TCPA Connect - October 2016

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Manatt, Phelps & Phillips, LLP

In This Issue:
  • New Record Deal Reached in TCPA Settlement
  • Wells Fargo Reaches $30.4M Deal in TCPA Suit
  • Ninth Circuit: Confirmation Text Message Doesn’t Violate TCPA
  • Court: Use of Human Agent Means System Not an ATDS
  • Lawmakers Ask: How to Modernize the TCPA?

New Record Deal Reached in TCPA Settlement

In what could be the largest Telephone Consumer Protection Act settlement yet, a federal judge in the Northern District of Illinois signed off on a deal requiring three cruise marketing companies to pay up to $76 million to two classes of call recipients.

The plaintiffs accused the defendants of making more than 900,000 illegal robocalls in which they offered a free cruise in return for taking a political survey. Caribbean Cruise Line, Inc., Berkley Group Inc., and Vacation Ownership Marketing Tours Inc. disputed the charges, but after four years of litigation and on the eve of trial, they reached a deal that features a promise to create a common fund of at least $56 million and up to $76 million.

Payments will be made from the fund to two classes of plaintiffs: one for landline call recipients and one for cell phones. Each class member who submits an approved claim will receive at least $500 per call unless the total payments, settlement administration and notice expenses, incentive awards, and attorneys’ fees exceed $76 million. In that event, class members will receive a pro rata share per call.

Four class representatives will receive incentive awards of $10,000 each, and class counsel said it would limit its request for attorneys’ fees to no more than $24.5 million.

The defendants agreed to a floor of $56 million, so depending upon the number of claims filed, class members could receive up to $1,500 per call. Class members whose phone numbers appear in the defendants’ records will not be required to submit any evidence with their claims while those whose numbers do not appear must document that they received calls when submitting a claim (such as a phone bill).

In addition, the defendants agreed to provide prospective relief. For a two-year period, the defendants will each perform annual internal audits of their procedures to ensure they will not make autodialed and/or robodialed telemarking calls to either cell phones or landlines “unless to the best of their knowledge, each call recipient has given prior express consent in writing to receive such calls.”

“By any measure, this Settlement is an extraordinary result,” the plaintiffs argued. The creation of a settlement fund of up to $76 million—“the largest such fund on record in any TCPA case”—will provide “nearly unprecedented” payments for class members. The previous record-holder, Capital One’s $75 million deal, only paid out $34.60 per claimant, the plaintiffs said. With a class composed of “a small fraction of the size of the Capital One class” and a larger fund to divide up, each class member is “set to recover hundreds if not thousands of dollars.”

“Simply put, this settlement dwarfs the typical result, both in terms of the absolute size of the fund and in terms of what each class member will receive,” the plaintiffs told the court.

U.S. District Court Judge Matthew F. Kennelly granted the motion for preliminary approval of the deal and scheduled a hearing for final approval in January 2017.

To view the motion in support of preliminary approval of the settlement in Aranda v. Caribbean Cruise Line, Inc., click here.

To read the court’s order granting preliminary approval, click here.

Why it matters: The record-setting deal puts an end to four years of litigation on the eve of trial, after the court had certified the two classes of plaintiffs and denied the defendants’ motion to dismiss for lack of standing based on the U.S. Supreme Court’s decision in Spokeo v. Robins. The agreement also demonstrates that the days of multimillion-dollar TCPA settlements are not over, and in fact, we may continue to see increasing settlement figures.

Wells Fargo Reaches $30.4M Deal in TCPA Suit

Another week, another multimillion-dollar Telephone Consumer Protection Act class action settlement.

Kenisha Cross alleged that after purchasing a new phone, she received multiple robocalls from Wells Fargo, even after she explained that she was not a customer and requested that the bank cease making the calls. The parties engaged in settlement negotiations and reached a deal totaling $30,446,022.75.

“This is an excellent result considering the risks, uncertainties, burden, and expense associated with continued litigation,” Cross wrote in her unopposed memorandum in support of preliminary approval of the settlement.

Once payments have been made for attorneys’ fees and expenses (not to exceed 30 percent of the total), settlement costs (including notice and claims administration), and an incentive award to Cross, the non-reversionary fund will be distributed on a pro rata basis to each class member who submits a qualified claim. For the class period running April 21, 2011, through December 19, 2015, if each of the estimated 6,409,689 class members filed a claim, the recovery would amount to $4.75 per plaintiff.

The monetary amount falls “well within the range” of TCPA class action deals approved by district courts in similar matters, Cross argued. She cited a $2.63 payment for each member of a class approved in the Southern District of Florida in a case against Sallie Mae, an award of $3.76 in a suit against Bank of America in California federal court, and a payment of $4.53 per member from Capital One in a suit from Illinois.

Class members who do not opt out of the settlement will provide a release of claims that the plaintiff noted are “specifically tailored” to the practices at issue in the suit. The release will apply “only to calls made in connection with overdrafts of deposit accounts during the applicable class period in alleged violation of the TCPA.”

Cross’s claims are typical of the class members, she told the court, and she would fairly and adequately protect the interests of the class, noting that she rejected an early individual offer of judgment “for a significant sum” because it did not provide any relief to the class.

Agreeing that the proposed settlement appeared to be “fair, reasonable, and adequate,” U.S. District Court Judge Richard W. Story granted preliminary approval in August.

To read the plaintiff’s memorandum in support of preliminary approval of the settlement in Cross v. Wells Fargo Bank, click here.

Why it matters: The deal is just the latest example of the multimillion-dollar settlements agreed to by TCPA defendants facing putative class actions. From $8.5 million in a suit against iHeartMedia Inc. to HSBC’s $40 million deal, the Wells Fargo settlement fits right in with the national trend.

Ninth Circuit: Confirmation Text Message Doesn’t Violate TCPA

The Ninth Circuit Court of Appeals has upheld dismissal of a class action seeking to hold a defendant liable under the Telephone Consumer Protection Act for a confirmation text message.

Eric Aderhold registered to use the car2go service and provided the company with his cell phone number. As part of the registration process, he received an automated text message to his cell phone requiring him to enter a validation code on car2go’s Web site.

Aderhold sued, alleging that the text violated the TCPA. A district court dismissed the suit and the plaintiff appealed.

The Ninth Circuit sided with the defendant for two reasons.

First, Federal Communications Commission regulations dictate such an outcome, the three-judge panel said. The agency’s 1992 rules state that “persons who knowingly release their phone numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary.”

“Aderhold therefore consented to receive text messages related to the application process from car2go simply by providing his phone number in the application for membership,” the court wrote. It found that this submission of information by the plaintiff satisfied the circuit’s standard that “prior express consent” be “[c]onsent that is clearly and unmistakably stated.”

As a secondary reason for tossing the suit, the Ninth Circuit said the text received by Aderhold was not a “telemarketing” message. “A message is characterized as ‘telemarketing’ if it is issued ‘for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services,’ ” the court said, adding that it approached the question of a message’s purpose “with a measure of common sense.”

“Car2go’s message contains no content encouraging purchase of car2go services,” the panel wrote. “The message was directed instead to completing the registration process initiated by Aderhold and to validating personal information. We follow the FCC’s determination that such messages, ‘whose purpose is to facilitate, complete, or confirm a commercial transaction that the recipient has previously agreed to enter into with the sender are not advertisements.’ ”

To read the memorandum in Aderhold v. car2go, LLC, click here.

Why it matters: The Ninth Circuit affirmed the district court’s “common sense” approach to the question of consent, finding it axiomatic that if a consumer provides a cell phone number as part of the registration process, he has signaled his consent to receive text messages at that number. The panel further found no merit to the argument that every message sent from a business constitutes telemarketing, and ruled that because car2go’s message was directed to completing the registration process—initiated by the plaintiff—no liability under the TCPA attached to the text.

Court: Use of Human Agent Means System Not an ATDS

A computer system that includes a point-and-click process operated by a human agent does not qualify as an automatic telephone dialing system (ATDS) for purposes of the Telephone Consumer Protection Act, a federal court in Florida recently determined, granting summary judgment in favor of the defendant.

Attempting to collect on a third-party debt, Stellar Recovery Collection Agency began calling a telephone number it believed belonged to the debtor. However, the number belonged not to the debtor but to Eduardo Pozo. He claimed he received more than 40 calls from Stellar and filed suit alleging violations of both the TCPA and the Fair Debt Collection Practices Act.

Stellar moved for summary judgment, arguing that the calls did not violate the TCPA because the company did not use an ATDS to dial Pozo’s number. Instead, the company used a program called LiveVox Human Call Initiator (HCI), which relies upon a human “clicker agent.”

Viewing a real-time dashboard, the agent must confirm in a dialogue box that a call should be launched to a particular telephone number. If a call is answered, the clicker agent refers the call to a “closer agent” who speaks with the debtor.

Because the program will not initiate a call unless a human clicker agent confirms the action, Stellar argued that it was not an ATDS as defined by the TCPA: “equipment which has the capacity to store or produce telephone numbers to be called, using a random or sequential number generator, and to dial such numbers.”

The key feature of an ATDS is to dial numbers without human intervention, U.S. Magistrate Judge Anthony E. Porcelli noted, and dialing systems which require an agent to manually initiate calls do not qualify as autodialers—meaning the defendant could not be liable under the TCPA.

“Most importantly, HCI does not allow any calls to be made without a Stellar agent clicking the dialogue box to initiate the calls,” the court said. “[B]ecause HCI requires intervention from its human clicker agents to make every call, HCI cannot be an autodialer.”

The plaintiff pointed to other cases involving LiveVox systems where the program was found to be an ATDS, but the court said LiveVox offers multiple types of dialing systems, including those capable of automatic dialing and those limited to human-initiated calls. Similarly, Pozo’s argument that the HCI system had the “capacity” for automatic dialing did not sway the court.

“There is no evidence that Stellar could modify HCI to make autodialed calls,” the court wrote. “HCI uses its own unique software and hardware different from other LiveVox systems. HCI is stored on a separate server from other LiveVox systems. HCI does not possess any features that may be activated to enable automated calling.…

“Of course, Stellar could hypothetically hire a team of programmers to modify and rewrite large portions of HCI’s code to enable HCI to make autodialed calls, eliminating clicker agents, the dashboard, and all human input. However, the fact that Stellar might be able to undertake such a pointless endeavor does not mean that HCI has the ‘capacity’ to be an autodialer or that it has the ‘potential functionality’ to be an autodialer within the meaning of the TCPA and the 2015 Order.”

Judge Porcelli granted Stellar’s motion to dismiss the TCPA claim but denied the motion with regard to the FDCPA count, finding a material issue of fact remained as to whether the calls to Pozo were harassing.

To read the order in Pozo v. Stellar Recovery Collection Agency, Inc., click here.

Why it matters: The court adopted a practical outlook on the issue of whether a program has the “capacity” for automatic dialing, recognizing that while the system could hypothetically be modified to eliminate human interaction, it would require a team of programmers to rewrite code and a complete change to the existing program to eliminate clicker agents and the dashboard system. Just because a company might be able “to undertake such a pointless endeavor” does not transform a non-ATDS into an autodialer for purposes of the TCPA, the court held.

Lawmakers Ask: How to Modernize the TCPA?

How can the Telephone Consumer Protection Act be updated to reflect changes in technology while still protecting consumers from unwanted calls?

At a hearing titled “Modernizing the Telephone Consumer Protection Act,” the House Energy and Commerce Subcommittee on Communications and Technology discussed this problem.

Subcommittee Chair Rep. Greg Walden (R-Ore.) noted in his opening remarks that “it is increasingly clear that the law is outdated and in many cases, counterproductive. It’s time to modernize the current law to reflect the incredible technological changes in our culture.”

The four witnesses who testified during the hearing backed up this characterization of the TCPA.

Michelle Turano of WellCare Health Plans Inc. told the legislators that concerns about the TCPA have caused her organization—which provides managed healthcare plans—not to send health-related reminders to patients on their cellphones, despite research that telephonic outreach via automated technology has been shown to be successful in encouraging consumers to receive important physician-recommended screenings.

Turano said businesses need greater clarity in TCPA application as well as harmonization between the statute and the Health Insurance Portability and Accountability Act (HIPAA).

Similarly, Shaun W. Mock from Snapping Shoals Electric Membership Corporation testified that his nonprofit electric co-op ceased providing low balance reminder calls to customers after the group was hit with a class action lawsuit. “[T]he strict liability tenets found within the statute leave no room for reasonable application of the law that would reflect the modernization of telecommunications and balance the member-benefit of phone notifications with cooperative best practices,” he said.

Testimony also included statistics demonstrating that, between 2010 and 2015, the number of TCPA lawsuits jumped 940 percent with an average payout for plaintiffs’ attorneys of $2.4 million—numbers that Rep. Marsha Blackburn (R-Tenn.) said “[tell] us that something is terribly wrong with this process.”

To view the hearing and read the witness statements, click here.

Why it matters: In a background memo, the Subcommittee said the TCPA fails consumers on two fronts: “it fails to stop the flow of unwanted calls, and it discourages American companies from providing information to their customers through calls and texts. As a result, because the law has failed to keep pace with technology and society, companies are faced with having to choose between providing the services and notices consumers want with the threat of litigation.” The lawmakers seemed to agree that issues such as the definition of an autodialer and the revocation of consumer consent need to be addressed and updated, but much work remains to be done.


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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