• 1:1 Consent – At the end of 2023, the FCC adopted an amendment to the definition of “prior express written consent” under its TCPA rules to require that a consumer give specific consent to be contacted by a particular seller for marketing purposes, and that such consent must be “logically and topically related” to the context in which it was obtained. This rule will officially go into effect on January 27, 2025, but we have seen a trend among service providers in the industry (particularly calling and texting platforms) requiring that their customers implement 1:1 consent well ahead of that deadline (and make corresponding changes to their privacy policy about sharing consent data with third parties). It would be prudent for affected businesses to take this time to carefully review their opt-in processes and privacy policies to assess what changes are necessary from both a commercial and legal compliance perspective.

• AI and the TCPA – On February 8, 2024, the FCC voted unanimously in favor of a Declaratory Ruling that classifies AI-generated voices on robocalls as ​“an artificial or pre-recorded voice” under the TCPA. This means that calls using AI technology to generate a simulated or pre-recorded human voice must satisfy the TCPA’s consent requirements (including prior express written consent for marketing calls using AI). While the FCC focused the ruling on the common use and accessibility of AI-generated voices by bad actors to perpetrate fraud and spread misinformation, the development underscores the heightened regulatory scrutiny on a business’s use of AI to mimic human behavior for marketing purposes. The FTC also outlined in a recent blog post some of the potential consumer protection and privacy concerns that can arise from the use of AI chatbots to interact with consumers.

• Expanded Opt-Out Rules – On February 15, 2024, the FCC adopted a Report and Order and Further Notice of Proposed Rulemaking to amend its TCPA rules and clarify the ways in which consumers can revoke consent to receive calls and texts. Among the changes were the adoption of various “per se” reasonable methods for revoking consent, including by texting the words ​“stop,” ​“quit,” ​“end,” ​“revoke,” ​“opt out,” ​“cancel,” or ​“unsubscribe.” The FCC also made clear that businesses cannot prescribe a particular method for revoking consent, and must honor reasonable opt-out requests within 10 business days. Importantly, while businesses are permitted to send a one-time text to clarify the scope of a consumer’s opt-out request if that consumer has previously consented to receive multiple types of messages, if the consumer does not respond to that message, they are presumed to revoke consent for all further non-emergency communications. The effective date for the amended revocation of consent rule is still uncertain, as it is undergoing a review by the Office of Management and Budget. Once that review is complete, the FCC will issue a notice, and the rule will be effective six months thereafter. Businesses can prepare for this change by evaluating and testing their technology and processes to confirm they can honor opt-outs in accordance with the new requirements.

• Telemarketing Sales Rule Changes – Looking beyond regulatory changes at the FCC, the FTC announced in March a significant update to the Telemarketing Sales Rule, most notably by expanding parts of the rule to business-to-business calls, and expanding the scope and timeline of recordkeeping obligations for telemarketers. These amendments generally became effective on May 16, 2024, except for the “call detail” records subsection, for which the FTC had previously announced a 180-day grace period to give affected businesses time implement systems, software, or procedures necessary to comply. As such, businesses will have until October 15, 2024 to adhere to that particular provision of the rule.

• New and Updated State Telemarketing Laws. A number of recently-enacted state laws related to telemarketing have taken effect (or will take effect) in 2024, including:

• Maryland – The “Stop the Spam Calls Act of 2023” became effective on January 1, 2024. Key provisions of the new law include a requirement for “prior express written consent” for telephone solicitations that involve “an automated system for the selection or dialing of telephone numbers,” as well as call time and frequency restrictions similar to those adopted in other states, and a private right of action for alleged violations. To date, we are not aware of any private litigant bringing forward an action in court under the new law.

• Maine – Earlier this year, Maine adopted a first-of-its-kind amendment to its telephone solicitation law that requires solicitors to scrub against the FCC’s reassigned number database prior to initiating a call. While limited in scope due to underlying exemptions in the statute, the requirement will become effective on July 16, 2024.

• Georgia – Several changes to an existing telemarketing law in Georgia were recently enacted, including: (1) eliminating the requirement for a “knowing” violation of the law to pursue enforcement; (2) extending liability for calls made “on behalf of any person or entity” in violation of the law; (3) allowing private plaintiffs to pursue claims for violations as part of a class action with no limitation on damages; and (4) creating a safe harbor defense for solicitations made to a consumer “whose telephone number was provided in error by another subscriber” if the caller “did not know, or have reason to know, that the telephone number was provided in error.” These amendments will become effective on July 1, 2024.

• Mississippi – By a series of amendments to its existing telephone solicitation law, Mississippi severely restricted the ability of businesses to contact consumers by phone about Medicare Advantage plans (unless a consumer first initiates a call to the business about such plans), and effectively banned telemarketing for Medicare supplement plans. These restrictions are unique among state telemarketing regulations because they are narrowly focused on calls about certain Medicare plans, and may be challenged on First Amendment grounds. In the interim, however, the restrictions will take effect on July 1, 2024.

If you have any questions about how these developments may affect your business, please contact Alysa Hutnik or Jenny Wainwright. For more telemarketing updates, subscribe to our blog.

Please contact your regular Kelley Drye attorney if you have questions about these changes.

While this change is noteworthy, it is important for businesses to remember that Maine’s telephone solicitation statute has a number of exceptions. For example, the law – and thus this new requirement to scrub against the reassigned number database – does not apply to calls made “in response to and at the express request of the person called,” and calls “to any person with whom the telephone solicitor has an established business relationship” (based on a purchase within the preceding 18 months or consumer inquiry within the preceding 3 months). As such, businesses engaged in telemarketing that may reach consumers in Maine should examine their practices carefully to understand whether the new requirement will apply, and if so, how to implement reassigned number database verifications into their outreach flows.

If you have any questions about how this new requirement may affect your business, please reach out to Alysa Hutnik or Jenny Wainwright. For more telemarketing updates, subscribe to our blog.

One key provision of the new law creates a prohibition, absent prior express written consent, against “telephone solicitation[s]” that involve “an automated system for the selection or dialing of telephone numbers.” A “telephone solicitation” is defined as “an organized activity, program, or campaign to communicate by telephone with residents of Maryland in order to: (i) sell, lease, or rent goods or services; (ii) attempt to sell, lease, or rent goods or services; (iii) offer or attempt to offer a gift or prize; (iv) conduct or attempt to conduct a poll; or (v) request or attempt to request survey information, if the results of the survey will be used directly to solicit persons to purchase, lease, or rent goods or services.” The term “communicate by telephone” suggests an intent to include both phone calls and text messages within the scope of this definition.

The reference to an “automated system” is not defined by the Maryland law and thus is broader than the Telephone Consumer Protection Act’s (“TCPA’s”) definition of “automatic telephone dialing system,” (“ATDS”), which the Supreme Court ruled in 2021 only encompasses devices that use a random or sequential number generator to either store or produce a telephone number. It’s possible, therefore, for a dialer to be subject to the Maryland law while not technically constituting an ATDS under the TCPA. It is also worth noting that after a similar law was implemented in Florida, the spike in litigation pertaining to autodialers caused the legislature to eventually reverse course and adopt a narrower definition of the term. Whether Maryland follows suit and amends its definition may depend on whether a similar uptick in litigation occurs in the coming months. The Maryland law also prohibits prerecorded message calls without prior express written consent.

The law defines the term “prior express written consent” similar to federal TCPA regulations, including requiring a signature by the called party (electronic signatures are acceptable) and informing consumers that consent is not required to purchase goods or services. The Maryland statute was passed and signed by the governor before the Federal Communications Commission (FCC) adopted its rule change mandating seller-specific (or one-to-one) consent, and as such, it does not reflect a similar requirement. The FCC rule, once effective in January 2025, will be the stricter standard and apply nationally, at least as to those calls made by an ATDS, as defined under the TCPA.

Other noteworthy provisions of the new law with respect to telephone solicitations include:

• A permissible calling window limited to between 8 AM–8 PM;
• A limit of three calls in a 24-hour period “on the same subject matter or issue” (this is similar to restrictions in Florida and Oklahoma);
• Prohibitions on the use of technology or voice altering to deliberately conceal the identity of the caller;
• A rebuttable presumption that any call made to a Maryland area code is a call made to a Maryland resident;
• Exceptions for “isolated transaction[s]”; solicitations by or on behalf of a tax-exempt nonprofit entity for religious, charitable, political, or educational purposes; business-to-business sales; soliciting contracts for the maintenance or repair of goods previously purchased from the solicitor; a single solicitation in response to an inquiry or request from a customer; and certain communications pursuant to an existing business relationship with the called party (provided the communication “is initially intended for informational purposes only; and based on further inquiry from the customer [it] becomes a telephone solicitation”).

The new law is enforceable under the Maryland Consumer Protection Act, which allows both the state and individual consumers to bring an action for alleged violations, does not require evidence of actual deception or damages to prove a violation, and establishes civil penalties of up to $10,000 per violation (or $25,000 for repeat violations), and criminal penalties of a fine of up to $1,000, one year in prison, or both, among other remedies. The private right of action in the new statute is in addition to an existing law in Maryland that allows consumers to recover $500 or actual damages, plus reasonable attorney’s fees, for violations of the federal TCPA or Telemarketing Sales Rule.

If you have any questions about how this new law may affect your business, please reach out to Alysa Hutnik or Jenny Wainwright. For more telemarketing updates, subscribe to our blog.

The August issue of Kelley Drye’s TCPA Tracker newsletter is here:

Recent News

On August 6, 2021, the FCC adopted a Further Notice of Proposed Rulemaking to consider additional anti-robocall requirements for interconnected VoIP provider that seek direct access to telephone numbers. Among the changes, the FCC proposes to require interconnected VoIP provider seeking access to numbers to “certify that it will use numbering resources lawfully; will not encourage nor assist and facilitate illegal robocalls, illegal spoofing, or fraud; and will take reasonable steps to cease origination, termination, and/or transmission of illegal robocalls once discovered.” Comments on this proposal will be due 30 days after publication of the FNPRM in the Federal Register.

CGB Issues its Second Annual Report on the Status of the Implementation of Call Blocking Technologies

On June 29, 2021 the FCC’s Consumer and Government Affairs Bureau released a Second Call Blocking Report, as required by the 2019 Call Blocking Declaratory Ruling. This Report, a follow up to the June 2020 First Call Blocking Report, provides (1) a detailed description of call blocking services offered by voice service providers, third-party analytics companies, and device manufactures (2) an in-depth evaluation of the effectiveness of call blocking tools (3) information on the state of deployment of caller ID authentication through implementation of the STIR/SHAKEN framework and (4) an analysis of the impact of call blocking on 911 services and public safety.

FCC Adopts Rules to Create an Online Portal for Private Entities to Report Robocall Violations

On June 17, 2021 the FCC’s Enforcement Bureau released a Report and Order implementing section 10(a) of the Pallone-Thune Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act), which directs the Commission to “prescribe regulations to establish a process that streamlines the ways in which a private entity may voluntarily share with the Commission information relating to violations of section 227(b) or 227(e) of the Communications Act.” The Report and Order establishes procedures for private entities may submit information about suspected robocall and spoofing violations. The rules do not supplement the complaint procedures available to consumers, and thus the portal is not open for consumer complaints of illegal robocalls. Similarly, government entity reports of robocall or spoofing violations should be submitted via other methods as well.

FCC Issues Further Notice of Proposed Rulemaking for Implementing STIR/SHAKEN

On May 20, 2021 the FCC’s Wireline Competition Bureau released a Third Further Notice of Proposed Rulemaking (FNPR) to consider accelerating its STIR/SHAKEN requirements for a subset of small voice service providers believed to be likely to originate illegal robocalls. In its Second Caller ID Authentication Report and Order, the FCC granted some small voice service providers an additional two years to implement the STIR/SHAKEN caller ID authentication framework. According to the FCC, a subset of these providers is originating an increasingly disproportionate amount of illegal robocalls. The NPRM outlines a proposal to “shorten the extension for small voice service providers most likely to originate illegal robocalls by one year, so that such providers must implement STIR/SHAKEN in the IP portions of their networks no later than June 30, 2022.” It also seeks comments on (1) “how best to identify and define the subset of small voice service providers that that are at a heightened risk of originating an especially large amount of illegal robocall traffic” and (2) “whether to adopt additional measures, including data submissions, to facilitate oversight to ensure that small voice service providers subject to a shortened extension implement STIR/SHAKEN in a timely manner.” Comments were due on or before July 9, 2021; reply Comments were due on or before August 9, 2021.

ZipDX Submits Letter of Intent to Serve as Registered Industry Consortium

As required by the Pallone-Thune Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act), the FCC must annually select “a single consortium to conduct private-led efforts to trace back the origin of suspected unlawful robocalls.” On May 27, 2021 ZipDx LLC (ZipDX) submitted a Letter of Intent to apply for this role. The Enforcement Bureau released a Public Notice on June 17, 2021 seeking comments on the matter. The current designated registered consortium, USTelecom – the Boadband Association’s Industry Traceback Group (USTelecom ITG) was not required to file another Letter of Intent, as its initial application and certifications continue for the duration of subsequent years, however it did submit a Comment reaffirming its commitment to the role. The Bureau will select the registered consortium by August 25, 2021. Comments were due July 2, 2021.

FCC Petitions Tracker

Number of Petitions Pending

• 30 petitions pending
• 1 petition for reconsideration of the rules to implement the government debt collection exemption
• 1 application for review of the decision to deny a request for an exemption of the prior express consent requirement of the TCPA for “mortgage servicing calls”
• 1 request for reconsideration of the 10/14/16 waiver of the prior express written consent rule granted to 7 petitioners

• Enterprise Communications Advocacy Coalition – Petition for Declaratory Ruling

On July 30, 2021, the Enterprise Communications Advocacy Coalition (ECAC) filed a Petition for Declaratory Ruling seeking federal preemption of portions of recently enacted Florida legislation (SB 1120), which amends the Florida Do Not Call Act and the Florida Telemarketing Act. The ECAC contends that portions of SB 1120 imposes obligations more restrictive than the TCPA Regulations and impose additional prohibitions on calls and the use of dialing equipment that are legal under federal law. The Petition relies upon a 2003 Commission TCPA order which states that “that any state regulation of interstate telemarketing calls that differs from our rules almost certainly would conflict with and frustrate the federal scheme and almost certainly would be preempted.”

• Perdue for Senate, Inc. – Petition for Declaratory Ruling

On July 2, 2021 Purdue for Senate, Inc. (Purdue for Senate) filed a Petition for Declaratory Ruling, asking the FCC to confirm that the Telephone Consumer Protection Act (TCPA) does not regulate ringless voicemail technology (RVM). Specifically, Purdue for Senate wants the FCC to rule that “the delivery of a voice message directly to a voicemail box through RVM technology does not constitute a ‘call’ subject to prohibitions on the use of an automatic telephone dialing system (“ATDS”) or an artificial or prerecorded voice under Section 227(b)(1)(A)(iii) of the TCPA or Section 64.1200(a)(1)(iii) of the FCC’s rules.” In the lead up to the January 2021 Senate runoff elections in Georgia, Purdue for Senate employed vendors that used RVM technology to deliver voice messages directly to potential voters’ voice mailboxes. According to Purdue for Senate, these RVM transmissions fall outside of the scope of the TCPA and other FCC rules because, not only are they not “calls,” they are also not transmitted via a wireless network, and the technology does not bill the recipients of the messages. Purdue for Senate claims that RVM technology is a “beneficial alternative” to robocalls, in that it allows non-profit organizations to relay important information without disrupting the lives of message recipients and/or adding charges to their bills.

This is the third petition to be presented to the FCC involving ringless voicemail technology. Two prior petitions relating to ringless voicemail were filed and subsequently withdrawn by the petitioners prior to a Commission decision.

• None

• None

Cases of Note

The District of Arizona has held that common ownership of an agent and principal may not be enough to establish an agency relationship nor, therefore, vicarious TCPA liability. Rather, the plaintiff must plead specific facts showing that the purported agent controlled or directed the calls that plaintiff alleges violated the TCPA. It further held that an offer to purchase property—rather than an offer to sell a product or services—does not qualify as a “telephone solicitation” under § 227(c) of the TCPA.

In Jance v. Homerun Offer LLC, Plaintiff filed suit against Homerun Offer alleging that he received 29 calls from the company making “a generic and cursory inquiry” into purchasing his house in violation of the TCPA. After conducting his own online research into the state corporate records, he learned of a second company, All Star Investments, owned by Homerun Offer’s registered agent, President, and CEO, that had made six property purchases between October 2019 and June 2020. Plaintiff hypothesized that the property purchases made by All Star Investments came about as Homerun Offer’s telemarketing efforts, and named both in his TCPA complaint.

All Star Investments moved to dismiss, arguing that Plaintiff failed to plausibly allege that it could be held vicariously liable for Homerun Offer’s calls. Defendants also both moved to dismiss Plaintiff’s § 227(c) claim prohibiting continued “telephone solicitation” after an individual requests to be put on a company’s internal do-not-call list, arguing that the calls fell outside the statutory definition of “telephone solicitation.” As to both, the Court agreed.

The Court held that Plaintiff failed to make a prima facie showing that All Star Investments had the right to substantially control Homerun Offer, and that Homerun Offer acted as All Star Investments’ agent. “The simple fact that the same individual . . . is the President and CEO of both [Defendants] as well as the parent company for both the agent and principle” was “[in]sufficient to show that All Star Investments controlled or directed Homerun Offer’s phone calls to Plaintiff.” With no agency relationship plausibly alleged in the complaint, the Court dismissed the claims against All Star Investment.

Separately, the Court dismissed Plaintiff’s claim for damages under § 227(c) of the TCPA, which prohibits an entity from continuing to initiate “telephone solicitation” after an individual requests to be put on a do-not-call list. Referencing the statutory definitions of “telephone solicitation” and “telemarketing,” the Court noted that the TCPA protects individuals from calls placed with the “purpose of encouraging the purchase of . . . property, goods, or services” by the recipient. Because the calls in question constituted an offer to purchase (rather than an offer to sell), the Court found the Complaint failed to state a claim under § 227(c) and dismissed those claims.

Not all Plaintiff’s claims were dismissed. His claims under § 227(b), which prohibits the use of an “automatic telephone dialing system” (ATDS) without the recipient’s consent survived. Noting that whether a defendant has used an ATDS is “often a fact exclusively within the defendants’ possession,” the Court found that Plaintiff’s allegations—that he had no business relationship with Defendants nor provided them with his contact information, that the caller’s numbers were attributed to a VoIP and had misleading caller ID information, that there was a brief pause before the caller began speaking on certain calls, and that the calls were generically formatted and scripted—were sufficient to plausibly allege use of an ATDS.

Jance v. Homerun Offer LLC, No. CV-20-00482-TUC-JGZ, 2021 WL 3270318 (D. Ariz. July 30, 2021)

Court Rejects Plaintiff’s Argument to Expand ATDS Definition Based on Duguid Footnote

In Hufnus v. DoNotPay, Inc., the Northern District of California granted Defendant company’s motion to dismiss after Plaintiff alleged that he had been contacted in a manner that violated the TCPA. In the June 24, 2021 order, the court found that Plaintiff’s interpretation of footnote 7 of Facebook, Inc. v. Duguid, 141 S. Ct. 1163, 1173 (2021) conflicted with Duguid’s “holding and rationale,” since Defendant in this case did not “dial random or sequential blocks of telephone numbers,” but instead used numbers provided by consumers during the registration process.

The dialing system that Defendant “used to contact [Plaintiff] merely processe[d] phone numbers supplied by consumers while signing up for [Defendant’s] services.” Plaintiff’s complaint alleged that Defendant’s dialing system stored the telephone numbers “in a random and/or sequential way; uses a random and/or sequential generator to pull from the list of numbers to send targeted text messages; and uses a random and/or sequential generator to determine the sequence in which to send messages.” Specifically, Plaintiff relied on footnote 7 in Duguid, which states that “an autodialer might use a random number generator to determine the order in which to pick phone numbers from a preproduced list. It would then store those numbers to be dialed at a later time.” Plaintiff argued that footnote 7 expanded the definition of an ATDS to include Defendant’s dialing system.

The court disagreed, stating “the [Supreme] Court employed the quoted line to explain how an autodialer might both ‘store’ and ‘produce’ randomly or sequentially generated phone numbers[.]” The court looked to the amicus curiae brief cited in footnote 7, which “makes clear that the ‘preproduced list’ of phone numbers referenced in the footnote was itself created through a random or sequential number generator.” The list of numbers used by the Defendant however, were “obtained in a non-random way (specifically, from consumers who provide them).”

Thus, because the platform solely used phone numbers that had been supplied by consumers, “and not phone numbers identified in a random or sequential fashion,” the court found that Defendant’s platform did “not qualify as an autodialer under the TCPA.” The court therefore dismissed Plaintiff’s complaint with prejudice.

Hufnus v. DoNotPay, Inc., No. 20-CV-08701-VC, 2021 WL 2585488 (N.D. Cal. June 24, 2021).

Court Finds Standing Sufficient But Dismisses TCPA Action For Insufficient Facts Alleged

In Camunas v. National Republican Senatorial Committee, the Eastern District of Pennsylvania dismissed a TCPA case for failure to adequately plead sufficient facts showing that an ATDS was used to send the text messages at issue.

Plaintiff alleged that he received “at least six messages” from a political organization, and that the messages were “generic and obviously pre-written.” The complaint further alleged that Defendant’s website “states that its opt-in messaging program communicates using ‘recurring autodialed marketing messages.’” Defendant moved to dismiss the complaint for lack of subject matter jurisdiction, arguing that Plaintiff failed to plead an injury-in-fact, and for failure to state a claim.

Defendant challenged the Plaintiff’s standing to assert a claim based on a handful of text messages. In denying Defendant’s motion to dismiss for lack of subject matter jurisdiction, the court held that Plaintiff “plausibly alleges he suffered an injury” and “also plausibly alleges that the injury is fairly traceable to [Defendant’s] conduct and that a favorable judicial decision would redress the alleged injury.” On this point, Defendant argued against Plaintiff’s position that the six messages should be sufficient for the injury-in-fact standing requirement. Defendant sought “to distinguish [Susinno v. Work Out World Inc., 862 F.3d 346 (3d Cir. 2017)], from the instant action by arguing that Susinno ‘involved a phone call and a one-minute prerecorded voicemail – not a small number of text messages’ and still ‘required the plaintiff actually assert and plead an injury – such as nuisance and invasion privacy.’” The court found that in this case, Plaintiff had similarly alleged that “he found [Defendant’s] unsolicited communication ‘annoying, disruptive, frustrating and an invasion of his privacy.’” Thus, the court found that it had subject matter jurisdiction over the claim.

On the 12(b)(6) motion to dismiss for failure to state a claim, the court held that Plaintiff had not plausibly alleged that Defendant “used an ATDS to send the messages at issue.” The court found that the complaint had not identified what was contained in the text messages at issue, had not identified “the phone number from which the messages were sent,” and had failed to “indicate whether that number was a short code.” The court noted that “[i]n cases involving text messages,” courts “‘have considered the nature of the message, the length of the sending number, the number of messages, and the relationship between the parties.’” Specifically, the court pointed out that “several courts have concluded that a ‘short code’ number supports an inference of ATDS use.” As such, Plaintiff had had not alleged sufficient facts “to ‘nudge’ his claim ‘across the line from conceivable to plausible.’”

Ultimately, the court denied Defendant’s motion to dismiss for lack of subject matter jurisdiction, but granted the motion to dismiss for failure to state a claim, dismissing the complaint without prejudice.

Camunas v. National Republican Senatorial Committee, No. 21-1005, 2021 WL 2144671 (E.D. Pa. May 26, 2021).

Subscribe to the TCPA Tracker here.

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Under the existing Florida Do Not Call Act, callers are prohibited from making telephonic sales calls using “an automated system for the selection or dialing of telephone numbers” unless (i) the call is in response to a consumer-initiated call, (ii) the numbers are unlisted or have been scrubbed against the state Do Not Call list, or (iii) the calls relate to goods or services previously ordered or purchased. This Act does not include exemptions from the definition of “telephonic sales calls.” The Florida Telemarketing Act determines licensure, call timing, identification, and recordkeeping requirements, among others, and includes a number of exemptions.

Changes to the Florida Do Not Call Act

Significantly, CS/SB 1120 adds a private cause of action to the Florida Do Not Call Act, permitting aggrieved consumers to recover the greater of actual damages or $500, or treble damages for any willful or knowing violations. In addition, the bill now requires “prior express written consent” before making “telephonic sales calls” via phone, text, or voicemail using an “automated system for the selection or dialing of telephone numbers” or a prerecorded message. The bill defines the term “prior express written consent” similar to the TCPA, including requiring an electronic signature and informing consumers that consent is not required to purchase goods or services. The bill deletes the existing call exemptions and creates a rebuttable presumption that any call made to a Florida area code is a call made to a Florida resident.

CS/SB 1120 also broadens the scope of dialer technology that is subject to the law, as compared with the TCPA. While the proposed amendments to the Florida Do Not Call Act do not separately define “autodialer,” relevant provisions regarding consent and call requirements refer to “automated system[s] for the selection or dialing of telephone numbers.” This reference is broader than the TCPA’s definition of “automatic telephone dialing system,” (“ATDS”) which the Supreme Court recently determined only encompasses devices that use a random or sequential number generator to either store or produce a telephone number. It’s possible, therefore, for a dialer to be subject to the Florida law while not technically constituting an ATDS under the TCPA.

Changes to the Florida Telemarketing Act

CS/SB 1120 also makes other noteworthy changes to the Florida Telemarketing Act, including:

• Changing the permissible call times from 8 AM–9 PM to 8 AM–8 PM;
• Prohibiting more than three “commercial telephone solicitation phone calls” within 24 hours about the same matter, regardless of the number used to make the call; and
• Prohibiting the use of technology to deliberately conceal the identity of the caller, punishable as a second-degree misdemeanor.

The bill is currently enrolled, though it hasn’t been presented to the Governor. Because the Florida legislative session ended on April 30, the Governor will have 15 days after receipt to take action on the bill. If he signs the bill, or fails to take action, then the bill will become law and go into effect on July 1, 2021. If he vetoes the bill, the Florida legislature can override the veto with a two-thirds vote in each house. Both houses unanimously voted to approve the bill, so they would likely override a veto and the bill would still go into effect on July 1, 2021.

Given the above changes, risk mitigation strategies include having appropriate consent processes in place. If you have any questions about how these changes may affect your business, please reach out to Alysa Hutnik. For more telemarketing updates, subscribe to our blog.

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Subscribe here to Kelley Drye’s Ad Law Access blog and here for our Ad Law News and Views newsletter. Visit the Advertising and Privacy Law Resource Center for update information on key legal topics relevant to advertising and marketing, privacy, data security, and consumer product safety and labeling.

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At one time, insurance policies did not say whether they provided coverage for claims brought under the TCPA. When the statute was passed in 1991, many policyholders were able to secure coverage for TCPA claims under the “personal and advertising injury” portions of their general liability insurance policies, which typically cover any "oral or written publication that violates a person's right to privacy." With the explosion of TCPA lawsuits in recent years, however, insurers have looked to reduce their own exposure by adding exclusions to their policies that expressly bar coverage for TCPA claims. At the same time, many carriers have started offering affirmative coverage for TCPA liability. Policyholders usually must pay extra for this, however, and the coverage often comes with reduced sublimits of liability or other restrictions on coverage.

But even when a policy has an express TCPA exclusion, an insurer still might have to defend its insured in a lawsuit that asserts TCPA claims because of a general principle of insurance law recognized by courts around the country: if a lawsuit asserts multiple claims against an insured, and at least one of those claims is covered by the policy, the insurer must defend the entire lawsuit – even if the other claims are expressly excluded from coverage. Thus, an insurer whose policy excludes TCPA claims might have to defend a TCPA lawsuit if the plaintiff also includes a false advertising or defamation claim, both of which are expressly covered.

The Seventh Circuit chipped away further at this policyholder-friendly rule in Mesa Labs. The plaintiff in that case, Mesa, had been sued in an underlying class action lawsuit brought by a dentist who claimed that Mesa sent him unsolicited fax advertisements in violation of the TCPA and the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA). The dentist plaintiff also asserted claims for common law conversion, nuisance, and trespass to chattels under the theory that, by sending the faxes, Mesa was appropriating the recipients’ fax equipment, paper, ink and toner. Mesa looked to its insurance carrier, Federal Insurance, to pay for the defense of the lawsuit. Federal denied coverage, pointing to a policy exclusion that barred coverage for claims “arising out of” any actual or alleged violation of the TCPA or “any similar regulatory or statutory law.” Mesa settled the class action lawsuit and then filed suit against Federal seeking to recoup the costs of the defense and settlement.

At issue on appeal was whether the presence of the common law claims triggered Federal’s obligation to defend the entire lawsuit, or whether those claims, like the TCPA and ICFA claims, were barred by the policy’s TCPA exclusion. Applying Illinois law, the Seventh Circuit held that, because the conduct supporting the common law claims – the sending of unsolicited faxes – was the same conduct supporting the TCPA and ICFA claims, the common law claims “arose out of” alleged violations of the TCPA and the ICFA, and therefore were excluded from coverage.

Advertisers who engage in telemarketing or other forms of digital marketing should be aware that insurance coverage for TCPA claims is available, but limited. Policyholders should seek out policies with express grants of TCPA coverage and not rely on older “silent” policy forms that may prove to have little coverage for TCPA claims. Kelley Drye’s Insurance Recovery Group is closely following developments in TCPA insurance coverage, and will follow up with future notes and decisions of interest.

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Subscribe here to Kelley Drye’s Ad Law Access blog and here for our Ad Law News and Views newsletter. Visit the Advertising and Privacy Law Resource Center for update information on key legal topics relevant to advertising and marketing, privacy, data security, and consumer product safety and labeling.

Kelley Drye attorneys and industry experts provide timely insights on legal and regulatory issues that impact your business. Our thought leaders keep you updated through advisories and articles, blogs, newsletters, podcasts and resource centers. Sign up here to receive our email communications tailored to your interests.

Follow us on LinkedIn and Twitter for the latest updates.

Our preview of the Supreme Court’s consideration of Duguid can be found here and our analysis of the oral argument can be found here. The Court’s decision is discussed below, and its opinion can be found here.

Background

Plaintiff Noah Duguid alleged that defendant Facebook had used an ATDS without the requisite consent to contact him via text message when its systems used an automated response protocol to alert a customer-provided number of an access attempt. Mr. Duguid alleged that he did not have a Facebook account and never provided consent for Facebook to send him text messages. In 2018, the Northern District of California dismissed Duguid’s TCPA claim against Facebook because it held that he had failed to properly allege the use of an ATDS where the complaint’s allegations “strongly suggested direct targeting rather than random or sequential dialing.” In 2019, the Ninth Circuit reversed the lower court’s decision. It reasoned that Duguid had sufficiently pled the use of an ATDS by alleging Facebook’s equipment “had the capacity to store numbers to be called and to dial such numbers automatically.” The Ninth Circuit thus held that any device or system that could store telephone numbers was an ATDS restricted by the TCPA. Facebook appealed this decision to the Supreme Court.

The TCPA defines an ATDS as equipment that has the capacity “(A) to store or produce telephone numbers to be called, using a random sequential number generator; and (B) to dial such numbers.” The Supreme Court took up the following question: “Whether the definition of ATDS in the TCPA encompasses any device that can ‘store’ and ‘automatically dial’” telephone numbers, even if the device does not ‘us[e] a random or sequential generator?’”

Although the Supreme Court’s Duguid decision stemmed out of a challenge to the Ninth Circuit’s ATDS definition, five other federal circuit courts of appeals had weighed in on that issue, creating a deep circuit split. The Second, Sixth, and Ninth Circuits had held that any predictive dialer or system that dials from a stored list should be considered an ATDS under the TCPA. On the other hand, the Third, Seventh, and Eleventh Circuits held that an ATDS must have the capacity to generate random or sequential telephone numbers to be subject to the restrictions of 47 U.S.C. § 227(b).

SCOTUS’s Decision: Supreme Court Reverses the Ninth Circuit

In an opinion authored by Justice Sotomayor, a unanimous Supreme Court held that to qualify as an ATDS subject to Section 227(b)’s restrictions, a device or system must use a random or sequential number generator in storing or in producing a telephone number. The Court found that because “the equipment in question must use a random or sequential number generator” to be an ATDS, “[t]his definition excludes equipment like Facebook’s login notification system, which does not use such technology.”

The Court started by confirming that a proper reading of the statutory text confirmed the narrower standard. The Court reasoned that under clear rules of grammar, the modifying phrase “using a random or sequential number generator” modifies both antecedent verbs: “store” and “produce.” Additionally, the Court reasoned that because the modifying phrase immediately follows the cohesive clause “store or produce telephone numbers to be called” it would be odd to apply the modifier to one part of the cohesive clause. Thus, the Supreme Court cut through the grammatical roadblock that had led some circuit courts into opining that equipment that could simply “store” telephone numbers could be considered to be a restricted ATDS.

Justice Sotomayor’s opinion also relied on the statutory context of the TCPA to support the Court’s holding. The Court noted that the TCPA’s ATDS restrictions “target a unique type of telemarketing equipment that risks dialing emergency lines randomly or tying up all the sequentially numbered lines at a single entity.” Congress intended to address a very nuanced problem; therefore, expanding the definition of an ATDS to encompass any equipment that merely stores telephone numbers would go beyond the intent of Congress, and “take a chainsaw to these nuanced problems when Congress meant to use a scalpel.” Additionally, the Court noted that such an expansive definition would encompass virtually all modern cellphones and expose ordinary cell phone owners to TCPA liability when they engage in speed dialing or send automated text message responses, which could not have been Congress’s intent.

As to public policy concerns, the Court refused to impose “broad privacy-protection goals” onto the statute’s narrow definition of ATDS, noting: “[t]hat Congress was broadly concerned about intrusive telemarketing practices, however, does not mean it adopted a broad autodialer definition.” The Court noted that the TCPA would continue to restrict artificial and prerecorded voice calls, regardless of the narrow reading of ATDS, and that fears of a “torrent” of “robocalls” are thus overstated. In the end, as Judge Sotomayor explained, “Duguid’s quarrel is with Congress, which did not define an autodialer as malleably as he would have liked.”

In a short concurrence, Justice Alito agreed with the Court’s ruling, but wrote separately to take issue with the main opinion’s reliance on a “set” grammar rule. He advised that the canons of statutory interpretation are meant to be used as tools to help identify the way in which “a reasonable reader” would have understood the text of a statute at the time it was issued. The other justices dealt with Justice Alito’s concurrence in a footnote, and reminded lower courts to be methodical when interpreting statutory text.

Impact

There are hundreds of litigations and arbitrations pending around the country dealing with claims of illegal use of an ATDS, and dozens of high-profile class action cases have been stayed pending the Supreme Court’s decision in Duguid. The Court’s decision will alter the course of current and future cases as courts and litigants now have a uniform definition of an ATDS when assessing ATDS-based claims brought under Section 227(b) of the TCPA. Additionally, Duguid has provided guidance for companies that wish to directly reach out to current and prospective customers, by settling the question of what types of devices and systems will be considered an ATDS so as to require specific prior consents for their use. The decision has already prompted calls for a legislative response to the Court’s more narrow interpretation of ATDS from lawmakers who want to “amend the [TCPA], fix the Court’s error, and protect consumers.”

The Court’s decision also moots much of the ATDS question remanded to the FCC in 2018 in ACA International v. FCC. Given that the Court has now interpreted the ATDS definition, the FCC will not be required to provide its own interpretation of the term. In addition, the Court undermines alternative formulations of the ATDS definition occasionally advanced by the FCC that inquire as to the ability to initiate a high volume of calls or texts in a short period of time. The Court’s statement that it does not “interpret the TCPA as requiring such a difficult line-drawing exercise around how much automation is enough” likely moots that line of inquiry. Finally, several pending petitions ask the FCC to create or modify exceptions to the ATDS restriction. Many of those petitions will have less practical impact going forward.

Prerecorded/artificial voice call claims and Do Not Call violation claims under the TCPA, however, were not the focus of the Court’s decision. Callers should remain vigilant about their communications practices and ensure that they have procedures in place to remain fully compliant with the TCPA.

If you have any questions, please contact our experienced TCPA team:

Lauri A. Mazzuchetti (973) 503-5910 [email protected]

Steven A. Augustino (202) 342-8612 [email protected]

Alysa Z. Hutnik (202) 342-8603 [email protected]

The new Supreme Court Term is underway and for the second straight Term, and second time in 2020, the Court will address a Telephone Consumer Protection Act (TCPA) question. On December 8, 2020, the Justices will hear argument in the case of Facebook v. Duguid, which is expected to resolve a widening Circuit split regarding the definition of an automatic telephone dialing system.

On the latest episode of the Ad Law Access podcast, Kelley Drye's litigation partner provides some background on where things stand with the TCPA, level-set on the current status of the ATDS definition, and lay out some of the potential implications for the Court’s ruling.

If you have any questions or concerns about the technology that you’re using or your particular telemarketing procedures, our team of compliance and litigation specialists would be happy to talk through your practices or campaign and offer practical feedback and evaluation of the potential risks on this quickly evolving topic.

For additional information, please visit:

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Recent News

On October 1, 2020 the FCC released a Notice of Proposed Rulemaking (NPRM) to seek input on proposed rules to codify previous exemptions to the TCPA’s consent requirements. Section 227(b) of the TCPA prohibits “any telephone call to any residential telephone line using an artificial or prerecorded voice to deliver a message without the prior express consent of the called party” unless the call meets the requirements of certain exemptions. The exemptions under review by the FCC include “(1) non-commercial calls to a residence; (2) commercial calls to a residence that do not constitute telemarketing; (3) tax-exempt nonprofit organization calls to a residence; (4) HIPAA-related calls to a residence; (5) package delivery-related calls to a wireless number; (6) financial-institution calls to a wireless number; (7) healthcare-related calls to a wireless number; (8) inmate calling service calls to a wireless number; and (9) cellular carrier calls to their own subscribers. Section 8 of the Pallone-Thune TRACED Act directed the FCC to examine these exemptions to ensure that they contain requirements addressing “(1) the classes of parties that may make such calls; (2) the classes of parties that may be called; and (3) the number of such calls that may be made to a particular called party.” To this end, the proposed measures include classifying parties as “informational callers” for callers only providing information, and “transactional callers” for callers trying to complete or confirm commercial transactions, in addition to limiting the number of calls that may be made during a period of time. Comments are due October 26, 2020, and reply comments are due November 3, 2020.

FCC Adopts New Rules to Combat Spoofed Robocalls

On October 1, 2020, the FCC released a Second Report and Order in its ongoing call authentication proceeding under the TRACED Act. In March, the FCC required originating and terminating voice service carriers to implement the STIR/SHAKEN call authentication framework in the IP portions of their networks by June 30, 2021. In the Second Report and Order, the FCC requires intermediate carriers also to implement the STIR/SHAKEN framework in their IP networks and to pass STIR/SHAKEN authentications to downstream carriers. The FCC extended the implementation deadline for small voice carriers (those with fewer than 100,000 subscriber lines) for two years, until June 30, 2023. Any carrier taking advantage of the extension must, however, implement a reasonable call mitigation program to reduce the origination of unlawful robocalls and must, by a date to be specified by the FCC, file a certification describing its call mitigation program. In addition, the Second Report and Order requires voice service carriers either to convert the non-IP portions of their networks to IP by June 30, 2021 or to be participating in industry efforts to develop and implement a call authentication framework for non-IP calls. Finally, implementing a requirement of the TRACED Act, the FCC prohibits voice service providers from imposing a line item fee on consumers to implement the STIR/SHAKEN framework.

FCC Proposes to Dismiss Old TCPA Preemption Petitions

On September 23, 2020 the Consumer and Governmental Affairs Bureau released a Public Notice, announcing plans to dismiss 10 pending petitions seeking preemption of state laws addressing unwanted robocalls and faxes. The petitions were filed between 2003 and 2005, and the relief requested may no longer be relevant due to regulatory changes that have occurred since their filing. The FCC will dismiss the petitions with prejudice unless petitioners file letters by November 20, 2020.

FCC Warns Robocall Scams May Undermine COVID-19 Contact Tracing Efforts

The FCC has warned consumers in the past against answering calls from unknown numbers in order to avoid falling victim to robocall scammers. During the September 25, 2020 Consumer Advisory Committee meeting, the CGB acknowledged that this advice may interfere with contact tracing efforts, as contact tracing calls will likely come from unknown numbers. Complicating matters, many recent scams explicitly refer to contact tracing in robocall messages. Some scammers even go so far as to spoof actual health department phone numbers. The FCC published an updated consumer guide and COVID-19 scam alert on their website to help consumers identify scams.

Anderson + Wanca File Application for Review of Ryerson Order

On October 5, 2020 Anderson + Wanca filed an Application for Review, asking the FCC to consider reversing the Ryerson Declaratory Ruling. According to Anderson + Wanca, “the Commission should reverse the Ryerson Bureau Order under Rule 1.115(b)(2) because its reasoning regarding ‘online fax services’ is in conflict with the statute, regulations, case precedent, and established Commission policy, and is based on erroneous factual findings.” More specifically, the Application questions whether the equipment referenced in the Ryerson decision as an online fax service has the requisite capacity to be a telephone fax machine. Anderson + Wanca also argue that the Amerifactors Declaratory Ruling, the decision cited as the primary reason for granting the Ryerson Petition, was based on a mistaken understanding of the TCPA guidelines and thus warrants Commission review.

FCC Petitions Tracker

Number of Petitions Pending

• 29 petitions pending
• 1 petition for reconsideration of the rules to implement the government debt collection exemption
• 1 application for review of the decision to deny a request for an exemption of the prior express consent requirement of the TCPA for “mortgage servicing calls”
• 1 request for reconsideration of the 10/14/16 waiver of the prior express written consent rule granted to 7 petitioners

• None

• None

• None

Cases of Note

In Creasy v. Charter Commc’ns, Inc., the Eastern District of Louisiana found that the Supreme Court’s decision in Barr v. Am. Ass’n of Political Consultants (“Barr”) rendered the entirety of 227(b)(1)(A)(iii) unconstitutional during the period from Congress's 2015 addition of the unconstitutional government-owed debt exception until its July 6, 2020 severance from the TCPA. Thus, the Court ruled that it lacked subject matter jurisdiction to hear claims alleging violations of the TCPA’s ATDS prohibition during that window of time.

In Barr, the Supreme Court held that the 2015 amendment adding an exception to the TCPA’s ATDS provision for calls made in connection with a government-owed debt created an impermissible content-based speech restriction. As a remedy, the Supreme Court excised the government-owed debt exception and left the (other constitutional) remainder of the TCPA intact.

In Creasy, the plaintiffs alleged that the defendant made 130 autodialed calls and texts without the necessary consent. None of the calls involved a government-owed debt. One hundred twenty-nine of the 130 were made during the time that the government-owed debt exception to the TCPA was operative.

The defendant moved to dismiss all claims as to the 129 calls arguing that the Court lacked subject matter jurisdiction because courts lack authority to enforce violations of unconstitutional laws. The Eastern District of Louisiana dismissed the 129 calls finding that the unconstitutional exception rendered the entire statute unconstitutional during that time period. Because the Supreme Court found the exception unconstitutional, the Court determined that it lacked subject matter jurisdiction to apply the law to the defendant’s conduct.

With respect to the lone remaining communication, the defendant unsuccessfully sought dismissal and the case will proceed. The Court rejected arguments that the defendant could not be held responsible for calls placed by its subsidiary and found the plaintiffs had met the standard for stating a valid claim. Thus, the motion to dismiss was granted-in-part and the claims as to the one post-Barr call will continue.

Creasy v. Charter Commc'ns, Inc., No. CV 20-1199, 2020 WL 5761117 (E.D. La. Sept. 28, 2020)

Court Dismisses Vague Text Claims For Lack Of Standing

In Clements v. Porch.com, Inc., the District of Alaska dismissed 17 plaintiffs’ TCPA claims based on a failure to allege proper standing. Plaintiffs alleged a total of 3,318 texts received, based solely on an approximation derived from multiplying the number of weeks during which each plaintiff received texts times an alleged average of 2 messages per week. The Court found that plaintiffs did not support those calculations with any specific allegations concerning specific text messages received by any specific plaintiff and produced only exemplar text messages. The Court found the Complaint lacked clear allegations that each plaintiff had received texts in violation of the statute. The Court further found that plaintiffs failed to properly allege which plaintiff(s) were pursuing Do Not Call claims under § 227(c)(5) since there were no allegations regarding any plaintiff’s number being listed on the National DO Not Call Registry. Thus, the Court held that plaintiffs’ assumptions were insufficient to establish an injury in fact and dismissed based on a lack of constitutional standing.

Clements v. Porch.com, Inc., No. 1:20-CV-00003-SLG, 2020 WL 5739591 (D. Alaska Sept. 24, 2020)

Court Dismisses Fraud Counterclaim Against TCPA Plaintiff

In Mey v. Castle Law Grp., the District of West Virginia granted plaintiff’s motion to dismiss fraud counterclaims against an alleged “serial” TCPA plaintiff because it found that the alleged basis for the counterclaim was actually behavior encouraged by the TCPA. Plaintiff’s complaint alleged that the defendants and/or their agents had called her using auto-dialers and pre-recorded messages selling debt relief services in violation of the TCPA. Four of the defendants counterclaimed for fraud asserting that the plaintiff voluntarily participated in a credit card qualification process in order to "trap the purported telemarketers into a lawsuit."

Plaintiff moved to dismiss arguing that her alleged conduct did not constitute fraud but was instead the type of investigation encouraged under the TCPA. The Court agreed. The Court relied heavily on a prior, similar District Court case holding that statutory damages in laws like the TCPA are “specifically designed to appeal to plaintiffs’ self-interest and direct that self-interest toward the public good” and “operate as bounties, increasing the incentives for private enforcement of the law.” Thus, the court dismissed the fraud counterclaim.

Mey v. Castle Law Grp., No. 5:19-CV-185, 2020 WL 5648326 (N.D.W. Va. Sept. 22, 2020)

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The TCPA prohibits telemarketing calls to be placed using an ATDS without the requisite level of prior consent. Thus, the definition of what technology qualifies as an ATDS is often a fundamental, threshold question upon which TCPA litigation turns. Prior to 2015, the FCC had offered various, sometimes vague, interpretations of the term. In 2015, the FCC offered an expansive definition, which was set aside in March 2018 in the ACA International decision. While the issue has been before the FCC on remand for over two years now, courts nevertheless engaged in their own analysis of the statute, resulting in a broadening Circuit split on how the law is interpreted and applied and divergent outcomes based on the court in which the case is filed. Now the Supreme Court is poised (potentially) to resolve that dispute.

DEFINITION OF AN ATDS

Since the March 2018 decision of the Court of Appeals for the D.C. Circuit in ACA International set aside the FCC’s overbroad and expansive definition of an ATDS, two distinct interpretations of an ATDS have emerged. In Marks v. Crunch San Diego, the Ninth Circuit held that any equipment that dials telephone numbers from a stored list qualifies as an ATDS under the TCPA. That expansive approach threatens to encompass ordinary smartphones on the market within the TCPA’s ambit. This approach is also employed by the Second Circuit. In contrast, the Third, Seventh, and Eleventh Circuits have opted for a narrower, more textually honest and logical interpretation, that requires a showing that equipment has the present capacity to generate numbers using randomly or sequentially and dial them. (Arguably, the D.C. Circuit’s decision also called for an interpretation closer to the Third, Seventh and Eleventh Circuit interpretations). District Courts in the remaining Circuits (as well as some where the Circuit Courts have spoken) have generally (but inconsistently) adhered to one of these two approaches. Some of our prior discussions of these issues can be found here and here.

FACEBOOK SEEKS AN END TO TCPA CONFUSION

In Facebook, Inc. v. Noah Duguid, et al, Case No. 19-511 (2020), plaintiff Noah Duguid alleges that defendant Facebook had contacted him via text messages without appropriate levels of consent using an ATDS, as that term is defined under the TCPA. Mr. Duguid is not a Facebook customer and alleges that he received repeated login notification text messages from Facebook. Plaintiff alleges that he never provided the company with his cellphone number, much less prior express written consent to be contacted by text. Plaintiff’s original complaint was filed in the Northern District of California in March 2015 and dismissed without prejudice for failure to properly allege that an ATDS was used to send the texts at issue. In his Amended Complaint, Duguid added factual allegations that Facebook used an ATDS by maintaining a database of numbers on its computer and transmitting text message alerts to selected numbers from its database using an automated protocol.

Facebook again moved to dismiss Duguid’s allegations arguing that the TCPA was unconstitutional and that Duguid failed to plead the use of an ATDS. On February 16, 2017, the District Court granted Facebook’s motion to dismiss, finding the ATDS allegations were insufficient. Because of that finding, the court never reached the constitutional question. The court reasoned that Duguid’s ATDS allegations “strongly suggested direct targeting rather than random or sequential dialing,” which did not indicate the use of an ATDS. Importantly, the District Court rendered its opinion before the Ninth Circuit’s interpretation of the ATDS definition in Marks v. Crunch San Diego in September 2018.

On June 13, 2019, the Ninth Circuit reversed the lower court’s dismissal. Applying the Marks standard, the Ninth Circuit reasoned that Duguid had sufficiently alleged that Facebook used an ATDS by alleging the equipment “had the capacity to store numbers to be called and to dial such numbers automatically.” The Ninth Circuit separately addressed Facebook’s constitutional challenge to the TCPA and agreed that, although the TCPA included content- and speaker-based restrictions on speech, the overall statute could be salvaged by severing what it saw as the most offensive aspect—the government debt exception.

ISSUES BEFORE THE COURT

Facebook appealed and in its petition to the Supreme Court presented both the constitutional challenge and definitional question for review.

On July 6, 2020, the Supreme Court upheld the constitutionality of the TCPA in William P. Barr et al. v. American Association of Political Consultants et al., Case No. 19-631 (2020), thus mooting the constitutional challenge in Facebook’s petition. Our analysis of that decision can be found here.

On July 9, 2020, three days after it released its decision in Barr, the Supreme Court granted certiorari on the following question: Whether the definition of ATDS in the TCPA encompasses any device that can “store” and “automatically dial” telephone numbers, even if the device does not “us[e] a random or sequential generator”?

CONCLUSION

The Supreme Court’s resolution of this circuit split has the potential to forever change business communications by making it more or less difficult for businesses to reach their customers. As noted, a threshold question in TCPA litigation is whether equipment used to originate a call or text is an ATDS. The D.C. Circuit, in remanding the FCC’s 2015 expansive definition, noted that definition’s “eye-popping sweep.” Just how far the 29-year-old TCPA’s definition should reach into modern dialing technology has been a central question in litigation since the D.C. Circuit remand. How the Supreme Court addresses this could affect the methods businesses use to provide notifications and reminders to customers as well as how they obtain new customer and collect debts.

In addition to resolving the question of an ATDS, the Supreme Court’s acceptance of Facebook’s petition has other implications. In the short term, companies and practitioners are likely to see stays across the robust and active TCPA docket as lower courts await direction on this core (often threshold) legal question from the Supreme Court. While the decision in ACA International returned the ATDS definition to the FCC for consideration, the Supreme Court’s grant also makes it less likely that the FCC will take any additional affirmative steps on the definition of an ATDS until the Facebook case is decided.

The Supreme Court’s next term opens on October 5, 2020, and oral argument will be scheduled for a date sometime thereafter. A decision can be expected to be published sometime between the argument and when the terms recesses in late June/July 2021.

The amendments take effect July 1, 2020, and address four topics: (1) the definition of a “telephone solicitation call,” (2) caller identification, (3) the private right of action, and (4) Attorney General enforcement.

1. Telephone Solicitation Call: The amendments clarify that the definition of a “telephone solicitation call” includes text messages, in addition to calls to landline and wireless numbers. Notably, the definition is drafted broadly. First, the Act will apply to calls and text messages to any number with a Virginia area code, regardless of whether that number belongs to a consumer or a business, potentially introducing another point of exposure for alleged do-not-call violations for B2B calls. Second, it will apply to numbers with non-Virginia area codes that are registered to a natural person who is a resident of Virginia. Identifying state of residence is already a difficult task, particularly if businesses do not collect address information, and relying on area code alone will no longer be sufficient once the amendments take effect.
2. Caller Identification: The amendments will expressly prohibit telephone solicitors from “engaging in any conduct that results in the display of false or misleading caller identification information.” While the Act will retain language that allows telephone solicitors to display the name and telephone number of the person or entity on whose behalf the call or text is being made, provided the telephone number displayed is that entity’s customer service number, these amendments introduce a new source of liability for businesses – particularly those that contract with third-party service providers to send text messages (often from short codes).
3. Private Right of Action: The amendments will significantly increase the damages individuals may recover for violation of the Act, including the new caller identification provisions, as well as the existing do-not-call and call abandonment provisions – from $500 per violation under the current law, to $500 for a first violation, $1,000 for a second violation, and $5,000 for each subsequent violation under the amendments. The increased liability is based on calls and texts received in violation, regardless of any intent or actual damages. A single call or text message constitutes a violation, so these payments can add up quickly, particularly if Virginia state law claims are allowed in addition to claims under the Telephone Consumer Protection Act (which also provides for up to $500 per violative call or text message) for a single call or text message.
4. Attorney General Enforcement: The amendments will similarly increase the penalties that the Attorney General can seek on behalf of aggrieved individuals – from $500 per violation under the current law, to $500 for a first violation, $1,000 for a second violation, and $5,000 for each subsequent violation under the amendments. A court may also assess up to $5,000 in civil penalties for each willful violation of the Act (even if it is the first or second violation).

TCPA litigation has largely focused on the autodialer restriction over the past decade. In 2015, the Federal Communications Commission (“FCC”) adopted an expansive interpretation of the restriction, which the U.S. Court of Appeals vacated and remanded in 2018. While the industry has waited for the FCC to offer further guidance, entities making calls and sending texts have navigated an environment plagued by uncertainty. Several courts of appeals have adopted conflicting interpretations of the autodialer provision. Meanwhile, the FCC could offer its interpretation at any time, throwing the issue into further litigation in all probability. In this environment, the Supreme Court agreed to hear the constitutionality of one TCPA exemption in the Barr case. Many are hoping for a decision that goes beyond the 2015 amendment and offers definitive guidance on the autodialer provision’s scope. This post discusses what to expect – and what to watch for – in the Supreme Court’s oral argument this week.

Background

In Am. Ass’n of Political Consultants v. Sessions, 323 F. Supp. 3d 737 (E.D.N.C. 2018), a group of political and polling organizations who wished to use autodialer technology to contact potential voters, sued the Government challenging the constitutionality of the TCPA’s autodialer ban. The group argued that the autodialer ban is a content-based restriction on speech, which does not survive strict scrutiny under First Amendment jurisprudence. According to the plaintiffs, the autodialer restriction fails strict scrutiny’s narrow tailoring requirement because it allows the FCC to promulgate various exemptions based on the content of the call and the 2015 amendment exempts calls related to the collection of government debt. Therefore, the law is not narrowly tailored to advance the privacy interests of the TCPA. Additionally, Plaintiffs asserted that less restrictive means could advance the TCPA’s interests.

The district court disagreed with the Plaintiffs and found that the government debt collection exemption survived strict scrutiny because it is a narrow exception, which furthers the compelling interest of government debt collection. Additionally, the court declined to consider the constitutionality of the FCC’s exemptions because it reasoned that it was not the correct court to hear such challenges. Regarding Congressional delegation of authority to the FCC to create exemptions, the court reasoned that the delegation “does not substantively except any communications” and therefore “is not facially or inherently content-based.” Lastly, the court concluded that the supposed less restrictive means would not be as effective in achieving the purposes of the TCPA.

Plaintiffs appealed the decision to the Fourth Circuit. In Am. Ass'n of Political Consultants, Inc. v. Fed. Commc'ns Comm'n, 923 F.3d 159 (4th Cir. 2019), the Fourth Circuit held that the government debt exemption failed strict scrutiny due to under-inclusiveness. The Fourth Circuit concluded that the exemption is underinclusive because: (1) the exemption “subverts the privacy protections underlying the ban” by authorizing many intrusive calls, and (2) debt collection calls are “among the most intrusive, disruptive, and complained of phone calls.” However, instead of invalidating the entire TCPA, the court relied on a severance clause in the Communications Act of 1934 (which contains the TCPA) and severed the government debt collection exemption. The court reasoned that severance was appropriate because Congress explicitly intended the severance of constitutionally infirm portions of the Communications Act and the autodialer restriction had worked effectively for twenty-four years before Congress amended it to exempt government debt collection calls.

Consequently, on November 14, 2019, the Solicitor General petitioned the Supreme Court to review the Fourth Circuit’s decision to settle the question of the TCPA’s constitutionality and to provide clarity on the severance of unconstitutional portions of the statute. On January 10, 2020, the Supreme Court accepted the petition for review.

Previewing the Supreme Court Review

The Supreme Court accepted two questions regarding the TCPA:

1. Is the 2015 government debt collection exemption constitutional, and
2. Is the appropriate remedy to sever the provision from the TCPA?

On the first question, the Government argued that the government debt collection exemption is not content-based but relationship-based as it is dependent on the relationship between debtors (called parties) and their creditor (the Government). Therefore, it argued, the government debt collection exemption is actually subject to intermediate scrutiny, which it passes since it is a narrow exception, which applies to a few calls only and furthers the significant interest of protecting the public fisc. This comports with the autodialer restriction, which is a content-neutral time, place, and manner restriction. The American Association of Political Consultants (Respondents in the Supreme Court) asserted that the Fourth Circuit correctly found that the autodialer restriction as currently written is a content-based restriction, which fails strict scrutiny and renders the TCPA unconstitutional.

Remedy

As to the second question, Respondents argued that First Amendment jurisprudence mandates that courts should issue decisions that protect speech and not abridge it. Thus, Respondents argued, finding the TCPA to contain a content-based restriction on speech, the proper remedy should have been to strike down the restriction on speech, not to sever the “speech-promoting exception.” Respondents also argued that the autodialer restriction must be invalidated because the TCPA, even after the Fourth Circuit’s remedy, continues to be an unconstitutional restriction on speech. .

Amicus Curiae Positions

In addition to the arguments presented by the litigants, interested parties filed 17 amicus curiae briefs. On the one hand, supporting the government and the constitutionality of the exemption were many states, members of Congress, student loan servicing centers and several consumer interest groups. In the amicus brief submitted by the states, the states argued, among other things, that the robocall ban should be upheld because it prohibits highly intrusive robocalls regardless of content and therefore passes First Amendment scrutiny. In the amicus brief submitted by the members of Congress, they argued that the TCPA is a critical law that stops intrusions on Americans’ privacy, deters scams, and protects the integrity of the telephone as a means of communication. Consumer groups similarly argued that the TCPA protects government interests “of the highest order” (according to Public Citizen) and argued that invalidation would harm consumer privacy. The consumer interests generally argued that, even if the government debt collection provision fails to satisfy scrutiny, the remainder of the TCPA should survive.

Notably, while not supporting either party, consumer groups the National Consumer Law Center and Consumer Federation of America, joined by telecommunications carrier Verizon, argued that the government’s interest is compelling and argued in support of the TCPA’s restrictions on calling, particularly restrictions on unconsented calls to cellular phones.

On the other hand, supporting the position that the provision is unconstitutional were the U.S. Chamber of Commerce, debt collection companies, several business groups and several free speech groups. In its amicus brief, the Chamber of Commerce argued that the TCPA should be invalidated because the autodialer restriction has become a tremendous source of meritless litigation that FCC guidance has not addressed. Similarly, trade groups such as the Retail Energy Supply Association argued that the government debt collection exemption is not severable because Congress would not have adopted such broad restrictions on automated calls without the exemptions adopted in the statute. Debt collectors such as Portfolio Recovery Associates sounded a similar point, arguing that the TCPA’s “open ended delegation of authority” to the FCC to create exemptions renders the statutory scheme unconstitutional. The Retail Litigation Center, while ostensibly not taking a position on either issue, offered an extensive critique of the TCPA’s “real world effects” on communications with customers and urged the Court to “address this dysfunction” in its disposition of the case.

What to Watch For in Oral Argument

With this lineup of arguments, the Supreme Court will hear oral argument in a highly unusual setting. Due to the COVID-19 pandemic, the Supreme Court scheduled its first-ever arguments to be held via teleconference for this week, giving court-watchers an unprecedented opportunity to hear arguments live, rather than via audio files released after the argument. Due to the teleconferencing format, the Justices will ask questions in order of seniority, rather than the customary rapid-fire open questioning format. In earlier arguments this week, the approach permitted a more straightforward examination of the issues, with fewer interruptions in the litigant’s arguments.

The resolution of Barr could affect many stakeholders. A key question to watch will be the extent to which the Court entertains questions relating to severability of the government debt collection exemption and the broader TCPA critiques offered by various amicus parties. While the Supreme Court has ruled in several TCPA cases recently, thus far, it has addressed the issues narrowly or on grounds not exclusive to the TCPA. We will be watching to see if the Court may deviate from this approach in Barr and bring some clarity to the more contentious provisions of the TCPA.

The Warning Letters

The agencies identified the three VoIP gateway providers as the sources of the illegal calls through the efforts of the USTelecom Industry Traceback Group, a consortium of phone companies that help officials identify potentially unlawful calls. The phone companies used a process known as “traceback,” in which they share information to trace unlawful spoofed robocalls to their origination.

In the letters, the agencies reminded the companies that the COVID-19 scam robocalls are in fact illegal and directed them to cease transmitting the traffic immediately, as the calls have “the potential to inflict severe harm on consumers.” The letters warned the companies that if they did not stop transmitting the identified traffic within 48 hours, the FCC would authorize other U.S. voice providers to block all calls from the companies and take any other steps necessary to prevent transmission of the calls. The agencies also sent a separate letter to USTelecom advising the trade association that, if the VoIP providers do not block the traffic, the FCC will authorize other U.S. service providers to block all calls coming from that gateway and will take other actions as necessary to authorize U.S. service providers to block traffic from the originating entities. In addition, the FCC encouraged other service providers to take immediate action to block unlawful calls pursuant to existing legal authority.

This action is a significant – and significantly aggressive – new approach by the agencies. While both agencies have taken actions to prevent and deter unlawful robocalls, the threat to block traffic from the originating carrier is a new tactic in the fight against unlawful calls. Notably, it is not clear under what authority the FCC can or would order the blocking of all traffic from the subject VoIP gateway providers if they failed to block the allegedly unlawful robocalls. The letter does not cite any provision of the Communications Act that would authorize such blocking. Moreover, existing FCC orders relating to call blocking have authorized only limited call blocking practices that were optional for the carriers. Were the FCC to order such blocking (and to make it mandatory), it appears that such action would be the first of its kind by the agency.

Briefly, we will review the agencies’ recent history with anti-robocall activities.

The Educare Services Enforcement Action and Prior FTC Warning Letters

In the three letters to the VoIP gateway providers, the FCC and FTC reference the FTC’s recent enforcement action against VoIP provider Globex Telecom. This action relied upon provisions of the FTC’s Telemarketing Sales Rule (“TSR”), which addresses calls made for a telemarketing purpose. In December 2019, the FTC obtained a preliminary injunction against Educare Services and Globex Telecom Inc. for robocalling consumers to promote allegedly fraudulent credit card interest rate reduction services. The FTC complaint alleges that Globex played a key role in “assisting and facilitating” the illegal credit card interest rate reduction services Educare promoted by providing Educare with the means to call consumers via interconnected VoIP communication services and facilities. For a VoIP company to be liable under a TSR “assisting and facilitating” theory, the FTC must prove that the company “knew or consciously avoided knowing” the robocall campaigns violated the TSR.

A week before the joint letters, the FTC sent letters to nine VoIP service providers and other companies warning them that “assisting and facilitating” in the transmission of illegal COVID-19-related telemarketing or robocalls is unlawful. The agency also sent letters to nineteen VoIP service providers in January with a similar warning about all illegal robocalls.

FCC TRACED Act Implementation and the STIR/SHAKEN Mandate

Like the FTC, the FCC recently shifted its focus in robocall enforcement towards the originating carriers. On February 4, 2020, the FCC’s Enforcement Bureau sent letters to seven VoIP gateway service providers, notifying them that unlawful robocalls had been traced to their networks and asking for their assistance in tracking down the originators of the calls. Although no enforcement action was threatened at the time, the FCC also asked each provider to detail their anti-robocall efforts to the Commission.

More recently, the FCC took several steps in implementing the TRACED Act, which requires the FCC to initiate several near-term rulemakings and other actions aimed at addressing unlawful spoofing and robocalling operations. On March 27, the agency adopted a Report and Order and Further Notice of Proposed Rulemaking establishing rules for the registration of a single consortium to conduct private-led “traceback” efforts, which is expected to formalize the relationship with the USTelecom Industry Traceback Group. Additionally, on March 31, the FCC adopted a separate Report and Order and Further Notice of Proposed Rulemaking mandating that originating and terminating voice service providers implement the STIR/SHAKEN framework in the IP portions of their networks by June 30, 2021. STIR/SHAKEN—the technology framework behind the “traceback” process—allows providers to verify that the caller ID information transmitted with a particular call matches the caller’s number as the calls are passed from carrier to carrier. FCC Chairman Pai previously urged major providers to adopt STIR/SHAKEN technology voluntarily and warned that the voluntary approach would become a mandate if the providers did not move fast enough. Still to come are comments on a “know your customer” obligation for service providers and rules to deny access to numbering resources to originators of unlawful calls.

As we have previously noted, the TRACED Act also requires the implementation of an alternative call authentication framework in non-IP networks, extends the FCC’s statute of limitations for bringing some illegal robocall enforcement actions, and eliminates the requirement to give warnings before issuing certain filings.

Takeaways

These letters, coupled with the recent activity by the FTC and FCC to combat illegal robocalls, signal the agencies’ desire to cause a meaningful reduction in unlawful calling, and in particular, demonstrate a desire to prevent scammers from taking advantage of the COVID-19 crisis to carry out their deceptions. Both agencies can seek civil penalties and take other actions necessary to prevent the proliferation of these calls.

Importantly, the targets of agency action are not necessarily limited to the entities that place the unlawful calls. These federal actions are a good reminder for VoIP and other service providers to assess whether their customers’ practices may indicate unlawful use of VoIP or other services. With the warning letters, and now these blocking letters, the FCC and FTC increasingly are showing an openness to pursuing penalties under vicarious liability theories. If there are facts that support knowledge of the unlawful activity or “red flag” type practices (such as a customer being the target of multiple third party government subpoenas, among other facts), that’s a good indication that further steps by the VoIP provider may be warranted to mitigate the risk of facing an enforcement action by the FTC or FCC. If you have questions about how these enforcement trends and related risk factors are relevant to your business, please contact your Kelley Drye counsel.

For example, Massachusetts issued an emergency regulation that prohibits creditors from making unsolicited debt collection telephone calls to Massachusetts consumers for the next 90 days, unless the state of emergency ends before that time. The regulation also prohibits collectors from

• filing any new collection lawsuit;
• garnishing wages, earnings, properties or funds;
• repossessing vehicles;
• applying for or serving a capias warrant;
• visiting or threatening to visit the household of a debtor;
• visiting or threatening to visit the place of employment of a debtor;
• confronting or communicating in person with a debtor regarding the collection of a debt in any public place.

First-party collectors and debt collectors should consider the Massachusetts and Nevada initiatives before contacting consumers in those states, and continue to monitor whether other states follow suit with similar restrictions.

States of Emergency: Two states, New York and Louisiana, prohibit certain telemarketing calls during declared states of emergency.

• New York: The prohibition applies to any unsolicited telemarketing sales call to any person under a declared state of emergency. Calls made (1) in response to an express written or verbal request, or (2) in connection with an existing business relationship, are not “unsolicited” and are therefore permissible. Importantly, it is ambiguous as to whether this prohibition also covers business-to-business telemarketing calls. The provision applies to unsolicited telemarketing sales calls made to any person during a declared state of emergency. The statute defines “person” to include businesses, but the other telemarketing provisions in the statute are limited to business-to-consumer calls.
• Louisiana: The prohibition applies to all telemarketing calls to consumers, except those made (1) within six months of an express request, or (2) pursuant to an existing business relationship or a prior business relationship that has lapsed within six months.

These are difficult times, but we are happy to help, so please do not hesitate to reach out to us or to check out the Kelley Drye COVID-19 Resource Center.

Glasser represents a significant reduction in the scope of liability under the TCPA. Since 2003, due to an order by the Federal Communications Commission (“FCC”), the use of predictive dialing equipment has been sufficient to trigger the TCPA’s protections under the ATDS provisions of the statute. In ACA Int’l v. FCC, however, the D.C. Circuit vacated prior FCC guidance on this issue, which the Eleventh Circuit (along with other courts), held includes the FCC’s 2003 order. In reaching its conclusion, the Eleventh Circuit noted that the FCC had improperly sought to expand to the scope of the TCPA in order to capture more modern technology. “[T]he [FCC] had watched companies switch from using machines that dialed a high volume of randomly or sequentially generated numbers to using ‘predictive dialers’ that called a list of pre-determined customers. . . .Watching this happen in real time, the [FCC] tried to use a broad ‘reading of the legislative history’ and an all-encompassing view of the law’s purpose to expand the statute’s coverage and fill this gap.”

Even under Glasser’s interpretation of the statute, an important limitation on the use of “automated telephone equipment” remains, however, because such equipment must connect customers with a “human representative” or obtain the requisite consent to place calls using an “artificial or prerecorded voice” to avoid liability under the TCPA. In Glasser, where the record demonstrated that one of the defendants had made calls using an “an artificial or prerecorded voice,” the Eleventh Circuit held that this conduct provided an “independent basis” for liability under the TCPA and affirmed summary judgment in plaintiff’s favor with respect to those calls.

In addition, it is important to keep in mind that while the Eleventh Circuit’s decision provides strong support to limit the scope of liability under the TCPA, the Ninth Circuit has held that dialing numbers from a stored list “automatically” will trigger the TCPA’s protections. In addition, there is uncertainty in many other jurisdictions as to the type of technology that will qualify as an ATDS and the FCC still has not issued its order on remand following the D.C. Circuit’s ruling in ACA Int’l. See www.adlawaccess.com/2019/03/articles/taking-stock-of-the-tcpa-in-2019-what-is-an-autodialer/. Further, it remains to be seen whether the Supreme Court will take up the issue of the appropriate definition of ATDS presented by the appeal in Duguid v. Facebook, Inc., in addition to the constitutional challenge it has already accepted in Barr v. American Association of Political Consultants, Inc. on January 10, 2020.

For additional information see the Ad Law Access blog posts:

• Taking Stock of the TCPA in 2019: What is an “Autodialer”?
• FCC Reaffirms Potential TCPA Liability for Text Message Platforms

For a deeper focus on TCPA-related issues at the FCC, listen to the “Inside the TCPA” series on Kelley Drye Full Spectrum.

The Ad Law Access podcast is available now through Apple Podcasts, Spotify, Google Podcasts, SoundCloud, and other podcast services.