Context Matters: An ‘Established Business Relationship’ Can Be Created During a ‘Telephone Solicitation,’ Thus Preventing Subsequent Calls From Violating the TCPA

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A federal court has ruled that an “established business relationship” can be created during a call, even if that call is a “telephone solicitation” that violates the Telephone Consumer Protection Act (TCPA). Charvat v. Southard Corp., No. 2:18-cv-190 (S.D. Ohio). A copy of the opinion is attached; the defendants in this matter are represented by BakerHostetler. Southard stands for the proposition that the context of a call is important and must be considered in determining whether the TCPA was violated. Southard appears to be the first decision that specifically addresses this issue and could impact the amenability of certain types of TCPA class actions to certification under Federal Rule of Civil Procedure 23.

For the TCPA, Congress intended a “balanced approach … [to] ensure a robust telemarketing industry while giving consumers relief from unwanted telephone solicitations.” See 137 Cong. Rec. S8784 (Daily Ed. Nov. 27, 1991) (statement of Rep. Hollings). But, as any entity operating in the digital media and advertising space can attest, the TCPA lawsuit juggernaut has undermined this balance. Even a perfunctory Internet search will reveal numerous seven-figure (or more) TCPA judgments and settlements. Southard, however, may help restore the balance that Congress sought with respect to calls to persons on the National Do Not Call Registry (NDNCR).

There are three main restrictions under the TCPA – calls initiated via an autodialer or that use prerecorded messages, unsolicited faxes, and, at issue in Southard, calls to persons on the NDNCR. The “Do Not Call” provisions of the TCPA prohibit the initiation of telephone solicitations to persons on the NDNCR.” But excluded from the “telephone solicitation” definition are calls “[t]o any person with whom the caller has an established business relationship [EBR].” 47 C.F.R. § 64.1200(f)(14)(ii). An EBR is defined as “a prior or existing relationship formed by a voluntary two-way communication between a person or entity and a residential subscriber with or without an exchange of consideration, … on the basis of the subscriber’s inquiry or application regarding products or services offered by the entity within the three months immediately preceding the date of the call, which relationship has not been terminated by either party.” 47 C.F.R. § 64.1200(f)(5) (emphasis added). Neither “voluntary” nor “inquiry” is defined by statute or regulation, but “voluntary” is commonly defined as “done or undertaken of one’s own free will.” “Inquiry” is commonly defined as a “question” or “query.”

A consumer can create an EBR in numerous ways. Generally, the Federal Communications Commission (FCC) states that EBR inquiries are those from which “a consumer might reasonably expect a prompt follow-up telephone call regarding the initial inquiry or application.” Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 68 Fed. Reg. 44,144, 44,159 (July 25, 2003). A consumer can become an “existing customer” by “an inquiry, application, purchase or transaction by the residential telephone subscriber regarding products or services offered by the telemarketer.” Sept. 17, 1992 Guidance, 1992 FCC LEXIS 7019, at ¶ 35. A consumer’s inquiry into a telemarketer’s products and services is sufficient to create an EBR, even where a purchase, transaction or exchange of consideration has not occurred. See In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 18 F.C.C. Rec. 14014, 14014 (2003).

In Southard, the plaintiff alleged he received seven telephone solicitations from the defendant. Five of the calls were answered by either the plaintiff or his spouse, neither of whom objected, told the defendant to stop calling or expressed any displeasure about receiving the call. To the contrary, the plaintiff engaged the defendant in conversation and asked about the defendant and its services, information ostensibly designed to learn more about the defendant’s services (e.g., its website) and the quality of the services (e.g., warranty). The plaintiff gave no indication he was not interested in those services.

The plaintiff subsequently filed a class action against the defendant. The defendant moved for partial judgment on the pleadings, arguing the plaintiff’s inquiries into the defendant, its products and its services created an EBR. The plaintiff opposed the motion, arguing that he was not interested in the defendant’s services and instead was feigning interest in order to gather information for a potential TCPA lawsuit.

In determining whether the plaintiff had established an EBR, the court focused on two questions. First, was the relationship formed by a “voluntary two-way communication” (emphasis in the original)? Second, did the plaintiff make an inquiry or application regarding products or services offered by Southard? With respect to the “voluntary” question, the plaintiff argued the communications were not voluntary because his number is on the NDNCR. The plaintiff also argued that he was engaging with the caller only to discover its identity.

The court, however, disagreed with both arguments. After noting surprise that it found no case law directly addressing whether an EBR could be established during a call that ostensibly violated the TCPA, the court identified several cases that “implicitly” support that concept. The court stated that the plaintiff chose to engage with the caller after receiving the call. The plaintiff was not forced to communicate with the caller and could have not communicated at all by hanging up or by telling the caller that he did not want to receive any more phone calls. In short, regardless of the plaintiff’s motivations for engaging with the telemarketer, the plaintiff chose to engage, and this did not make an “otherwise voluntary conversation involuntary.”

With respect to the “inquiry” question, the court reviewed the transcripts of the calls and noted that during several calls, the plaintiff asked questions about the defendant and was “coy” about whether or not he was interested in purchasing windows, but the plaintiff did not “actually ask about the products themselves.” Instead, the plaintiff’s inquiries “were more akin to an inquiry about a business’s hours or location, which the FCC has said is insufficient to create an EBR (citing 68 Fed. Reg. 41,144). But on a later call, the plaintiff did inquire about the defendant’s products and services by asking about the warranty, which was “unambiguously an inquiry about products or services.” At that point, the “plaintiff moved from inquiries geared towards discovering the [defendant’s] identify to a seemingly legitimate question about what was being marketed.” That inquiry was “sufficient to create an EBR.”

That the plaintiff created an EBR with the defendant is consistent with the “balanced approach” intended by Congress, FCC regulations and common sense. Recall that the TCPA states that EBR inquiries are those from which “a consumer might reasonably expect a prompt follow-up telephone call regarding the initial inquiry or application.” Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 68 Fed. Reg. 44,144, 44,159 (July 25, 2003). And neither the statute nor its regulations limit the EBR exception to relationships established prior to or during the first call. Instead, the statute defines an EBR as a relationship created through any “voluntary two-way communication.” 47 C.F.R. § 64.1200(f)(5). In other words, Congress left room for the creation of an EBR during any call. Moreover, whether the person made an “inquiry” should not turn on whether the consumer was legitimately interested in the seller and its services. In Southard, the plaintiff received a call from the defendant, was “coy” about whether he was interested in the services and asked about a warranty, all the while not expressing any disagreement or displeasure whatsoever. Given that context, the defendant had no reason to suspect that the plaintiff was not interested in its services, and the plaintiff surely expected and in fact received “a prompt follow-up telephone call regarding the initial inquiry.”

While not referenced in the opinion, three background facts likely aided the court’s determination that the calls were voluntary and the plaintiff made an inquiry. First, the calls were recorded, and both the audio and transcripts of the calls were filed with the court; thus, there was no dispute about the tone or content of the calls. Second, the callers were polite, and the calls lasted as long as the plaintiff wanted. Third, the calls stopped as soon as the defendant received notice (through the mail) that the plaintiff did not want to receive such calls.

Southard stands for the proposition that an EBR can be created if a call recipient makes an inquiry – feigned or sincere – into the caller’s products or services. This rule is consistent with the balanced approach intended by Congress and could impact the amenability of certain proposed NDNCR classes to certification.

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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