TCPA Connect

by Manatt, Phelps & Phillips, LLP
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In This Issue:

  • Two Recent Yahoo! Decisions Produce Differing Results for TCPA Liability
  • Eleventh Circuit Sides with TCPA Plaintiff, Sends Case to Jury
  • T-Mobile Settles TCPA Suit for $5 Million
  • Consent Found in Context, Court Rules in TCPA Case

Two Recent Yahoo! Decisions Produce Differing Results for TCPA Liability

  • PA Court: Yahoo!’s System Not an ATDS

Yahoo! won dismissal of a Telephone Consumer Protection Act (TCPA) suit when a federal court judge in Pennsylvania held that the company did not violate the statute by sending text messages to an unintended recipient via an Automatic Telephone Dialing System (“ATDS”).

After purchasing a used smartphone, the plaintiff began receiving text messages from Yahoo! The prior owner of the phone had enrolled the number in Yahoo!’s text message system to receive a text notification when he received an e-mail to his Yahoo! account. The plaintiff alleged that he received up to 60 texts on a given day and asked Yahoo! to stop sending the texts. According to the plaintiff, he was told that only the former owner of the phone could request a halt. He then filed a TCPA suit.

Yahoo! moved for summary judgment and argued that the TCPA only prohibits unsolicited automated telemarketing and bulk communications sent via an ATDS—a system with the capacity to store or produce telephone numbers to be called using a random or sequential number generation. Yahoo! explained that its system lacks the capacity to store or produce and call telephone numbers using a random or sequential number generator and therefore was not an ATDS under the statute.

The plaintiff countered, with the support of an expert opinion, that the Yahoo! system had the “capacity” to meet the ATDS definition and the manner in which the system was actually used was irrelevant. But the court said that the expert opinion was unreliable and that the plaintiff failed to present evidence to dispute Yahoo!’s assertion that its system lacked the requisite current capabilities.

In granting summary judgment to Yahoo!, U.S. District Court Judge Michael M. Baylson wrote that “Plaintiff has not offered any evidence to show that Yahoo!’s system had the capacity to randomly or sequentially generate telephone numbers (as opposed to simply storing telephone numbers), as required by the statutory definition of ATDS.”

To read the decision in Dominguez v. Yahoo!, click here.

  • CA Court: Yahoo!’s ATDS Arguments Do Not Prevail

In complete contrast to the above decision, illustrating the way courts are struggling with TCPA cases, Yahoo! lost a motion for summary judgment in a TCPA suit in California federal court that raised the same ATDS arguments because the court decided that a reasonable jury could find that the Yahoo! system was an ATDS.

Rafael Sherman sued the company after receiving two text messages. The first read: “A Yahoo! user has sent you a message. Reply to that SMS to respond. Reply INFO to this SMS for help or go to yahoo.it.imsms.” The second message (sent by the person trying to contact Plaintiff) stated, “hey get online I have to talk to you.” The messages were sent as a part of Yahoo!’s Instant Messenger Service, which converts IMs into text messages and allows Yahoo! users to send instant messages to mobile devices from their computers using Yahoo!’s system.

According to Sherman’s complaint, the first message violated the TCPA because he never provided Yahoo! with his mobile phone number, he was not a subscriber to Yahoo!’s Instant Messenger Service, and his message was sent with an automatic telephone dialing system (ATDS).

Yahoo! mounted a three-pronged argument for summary judgment that U.S. District Court Judge Gonzalo P. Curiel rejected.

First, the court rejected arguments that Yahoo!’s message to Sherman was a single confirmatory text message like those courts have found permissible under the TCPA because he did not initiate contact with Yahoo!, had not provided his number to the defendant, and was not a member of the Instant Messenger Service. “Sherman did not send a voluntary message to Yahoo! prior to receipt of the unsolicited text message,” the court said. “Plaintiff did not provide Yahoo! prior express consent or take any action which would have justified a response or confirmation by Yahoo!”

As for the use of an ATDS, the court found that because software could be written to create random or sequential dialing capabilities in the Yahoo! system—even though no such current capabilities existed—the equipment might be considered to have “capacity” to place random or sequentially dialed calls. Thus, despite evidence from Yahoo! that no current capacity to randomly or sequentially dial existed in its systems so as to constitute use of an “ATDS” as defined by the TCPA, the court ruled that a material fact remained that precluded dismissal on the ATDS issue.

To read the order in Sherman v. Yahoo!, click here.

Why it matters: These diametrically opposed Yahoo! decisions illustrate that courts are confused about whether a system has “capacity” to randomly or sequentially dial, an issue also being considered by the FCC. While the Pennsylvania court took the common-sense approach that “capacity” should be tied to a system’s current configuration, the California court was reluctant to rely on the same determination and instead felt that arguments about “potential capacity” should go to a jury. Yahoo! has already filed a motion seeking reconsideration of the California court’s order. But in the meantime, companies need to be careful about the equipment they are using to place calls or to send text messages, and to be aware that plaintiffs continue to argue (and some courts have accepted) that a system that could be reprogrammed to sequentially dial numbers has “capacity” to make such calls.

Eleventh Circuit Sides with TCPA Plaintiff, Sends Case to Jury

In a ruling with negative implications for defendants in TCPA suits, the Court of Appeals for the Eleventh Circuit reversed a lower court’s grant of summary judgment and said a jury should decide whether the plaintiff consented to the defendant’s phone calls.

Florida resident Clara Betancourt applied for a car insurance policy and opened a credit card account with State Farm in 2007. During the application process, she provided a phone number with the last four digits 8626—a phone number that belonged to her housemate, Fredy D. Osorio, with whom she shared a cell phone plan and an adult son.

When Betancourt failed to make a payment on her credit card account in 2010, a debt collector retained by State Farm placed 327 autodialed calls to the above number in a six-month span in an attempt to collect the minimum due. The calls intended to reach Betancourt at a number she had provided instead went to Osorio, who responded with a TCPA lawsuit. State Farm fought back by filing a third-party complaint against Betancourt for the balance owed on her account, as well as its legal expenses in defending itself against Osorio’s suit, premised on Betancourt’s negligent misrepresentation regarding the telephone number she provided the company.

A federal district court ruled in State Farm’s favor on cross-motions for summary judgment and awarded State Farm all requested damages, including $132,000 in legal fees the company incurred in defending the TCPA action.

But the Eleventh Circuit has now reversed, holding that a jury should determine whether Betancourt consented to receive the calls made to Osorio’s phone.

The panel first followed a Seventh U.S. Circuit Court of Appeals decision to find that an “intended recipient” is not the same thing as a “called party” under the statute. Osorio was the “called party,” the court said, as the subscriber to No. 8626, and would have standing to bring suit. Next, the Eleventh Circuit indicated that consent could be provided by an “authorized agent” other than the subscriber, but said that State Farm failed to demonstrate that Betancourt had an agency relationship with Osorio that permitted her to consent. Therefore, the issue could not be decided on summary judgment.

“[T]he key facts regarding agency are clearly in dispute,” the three-judge panel wrote. “Betancourt and Osorio testified in their respective depositions that they have never given each other authority to consent to phone calls from third parties. State Farm nevertheless contends that the court should infer such authority because Osorio and Betancourt have an adult son and shared both a home and a cellphone plan. But State Farm’s argument, if accepted, proves too much.”

The court continued: “Parents and cohabitants everywhere would be shocked to learn that every adult in their household is legally entitled to consent to having autodialing debt collectors call any of their cell phones,” the panel added. A jury could find that Betancourt had the requisite authority to provide consent, or alternatively, that she exercised “only a limited scope of agency” to use the number for emergency purposes.

The court also found that a genuine issue of fact existed with regard to revocation of consent. First, the court rejected the district court’s finding that written permission was required to consent. The TCPA does not contain an “in-writing” requirement to revoke consent for calls, and follows common-law notions of consent, which allow for oral revocation.

Because Osorio claimed he twice asked State Farm to “stop calling,” a contention challenged by State Farm, summary judgment was inappropriate, the panel said.

Turning to State Farm’s third-party negligent misrepresentation complaint, the court similarly found that factual issues precluded summary judgment.

To read the decision in Osorio v. State Farm Bank, click here.

Why it matters: TCPA defendants take note. While agency may form the basis for consent in a TCPA suit, it could be very difficult to prove an agency relationship exists. Here, the court found that summary judgment was not appropriate to determine agency for a cohabiting couple sharing a cell phone plan and child. The ruling also underscores the importance of good recordkeeping to resolve factual issues on summary judgment: although consent could be orally revoked, the court found that there were genuine issues of fact surrounding the revocation here.

T-Mobile Settles TCPA Suit for $5 Million

T-Mobile has agreed to pay up to $5 million to settle a TCPA case in California federal court, and resolve a dispute where the plaintiffs claimed the company autodialed noncustomers without consent.

The estimated 106,157 class members – defined as non-T-Mobile customers who received autodialed collection calls between September 4, 2008 and September 4, 2012 – can receive up to $90 each. Depending on the total number of class members, the payout for each individual may be reduced on a pro rata basis. T-Mobile’s settlement fund will also cover $1.2 million in administrative costs and counsel fees.

Plaintiff Sayan Aboudi alleged that he received multiple automatically dialed prerecorded T-Mobile calls to his cell phone despite never having given the company his consent to contact him. The calls were an attempt to collect an outstanding debt from a third party Aboudi said he did not know.

T-Mobile did not admit liability or wrongdoing, but agreed to settle the case to avoid the risks of continuing the action.

To read the motion in support of preliminary settlement approval in Aboudi v. T-Mobile, click here.

Why it matters: With its multimillion-dollar deal, T-Mobile joins the ranks of other companies settling costly TCPA class action litigation, from Domino’s $9.75 million agreement to Sallie Mae’s hefty $24 million payout to Discover Bank’s $8.75 million settlement.

Consent Found in Context, Court Rules in TCPA Case

In dismissing a TCPA claim, a Washington federal court found that the context in which the plaintiff provided his cell phone number constituted sufficient consent to receive text messages under the statute.

Eric Aderhold registered to become a member of car2go, a one-way local car-sharing service. He filled out a form on the company’s Web site which required him to input personal information like his address, cell number, and e-mail address. He was also required to review car2go’s Terms and Conditions, Trip Process, and Privacy Policy and check boxes confirming his acceptance of the three documents.

Within “seconds” of submitting his registration form, Aderhold received a text message and an e-mail from car2go. The text consisted of two sentences: “Please enter your car2go activation code 145858 into the emailed link. We look forward to welcoming you to car2go.”

Claiming that the text message violated the TCPA, Aderhold filed a putative class action complaint. He said that despite providing his cellphone number as part of the registration process, he did not give his prior express consent to receive the text message.

Taking a “common sense” approach to interpretation of the statute, Judge Richard A. Jones disagreed. He dismissed the TCPA claim and found that consent may be found based from the context of the transaction in which a consumer provides a cellular number, a conclusion also reached by federal courts in California.

In Aderhold’s case, the various documents he reviewed and accepted as part of the registration process notified him that car2go “may confirm a registration via instant text message,” while the privacy policy noted that the company may store and use the personal information collected. Aderhold checked all three boxes confirming that he reviewed and accepted the documents, the court said.

“The text message that Mr. Aderhold receives falls squarely within the scope of these disclosures,” Judge Jones wrote. “Although he arguably did not explicitly grant permission for car2go to contact him by text message regarding his registration form, no reasonable person in his shoes could have doubted that car2go would contact him in some manner. That car2go chose a text message (in addition to an email) is not significant. Mr. Aderhold clearly and unmistakably consented to being contacted about his registration for car2go.”

Even if car2go made no disclosures at all about the purposes for which it planned to use the plaintiff’s number, the court determined that “it defies logic to contend that he did not consent to be contacted regarding his membership application.”

Judge Jones refused to hold that express consent must be “affirmatively stated” as argued by Aderhold, as the TCPA “does not require specific consent to the medium by which a company contacts a consumer.”

“When people provide their telephone numbers in commercial transactions, it would be odd to imagine that they do not consent to being contacted for purposes of completing that transaction,” the court wrote.

To read the order in Aderhold v. car2go, click here.

Why it matters: Judge Jones emphasized a “common sense” approach to TCPA interpretation. Although he noted that he was not ruling on what prior express consent means in every case, the judge asked, “Could a person who provided a telephone number to a delivery service seriously contend that she had not consented to be telephoned by the service to inform her that her package was en route? Could a person who provided a telephone number to a mechanic claim that she did not consent to be called (or texted) when her car was repaired?” Under the plaintiff’s theory, if the delivery service and the mechanic used an autodialer, they would break the law. The court is confident that Congress did not intend that result when it passed the TCPA.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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