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CLIENT ALERT: Federal Appeals Court Strikes Down Two FCC Provisions Relating to Automated Calls and Texts

March 22, 2018
Andrew B. Lustigman and Scott A. Shaffer

Companies that communicate with consumers through autodialed telephone calls or mass text messages should be aware that a federal appeals court has just struck down two key, pro-plaintiff Federal Communications Commission (“FCC”) interpretations of the Telephone Consumer Protection Act (“TCPA”). Although the ruling did not provide clear limits to what marketers can and cannot do, it certainly provides marketers and debt collectors with important tools that should make life more difficult for class-action plaintiffs.

Here are the highlights of the decision in ACA International. v. FCC (issued on March 16, 2018 by the District of Columbia Circuit Court of Appeals):

  • The biggest boon to companies using automated call and mass text message technology covers the issue of reassigned telephone numbers. If a company has prior express consent from a consumer to call or text his or her mobile phone, but the phone number subsequently passes from the consumer to someone else, the FCC held that $500-per-call liability under the TCPA attached to the company after only one call to the new owner. The FCC applied this rule even if the company did not know the phone number had been reassigned to a new person. The appellate court found this one-call safe harbor to be arbitrary and capricious and struck it down, asking rhetorically, “why does a caller’s reasonable reliance on a previous subscriber’s consent necessarily cease to be reasonable once there has been a single, post-reassignment call?” The appellate court seemed to doubt that the TCPA should be a strict liability statute for reassigned numbers. This portion of the ruling is significant because plaintiffs often sue for dozens, or even hundreds, of calls or text messages and the TCPA provides a remedy of $500 per call. Factor in a multiplier for class actions and the liability to businesses quickly becomes astronomical. (Dish Network is currently fighting a $61 million dollar TCPA verdict against it). Companies should now be able to show they acted reasonably in calling a reassigned number more than once.
  • The other significant blow to FCC interpretations of the TCPA involved the definition of an autodialing device. The TCPA covers calls (and text messages) sent via an autodialing device and/or using a prerecorded message. Until March 16th, the FCC took a very broad view of what constituted an automatic dialing equipment. Based on statutory language written in 1991, the FCC deemed any call equipment to be an autodialer if it “had the capacity” to store/produce and then dial numbers on a random or sequential basis. The appeals court found that the FCC interpretation meant that, under 2018 technology, most smart phones now qualify as autodialers, which clearly is an unsatisfactory result. The appellate court therefore struck down the FCC definition, stating, “The TCPA cannot reasonably be read to render every smartphone an ATDS subject to the Act’s restrictions, such that every smartphone user violates federal law whenever she makes a call or sends a text message without advance consent.” The appellate court did not, however, provide a new definition of the term.
  • The decision was not a total loss for the FCC, because the appellate court upheld one key FCC interpretation concerning the right to revoke previously given consent to receive automated calls or text messages. Consumers remain free to revoke previously given consent by any reasonable method, including oral notification, so long as the revocation “clearly expresses a desire not to receive further messages.” Some companies, when obtaining consumer consent, have been attempting to limit consumers’ right to revoke consent by requiring them to use certain designated methods (for example, sending a letter or using particular language). The appellate court’s ruling rejected such strategies.
  • The appellate court also validated the FCC’s exemption for calls having a healthcare treatment purpose such as reminders about medical appointments, vaccinations and prescription notifications. While healthcare companies are exempt for those types of calls, they still must adhere to the TCPA for calls relating to accounting, billing, debt collection and other financial matters.

Although the March 16, 2018 appellate court ruling was undoubtedly pro-business and pro-defendant, it did not provide clear standards for legal liability, it merely struck down two significant FCC interpretations as arbitrary and capricious. Normally, an appeal to the Supreme Court would be expected, but the FCC, whose leadership has changed under President Trump’s administration, has already said it will not appeal. Instead, it will head back to the drawing board to try and adapt a 27 year-old statute to today’s technology. With respect to the reassigned number issue, there is already proposed rulemaking under consideration that would create a directory of recently reassigned mobile numbers and provide a safe harbor for businesses that scrub their calling lists against that directory.

Please contact the Olshan attorney with whom you regularly work or one of the attorneys who authored this alert if you would like to discuss these issues further or have any questions.

This publication is issued by Olshan Frome Wolosky LLP for informational purposes only and does not constitute legal advice or establish an attorney-client relationship. In some jurisdictions, this publication may be considered attorney advertising.
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