Dialing In: TCPA Top 5 Issues for 2021

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Eversheds Sutherland (US) LLPWill anything stop the continuing barrage of class action lawsuits under the Telephone Consumer Protection Act (TCPA)? In 2020, TCPA lawsuits remained one of the most commonly-filed type of class action in federal courts across the country, and all signs indicate that the trend will continue in the year ahead. Yet potential changes loom on the horizon. The United States Supreme Court is poised to issue a decision that could dramatically impact hundreds of pending cases involving alleged autodialers and alter the TCPA landscape for good. New leadership at the Federal Communications Commission (FCC) could revise or clarify TCPA rules, and courts across the country continue to grapple with various issues regarding the scope and potency of the statute. Here, we discuss the TCPA Top 5 issues for 2021.

  1. The Supreme Court might (finally) tell us what an autodialer is.

Courts and businesses alike continue to struggle with the foundational TCPA question of what constitutes an automatic telephone dialing system (ATDS or autodialer). The question has finally reached the U.S. Supreme Court, in Facebook, Inc. v. Noah Duguid, and the Court is expected to issue its opinion in the coming months.

The history of the autodialer issue goes back decades to the 1991 enactment of the TCPA, but the significance of the question has come into sharp focus over the past five years. In a 2015 Order, the FCC expanded the definition of ATDS to encompass any equipment that has the capacity or potential capacity to dial numbers randomly or sequentially, even if the company does not use the device in that capacity or the device requires an upgrade to have those features. In early 2018, however, the FCC’s definition was struck down by the U.S. Court of Appeals for the D.C. Circuit. The FCC subsequently solicited comments from the public in order to develop a new rule, but the FCC has held off on setting a new standard despite the importance of the issue to hundreds if not thousands of pending matters in courts across the country.

Since the D.C. Circuit’s decision in 2018, some courts have moved partly back toward the FCC’s 2015 definition in finding that an ATDS can be a device that automatically dials numbers from a list, even if a random or sequential number generator is not used.1 Other courts, however, have held that an ATDS must have the capacity to generate numbers, which is a narrower interpretation seemingly more faithful to the plain language of the statute.2  These courts have held that to be an ATDS, the calling system must: (1) use a random or sequential number generator either to store or produce telephone numbers; and (2) dial the numbers.3

Is a device that simply stores and dials telephone numbers an ATDS, or must the device also use a random or sequential number generator? That is the question the Supreme Court stands to answer in 2021 with a decision in the Facebook case. The fate of hundreds of pending class actions hangs in the balance, as plaintiffs could face a much higher – in some cases, insurmountable – hurdle in prosecuting their claims.

  1. Impact of a new administration and a reconstituted FCC

The change of presidential administrations in January 2021 will result in an immediate change at the FCC.  Chairman Ajit Pai, who has served as chair for four years, has announced that he will leave the FCC in January.  With Pai’s departure, the FCC would be left with four members—two Democrats and two Republicans—until the Senate confirms a new member nominated by the incoming Biden administration. Even before a new commissioner is installed, however, the Biden administration can designate one of the sitting Democrats as the new chair, so that control of the FCC’s agenda will shift parties.

For the TCPA, the policy implications of the shift are as yet uncertain. Companies impacted by TCPA litigation risk had hoped that Republican control over the past four years would have resulted in more business-friendly rules—at a minimum to provide more clarity on permitted calling practices, if not also to get some relief from class action exposure based on technical violations. Those hopes mostly did not come to pass, and key issues remain unresolved (e.g., the FCC never issued new rules clarifying the definition of autodialer) and the wave of class actions has continued largely unabated. 

It is unlikely that a reconstituted FCC would be in favor of loosening TCPA rules. Nonetheless, any additional guidance that clarifies gray areas would be helpful for businesses seeking to comply with the TCPA.

  1. When does a plaintiff have standing to file a TCPA claim?

Does receipt of a single call or text constitute an “injury” sufficient for a plaintiff to file a TCPA lawsuit in federal court? What about two calls or texts? Is a momentary annoyance really enough injury to open the doors to a federal courthouse?

Federal appellate courts are reaching differing conclusions on standing, setting this up as a key issue to watch in 2021. Some courts have held that the receipt of one or two unsolicited calls or texts is a sufficient injury in facts to confer standing.4 But other courts are questioning whether such a minimal event really constitutes an “injury.” In 2019, a panel of the Eleventh Circuit held that the receipt of a single unsolicited text message did not amount to an “injury in fact” sufficient to establish Article III standing to bring a TCPA lawsuit.5 The court found that the plaintiff’s allegations, reflecting nothing more than a momentary annoyance, did not generate the harm necessary to support a claim in federal court. In a subsequent case, however, a different panel of the Eleventh Circuit opined that receiving “more than one unwanted telephone call” could be an injury in fact, and that the named plaintiff, who had asked not to be called, had alleged an injury traceable to the defendant’s alleged failure to maintain an internal do-not-call list.6 In a 2020 decision, a third panel in the same Circuit noted that “the point is close” as to whether even receipt of two calls is sufficient for standing.7

These cases touch on an area in TCPA law that warrants further clarification by the courts in 2021, specifically, delineating the types of harm and the degree of harm required to establish standing to bring a TCPA claim. Courts are scrutinizing whether cases alleging a small number of texts or calls are subject to dismissal for lack of standing. The injury question is also potentially significant at the class certification stage if the alleged class contains individuals who may lack standing.

  1. Who’s calling?  Standards for third-party liability under the TCPA

Companies that market products through third-party agents or distributors face a particular risk under the TCPA when their agents call, text, or fax consumers without obtaining the necessary consent. TCPA cases often implicate issues of vicarious liability when a third party initiated the communications on behalf of another party. Courts generally apply traditional agency principles in cases involving telephone calls and text messages. The TCPA makes it unlawful “to initiate” certain telephone calls and text messages, and both the FCC and courts have agreed that traditional agency principles govern the application of third-party or vicarious liability. The 2013 FCC declaratory ruling, In re Dish Network, 28 FCC Rcd. 6574 (2013), has been interpreted to establish that a person who does not physically initiate a telephone call, but rather relies on a third party to do so, may be held liable under the TCPA under the common law of agency, based on actual approval, apparent authority and ratification. Subsequent cases have applied the vicarious liability standard articulated in In re Dish Network to assess third-party liability under the TCPA.

With the proliferation of online lead generators and multi-channel marketing, class actions involving multiple parties are more and more common in the TCPA space. Some complaints allege vicarious liability based on the actions of third parties that may be far removed from the acts of one or more of the other defendants, who may have had no involvement in the allegedly unlawful telemarking. District courts are scrutinizing these allegations at the motion to dismiss stage, particularly where a plaintiff is not able to draw a clear connection between the various parties.8 In other cases, the relationships between the parties may raise multiple questions of fact. We expect courts will continue to evaluate the bounds of third-party TCPA liability in multiple new cases over the next year.

  1. Was the TCPA unconstitutional before 2020?

A small number of recent lower court decisions have called into question whether the autodialer prohibitions of the TCPA were unconstitutional—and therefore unenforceable—between 2015 and 2020. If this position gains traction in the courts, it could wipe away hundreds of pending TCPA lawsuits across the country that allege autodialing violations.

The theory for unconstitutionality is based on the U.S. Supreme Court’s 2020 decision in Barr v. AAPC,9 which struck down a robocalling exception for government debt-collection calls that had been enacted by Congress in 2015. In AAPC, the Court held that the government debt-collection exception was an unconstitutional content-based restriction under the First Amendment. The Court declined to strike down the TCPA’s robocalling restrictions in their entirety—as the petitioners were requesting—and instead applied severability principles to invalidate only the debt-collection exception while leaving the remainder of the statute intact. The result was that the bulk of the TCPA’s autodialing provisions are enforceable after the Supreme Court’s ruling in July 2020.

In a series of recent cases, however, defendants have argued that the existence of the unconstitutional provision with the robocalling portion of the statute rendered the entire robocalling section unconstitutional until the constitutionality of the statute was restored by the Supreme Court in July 2020. The first federal district courts to consider the issue agreed with the defendant and dismissed complaints that alleged robocalling violations that occurred before 2020.10 More recently, several district courts have gone the other way,11 with more courts set to consider the issue in 2021, including possible appeals of these early decisions. This is a key issue to watch that could have an enormous impact on litigation over pre-2020 calls and texts.

Conclusion

TCPA cases remained one of the most common types of class action in 2020, and that trend is expected to continue as 2021 gets underway. Plaintiffs’ lawyers will continue to target many different industries, and a strong TCPA compliance program is essential to help businesses of all kinds avoid TCPA lawsuits and potential exposure.

_____________________

1 Marks v. Crunch San Diego, LLC, 904 F.3d 1041, 1053 (9th Cir. 2018).
2 See e.g., DeCapua v. Metro. Prop. & Cas. Ins. Co., No. 18-00590-WES, 2019 WL 4757995, at *3 (D. R.I. Sept. 30, 2019); Denova v. Ocwen Loan Servicing, No. 8:17-cv-2204-T-23AAS, 2019 WL 4635552, at *4 (M.D. Fla. Sept. 24, 2019); Reed v. Quicken Loans, Inc., No. 3:18-cv-3377-K, 2019 WL 4545010, at *2 (N.D. Tex. Sept. 3, 2019); Adams v. Safe Home Sec. Inc., No. 3:18-cv-03098-M, 2019 WL 3428776, at *4 (N.D. Tex. July 30, 2019).;
3 E.g., Glasser v. Hilton Grand Vacations Co., LLC, 948 F.3d 1301 (11th Cir. 2020).
4 Van Patten v. Vertical Fitness Group, LLC, 847 F.3d 1037, 1043 (9th Cir. 2017) (receipt of two allegedly unsolicited text messages constituted an injury in fact).
5 Salcedo v. Hanna, 936 F.3d 1162 (11th Cir. 2019).
6 Cordoba v. DIRECTV, LLC, 942 F.3d 1259 (11th Cir. 2019).
7 Glasser v. Hilton Grand Vacations Co., 948 F.3d 1301, 1306 (11th Cir. 2020).
8 E.g., Bilek v. Fed. Ins. Co., No. 19 C 8389, 2020 WL 3960445, at *6 (N.D. Ill. July 13, 2020) (“[Plaintiff] does not allege that [defendant] had control over the quality, timing, and volume of calls, as well as the geographic location of customers to be targeted.”), appeal docketed, No. 20-2504 (7th Cir. Aug. 12, 2020); Rogers v. Postmates Inc., No. 19-CV-05619-TSH, 2020 WL1032153, at *4 (N.D. Cal. Mar. 3, 2020) (“[E]ven if the sender was authorized to market on [defendant’s] behalf, there are no factual allegations suggesting that [defendant] knew or reasonably should have known that the sender of the text or any of its agents or sub-agents were violating the TCPA on its behalf.”).
9 Barr v. Am. Ass'n of Political Consultants, Inc, 140 S. Ct. 2335 (July 6, 2020).
10 Creasy v. Charter Commc'ns, Inc., No. CV 20-1199, 2020 WL 5761117 (E.D. La. Sept. 28, 2020).
11 Shen v. Tricolor California Auto Grp., LLC, No. CV 20-7419 PA (AGRX), 2020 WL 7705888, at *4 (C.D. Cal. Dec. 17, 2020).

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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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