InsideCounsel - November 18, 2014

The good faith exception is a common sense theory that prevents the TCPA from being used as a barrier to normal and desired business communications

It is possible that a business may contact a changed or recycled phone number. According to the Wall Street Journal, as many as 37 million phone numbers are recycled each year by telephone companies. It is equally likely that a customer could accidentally input an incorrected single digit when providing his contact information. If that incorrectly inputted cellular telephone number turns out to be an actual phone number assigned to someone else, should that lead to expensive class action litigation for a business that otherwise has all the mechanisms in place to comply with the Telephone Consumer Protection Act (TCPA)? Common sense says no.

The TCPA — “Called party”

The TCPA prohibits certain marketing calls made with automatic telephone dialing systems (ATDS), artificial or prerecorded voices, and other communications to wireless phone numbers without the prior express consent of the called party. Who or what constitutes a “called party” for purposes of the statute is unclear because Congress did not define the term “called party” when it enacted the TCPA and the FCC has yet to issue an interpretation clarifying whether “called party” refers to the intended recipient of a call or the current subscriber of a cell phone number. With statutory damages ranging from $500 to $1,500 for each instance and potential liability extending back four years, the perceived lack of clarity has emboldened the plaintiffs’ bar to pursue costly class action litigation against businesses that are otherwise committing their best efforts to comply with the law.

Courts are beginning to recognize that subjecting businesses to litigation and liability in these circumstances does not make good social or business policy.

Strict interpretation of “called party”

The first courts to address the issue of who constitutes a called party adopted a rigid interpretation of the statute devoid of common sense considerations for how businesses and customers interact.

In Soppet v. Enhanced Recovery Company, LLC, for example, the 7th Circuit ruled that the current subscriber of a telephone number should be considered the called party under the TCPA. In Soppet, the defendant placed a call with an automatic dialer to a phone number for which it had received prior consent from a customer who had been assigned the number. However, the customer had relinquished that number and the phone company reassigned it to the plaintiff. The plaintiff and current subscriber of the line had not provided consent, and there was no way for the defendant to know that the telephone number had been reassigned.

The court ruled that the plaintiff could bring a cause of action under the TCPA, emphasizing that “only the consent of the subscriber assigned to that cell number at the time of the call (or perhaps the person who answers the phone) justifies an automated or recorded call.” The court reasoned that there cannot be any long-term consent to call a given cell number, and that any previous consent given to call a particular number lapses when the cell number is reassigned. The court opined that businesses could continue to use automated dialers if they had an employee first call the phone number to verify that the number was still assigned to the original customer who had provided consent or, if a debt collector, obtain an indemnity from a creditor who assigned the debt. These suggestions make little business sense however, as manually verifying consent prior to placing an autodialed call is costly and inefficient, and creditors are not apt to indemnify their debt assignments.

Similarly, in Osorio v. State Farm Bank, a debt collector called the plaintiff’s cell phone to collect a credit card debt owed by the plaintiff’s housemate, who had identified the plaintiff’s cell phone number as being her own on a credit application. Though the trial court dismissed the case because it recognized that debt collectors would otherwise “be held liable whenever a debtor lists a family member’s number as his own,” the 11th Circuit reversed, holding that the debt collector could only call a cell phone using an auto dialer when it has obtained the prior express consent of the called party. The appeals court rejected the trial court’s view that consent can come from a person cohabitating with the subscriber, stating that a fact-intensive analysis is needed to determine whether consent is valid under agency law. This conclusion, however, ignores the common sense question of how a business could ever know if the phone number provided to it actually belonged to the person who gave it.

Following Osorio, the 11th Circuit in Breslow v. Wells Fargo Bank again held that a “called party” is the current subscriber or user of a cell phone number, rather than the intended recipient of the call. In Breslow, the plaintiff sued the bank, alleging that it made a number of autodialed calls to a cellular phone used by her child. As in Soppet, the bank had previously obtained consent from a customer, but the phone number was later reassigned to the plaintiff. The plaintiff argued in her motion for summary judgment that she did not give permission to receive autodialed calls. In its own motion for summary judgment, the bank asserted that it did not know that the number was no longer assigned to the consenting debtor because he never revoked his consent to receive calls.

Here too, the court held that the consent by the prior subscriber of the phone number was invalid and that the plaintiff was entitled to summary judgment because she, as the current subscriber, had not consented to receive the calls. Surprisingly, the court came to this conclusion despite acknowledging that even if the bank used an employee to “confirm[] that the consent remains valid, that confirmation is good only for that moment in time. There is no guarantee that the customer will continue to use the cell phone. Indeed, a bank customer who owes a debt may decide to get rid of the cell phone after receiving the first debt-collection call in an effort to avoid paying the debt.”

Cognizant of the problems with the approach taken in the above cases, courts are beginning to recognize a “good faith” exception to liability. Under this theory, there is no violation under the TCPA if the defendant has a good faith belief that it obtained the prior express consent required by the statute.

Good faith exception makes good business sense

In Chyba v. First Fin. Asset Mgmt. Inc., the plaintiff sued the defendant claiming that it had called her cellular phone multiple times without her express consent. The defendant, a debt-collector acting on behalf of a rental car company, responded that the plaintiff owed it money for damages on a car she rented. The plaintiff claimed that she did not recall whether she rented a car but that even if she did, she did not give her telephone number to the rental car company. The court acknowledged that a reasonable fact finder could determine that the plaintiff never gave express consent because she never provided her phone number.

Nevertheless, the court granted the defendant’s summary judgment motion, holding that the defendant was not liable under the TCPA because it had a good faith belief that the plaintiff had given the rental company her consent to be called. In support of its ruling, the court cited the FCC guidance that a creditor is responsible for violations for calls made on its behalf. Second, the court found that a rental agreement containing the plaintiff’s phone number, which the plaintiff had presumably provided, gave the defendant “a good faith basis to believe that it had consent” to contact the plaintiff at that number.

This common sense principle is supported by the FCC. While the FCC has not clarified the term “called party,” it has ruled that “prior express consent” does not require actual consent to receive auto-dialed calls, but may also exist in situations where “a person [has] knowingly release[d] their phone number” and has provided it “as one at which the called party wishes to be reached.” The FCC also opined that where there is an intermediary who places a call on behalf of a seller, like a debt-collector for a creditor, such calls are proper to the extent the seller/creditor passes the phone number along to the service provider.

Understanding that creditors are in the best position to have records kept showing consent and that the burden will be on the creditor to show it obtained prior express consent, the FCC essentially concluded that a debt-collector could make the call because of a good faith belief that the creditor obtained express consent.

Help may be on the way

Recently, the FCC’s Consumer and Governmental Affairs Bureau issued a public notice seeking comment on a petition for an expedited declaratory ruling filed by Rubio’s Restaurant. Rubio’s asked the FCC to confirm that callers who obtain prior express consent from a called party are not liable under the TCPA for disseminating informational communications to telephone numbers that have been reassigned without the caller’s knowledge. The comment and reply period has now closed.

For now, good faith means defending against class certification is likely

Despite Soppet, Osorio, and Breslow, defendants can still take solace in the fact that class certification remains a high hurdle for the plaintiff’s bar. Cases like these involving reassigned numbers present a variety of factual issues that make ascertaining a class difficult. For example, it is unlikely that every member of a proposed class was also only called on a reassigned phone number for which the caller had previously obtained consent, and proving this will require individual factual inquiries. Further, any class that is certified will likely be small, limited only to those who were called on reassigned numbers.

Conclusion

A business, acting in good faith, should not be held hostage to the risk of potentially ruinous penalties for something no company can reasonably prevent. The good faith exception is a common sense theory that prevents the TCPA from being used as a barrier to normal and desired business communications and refocuses the law on its intended purpose of reducing unwanted calls from more ill-intentioned actors.

A version of this article originally appeared in InsideCounsel on November 18, 2014. To view the original version of this article, please click here.