The legislation and litigation regarding unwanted calls remain alive and well and show no signs of ending anytime soon. With recent statutes enacted by the federal and New York State legislatures, telemarketing and debt collection practices (or any other practices using automated or prerecorded calls) continue be a trap for the unwary or unprepared.
In the last several years, there have been thousands of class action lawsuits filed asserting claims under the Telephone Consumer Protection Act, 47 U.S.C. § 227 (“TCPA”) along with increased governmental and regulatory enforcement resulting in massive verdicts, settlements, and fines. For this reason, and notwithstanding some recent high-profile rulings that may help companies making these calls, the TCPA and related statutes continue to be regarded as low-hanging fruit by the Plaintiffs’ bar and serial Plaintiffs who continue to cash in from bringing these suits.
Aside from the crippling potential liability from private causes of action, this Legal Alert addresses recent state and federal ligation of which any entity using automated or prerecorded calls (or employs venders to do so) must be aware. Additionally, the TCPA has once again caught the eye of the United States Supreme Court, which just granted a petition to review a Fourth Circuit Court of Appeals ruling striking down an exemption to the TCPA regarding government-backed debt collection calls on First Amendment grounds.
Federal Legislation: Pallone-Thune TRACED Act
On December 30, 2019, the Pallone-Thune Telephone Robocall Abuse Criminal Enforcement and Deterrence (TRACED) Act was signed into law, amending the TCPA in numerous respects. The TRACED Act requires a multitude of rulemaking and reports over the next 12 to 18 months in an effort to curb illegal calls. The TRACED Act provides the Federal Communications Commission (FCC) with greater powers to pursue violators of the TCPA, including increased forfeiture penalties, a longer time period for the FCC to pursue violations, and the elimination of the requirement that the FCC issue a citation to a caller before seeking penalties for subsequent violations. In order to prevent telemarketers and scammers from “spoofing” the number from which their outbound calls are made, the TRACED Act also mandates that voice service providers implement STIR/SHAKEN call authentication to ensure that the calling party is accurately identified. In short, the TRACED Act will have wide-ranging effects on all aspects of automated calls and text messages in the coming months and years.
New York State Legislation: General Business Law (GBL) § 399-Z
Any company making telemarketing calls or using any vendor to make telemarking calls to consumers in New York state will need to be aware of a number of critical amendments to New York’s telemarketing statute (GBL § 399-Z), which goes into effect on March 1, 2020. Among the most notable of the amendments is GBL § 399-Z (9), which will require any telemarketer or seller to inform the customer that he or she may request that the telephone number be added to the entity’s internal Do-Not-Call (DNC) list. If the customer elects to do so, the telemarketer or seller is required to immediately end the call and add the number to the internal list. This amendment is a game-changer for many companies and telemarketing vendors that place calls into New York, by imposing an affirmative disclosure obligation regarding internal DNC requests that is not required under current federal regulations or by other states. Also, the company is not afforded any time or grace period to add a number to its internal DNC list. As such, companies using telemarketing and their vendors will need to quickly train their employees on the New York-specific disclosure requirements and adopt necessary training and technology so that internal DNC requests can be added in real time. (Needless to say, the requirement that consumers be expressly informed of their right to be added on an internal DNC list will surely cause internal DNC requests to skyrocket.)
Another critical amendment relates to data privacy/sharing, which on its face is extraordinarily broad in scope. Under GBL § 399-Z (10), as of March 1, 2020, no telemarketer or seller shall “transmit, share, or otherwise make available any customer’s contact information, including name, telephone number, or email address, which has been provided to such telemarketer or seller by such customer, to any person, corporation, or other entity without the express agreement of the consumer in writing….” Fines for violating GBL § 399-Z continue to be up to eleven thousand dollars ($11,000.00) per violation.
The United States Supreme Court Accepts Another TCPA Challenge
On January 10, 2020, the U.S. Supreme Court jumped into the fray, agreeing to review a First Amendment challenge regarding the constitutionality of a TCPA carve-out that exempted government-backed debt collectors from the TCPA’s ban on calls to cellular phones using an Automatic Telephone Dialing System (ATDS) or autodialer. See William P. Barr et al. v. American Association of Political Consultants et al., Supreme Court of the United States, case number 19-631. In Am. Ass'n of Political Consultants, Inc. v. FCC, 923 F.3d 159 (4th Cir. 2019), the Fourth Circuit Court of Appeals held in April 2019 that Congress’ addition of this exemption to the TCPA in 2015 violates the First Amendment as a content-based restriction on free speech that is fatally underinclusive. The exemption at issue covered more than 41 million borrowers that owed over $1 trillion in federal student loans as of the end of 2016, according to reports from the FCC. The Fourth Circuit invalidated the exemption for government-backed debt collection calls, but left the ATDS ban to cellular phones otherwise intact. The broader interests at issue are the numerous entities and political groups that wish to be exempted from the TCPA’s restrictions and have asserted that the bans on calls they wish to make violate Free Speech. Specifically, the American Association of Political Consultants submits that it should be permitted to make calls using an ATDS or prerecorded messages to inform voters on political issues and to solicit donations.
Facebook has separately asked the U.S. Supreme Court review a Ninth Circuit Court of Appeals decision involving unsolicited security notification text messages allegedly in violation of the TCPA. See Duguid v. Facebook, Inc., 926 F.3d 1146 (2019). In Duguid, the Ninth Circuit addressed what constitutes an ATDS and joined the Fourth Circuit in severing the government-backed collection calls exemption to the TCPA, but leaving the remainder of the TCPA intact. Charter Communications, Inc. and Spectrum Management Holding Company, LLC have also petitioned the US Supreme Court to review a Ninth Circuit Court of Appeals decision in a case involving a single phone call to the putative class Plaintiff, which was decided in tandem with and identically to Duguid. See Gallion v. Charter Communications, Inc., et. al., No. 18-55667 (9th Cir. 2019). The Charter Communications petition to the U.S. Supreme Court explains that the staggering statutory damages available ($500.00 - $1,500.00 per call) coupled with low burden to prove any individualized harm, has made the TCPA a magnet for putative class actions. Charter emphasized that the TCPA is one of the most frequently litigated statutes in the U.S. Code, noting that there has been nearly a 50-fold increase in TCPA class actions filed between 2009 and 2016, with jury awards as high as $1.6 billion.
While there has already been a tremendous amount of litigation and regulation regarding telemarketing and other calls and text messages using an ATDS or prerecorded voice, this issue still remains at the forefront of legislators and the Courts. With the amounts and interests at stake, these will continue to be hot-button issues for the foreseeable future. Those entities that will be affected by the rapidly-evolving landscape would be wise to become well-versed in these laws and developments, and to conduct a thorough and comprehensive review of their own practices, as well as the practices of any third-party agents they employ in an effort to minimize the risk for exposure.
