Locked-In: TCPA Consent Not Revocable If a Term of Contract

by Eversheds Sutherland (US) LLP

Eversheds Sutherland (US) LLP

Consent to be contacted under the Telephone Consumer Protection Act (TCPA) is not revocable if included as a term of a written contract, according to a decision by the US Court of Appeals for the Second Circuit in Reyes v. Lincoln Automotive, No. 16-2104 (2nd Cir. June 22, 2017). Revocation of consent to be contacted, and the litigation that has arisen over opt-outs, has been a significant issue under the TCPA in recent years. The Federal Communications Commission (FCC) and a number of courts have issued rulings stating that consumers have a right to opt out of receiving calls by revoking consent. The Reyes decision, however, distinguishes unilateral consent given outside the context of a bargained-for exchange, which is revocable by a consumer under the FCC rules, from consent given as a term of a contract. Where consent is a term of a contract, the Second Circuit held that consent is irrevocable because one party cannot alter a bilateral contract by unilaterally changing or revoking terms.

The Reyes TCPA litigation arose out of an automobile lease between the plaintiff and the defendant. In the lease agreement, the plaintiff consented to receive manual and automated telephone calls from the company. After the plaintiff defaulted on the lease, the company made repeated calls to the plaintiff, including after he allegedly sent a letter revoking his consent to be contacted. The plaintiff sued for damages under the TCPA, alleging that the company did not have his consent for the calls. The district court granted summary judgment for the company, and the Second Circuit affirmed.

The Second Circuit held that the TCPA does not permit revocation when consent has been provided as part of a binding bilateral contract. In reaching this conclusion, the court distinguished prior authority holding that consumers have a right to revoke consent under the TCPA. According to the court, those authorities, including a 2015 FCC Order and opinions of two other federal circuit courts of appeal, address a different question: whether the TCPA allows a consumer who has freely and unilaterally given consent to later revoke that consent.1 The Reyes case, however, presented a question which had not been addressed by either the FCC or other appellate courts: “whether the TCPA also permits a consumer to unilaterally revoke his or her consent to be contacted by telephone when that consent is given, not gratuitously, but as bargained‐for consideration in a bilateral contract.”

The Second Circuit reasoned that consent is revocable when unilaterally given by the customer, but not where it is incorporated into a binding legal agreement. The court relied on basic contract law for the proposition that one party cannot unilaterally revoke terms of a contract, even non-essential terms in a standard form contract. The court acknowledged a “hypothetical concern” that its holding could be used by businesses to restrict opt-out rights by inserting consent provisions into form contracts, but found that this policy consideration was not a basis for creating a right to revoke contractual consent under the TCPA.

The decision is a significant victory for businesses facing TCPA litigation over opt-out issues or seeking to avoid litigation by strengthening consent. Even for companies that have procedures allowing customers to opt out of automated calls, the ruling provides a potential additional defense in the event litigation arises over opt-outs, which is not uncommon. The decision will likely have the most direct impact on non-marketing calls, such as collection calls, because many businesses include consent language in their standard form contracts. For marketing calls, however, the FCC rules preclude making consent a condition of purchase.

Disputes over revocation issues continue to play out in several forums. In its 2015 Omnibus TCPA Order, the FCC ruled that consent to be contacted is revocable and that businesses may not restrict the manner for opting out of receiving telephone communications. Instead, the FCC stated that companies must permit consumers to opt out by any reasonable means. The 2015 FCC Order is currently on appeal to the DC Circuit on a number of issues. Also, earlier this year, the DC Circuit struck down the FCC’s requirement that opt-out language be required on solicited fax advertisements sent with the express permission of the recipient.

With the ongoing wave of TCPA litigation, the standards for consent and revocation of consent will continue to be key issues in many new and ongoing cases.

1Gager v. Dell Fin. Servs., LLC, 727 F.3d 265, 270-72 (3d Cir. 2013); Osorio v. State Farm Bank F.S.B., 746 F.3d 22 1242, 1253 (11th Cir. 2014); Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 30 F.C.C. Rcd. 7961, 7993‐94 (2015) (hereinafter 2015 FCC Order)

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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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