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On June 12, the U.S. District Court for the Northern District of Illinois denied an auto financing company’s renewed motion for summary judgment and request for reconsideration, concluding that the company’s calling system falls within the definition of automatic telephone dialing system (autodialer) under the TCPA.
According to the opinion, two separate class actions were filed alleging that the company violated the TCPA when making calls to consumers regarding outstanding auto loans by using an autodailer. In April 2016, the company filed a motion for summary judgment, arguing, among other things, that the calling system it uses does not constitute an autodialer under the TCPA, and moved to stay the proceedings until the D.C. Circuit issued its ruling in a related case, ACA International v. FCC. The court denied the motions but stated that it would “revisit any issues affected by [the ACA International] decision as needed.” In March 2018, the D.C. Circuit issued its ruling in ACA International, concluding that the FCC’s 2015 interpretation of an autodialer was “unreasonably expansive.” (Covered by a Buckley Special Alert here.)
The company then filed the renewed motion for summary judgment and request for reconsideration of the earlier decision. The court denied the motion, concluding that the company’s calling system was an autodialer under the TCPA as a matter of law, because the system automatically dialed numbers from a set customer list. The court applied the logic of the 9th Circuit in Marks v. Crunch San Diego, LLC (covered by InfoBytes here), stating that it was not bound by the FCC’s interpretations of an autodialer based on ACA International, and “[a]s such, ‘only the statutory definition of [autodialer] as set forth by Congress in 1991 remains.’” After reviewing the legislative history of the TCPA, the court determined that “[g]iven Congress’s particular contempt for automated calls and concern for the protection of consumer privacy,” the autodialer definition “includes autodialed calls from a pre-existing list of recipients,” rejecting the company’s argument that an autodialer must have the capacity to generate telephone numbers, not just pull from a preexisting list. Additionally, the court concluded that the system “need not be completely free of all human intervention” to fall under the definition of autodialer.
On April 24, the U.S. Court of Appeals for the 4th Circuit vacated a district court’s decision to grant summary judgment in favor of the FCC, concluding that an exemption under the TCPA that allows debt collectors to use an autodialer to contact individuals on their cell phones when collecting debts guaranteed by the federal government violates the First Amendment’s Free Speech Clause. According to the opinion, several political consultant groups (plaintiffs) argued that a statutory exemption enacted by Congress as a means of allowing automated calls to be placed to individuals’ cell phones “that relate to the collection of debts owed to or guaranteed by the federal government” is “facially unconstitutional under the Free Speech Clause” of the First Amendment. The plaintiffs argued that the debt-collection exemption to the automated call ban contravenes their free speech rights. Moreover, the plaintiffs claimed that “the free speech infirmity of the debt-collection exemption is not severable from the automated call ban and renders the entire ban unconstitutional.” The FCC, however, argued that the applicability of the exemption depended on the relationship between the government and the debtor and not on the content. The district court awarded summary judgment in favor of the FCC after applying a “strict scrutiny review,” ruling that the exemption does not violate the Free Speech Clause.
On appeal the 4th Circuit agreed with the plaintiffs that the exemption contravenes the Free Speech Clause, and found that the challenged exemption was a content-based restriction on free speech that did not hold up to strict scrutiny review. “Under the debt-collection exemption, the relationship between the federal government and the debtor is only relevant to the subject matter of the call. In other words, the debt-collection exemption applies to a phone call made to the debtor because the call is about the debt, not because of any relationship between the federal government and the debtor.” And because the exemption is a content-based restriction on speech, it must satisfy strict scrutiny review to be constitutional, which it fails to do, the 4th Circuit opined. “The exemption thus cannot be said to advance the purpose of privacy protection, in that it actually authorizes a broad swath of intrusive calls. . . [and] therefore erodes the privacy protections that the automated call ban was intended to further.” However, the appellate court sided with the FCC to sever the debt collection exemption from the automated call ban. “First and foremost, the explicit directives of the Supreme Court and Congress strongly support a severance of the debt-collection exemption from the automated call ban,” the panel stated. “Furthermore, the ban can operate effectively in the absence of the debt-collection exemption, which is clearly an outlier among the statutory exemptions.”
On April 16, the U.S. District Court for the Eastern District of Pennsylvania granted in part and denied in part a telemarketing company’s motion to dismiss, concluding that the plaintiff did not have standing to bring some of his claims under the TCPA. According to the opinion, the plaintiff filed a lawsuit against the company for various claims under the TCPA, alleging that he received ten calls from the company to a phone number he had listed on the “National Do Not Call Registry” (Registry), nine of which were allegedly placed using an automatic dialing system (autodialer). The plaintiff requested orally, and later in writing, that the company cease calling the number, but the company allegedly continued to do so. The company moved to dismiss the action, arguing that the plaintiff created a business model to “encourage telemarketers to call his cellphone number so that he can later sue the telemarketers under the TCPA,” and therefore, has not suffered an injury-in-fact that the TCPA was designed to protect. The court agreed with the company on two claims related to the Registry, holding that the plaintiff does not have standing to bring claims under the TCPA’s prohibition of contacting numbers on the Registry because the phone was for business use and “business numbers are not permitted to be registered on the [Registry].” The court denied the motion to dismiss as to the remaining TCPA claims and ordered the company to respond.
On April 16, the U.S. District Court for the Northern District of California granted final approval to a $7.5 million class action settlement resolving allegations that a payment processor and its sales representative violated the TCPA by using an autodialer for telemarketing purposes without first obtaining consumers’ prior express consent. The settlement terms also require the defendants to pay roughly $1.8 million in attorneys’ fees. According to the second amended complaint, the sales representative placed pre-recorded calls to potential clients on behalf of the payment processor through the use of an autodialer, including consumers who had not consented to receiving the calls. The plaintiff further alleged that the payment processor also violated the TCPA by sending facsimile advertisements that did not contain a “Compliant Opt Out Notice” to recipients. The parties reached a preliminary settlement last August following discovery and mediation.
On March 29, the U.S. District Court for the Northern District of Illinois granted a telecommunication company’s summary judgment motion in a putative TCPA class action involving text messages. The plaintiff asserted that the company sent him text messages asking survey questions, even though he did not consent and was registered on the Do Not Call list. The company argued that it did not use an automated dialing system (autodialer) to send the text messages to the plaintiff. The court agreed. Citing to the D.C. Circuit’s decision in ACA International v. FCC and analyzing the definition of an autodialer under the TCPA, the court concluded that the system used by the company to send the text messages was not an autodialer because it could not “generate telephone numbers randomly or sequentially.” The court also rejected the consumer’s argument that the system had “the capacity” to generate numbers randomly by selecting numbers to dial from a compiled list of accounts, noting that the TCPA “does not support a reading where ‘using a random or sequential number generator’ refers to the order numbers from a list are dialed.”
On March 22, the U.S. Court of Appeals for the 9th Circuit reversed a lower court’s decision to dismiss TCPA claims against a student loan administrator (defendant), finding that the administrator could be held vicariously liable for a contractor’s alleged debt collection attempts. The plaintiff claimed in her suit that the companies hired by the contracted student loan servicer violated the TCPA by using an autodialer when attempting to contact borrowers to collect payment. The plaintiff argued that the defendant was “vicariously liable” for the alleged TCPA violations of the companies that were hired to collect the plaintiff’s debts, and that the defendant was “similarly liable under the federal common law agency principles of ratification and implied actual authority.” The claims against the collectors and the servicer were dismissed for lack of personal jurisdiction, and the lower court ruled on summary judgment that a jury could not hold the defendant responsible for the actions of the servicer.
On appeal, the split three-judge panel held that a reasonable jury could find that the defendant knew of the alleged TCPA violations, and that because the defendant “ratified the debt collectors’ calling practices by remaining silent,” or alternatively, willfully ignored potential violations through its collections arrangement with the servicer, a jury could find a “principal-agent” relationship—even if one did not exist in the contract—and the court should hold it liable for the collectors’ TCPA violations. According to the panel, there was evidence in the record that the defendant “had actual knowledge” of the alleged violations through audit reports provided by the servicer and “did nothing” to ensure that the debt collectors complied with the law. However, the entire panel agreed that the defendant was not per se vicariously liable for the debt collectors’ alleged TCPA violations.
In dissent, Judge Bybee agreed with the panel that the defendant is not per se vicariously liable for the debt collectors’ practices, and noted in addition that there is not enough evidence to show that the defendant consented to practices that violate the TCPA or that it granted the debt collectors authority to violate the law. He wrote, “there is no evidence whatsoever that [the defendant] approved of such practices. In fact, the only evidence in the record is to the contrary: when [the defendant] learned of wrongful practices, it reported them to [the servicer] and asked [the servicer] to correct the problem.”
On March 26, the FTC announced settlements issued against four separate operations for allegedly placing billions of illegal robocalls to consumers selling auto warranties, debt-relief services, home security systems, veterans’ charities and Google search results services. The actions are part of the FTC’s ongoing efforts to combat illegal robocalls. According to the FTC, the companies—along with several of their affiliates and leaders—allegedly violated the FTC Act and the Telemarketing Sales Rule (TSR), including its Do Not Call provisions.
Proposed settlements issued against two related operations and their leaders—who, according to the FTC’s complaint, developed and enabled a software dialing platform that resulted in more than one billion robocalls—ban the defendants from engaging in telemarketing activities utilizing an autodialer, and imposes judgements ranging from $1 million to $2.7 million, of which two are fully suspended due to the defendants’ inability to pay. The FTC also reached a final settlement against defendants who allegedly placed robocalls to pitch fake debt-relief services promising lowered credit card interest rates and interest payment savings. The order permanently bans the defendants from engaging in telemarketing and debt-relief services, and imposes a $3.15 million judgment, which will be suspended following the turnover of available assets. Separately, the FTC reached a proposed settlement with a defendant who allegedly used robocalls promoting fake veterans’ charities to solicit donations, which he eventually sold for his own benefit. The proposed order bans the defendant from engaging in telemarketing services or soliciting charitable contributions, prohibits him from making future misrepresentations, and imposes a $541,032 monetary judgment, which will also be suspended following the turnover of available assets. Finally, the FTC announced proposed settlements against three defendants (see here, here, and here) whose Florida-based operations allegedly violated the TSR by falsely claiming to represent Google and making threats and promises to businesses concerning search results and page placements. The terms of the proposed settlements, among other things, ban the defendants from deceptive sales practices, and require the defendants to disclose their identities during telemarketing sales calls. Monetary judgements imposed against the defendants and their companies range from $1.72 million to $3.62 million, and will be partially suspended due to their inability to pay.
On February 8, the U.S. District Court for the Eastern District of Virginia granted final approval to a $2.5 million putative class action settlement resolving allegations that a student loan servicer violated the TCPA by using an autodialer to contact student borrowers’ credit references without first obtaining their prior express consent. The settlement terms also require the servicer to pay more than $850,000 in attorneys’ fees and expenses. According to the plaintiff’s memorandum in support of its motion for preliminary approval of the class action settlement (as referenced in the final approval order), the servicer allegedly used an autodialer to contact the plaintiff’s cellphone without her prior express consent, which the servicer subsequently denied. The servicer had moved for summary judgment on multiple grounds, arguing, among other things, that the plaintiff could not establish that the servicer used an autodialer to place calls to her and other credit references listed on the delinquent student loans. Citing to the D.C. Circuit’s decision in ACA International v. FCC, which set aside the FCC’s 2015 interpretation of an autodialer as “unreasonably expansive,” (covered by a Buckley Special Alert), the servicer had argued that the decision “governs analysis of the issue” and that the plaintiff could not succeed in demonstrating that the telephone system used falls within the statutory definition of an autodialer. However, prior to the court issuing a ruling on the servicer’s summary judgment motion, the parties reached the approved settlement through mediation.
District court orders TCPA suit to mediation, states FCC’s interpretation of autodialer may take years
On February 1, the U.S. District Court for the Eastern District of Missouri issued an order referring the parties in a putative TCPA class action to mediation. The plaintiff’s complaint alleges that the defendant’s insurance company sent her text messages without her consent using an automatic telephone dialing system (autodialer). In response, the defendant argued that the software it used to send the text messages does not qualify as an autodialer because it calls numbers from a pre-set list, instead of one that is randomly or sequentially generated. The defendant further argued that the case should be stayed because the FCC is currently considering whether systems such as the one at issue qualify as autodialers under the TCPA following the D.C. Circuit’s March 2018 ruling in ACA International v. FCC, which set aside the FCC’s 2015 interpretation of an autodialer as “unreasonably expansive.” (Covered by a Buckley Special Alert.) The decision to refer the case to mediation comes after the court’s August 2018 order denying the defendant’s motion to stay the proceeding. In that order the court explained that, although the FCC issued a notice in May 2018 (covered by InfoBytes here) seeking comments on the interpretation of the TCPA, the rulemaking process would likely take years and may not even resolve the issue in the case.
District Court allows TCPA action to proceed, citing 9th Circuit autodialer definition as binding law
On January 17, the U.S. District Court for the District of Arizona denied a cable company’s motion to stay a TCPA action, disagreeing with the company’s arguments that the court should wait until the FCC releases new guidance on what constitutes an automatic telephone dialing system (autodialer) before reviewing the case. A consumer filed a proposed class action against the company, arguing that the company violated the TCPA by autodialing wrong or reassigned telephone numbers without express consent. The company moved to stay the case, citing the FCC’s May 2018 notice (covered by InfoBytes here), which sought comments on the interpretation of the TCPA following the D.C. Circuit’s decision in ACA International v. FCC (setting aside the FCC’s 2015 interpretation of an autodialer as “unreasonably expansive”). The company argued that the FCC would “soon rule on what constitutes an [autodialer], a ‘called party,’ in terms of reassigned number liability, and a possible good faith defense pursuant to the TCPA,” all of which would affect the company’s liability in the proposed class action. The court rejected these arguments, citing as binding law Marks v. Crunch San Diego, LLC, a September 2018 decision from the U.S. Court of Appeals for the 9th Circuit that broadly defined what constitutes an autodialer under the statute (covered by InfoBytes here), and therefore, determining there was nothing to inhibit the court from proceeding with the case. As for the FCC’s possible future guidance on the subject, the court concluded, “there seems little chance that any guidance from the FCC, at some unknown, speculative, future date, would affect this case.”
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- Warren W. Traiger to discuss "CRA modernization" at the National Association of Industrial Bankers and the Utah Association of Financial Services Annual Convention
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
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- Brandy A. Hood to discuss "RESPA Section 8/referrals: How do you stay compliant?" at the New England Mortgage Bankers Conference
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions and CMPs" at the ACAMS AML & Financial Crime Conference
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