Thinking of Automating Your Customer Contacts? Beware the TCPA

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1.             BACKGROUND

The Telephone Consumer Protection Act (“TCPA”), also known as the “Robocall Law,” is a federal law that was initially enacted to regulate telemarketing calls.  However, in recent years aggressive plaintiffs’ lawyers have exploited ambiguities in the law in order to bring often crippling class action litigation against a host of companies – well beyond the telemarketing context Congress initially contemplated.  TCPA class action litigation has exploded in the past several years.  Over 2,000 TCPA class actions were reportedly filed in 2014 alone.

The TCPA itself encompasses only one statute – 47 U.S.C. §227.  However, the statute is rather lengthy and the regulations promulgated under the statute have added complexity and ambiguity, all to the detriment of the unfortunate defendants subjected to class litigation.

Part of the reason for the TCPA class action explosion is its damage scheme.  The TCPA provides for virtual strict liability for making calls or texts to a cellular line.  No proof of actual damage is required, and the statutory damages range from $500 per call to $1,500 per call for willful violations.  Companies that have made thousands of calls to consumers are therefore subjected to potential seven to eight figure liability.  The threat of such enormous damages, as well as the attorney fees and costs involved in defending against such cases, has led many companies simply to settle the cases rather than aggressively to defend them.

2.             AUTODIALER

The nub of the most numerous TCPA cases is the TCPA’s definition of “Automatic Telephone Dialing System,” or ATDS.  The typical TCPA class action is asserted for violations of the subsection that prohibits any call using an ATDS or an artificial or prerecorded voice to any cellular number, without the prior consent of the party being called.  “Call” includes text messages, which have also been the subject of high-stakes class litigation.

The ambiguity in the statute’s definition of ATDS has generated the bulk of the class litigation.  Under the TCPA, an ATDS is “equipment which has the capacity (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.”  Cases interpreting this definition have had inconsistent results.  However, enough cases have interpreted the definition broadly to include any automated dialing system that has the potential, via hardware or software modifications, to generate random or sequential numbers to encourage numerous costly class lawsuits.  In other words, even if a defendant made automated calls to a list of its existing customers using a system that had no ability to dial random or sequential numbers, that system may still be found to be an ATDS and subject the defendant to TCPA liability.

Many companies use, or are considering using, “predictive dialers” to increase efficiency in their communications with their customers.  In general terms, a “predictive dialer” is an automated system that dials consumers’ telephone numbers and eliminates wait time by predicting when a consumer will answer the telephone and ensuring that a representative is available to speak to the consumer when the consumer answers.  Companies that use predictive dialers generally incorporate telephone numbers from their consumer lists.  However, many cases have held that such a predictive dialer qualifies as an ATDS under the TCPA, even if it is not used with a random number or sequential number generator.

The Federal Communications Commission (FCC) is the federal agency with jurisdiction over TCPA rules and regulations.  Over the past three years, the FCC has been very active in inviting commentary on the ATDS definition.  Additionally, numerous courts have stayed lawsuits under the primary jurisdiction doctrine pending a definitive FCC pronouncement on the ATDS definition issue.  Unfortunately, the FCC has not yet issued anything definitive, despite the 2014 observation by one FCC director that the time was right to do so.

3.             DEFENSES

a.             Consent.   Defenses are available under the TCPA, though asserting them is not always clear-cut.  For example, if a defendant can show that it obtained “express consent” for it to contact the consumer on a cellular telephone line, it can potentially escape liability.  Consent is an affirmative defense under the TCPA, and the defendant therefore bears the burden of proving consent.  Often companies will obtain consent in connection with the transaction that creates the relationship with the consumer.  However, obtaining consent, express or implied, does not always absolve the defendant of TCPA liability.  Companies often assume that if a consumer provides a cellular telephone number in communications with the company, that constitutes consent for the company to then contact the consumer on that line.  However, a 2013 FCC release has cast doubt upon the validity of this method of consent, and has suggested that only “express written consent” will qualify as a TCPA defense.  Issues of scope and retroactive effect of this FCC pronouncement continue to be litigated in the courts.  Given the uncertainty, the conservative course is to ensure that any consumer has given express written authorization to be contacted by an ATDS on a cellular line.

b.             Number Reassignment.   Further complicating the consent issue is the fact that wireless telephone numbers are routinely released by consumers and reassigned to other consumers, without notification to the companies who had previously obtained a consumer’s consent to contact them on the cellular line.  One estimate places the approximate number of such reassigned cellular numbers at 100,000 per month.  Despite hundreds of recent filings with the FCC addressing the reassigned number/consent issue, the FCC has yet to make a formal pronouncement on the subject.  As a result, companies continue to be sued in TCPA class actions based on calls to numbers that have been reassigned to different consumers from those who originally gave consent to be contacted.

c.             Existing Business Relationship.   Until 2013, a prior existing relationship between the company and the consumer being contacted would defeat TCPA liability.  However, in 2013 the FCC removed the “prior existing business relationship” exemption, which has exacerbated the explosion in TCPA litigation.  As a result, a statute that was initially intended to stop unsolicited telemarketing calls is now being applied to companies that are making (often invited) business calls to their own customers.  The potential liability is chilling companies such as utilities, financial institutions, social media, medical providers, and others from using the most efficient technological methods of reaching their own customers.  The TCPA has become a major roadblock to many companies well-outside the telemarketing world.  Until either the FCC, Congress, or the United States Supreme Court weighs in definitively, the TCPA will remain a minefield.

4.             FURTHER ADVICE

This article is an overview of the major TCPA issues that are facing numerous industries today.  You should consult qualified counsel before making any decisions regarding automated contacting  of consumers.