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October 19, 2016

TCPA Lawsuit Roulette

No one loves a perfect storm of circumstances like trial attorneys. While the collision of outdated laws and clumsy regulations make most of us cringe, clever plaintiffs’ lawyers see opportunity. When that opportunity is aided by the federal government, a federal court usually becomes involved.

Such is the case this week, as the DC Circuit hears from nine business petitioners, including the U.S. Chamber of Commerce, concerning a July 2015 FCC Declaratory Ruling that should have helped to modernize and clarify the outdated Telephone Consumer Protection Act (TCPA), but instead made that 1991 statute worse by interpreting the law in a way that enabled a swarm of lawsuits over harmless business-related phone calls and texts sent by well-intentioned companies to their own customers’ numbers. 

Last year, the FCC Declaratory Ruling allowed the plaintiffs’ bar to continue arguing that the modern tools businesses use to communicate with their customers are “autodialers” under the statute, so as to expose companies to staggering liability while strapping them with the impossible task of knowing when a customer provided phone number has been reassigned.  The FCC also created a “revocation” right from whole cloth without establishing any clear and functional way for such requests to be conveyed by a consumer.

Further, the FCC came up with a “one call” exception that provides no help to businesses who need to contact their customers.  According to the ruling, if a company calls a cellular number it was provided by a consumer, the company has one call to learn somehow that the number has been reassigned—regardless of whether the call rolls into an uninformative voicemail, is unanswered, or the individual taking the call does not identify himself or herself. After this one call, lawyers can allege that the company is on the hook for $500 per call.  And just one call to one person can anchor a class action lawsuit, leaving the company facing claims for billions of dollars in statutory damages.  

The TCPA also governs what type of equipment companies can use to place calls, prohibiting the use of certain defined “autodialers.”  The FCC, in its interpretation of what technology fits under this definition, refused to place common sense constraints on this definition, so that litigants can argue that even a mass-market cellphone could be considered an autodialer.  Indeed, the FCC could only provide an antiquated rotary phone as an example of equipment that definitely would not be an “autodialer” subject to lawsuits under the TCPA’s definitions. 

With 37 million wireless phone number reassigned each year, and with lawyers and professional TCPA plaintiffs combing all communications for possible TCPA claims, companies are forced to navigate the litigation floodwaters.  And after the FCC rule was finalized, sure enough the flood came. TCPA cases increased by 91%, and class action filings increased by 199%. 

Simply put, the FCC’s Declaratory Ruling makes company compliance with the TCPA nearly impossible unless they cease calling or texting their customers.  The only beneficiaries to this rule are the plaintiffs’ lawyers, who can rake in millions of dollars in settlement fees in class action cases, mostly for themselves.  In fact, one survey of federal TCPA settlements found that in 2014, the average attorneys’ fees awarded in TCPA class settlements was $2.4 million, while the average class member’s award in these same actions was $4.12.

Meanwhile, the impact of the FCC’s ruling is felt by customers and companies alike because it covers everything from a call from a pharmacy with a prescription reminder to a restaurant sending out a food safety alert. The type of litigation once reserved only for those annoying, aggressive dinner-time phone calls is now being used against virtually every company for everyday communications with their customers.

The TCPA was enacted to stop aggressive cold-call telemarketing, but is now primarily targeting entities placing calls for transactional or informational purposes.  To be sure, companies do not want to waste resources calling people who aren’t their customers or who do not want to receive communications. What businesses need is common sense, predictability, and a set of standards they can comply with.

The DC Circuit should take a hard and fair look at the FCC’s Declaratory Ruling. When it does, this court should find the agency overstepped its authority by creating an arbitrary ruling that holds companies to an impossible standard of compliance. The appellate court should act with common sense to end this game of lawsuit roulette.

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