . . Intentionally make or cause to be made any unsolicited telephone sales call to any mobile or telephone paging device.”

Note that the restriction in the Arizona Statute specifically applies to an “unsolicited telephone sales call”, regardless of how the call is delivered. The question then is, if you have the appropriate “express written consent”, would it no longer be an unsolicited call? This of course, depends on how you obtained the consent, and what exactly the call recipient consented to.

Similarly, Title 56, Chapter 8 of the New Jersey Statutes covers "Frauds, etc. in Sales or Advertisements or Merchandise." § 56:8-130 of this chapter contains the following:

“No telemarketer shall make or cause to be made any telemarketing sales call to a commercial mobile service device of any customer . . .”

There does not appear to be any way around this prohibition, even for manual dialing, unless you are making a call that does not meet the definition of a “telemarketing sales call”.

Turning our attention now to Texas statutes, we find, in Title 10, Chapter 305, § 305.001, the following prohibition:

“A person may not make a telephone call or use an automatic dial announcing device to make a telephone call for the purpose of making a sale if: (1) the person making the call or using the device knows or should have known that the called number is a mobile telephone for which the called person will be charged for that specific call; and (2) the called person has not consented to the making of such a call to the person calling or using the device or to the business enterprise for which the person is calling or using the device.”

If you have obtained the necessary “express written consent” to call the individual using automated technology under the TCPA, you would most likely be exempt from this restriction. If you don’t have the appropriate consent, you should avoid calling Texas mobile telephone numbers, even if you are manually dialing.

Likewise, under Title 40, Chapter 12, Article 3, § 40-12-302 of the Wyoming Statutes, we find:

“No telephone solicitor or merchant shall willfully make or cause to be made any unsolicited telephonic sales call to any unpublished cellular telephone number.”

Here again, the restriction applies to an “unsolicited telephonic sales call”, and only prohibits calls to “unpublished cellular telephone numbers”. Wyoming defines both of these terms in § 40-12-301.

The Louisiana rule is a little more difficult to find, but it's there nonetheless, in the Louisiana Public Service Commission's Do Not Call Program General Order:

“No call will be placed to . . . any telephone number assigned to a paging service, cellular or mobile telephone service, specialized mobile radio service, or other radio common carrier service, or any service for which the called party is charged for the call, unless the call is made pursuant to the recipient's prior express consent.”

Louisiana does not define what prior express consent means, but “express written consent” under the TCPA would certainly qualify.

What's the simple solution to comply?  Marketers who want to call cell phones should either refrain from calling wireless phones in the above 5 states, or should ensure they always have prior written consent before calling (or at least an EBR in Wyoming).  Remember also that having such written consent will not only allow you to comply with these state laws, but would also allow you to use an autodial under the TCPA. Same is true for both cell and VoIP lines.  

Bottom line = consent is the key to both the state and federal wireless (and VoIP) rules.

D.C. Court Makes Important Decision in Fax Opt-Out Case

On Friday, the D.C. Circuit Court vacated part of an important 2006 FCC Order that required opt-out language on faxes sent even with the recipient's consent. The implication is that on faxes that are not "unsolicited" and which are sent with prior consent, special opt-out language will no longer be required.  This should make marketing somewhat easier for companies who market to their own customers and others who have opted in.  Prior to this ruling, there existed a notable amount of TCPA litigation against fax marketers for technical violations of the opt-out disclosure rules, even when the company had consent.  The decision is a good sign as the D.C. Circuit is also poised to rule any day on the pending ACA Int'l v FCC petition regarding what an autodialer is. Opt-out disclosures are still required on faxes sent without prior consent.
 

FCC Seeks Comments on Fax-Related FCC Petition

The Consumer and Governmental Affairs Bureau of the FCC is now seeking comments on a petition by M3 USA to clarify that research survey invitations sent by fax do not constitute "advertisements." Click here to read more about the petition and to find instructions for commenting. Comments are due on April 27, 2017.
 

CUNA Meets with FCC Chairman's Staff

The Credit Union National Association (CUNA) announced today that they met this week with the staff of FCC chairman Ajit Pai. During the meeting CUNA expressed concerns about how recent changes to the interpretation of the TCPA, such as the July 2015 ruling on autodialers, are making it difficult for credit unions all around the country to communicate with their members. They also expressed concern that these new rulings have opened up the doors for frivolous class action lawsuits against credit unions. CUNA has highlighted the following problems: 1) The overly broad definition of what is considered an autodialer, 2) Unclear guidance about how a consumer can revoke consent, 3) Unclear guidance about calling reassigned numbers, and 4) Problems with requiring free-to-end user calls. Read the linked article for additional information.

California Judge Dismisses TCPA Class Action

Several weeks ago, a California judge dismissed a TCPA class action lawsuit against the United Student Aid Funds (USAF). The judge determined that USAF was not vicariously liable for the actions of the third party vendors it had hired to carry out debt collection on certain student loans. The plaintiff, who had 2 defaulted student loans, sued USAF when she received unsolicited calls from Navient Solutions Inc., who had been hired by USAF to collect. The court disagreed with the plaintiff, holding that there had been no "classical agency relationship,"​ "implied actual authority"​ or "ratification"​ under which USAF could be held vicarious liability. Click here for more information.

What's on the Compliance Horizon for 2017?

2016 was a tough year for companies who were victim to TCPA, TSR and state regulatory cases.  There are some reasons to think 2017 and beyond may not be quite so bad.  For example, with the new presidential administration having appointed Commissioner Pai as the FCC's Chairperson, and given the current Republican majority on the Commission, we have good reason to expect FCC rulings over the next several years may be somewhat more reasonable and business friendly.  Regardless of your politics, you should certainly like Commissioner Ajit Pai.  Commissioner Pai is of course a proponent of the TCPA and is committed to fighting illegal robocalls.  However, Pai strongly dissented to many of the FCC's recent rulings, including on the FCC's expansive definition of an autodialer, for example.  Pai has made clear on several occasions that he thinks the TCPA has been misconstrued and has resulted in significant TCPA lawsuit abuse.

Also on the horizon is the impending decision in ACA Int'l v. FCC, currently before the DC Circuit Court of Appeals.  Recall that a combination of 9 companies and trade associations sued the FCC in federal circuit court following the FCC's July 2015 ruling on autodialers, revocation of consent, and the reassigned number problem.  That case was fully briefed in writing and a live, oral hearing was held in DC last October.  The case is ripe for a decision now.  Based upon some of the judge's questions during the hearing, I am hopeful that the industry will win on at least some of the issues in that case.  For example, will the courts strike down the FCC's insufficient "one free pass" rule on the calling of reassigned number, or the impossibly harsh "future capacity" ATDS standard?  Very possible and we will know any day now.

Finally, watch the recent FCC petition by Cunningham and Moskowitz under which they want to destroy implied "express consent" for automated non-marketing calls.  These two petitioners are frequent serial TCPA plaintiffs.  The FCC recently solicited comments on the petition.  Under the Commission's new leadership, I won't be surprised at all when the Commission denies this petition - at least we hope!  Stay tuned.