TCPA Connect -- Oct 16, 2013

by Manatt, Phelps & Phillips, LLP

In This Issue:

It's TCPA Day

It's October 16—"TCPA Day." Today the FCC’s updated Telephone Consumer Protection Act (TCPA) regulations will finally take effect. The new rules pose significant challenges for companies seeking to communicate with consumers by mobile phone, text, and pre-recorded calls. Specifically, marketers must obtain and possess a consumer’s “express written consent” prior to sending any of the foregoing communications.

To help you stay ahead of the curve, we’ve created this new monthly online news publication, TCPA Connect, which will highlight important TCPA-related cases and developments. We’ve also formed a new practice group, TCPA Compliance and Class Action Defense, to help our clients understand and comply with the new regulations and defend against regulatory and class actions brought under the Act. Manatt’s dedicated team is uniquely equipped to advise on the TCPA’s varied and complex challenges. Our 360-degree view is the result of decades of experience counseling major B2C and B2B companies, as well as the call centers and telemarketing solutions providers that serve them.

To test your knowledge of the TCPA, take our online quiz and see how you rate! Click here. And feel free to share this newsletter with friends and colleagues.

TCPA Settlement: Largely Dependent on Insurance Coverage

A New York-based company recently agreed to pay $10,000 in a suit alleging violations of the TCPA – plus any available insurance coverage up to a total of $10 million.

A Aventura Chiropractic Center filed a class action suit under the TCPA after it received a faxed advertisement from Med Waste Management offering a “Guaranteed 20% Savings” that did not contain the clear and conspicuous notice required under the statute and FCC regulations.

After a Florida federal court judge certified a class of the potential 20,000 recipients of Med Waste’s faxes, the parties reached an agreement.

The terms of the settlement provide for Med Waste to pay the class $10,000, but that the court enter judgment in the total amount of $10 million. Under the TCPA, statutory damages of $500 per fax would result in an award of at least $10 million for the estimated 20,000 faxes at issue. While the statute allows for trebled damages – potentially increasing an award to $30 million – the agreed-upon $10 million “is within the range of possible approval,” the parties wrote in a motion for preliminary approval of the deal.

Because Med Waste said it is unable to pay any more than $10,000 except through its insurance policy, the class agreed to a covenant not to execute against the defendant and its assets. Instead, the plaintiffs will seek recovery to satisfy the remainder of the judgment against Med Waste’s insurer, the James River Insurance Company (James River), which insured the company under a commercial general liability policy during the relevant time period. Defendants had promptly tendered notice of the suit to James River, but James River had denied coverage and refused to defend the litigation.

The agreement not to execute against the defendants remains in place “even if a determination is made that James River does not owe defense or indemnity coverage for the claims alleged in the litigation.”

“Further litigation of the underlying claims against defendants in this court, on appeal, or in bankruptcy will be expensive for the class and will not move the class members closer to collecting any money,” the parties wrote. “On the other hand, if this action is settled, the class can concentrate the efforts on seeking recovery from James River. The settlement should be preliminarily approved because it will minimize the inevitable costs of future litigation of this matter.” To read the parties’ motion in support of preliminary approval of the settlement in A Aventura Chiropractic Center, Inc. v. Med Waste Management, click here.

Why it matters: If approved, the settlement will shift the focus of the litigation from a TCPA action to an insurance recovery fight. Med Waste averred that it provided prompt and correct notice of the suit to James River and case law is on its side. Several courts have recently addressed the issue of whether TCPA damages are insurable, and policyholders won coverage in the 8th and 11th U.S. Circuit Courts of Appeals, federal courts in Massachusetts and Ohio, the Illinois Supreme Court, and the Missouri Supreme Court.

Noted and Quoted . . . Becca Wahlquist and Marc Roth Provide Insight on Critical Issues of TCPA Liability

On October 15, 2013, Bloomberg BNA’s Daily Report for Executives published an article by Manatt partner Becca Wahlquist that points to “auto-dialed” calls to mobile phones as the largest driver of litigation under the Telephone Consumer Protection Act (TCPA). Courts and the FCC are currently considering whether manual calls made on equipment that has the theoretical capacity to be used as an auto-dialer should fall within the TCPA’s definition of an “automated telephone dialing system.”

According to Becca, “businesses must consider the technological capabilities of the calling equipment they are using to reach out to customers’ mobile phones, and determine whether that dialing equipment has the ‘present capacity’ to random or sequentially dial phone numbers.” For companies that make outbound calls or other communications via telephone lines, Becca cautions how important it is to stay abreast of TCPA litigation and regulatory developments.

On October 16, 2013, the Daily Online Examiner, a blog published by Media Post, turned to Manatt partner Marc Roth to shed light on the requirement under the FCC’s new regulations that companies obtain consumers’ written consent before sending them SMS ads. The article cites a recent decision in which an Alabama federal court ruled in favor of a national retailer in a case that alleged the company spammed a customer with SMS messages after she had provided her cell phone number to a pharmacy. Under the FCC’s new rules, Marc commented, the result likely would have been different. Further, as the stakes of these cases are high, given that the law provides for damages of up to $1,500 per violation, and that the regulations have been tightened, Marc observed that “[t]here will be an increase in the number of class actions filed. . . . No doubt.”

To read the full 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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