FCC Issues Far-Reaching TCPA Declaratory Ruling

An already active TCPA class action bar is sure to become even more active after a significant Declaratory Ruling and Order from the FCC that, among other points, broadened what technologies may be considered autodialers, gave further strength to class actions based on reassigned cell numbers, and muddied the waters for constructing compliance mechanisms to support consumer revocation of consent.

On July 10, 2015, the Federal Communications Commission issued a declaratory ruling to resolve various concerns raised by 21 petitions regarding the Commission’s implementation of the Telephone Consumer Protection Act, which carries a $500 penalty for each call or text in violation.

In this omnibus ruling, issued over the strenuous dissents of Commissioners Pai and O’Rielly, the Commission went beyond clarifying its prior statements and took several significant steps in an effort to alleviate consumer complaints over robocalls to wireless numbers. Specifically, the Commission:

• Broadened the definition of an “automatic telephone dialing system” (or, colloquially, “autodialer”) to include any device or system that could be modified to dial numbers randomly or sequentially;
• Held that a consumer may revoke his or her consent to be called at any point in any “reasonable” manner;
• Determined that, when a wireless number is reassigned from a person who has given consent to be called to a person who has not, a caller will be liable for violating the TCPA after its first call to that wireless number after reassignment, even if no one answers or the recipient fails to alert the caller to the reassignment;
• Created exemptions to the TCPA’s liability provisions for financial institutions to send fraud alerts and for healthcare providers to send updates related to medical care.

Time (and litigation) will tell whether these actions are consistent with the TCPA or whether they will actually protect consumers. What is immediately clear, however, is that telemarketing is a much riskier practice for businesses after this ruling.

Is Every iPhone an Autodialer?

Take, for instance, the Commission’s redefinition of an autodialer: under the TCPA, an autodialer is a device or system that “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.” 47 U.S.C. § 227 (emphasis added). To date, a majority of courts have read the capacity restriction to mean that the dialing device must have the current ability to numbers randomly or sequentially to qualify as an autodialer. See, e.g., Glauser v. GroupMe, Inc., No. C11-2584 PJH, 2015 WL 475111, *6–7 (N.D. Cal. Feb. 4, 2015); Marks v. Crunch San Diego, LLC, 55 F. Supp. 3d 1288, 1291–92 (S.D. Cal. 2014); Gragg v. Orange Cab Co., 995 F. Supp. 2d 1189, 1192–93 (W.D. Wash. 2014); Hunt v. 21st Mortg. Co., No. 2:12-CV-2697-WMA, 2013 WL 5230061, at *4 (N.D. Ala. Sept. 17, 2013). The Commission, however, sided with the minority of district courts, see, e.g., Sterk v. Path, Inc., 46 F. Supp. 3d 813, 819–20 (N.D. Ill. 2014); Sherman v. Yahoo! Inc., 997 F. Supp. 2d 1129, 1142 (S.D. Cal. 2014), which have held that the capacity restriction refers to “future ability,” and ruled that “a piece of equipment can possess the requisite ‘capacity’ to satisfy the statutory definition of ‘autodialer’ even if, for example, it requires the addition of software to actually perform the functions described in the definition.” Order at 15 ¶ 18.

As Commissioner Pai noted, such a reading “dramatically departs from the ordinary use of the term ‘capacity’” and is equivalent to arguing that “Lambeau Field in Green Bay, Wisconsin, which can seat 80,000 people, has the capacity (i.e., the ‘potential or suitability’) to seat all 104,000 Green Bay residents just because it could be modified to have that much seating.” Order at ¶ 115 (Comm’r Pai, dissenting).

More practically, it also means that an iPhone or any other smartphone would qualify as an autodialer under the majority’s definition because an app could be downloaded to dial numbers from the phone’s contact list at random. The Commission acknowledges that its redefinition is broad enough to cover the ubiquitous smartphone, see Order at 16–17 ¶ 21; but wrote that it does not see that as a problem because “there is no evidence in the record that individual consumers have been sued based on typical use of smartphone technology,” Order at 17 ¶ 21.

That no one has filed such a suit yet, however, should be little comfort given that TCPA suits have become a cottage industry and grown “from 14 in 2008 to 1,908 in the first nine months of 2014.” Order at 113 (Comm’r Pai, dissenting). Accordingly, given the TCPA’s ban on using an autodialer to call a wireless number without prior written consent, businesses will need to consider with care the technology they use to dial wireless numbers.

Reassigned Numbers: One Strike and You’re Out

If the redefinition of an autodialer were not enough to dissuade businesses from calling wireless numbers, however, the Commission’s treatment of reassigned numbers and previously obtained consent could be.

The Commission’s rules and regulations require callers to obtain express written consent from the “called party” before placing marketing calls to wireless numbers. See Order at 11 ¶ 9. In its ruling, the Commission interpreted “called party” to be “the current subscriber” whose account is tied to the wireless number. Order at 39–40 ¶72. A number of appellate courts had already reached this same conclusion.

For businesses, this redefinition is worrisome because wireless numbers are reassigned frequently and no comprehensive database exists to flag when a number has been turned over to a new subscriber. Thus, a business could incur substantial liability for calls for which it believes it has the necessary consent.

Recognizing this problem, the Commission created a narrow exception to liability, exempting a caller’s first call to a reassigned number from any imposition of liability. See Order at 49 ¶ 89. Afterward, however, the Commission would charge that the caller has “constructive knowledge” of the reassignment. But even with procedural safeguards to regularly verify the cell phone number of customers, this exception appears to be inadequate to fully eliminate the risk.

As Commissioner O’Rielly argued in dissent, that one-call exemption may be relatively hollow because it includes misdials, calls for which there is no answer, texts for which there is no response, and calls where the recipient lies about his or her identity. Order at 130–31 (Comm’r O’Rielly, dissenting). Consequently, even businesses that have obtained prior written consent and include procedures to document and remove wireless numbers for which they are informed have been reassigned are at significant risk of incurring liability or, at a minimum, facing a lawsuit under this ruling.

Revocation of Consent

Further, for companies seeking to craft practical compliance programs to reflect the FCC’s Order, the affirmation that consumers have the right to revoke their consent to receive robocalls and robotexts in any reasonable way at any time could undermine implementation, as well as companies’ ability to defend itself against consumers claiming to have revoked consent. In particular, companies may not designate a method of consent (e.g., in writing or through an online opt-out) that will allow them to create a definite record of all revocations. This uncertainty is compounded by the FCC’s clarification that “if any question arises as to whether prior express consent was provided by a call recipient, the burden is on the caller to prove that it obtained the necessary prior express consent.”

Implications

The FCC’s declaratory ruling seeks to fulfill the mandates of the TCPA to protect consumers from annoying, harassing and potentially expensive telemarketing via robocalls, and consumers certainly deserve protection from the predatory practices of rogue telemarketers. The Commission’s ruling, however, does not appear to target only those bad actors. Rather, the new order appears to be predicated on the notion that almost no sort of autodialing is acceptable, and thereby knowingly opening the floodgates to increased TCPA suits against well-intentioned businesses attempting to comply with the Commission’s aggressive reading of congressional intent.

Predictably, within a week of the Declaratory Ruling and Order, several entities have petitioned courts for review of the order, including in the United States Court of Appeals for the District of Columbia Circuit, and the Seventh Circuit. See Petition for Review, ACA Int’l v. FCC, No. 15-1211 (D.C. Cir. Filed July 10, 2015); Petition for Review, Sirius XM Radio, Inc. v. FCC, No. 15-1218 (D.C. Cir. Filed July 14, 2015); Petition for Review, Prof’l Ass’n for Customer Engagement, Inc. v. FCC, No. 15-2489 (7th Cir., filed July 14, 2015). While many businesses look towards these cases for potential relief, in the meantime, any company engaged in marketing to cell phones or other use of autodialers should determine what additional compliance controls may help to mitigate the ongoing risks.