TCPA ruling should provide businesses with more confidence

The U.S. Court of Appeals for the D.C. Circuit recently issued its mandate to the Federal Communication Commission making the ACA International v. FCC, 885 F.3d 687 (D.C. Cir. May 8, 2018) [ruling attached below], decision regarding the scope of the Telephone Consumer Protection Act final and effective.

The ruling means companies striving to provide a personalized and interactive customer experience can more confidently implement reasonable/careful procedures with customers who opted in to receive telephone communications. Companies also can proceed with less fear that a single unintended (or unknown) wrong act may result in ruinous liability under the TCPA.

While limited, the ACA Int'l ruling addressed the main TCPA "traps" many companies fall into when communicating with customers about their health, insurance, transactions, purchases, accounts and other expected and relevant issues. In particular, retailers and health care companies who develop loyal customer bases through affirmative and voluntary outreach can now more reasonably establish protocols for collecting phone numbers, transmitting content via telephone systems, receiving and processing opt-outs, and communicating about a customer's specific circumstances.

Definition of an ATDS

Liability under one main section of the TCPA requires the use of an "automatic telephone dialing system" to place calls or send text messages. The TCPA defines an ATDS as equipment with the "capacity" to store or produce phone numbers to be called, using a random or sequential number generator to dial the numbers.

While the TCPA does not define "capacity," a 2015 declaratory ruling by the FCC broadly interpreted the term as including both a dialer's "current" and "future" capacity. This meant if equipment could be modified to dial in an automated way -- for instance, by adding software not currently owned by the calling party -- the system qualified as an ATDS.

Critically, the D.C. Circuit held the FCC's expansive interpretation of "capacity" was "utterly unreasonable" and offered "no meaningful guidance," thus leaving companies in a "significant fog of uncertainty" as to whether their equipment was as an autodialer.

The court also rejected the FCC's explanation of what precise functions an autodialer must have the "capacity" to perform. Unfortunately, the court did not supply an alternative interpretation -- or explain which devices would qualify as an ATDS. At best, the court identified some possible considerations, including: (i) the effort required to modify equipment to function as an autodialer; (ii) how simple or complex this modification would be; and (iii) how much "human intervention" was required to dial numbers.

Ultimately, the D.C. Circuit handed the responsibility back to the FCC to define an ATDS. This may be good news for businesses. FCC Chairman Ajit Pai has gone on record to say the definition of an ATDS should be limited to equipment's "present" -- not potential -- capacity. If the full FCC follows suit, this could limit exposure for retailers and health care providers who make calls or send texts as a result of a customer/patient inquiry or visit. In addition, a focus on the "human intervention" element may prove a more attractive defense, whereby courts would not have to analyze the more technological issue of a dialer's "future" capacity to autodial.

Until a replacement ATDS definition is crafted, retail and health care defendants can still seek to dismiss TCPA claims where the communication was made with sufficient human intervention -- i.e., triggered by conduct or occurrence specific to the customer plaintiff -- thus arguing that plaintiffs have failed to allege the use of an ATDS, and/or ask for a stay pending guidance from the FCC as to whether the system at issue would qualify as an ATDS even if it did not have the then-current capacity to autodial.

Reassigned Numbers

In its 2015 declaratory ruling, the FCC attempted to make clear that parties are liable for making calls to reassigned wireless numbers. Rejecting arguments that the "called party," as that term is used in the statute, means the "intended recipient" of the call, the FCC ruled the "called party" is "the [current] subscriber, i.e., the consumer assigned the telephone number dialed and billed for the call, or the non-subscriber customary user of a telephone number included in a family or business calling plan."

The implications of this rule were far-reaching; given the frequency with which cellular phone numbers are recycled, a business could dial a phone number, believing it belonged to a customer who had provided consent to be called, when in fact the number had been transferred to an individual who had not provided consent to be called. Indeed, some enterprising plaintiffs went out of their way to acquire dozens recycled phone numbers for the sole purpose of generating lawsuits. In its ruling, the FCC permitted callers a free pass; the first call to a reassigned number would be exempt from liability, provided the caller could show that it reasonably believed it had consent to call and did not have actual or constructive knowledge of reassignment. This was of little consolation to callers, who would not learn of the reassignment until several calls later.

The D.C. Circuit set aside the FCC's treatment of reassigned numbers in part, but also affirmed it in part. First, the court agreed the term "called party" meant the subscriber of the called number, i.e., the person actually reached and not the person who the caller expected to reach. On the other hand, the court struck down the FCC's one-time safe harbor for calls to reassigned numbers. The court found the rule to be arbitrary, noting that the FCC "gave no explanation of why reasonable-reliance considerations would support limiting the safe harbor to just one call or message." Rather than revise the FCC's one-call safe harbor, the court vacated the rule altogether.

Help may be on the way for reassigned number calls. The D.C. Circuit took note of the fact the FCC is working on technical solutions to the reassigned number problem. This includes working with service providers to create a single, FCC-designated database of reassigned numbers. The D.C. Circuit seemingly endorsed this approach, opining it would have "greater potential to give full effect to the [FCC's] principle of reasonable reliance." For the time being, callers may attempt to assert, more generally, a good faith and reasonable reliance defense.

Revocation of Consent

The D.C. Circuit upheld the portion of the 2015 Declaratory Ruling that found "'a called party may revoke consent at any time and through any reasonable means' -- whether orally or in writing -- 'that clearly expresses a desire not to receive further messages.'"

In affirming the FCC's approach, the court explained callers are not required to "adopt (opt-out) systems that would entail 'undue burdens' or would be 'overly burdensome to implement.'"

To avoid liability, the court advised callers make "available clearly-defined and easy-to-use opt-out methods." And that if called parties "are afforded such options, any effort to sidestep the available methods in favor of idiosyncratic or imaginative revocation requests might well be seen as unreasonable." Finally, the court opined that while the 2015 declaratory ruling precludes callers from imposing unilateral revocation rules, it does not limit contracting parties from mutually agreeing on revocation procedures.

Accordingly, retail and health care providers should consider adding terms and conditions to their customer-facing agreements addressing revocation methods. These conditions should include TCPA disclosures (regarding the use of an autodialer, and the scope of consent) as well as a "safe harbor" period of time for the entity -- and any third-party vendors -- to process an opt-out request. If a text message campaign is involved, companies should offer traditional opt-out options like "STOP" "CANCEL" "DELETE" "DO NOT CALL" and "DO NOT CONTACT," in addition to any industry-specific terms. Lastly, a policy for directing opt-out customer requests received via email/phone to dedicated customer service numbers can help "institutionalize" the practice.

Health Care Exemption

In its 2015 declaratory ruling, the FCC granted limited exemptions for health care calls and texts to cellphones. Specifically, the FCC granted an exemption for certain calls "for which there is exigency and that have a health care treatment purpose," provided the calls met certain technical and content requirements, including that the messages be strictly limited in purpose to eight exempted types of messages (such as appointment reminders or prescription notifications) and do not include "telemarketing, solicitation, or advertising content, or which include accounting, billing, debt-collection, or other financial content." The FCC declined to extend this exemption to all calls regulated by the Health Insurance Portability and Accountability Act (HIPAA), reasoning there was no need to exempt health care calls regarding account communications and payment notifications. Rite Aid challenged the scope of the FCC's exemption on the grounds that it conflicted with HIPAA and was arbitrary because, among other things, the FCC had previously provided for such calls to landlines.

The D.C. Circuit affirmed, holding HIPAA and the TCPA do not conflict with each other and, instead, provide "separate protections." The court found the FCC's exemption was not arbitrary, noting the intrusive nature of calls to cellphones warranted limits on the exemption.

Notably, the D.C. Circuit's ruling did not extend to another, prior FCC exception, in which the FCC stated the "provision of a phone number to a health care provider constitutes prior express consent for health care calls subject to HIPAA by a HIPAA-covered entity and business associates acting on its behalf, as defined by HIPAA, if the covered entities and business associates are making calls within the scope of the consent given, and absent instructions to the contrary." Multiple courts have found prescription notifications and flu shot reminders to be subject to the health care exception to telemarketing, for example. Thus, health care providers whose communications do not fit within the rigid requirements of the health care exemption may still be able to avail themselves of this exception.

Conclusion

It is possible the FCC may go back to the drawing board and interpret the D.C. Circuit's mandate differently than the defense bar and courts that take up these issues. Indeed, in response to the ruling, a group of Democratic senators sent a letter to the FCC on April 18, 2018, asking the FCC to: (a) agree the "definition of automatic telephone dialing systems (auto dialers)" means "technologies that can be used to rapidly call and text large groups of consumers;" (b) to rule that callers cannot limit methods by which consumers can revoke consent; and (c) to "maintain aggressive protections restricting unwanted calls and texts to reassigned numbers." The FCC has not yet responded to the letter. In addition, a coalition of trade groups recently petitioned the FCC to adopt a narrow ATDS interpretation, which takes in to account the present, actual ability to store or produce numbers without human intervention.

For now, though, carefully-crafted policies and procedures for communicating with customers and processing opt-out requests may mean the difference between class-wide judgments in the millions (or billions) of dollars and one-off individual claims based on honest mistakes.