The Telephone Consumer Protection Act ("TCPA") has been the subject of significant class and consumer litigation risk exposure for many industries, including financial institutions. In a July 6 ruling, the United States Supreme Court eliminated one liability exception that permitted cell phone robocalls to be used to collect on debts owed to or backed by the federal government. See Barr v. American Association of Political Consultants Inc., __U.S. __, 2020 WL 3633780 (July 6, 2020). The Court's mixed plurality ruling left both Plaintiffs and the financial services industry wanting more. Justice Kavanaugh's opening line is telling: "Americans passionately disagree about many things. But they are largely united in their disdain for robocalls."
The TCPA was enacted in 1991 in response to a growing number of telephone solicitations, and generally restricts a company’s use of automated phone equipment and artificial or prerecorded voice messages without prior express written consent from consumers. The TCPA prohibits almost all robocalls to cellphones. In 2015, the TCPA was amended by the Bipartisan Budget Act, and Congress created a government debt collection exception to the general robocall restriction. In essence, the exception allows debt collectors to utilize robocalls to collect on federally backed debts such as mortgages and student loans.
Shortly after the creation of this exception, the American Association of Political Consultants (“AAPC”) and several other political groups filed suit, arguing that the exception violated the First Amendment and that the TCPA was unconstitutional. The AAPC and others urged the Court to invalidate the entire TCPA, rather than eliminate the government debt collection exception.
The Kavanaugh Plurality Opinion - Surgical Severance
Applying well-settled First Amendment principles, the Court concluded that the exception was a content-based restriction on speech. The Court reasoned that because it is permissible under the TCPA to make a robocall that says “please pay your government debt” but illegal to make a robocall that says “please donate to our political campaign” the restriction is “about as content-based as you can get.” See Id.
Under First Amendment precedent, a content-based restriction on speech must satisfy strict scrutiny. Strict scrutiny is the highest standard of review that the Court employs, and for a law to satisfy strict scrutiny, the legislature must have passed the law to further a compelling governmental interest, and must have narrowly tailored the law to achieve that interest. The Court noted that “[a]lthough collecting government debt is no doubt a worthy goal, the Government concedes that it has not sufficiently justified the differentiation between government-debt collection speech and other important categories of robocall speech, such as political speech, charitable fundraising, issue advocacy, commercial advertising, and the like” and thus the Court concluded that the government debt collection exception could not pass strict scrutiny. Id.
Although the Court agreed with the AAPC that the exception was unconstitutional, it refused to invalidate the entirety of the TCPA. The Court stated that “Congress’s addition of the government-debt exception in 2015 does not cause us to doubt the credibility of Congress’s continuing interest in protecting consumer privacy” and noted that the American public is still very much united in its hatred of robocalls. Id.
Applying general severability principles, the Court severed the unconstitutional exception from the TCPA, leaving the remainder of the law in full force and effect. The Court reasoned that severing the narrow exception cured the First Amendment matter at issue.
The Dissents - Content Based Commercial Speech Injunction
Justices Gorsuch and Thomas cast the two votes against severing the debt collection provision, as they believed that severing the ban did not provide plaintiffs the relief for which they petitioned the Court. Rather, Justices Gorsuch and Thomas felt that a decision with more tangible relief, such as granting an injunction, would better protect the plaintiffs. Gorsuch wrote:
“[sic.] [I]t’s hard to see how today’s use of severability doctrine qualifies as a remedy at all: the plaintiffs have not challenged the government-debt exception, they have not sought to have it severed and stricken, and far from placing ‘unequal treatment’ at the ‘heart of their suit,’ they have never complained of unequal treatment as such.”
See Barr, __ U.S. __, 2020 WL 3633780 (July 6, 2020) (Gorsuch, J. dissenting).
In the partial dissent, Justice Breyer along with Justices Ginsburg and Kagan, held that unlike the plurality, they did not believe that the exemption for government-backed debt violated the First Amendment, arguing that the strict scrutiny test was inappropriately applied. Breyer wrote:
“The problem with that approach, which reflexively applies strict scrutiny to all content-based speech distinctions, is that it is divorced from First Amendment values. This case primarily involves commercial regulation—namely debt collection. And in my view, there is no basis here to apply “strict scrutiny” based on “content discrimination.”
See Barr, __ U.S. __, 2020 WL 3633780 (July 6, 2020) (Breyer, J. dissenting in part).
The three justices nonetheless concluded that the correct decision would be to remove the constitutionally-flawed provision, as the government-debt exception would not survive strict scrutiny under the reasoning outlined in the plurality opinion.
TCPA Compliance & Litigation Risk Going Forward
Justice Kavanaugh's plurality opinion clarifies in Footnote 12:
“...[A]lthough our decision means the end of the government-debt exception, no one should be penalized or held liable for making robocalls to collect government debt after the effective dated of the 2015 government-debt exception and before the entry of final judgment by the District Court on remand in the case, or such date that the lower courts determine is appropriate."
See Barr, __ U.S. __, 2020 WL 3633780 (July 6, 2020) (Footnote 12).
Notwithstanding, Justice Kavanagh's clarification, the Court's ruling leaves open the possibility of an uptick in TCPA claims challenging robocalls related to the collection of government debts.
In discussing the history and parameters of the TCPA, the opinion also highlights the primary exception that remains intact after the ruling for calls "made with the prior express consent of the called party" as codified in § 227(b)(1)(A)(iii)of title 47 of the U.S. Code. See Barr, __ U.S. __, 2020 WL 3633780 (July 6, 2020).
Financial services companies including mortgage, credit card and student loan servicers will continue to rely most heavily on obtaining express written consent to calling cell phones. As we move forward, entities should focus on the strength of and document management of consumer express disclosures and express written consent. Entities should also focus on accurately tracking and monitoring withdrawal of consent policies. Further, internal protocols pertaining to these processes should be reviewed and audited against the actual calls conducted by the entities.
In the class action context, a number of cases have focused on withdrawal of consent. The good news for those in the industry is that hurdles to class certification may include: appropriately defining a “withdrawal of consent” class, ascertaining the membership of such a class, the predominance of individualized issues as to when and how the withdrawal was communicated and whether company personnel may have made human error in processing that withdrawal. This focus on individualized withdrawal occurrences may tend to reign in potential classwide TCPA risk.
In not striking down the TCPA in its entirety, the Court’s decision also failed to deliver the hoped for relief of many in the servicing and collections industries. Such hopes for mitigating uncapped risk of legitimate automated calls in a "gotcha" withdrawn consent environment now rest, in part, on the Federal Communications Commission (“FCC”) following through on long-awaited guidance on the TCPA. Time will tell whether and, if so, in what form such guidance takes.