In some of its most comprehensive guidance published in years, resolving more than 20 petitions requesting clarification of the Telephone Consumer Protection Act (TCPA), the Federal Communications Commission (FCC) on July 10 published a 138-page Declaratory Ruling and Order. Given the opportunity to add much needed clarity and reason to the TCPA, which has spawned thousands of class action lawsuits over just the past few years, the FCC dialed a wrong number.

Acclaimed by the FCC’s majority as providing guidance that “will benefit consumers and good-faith callers alike by clarifying whether conduct violates the TCPA and by detailing simple guidance intended to assist callers in avoiding violations and consequent litigation,” the Order purports to “affirm the vital consumer protections of the TCPA while at the same time encouraging pro-consumer uses of modern calling technology.” Even a casual reading of the Order, however, reveals that the FCC has left businesses unnecessarily exposed to liability because of an unwillingness to apply common sense rules that recognize the realities of modern day communication. As stated bluntly by FCC Commissioner Michael O’Rielly in dissent: “Today’s order has been hailed as ‘protecting’ Americans from harassing robocalls and texts. That is a farce.” FCC Commissioner Ajit Pai commented in a separate dissent that “the Order twists the [TCPA’s] law’s words even further to target useful communications between legitimate businesses and their customers. This Order will make abuse of the TCPA much, much easier. And the primary beneficiaries will be trial lawyers, not the American public.”

In its simplest sense, the Order states the unremarkable and well-settled position that “if a caller uses an autodialer or prerecorded message to make a non-emergency call to a wireless phone, the caller must have obtained the consumer’s prior express consent or face liability for violating the TCPA. Prior express consent for these calls must be in writing if the message is telemarketing, but can be either oral or written if the call is informational.” The Order also confirms that text messages fall within the scope of the TCPA.

Moving beyond the surface, the Order addresses a number of important issues. This Legal Alert focuses on four issues that have given rise to liability under the TCPA and that, given the FCC’s failure to use common sense in its interpretation of the TCPA, will continue to vex customer-facing businesses that communicate with consumers by phone or text. These issues are (1) the intractable problem of reassigned phone numbers, (2) the definition of autodialer, (3) consent, including revocation thereof; and (4) issues unique to certain third-party providers. The Order also provides a safe harbor and exempts from TCPA liability certain types of calls from financial institutions and health-related providers. These issues are discussed in further detail below.

Reassigned Cell Phone Numbers

Perhaps no issue causes more problems and has given rise to more liability under the TCPA than the issue of reassigned cell phone numbers. The FCC acknowledged that approximately 100,000 cell phone numbers are reassigned to new users each day and that there is no systematic means by which a business may track or even know when a subscriber has relinquished his or her cell phone number and whether that number has been reassigned to another user. Without providing any practical guidance, the FCC cautioned businesses to institute new and better safeguards to avoid calling reassigned wireless numbers that may give rise to TCPA liability.

The FCC’s Order only offered a modest safeguard that callers who make calls without knowledge of reassignment and have a reasonable basis to believe that they have valid consent from the prior subscriber may make one call after reassignment as an opportunity to gain actual or constructive knowledge of the reassignment, regardless of whether the called party answers the phone and alerts the caller that the number has been reassigned. Paradoxically, the FCC opined that “if this one additional call does not yield actual knowledge of reassignment, we deem the caller to have constructive knowledge of such.” How a caller can be deemed to have constructive knowledge regarding reassignment when the call did not yield actual knowledge of the reassignment is a mystery.

The FCC explicitly rejected the pragmatic argument that would have created a good faith exception to the TCPA’s strict liability standard by exempting from liability any call made in good faith to the number last provided by the intended call recipient, unless and until the caller has actual knowledge that the intended recipient has relinquished his or her cell phone number. That standard could be satisfied when the original cell subscriber notifies the caller that it has relinquished his or her cell number or when the party to whom the number has been reassigned notifies the company about the reassignment.

Commenting on the FCC’s response to problems caused by reassigned cell phone numbers, FCC Commissioner O’Rielly stated “[t]he Commission’s unfathomable action today further expands the scope of the TCPA and sweeps in a variety of communications either by denying relief outright or by penalizing companies that dial a number that, unbeknownst to them, has been reassigned to someone else. Indeed, the order paints companies from virtually every sector of the economy as bad actors, even when they are acting in good faith to reach their customers.”

Autodialers

The TCPA restricts the use of autodialers, which are defined as “equipment which has the capacity—(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” Also included within the FCC’s definition of autodialers are predictive dialers, defined as “equipment that dials numbers and, when certain computer software is attached, also assists telemarketers in predicting when a sales agent will be available to take calls.”

Over the past few years, courts have begun to apply a common sense standard recognizing that a piece of equipment’s capacity alone, without some showing that the functionality in question had been utilized, would not be sufficient to establish liability under the TCPA. Gragg v. Orange Cab Co., Inc., 995 F. Supp. 2d 1189, 1196 (W.D. Wash. 2014). See also Marks v. Crunch San Diego, LLC, 55 F. Supp. 3d 1288, 1291-1292 (S.D. Cal. Oct. 23, 2014); Glauser v. GroupMe, Inc., 2015 WL 475111 *3-4 (N.D. Cal. Feb. 4, 2015).

In its Order, the FCC disregarded this pragmatic trend and stated that the mere capacity or capability alone to store or produce, and dial random or sequential numbers, without any showing that such functionality had been utilized or even could have been utilized at the time the calls were made, would define whether equipment constitutes an autodialer, thus giving rise to potential TCPA liability for the use of such equipment, regardless of whether the autodialer functionality was actually used and even if the equipment was used only to dial numbers from customer telephone lists.

As if the FCC’s broad definition of autodialer were not enough, the Order fails to provide meaningful guidance on the type of equipment that would not qualify as an autodialer under the FCC’s definition. The FCC’s Order observes that while “it might be theoretically possible to modify a rotary-dial phone to such an extreme that it would satisfy the definition of ‘autodialer,’ but such a possibility is too attenuated for us to find that a rotary-dial phone has the requisite ‘capacity’ and therefore is an autodialer.” By resorting to comparisons with rotary phones as an example of what is not an autodialer, the FCC has left businesses with little practical guidance.

Consent

One aspect of the TCPA that has given rise to significant class action litigation is the issue of consent. Consent for certain types of calls may be established expressly, generally by providing a phone number. Consent for other types of calls must be in writing. Although not addressed in the text of the TCPA, the Order states unambiguously that consent may be revoked at any time by any reasonable means, and a caller may not limit or restrict the manner in which revocation may occur. The Order also highlights that the caller has the burden of showing that the requisite consent was provided.

Other issues relating to consent addressed by the FCC include:

• The fact that a consumer’s wireless number is in the contact list on another person’s wireless phone, standing alone, does not demonstrate consent to autodialed or prerecorded calls, including texts;
• Porting a telephone number from wireline residential service to wireless cell service does not revoke prior express consent. If a caller obtains prior express consent to make a certain type of call to a residential number and that consent satisfies all of the requirements for prior express consent for the same type of call to a wireless number, the caller may continue to rely on that consent after the number is ported to a wireless service;
• Individuals who might not be the cell phone subscriber, but who, due to their relationship to the subscriber, are the cell phone number’s customary user may provide prior express consent for the call. The FCC found that it is reasonable for callers to rely on customary users, such as a close relative on a subscriber’s family calling plan or an employee on a company’s business calling plan, because the subscriber will generally have allowed such customary users to control the calls to and from a particular number under the plan, including granting consent to receive calls;
• Providing a retroactive waiver from October 16, 2013, to July 10, 2015, and a safe harbor for another 89 days (until October 7, 2015), for certain entities that obtained consent from individuals before October 16, 2013 (the effective date of the FCC’s requirement that consent for telemarketing calls made to cell phones must be in writing) to obtain the prior express written consent required by the current rule; and
• Clarification that recipients who request receipt of text messages are deemed to have provided consent for the receipt of such texts.

Calls Exempt From TCPA Liability

The FCC created an exemption from the TCPA’s consumer consent requirements for certain calls and texts it deemed to be pro-consumer regarding time-sensitive financial and health-related issues.

With respect to healthcare calls, the FCC clarified that providing a phone number to a healthcare provider constitutes prior express consent for healthcare calls, and a third party may consent to receive calls on behalf of an incapacitated patient. The Order clarified that when a patient is incapacitated and unable to provide a telephone number directly to a healthcare provider, but a third-party intermediary provides the number, the provision of the phone number by the third party constitutes prior express consent “for healthcare calls to that number unless and until the patient requests otherwise.” But, the FCC noted, the prior express consent provided by the third party is no longer valid once the period of incapacity ends. The FCC also recognized that providing a phone number to a healthcare provider constitutes prior express consent for healthcare calls subject to the Health Insurance Portability and Accountability Act (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.

With respect to financial institutions, the FCC created an exemption for calls intended to prevent fraudulent transactions or identity theft, including data security breaches, provided that the messages do not include marketing, advertising, or debt collection, and that each message includes information regarding how to opt out of future messages. Financial institutions are limited to no more than three calls over a three-day period. According to the FCC, these types of calls are intended to address exigent circumstances in which a quick, timely communication with a consumer could prevent considerable consumer harm or mitigate the extent of such harm. The FCC also exempted from the consent requirement calls regarding money transfers, including notifying the recipient of steps to be taken in order to receive the transferred funds.

By contrast, the FCC did not provide express guidance on any other specific types of time-sensitive pro-consumer calls, such as calls made by utility companies regarding power outages and service interruptions.

Third-Party Providers

The TCPA does not define the terms “make” or “initiate” in connection with placing a call for purposes of establishing TCPA liability. In its Order, the FCC clarified these terms noting, among other things, that a business does not make or initiate a text or a call when it merely uses its service to set up auto-replies to incoming voicemails. A business will also not be deemed to make or initiate a call when an app user sends an invitational message using its app. Further, with respect to collect call services, the FCC clarified that, where a caller provides the called party’s phone number to a collect call service provider and controls the content of the call, because the entity is so closely connected to the call, it will be deemed the maker of the call rather than the collect-call service provider that connects the call and provides information to the called party.

Conclusion

The full impact of the FCC’s July 10 Order will unfold over the ensuing months and years as TCPA litigation continues to flourish. Given the opportunity to stem the tide of vexatious litigation affecting legitimate businesses that communicate with their customers in good faith, the FCC failed to introduce rationality in the interpretation and application of the TCPA. Some of the progress made in the courts, for example, by applying a common sense interpretation of what constitutes an autodialer, may have been undone. In its efforts to protect consumers, the FCC has thrown the proverbial baby out with the bathwater.