TCPA Connect - July 2014

by Manatt, Phelps & Phillips, LLP

In This Issue:

  • Donna Wilson Invited to Speak on TCPA Developments at Advertising, Marketing & Media Law MCLE Seminar
  • TCPA Suit Claims Obligation To Check Recycled Numbers
  • Ninth Circuit Finds No TCPA Vicarious Liability for Taco Bell for Texts Sent By Franchisee
  • Missouri Federal Court Finds That TCPA Plaintiff Contractually Consented To Calls By Third Parties
  • Conflicting ATDS Definitions Continue: New ND of Illinois Ruling is Bad for TCPA Defendants
  • Don’t Change Your Number: Just Put It In Your TCPA Complaint
  • Ohio District Court Strikes “Fail-Safe” Class Allegations In TCPA Suit
  • Noted and Quoted . . . Law360 Seeks Insight from Becca Wahlquist on 9th Circuit’s TCPA Ruling

Donna Wilson Invited to Speak on TCPA Developments at Advertising, Marketing & Media Law MCLE Seminar

On July 25, 2014, Manatt litigation partner Donna Wilson will speak at a session titled “All About the Telephone Consumer Protection Act” during Bridgeport Continuing Education’s Advertising, Marketing & Media Law: Litigation & Best Practices Seminar.

Additional sessions throughout the program will cover false advertising litigation, online and mobile space advertising, and advertising law and regulatory developments in California and at the FTC.

The seminar will be held in Costa Mesa, California. For more information, click here.

TCPA Suit Claims Obligation To Check Recycled Numbers

The latest company to fall prey to a Telephone Consumer Protection Act (TCPA) class action?

Twitter, facing a California suit from a plaintiff who claims she never opened a Twitter account or consented to receive text messages from the micro-blogging site. Despite that, she says she received multiple “impersonal, promotional text messages” from Twitter right after she bought a new cellphone, up to six messages per day.

Massachusetts resident Beverly Nunes alleged that Twitter caused actual harm to consumers by failing to check its contact list for “recycled numbers,” which are cellular telephone numbers that have been deactivated by a user and then reassigned to a new subscriber.

“Twitter knows, or is reckless in not knowing, that its SMS text messages are sent to non-consenting, recycled cellular number subscribers,” in violation of the TCPA, according to the complaint. “Twitter is responsible for verifying cellular telephone number ownership and obtaining consent before sending automated text messages to cellular telephone subscribers.”

The complaint referenced the Mobile Marketing Association’s guidelines, which recommend, as a best practice, that mobile marketers have a system in place for managing deactivation and recycled number information, as consent from a prior owner does not transfer to the new recycled cellular number’s owner.

Twitter has little incentive to follow the guidelines, Nunes claimed, because the company is paid based on the volume of activity of people using its platform: the more SMS messages sent by Twitter – authorized or not – the more people who may participate in the site and engage in its advertisements, generating more income for Twitter.

Seeking statutory damages and costs, the complaint also alleged that Twitter ignored recipients’ attempts to halt the messages when they replied with a “STOP” request.

To read the complaint in Nunes v. Twitter, click here.

Why it matters: Yahoo faced a similar suit that was dismissed earlier this year when the court found the company did not use an automated telephone dialing system as required by the statute, a decision currently on appeal.

Ninth Circuit Finds No TCPA Vicarious Liability for Taco Bell for Texts Sent By Franchisee

On July 2, 2014, the Ninth Circuit issued an unpublished decision in Thomas v. Taco Bell Corp. that is certain to give heart to defendants finding themselves being sued for calls/texts/faxes sent by another corporate entity under a vicarious liability analysis.

In 2005, an association of 12 Chicago-area Taco Bell store operators (one of which was Taco Bell Corp., with 160 stores, collectively, “ESW”) promoted its Nachos Bell Grande product through a text message campaign, hiring an advertising agency isph!net (“Ipsh”) to conduct the campaign. Tracie Thomas received one of the texts, which spawned her California-based TCPA lawsuit against Taco Bell Corp. As Taco Bell Corp. itself did not send the text message, the district court found it had direct liability under the TCPA.

The Ninth Circuit agreed with the district court’s ruling that there was no vicarious liability for Taco Bell Corp., because “[a]ll of [the] control over the manner and means of the text message campaign was exercised by the [Chicago] Association, ESW, and Ipsh, and Ms. Thomas has not presented any evidence . . . demonstrating that Taco Bell [Corp.] controlled the actions of these entities with respect to the campaign.”

The Ninth Circuit further indicated that even if principles of apparent authority and ratification could arguably provide a basis for vicarious liability, “Taco Bell Corp. cannot be held liable on either theory” because (1) Thomas did not demonstrate that she reasonably relied (to her detriment) on any apparent authority Taco Bell may have given to others, and (2) a ratification theory only holds up if the actor is an agent of the principal, and there was no evidence that Ipsh, ESW, or the Chicago association was an agent of Taco Bell Corp.

Why it matters: The Ninth Circuit, in its short and unpublished opinion affirming the trial court’s dismissal of the TCPA lawsuit, has indicated that TCPA liability does not simply work its way up the chain of actors to the deepest pocket. Instead, the court confirmed that a defendant must control the manner and means of a marketing campaign and the actions of the entities placing text calls, or that some other solid proof of agency must exist.

Missouri Federal Court Finds That TCPA Plaintiff Contractually Consented To Calls By Third Parties

When a TCPA plaintiff agreed to the terms of her health insurance plan – including a provision that the insurer could share her phone number with other companies working with the plan – she provided consent to be contacted by those third parties, according to a decision from a Missouri federal court.

Suzy Elkins enrolled in her employer’s health plan with Coventry Health of Missouri. During the enrollment process, she provided a phone number (which was on the federal Do Not Call Registry) and agreed to abide by the terms of the agreement which included a provision that Coventry could use and share the personal information provided with “other businesses who work for the Plan … [t]o tell you about treatment options or health related services.” The agreement also provided that members had a right to ask for restrictions on the use of their information.

Elkins was given a card from Coventry and Medco Health Solutions, a prescription benefit management service that contracted with the plan. Over a 12-month period, she utilized Medco’s services to fill 12 prescriptions. When Elkins stopped using the service, Medco made two phone calls to the number she provided Coventry.

Based on the calls, Elkins alleged Medco violated the TCPA and the federal Do Not Call rules. The company moved for summary judgment, arguing that she had provided prior express consent to be contacted when signing up with Coventry Health and had an established business relationship with the company.

U.S. District Court Judge Terry I. Adelman agreed. “Plaintiff’s TCPA claim is barred because she gave her express prior consent to be called at the number she provided when she gave that number at the time of enrollment as her number for contact related to her healthcare benefits,” the court said. “It is uncontroverted that Plaintiff agreed in writing that she would abide by the provisions of the [plan agreement], and she never provided notice requesting she should not be contacted at the number she provided with respect to her health benefits.”

The calls from Medco were made “on behalf of her existing health plan regarding the pharmacy benefits she was receiving on an ongoing basis,” the court added. Elkins’ contention that she could not provide consent because she failed to review the documents and agreements at the time of her enrollment did not sway Judge Adelman. “The Court concludes that the provision of her cell phone number reasonably evidences prior express consent by Plaintiff to be contacted at that number regarding pharmacy benefits,” he wrote.

Medco also dodged Elkins’ claims alleging a violation of the Do Not Call rules because the company established an affirmative defense of an existing business relationship. “It is uncontroverted that Plaintiff had an established business relationship with Medco as evidenced by Plaintiff utilizing Medco’s prescription management services to fill twelve prescriptions,” the court wrote.

To read the order in Elkins v. Medco Health Solutions, click here.

Why it matters: TCPA defendants can take heart from the decision, which recognizes that the plaintiff provided prior express consent to be contacted by third parties when she enrolled in her health insurance plan – even if she did not review the documents in which she provided the consent. Moreover, echoing recent findings by the FCC, the Elkins Court agreed that consent given to a health plan could extend to a separate company doing business with that plan.

Conflicting ATDS Definitions Continue: New ND of Illinois Ruling is Bad for TCPA Defendants

In contrast to recent decisions on the issue of what qualifies as an automated telephone dialing system (“ATDS”) under the TCPA, a judge in Illinois held that a machine may fit the bill even if it doesn’t have the current capacity to randomly or sequentially generate numbers.

The case involved social networking service Path, Inc. Illinois resident Kevin Sterk sued the company after he allegedly received an unsolicited promotional text message. After limited discovery on the issue of whether the text was transmitted via an ATDS, the parties both moved for partial summary judgment. The central question was one about the capabilities of the calling equipment.

ATDS equipment covered by the TCPA’s prohibitions is defined in the statute as “equipment which has the capacity: (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.”

Path argued that it did not have equipment with the capacity to generate random or sequential phone numbers. But relying on Federal Communications Commission decisions interpreting the TCPA, the court held the lack of equipment didn’t matter.

“The undisputed facts show that Path acquires a stored list of phone numbers from users,” U.S. District Court Judge Samuel Der-Yeghiayan wrote. “The undisputed facts also show that Path’s agent then uses automated equipment to make calls from that list. The FCC found that a predictive dialer, which makes calls from a database of numbers constitutes an ATDS. The FCC emphasized that the main requirement for an ATDS is not the capacity to generate random or sequential numbers, but rather to be able to ‘dial numbers without human intervention.’”

Path countered that human intervention occurs when a user works his or her way through prompts to upload their contact list, but the court disagreed. “[S]uch conduct by Path users merely relates to the collection of numbers for Path’s database for numbers. The undisputed evidence shows that the equipment used by Path’s agent made calls from the list without human intervention,” the court said. “It is such calling that the section of the TCPA at issue in this case covers, not the collection of numbers for storage.”

Judge Der-Yeghiayan added that even if the FCC rulings were not controlling, he would reach the same conclusion based on Congressional history and “well-founded concerns” as to “the threats posed to the public welfare and safety by certain telemarketing practices.”

In a final attempt to sway the court, Path pointed out that the court’s interpretation could lead to absurd results, but the Court responded, the “TCPA does not bar the ownership of an ATDS. The TCPA bars the improper use of an ATDS to harass unsuspecting consumers and place the public safety at risk. If a person used a cellphone to send countless unsolicited text messages that harmed the public welfare in such a fashion, it would not be an absurd result to find that the cellphone user had violated the TCPA.”

To read the order in Sterk v. Path, click here.

Why it matters: The Path decision adds to the discordant rulings on the issue of what constitutes an ATDS. In April, a federal court judge in Pennsylvania tossed a TCPA suit after finding that the plaintiff failed to present evidence that the existing configuration of Yahoo!’s system rendered it an ATDS while a Washington court reached a similar decision in February. This dichotomy in decisions demonstrates the continuing conflict between federal courts on the issue and the need for companies to be cognizant of the equipment being used to place telephone calls or send text messages, as there is little certainty right now which way a judge may rule.

Don’t Change Your Number: Just Put It In Your TCPA Complaint

In a move that will help TCPA defendants to investigate claims brought against them, a federal court in Michigan held that a plaintiff failed to state a claim under the statute because she neglected to plead the telephone number at which she claimed to receive illegal calls.

Tiffany Strand alleged that she received multiple automated calls to her cell phone from Corinthian Colleges over a four-year period offering her the opportunity to enroll in classes. Even after she requested that the calls stop, she said the calls continued. One problem: Strand did not put her telephone number in the complaint.

Corinthian filed a motion to dismiss for failure to state a claim, arguing that a plaintiff in a TCPA action must plead her telephone number to state a plausible claim for relief. Without the telephone number and the time and date of the calls, a plaintiff has not stated sufficient grounds for a claim, Corinthian said. Basing its holding only on the need to supply a phone number as part of the complaint, the court agreed.

Under Rule 8 of the Federal Rules of Civil Procedure and the heightened pleading standards articulated by the U.S. Supreme Court in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal, a defendant must be provided with fair notice of what the claim is and the grounds upon which it rests, U.S. District Court Judge Robert Holmes Bell explained. “Specifically, a plaintiff is required to plead facts that make a defendant’s liability plausible. This means going beyond factual allegations that are merely consistent with a defendant’s liability. … [T]he bare assertions in the complaint that the calls were placed to plaintiff’s ‘cellular telephone,’ are merely consistent with defendant’s liability, but do not serve to put defendant on notice of the grounds on which plaintiff’s claim lies.”

“The plain language of the statute refers to calls placed to a ‘telephone number assigned to a…cellular service.’ A plain reading of the statute then, shows that to prove her case a plaintiff must prove that a defendant called a specific telephone number and that the telephone number was assigned to a cellular telephone service,” the court wrote. “Notice pleading, therefore, under Twombly and Iqbal, necessarily requires that a plaintiff plead the telephone number in question to ‘raise a right to relief above a speculative level.’ Otherwise, as defendant argues, ‘[w]ithout the telephone number, TCPA defendants are forced to make educated guesses as to which telephone number belongs to a newly filed
plaintiff.’ ”

Strand’s alternative argument for omitting her telephone number – “privacy reasons” – was similarly insufficient. “[I]f plaintiff is concerned about the privacy of her telephone number, she can easily file it as an attachment under seal,” the court said. The court declined to dismiss the complaint with prejudice, which allows the plaintiff to file an amended complaint that includes her cellular telephone number.

To read the opinion in Strand v. Corinthian Colleges, Inc., click here.

Why it matters: The decision provides defendants with case law as support for requiring plaintiffs to plead a phone number allegedly called in TCPA suits or face dismissal of the complaint, which is a boon to defendants that have been unable to investigate TCPA plaintiffs’ claims in advance of formal discovery.

Ohio District Court Strikes “Fail-Safe” Class Allegations In TCPA Suit

In a recent TCPA case, the United States District Court for the Southern District of Ohio struck plaintiff’s class action allegations because plaintiff proposed a “fail-safe” class in which membership was dependent on the validity of the putative class member’s claim.

Plaintiff Chris Sauter filed suit against CVS Pharmacy for violations of the TCPA, alleging that CVS enrolled customers in a program that automatically refills their prescriptions without consent in order to meet internal sales goals. As part of the program, Sauter claimed he received a total of 12 calls from CVS with prerecorded messages about a prescription refill and the location of his pharmacy.

Sauter said he did not provide CVS with his phone number and never expressly consented to receive the calls. He proposed to represent a class defined as “all persons within the United States who received a non-emergency telephone call from CVS to a cellular telephone through the use of an automatic telephone dialing system or an artificial or prerecorded voice and who did not provide prior express consent for such calls” over a four-year period.

CVS responded with a motion to strike the class claims. Because the classes were defined so that whether a person qualified as a member depended on whether the person has a valid claim under the TCPA, they were “fail-safe” classes, CVS told the court.

U.S. District Court Judge James L. Graham agreed with CVS that Sauter’s classes met the definition of a “fail-safe” class – that is, a class that includes only those entitled to relief. “Each of the plaintiff’s proposed classes is defined to include only those individuals who did not expressly consent to the receipt of the defendant’s phone calls made with the use of an ATDS,” the court said – solely those persons who can establish CVS violated the TCPA.

“If the plaintiff successfully demonstrates that the defendant made calls using an ATDS or an artificial or prerecorded voice to the class members’ cell phones without the class members’ prior consent, then the class members win,” Judge Graham explained. “However, if the plaintiffs are unsuccessful in meeting their burden of proof, the class does not exist and the class is not bound by the judgment in favor of the defendant. This is the definition of a prohibited fail-safe class.”

The court noted limited case law on the issue of fail-safe classes in the TCPA context with contradictory results. A federal court in Illinois reached a contrary conclusion earlier this year in Wolfkiel v. Intersections Insurance Services Inc., while courts in California (Olney v. and Missouri (Lindsay Transmission LLC v. Office Depot) reached holdings in line with Sauter last year.

Because the proposed class definition was impermissible, the court granted CVS’s motion to strike but also granted Sauter 14 days in which to file an amended complaint.

To read the opinion in Sauter v. CVS, click here.

Why it matters: The Sauter decision recognizes a possible line of argument for TCPA defendants, albeit with the possibility that plaintiffs will be granted leave to amend and redefine their proposed class. However, a redefined and likely broader class raises another line of defense: the need for individualized analysis of whether each class member provided his or her express consent. This decision thus emphasizes the problems with class actions and the TCPA – a statute that has no class action provision.

Noted and Quoted . . . Law360 Seeks Insight from Becca Wahlquist on 9th Circuit’s TCPA Ruling

On July 10, 2014, Law360 spoke with Manatt partner Becca Wahlquist regarding the Ninth Circuit’s recent decision in Thomas v. Taco Bell, in which it affirmed the district court’s ruling that the company was not vicariously liable for a franchisee association’s alleged violations of the TCPA.

“Companies whose products are mentioned by independent companies in phone calls or texts are more often finding themselves getting sued under the TCPA for calls they didn’t make or authorize to be made,” Wahlquist said. “This is a favorable decision for defendants facing these types of suits because the Ninth Circuit has indicated that TCPA liability does not simply work its way up the chain to the entity with the deepest pocket.”

To read the article, click here.

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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