Consumer Crossroads: Where Financial Services and Litigation Intersect

We analyze in this client advisory the recent decision by a unanimous U.S. Supreme Court to narrow the definition of what constitutes an automatic telephone dialing system, or autodialer. Our analysis includes a take on the potential impacts of the decision, as well as the significance of a Democratic Party-controlled FCC. We note that the TCPA has not gone away and callers should continue to carefully consider how best to comply with its provisions to avoid further litigation and regulatory risk.

With a major U.S. Supreme Court decision leading the way, recent developments continue to reshape the landscape of the Telephone Consumer Protection Act (TCPA).

The Federal Communications Commission (FCC) recently issued a Declaratory Ruling clarifying the definition of an autodialer. Exactly what constitutes an autodialer under the TCPA has been a burgeoning topic in consumer litigation. The TCPA prohibits any person from texting or calling a cellular telephone number using an automatic dialing system (“autodialer” or “ATDS”) without prior express consent. The TCPA defines an ATDS as equipment which has the capacity to (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.

Hinshaw continues to monitor the deepening circuit split over what constitutes an automatic telephone dialing system (ATDS) under the Telephone Consumer Protection Act (TCPA), which restricts certain automated calls and text messages. To say there has been substantial debate by the courts and FCC concerning what constitutes an ATDS would be putting it lightly. And, just when it seemed a majority position was emerging, the playing field seems to have leveled with the Second Circuit's decision in Duran v. La Boom Disco, Inc.

We now have a split among federal circuits regarding the definition of an automatic telephone dialing system (ATDS), under the Telephone Consumer Protection Act (TCPA), which limits automated calls and text messages. What constitutes an ATDS has been debated both by the FCC and courts for quite some time. In 2008 and 2015, the FCC found that all predictive dialers were automated telephone dialing systems under the TCPA. In Marks v. Crunch San Diego in 2018, the Ninth Circuit, held that the TCPA applies to devices with the capacity to automatically dial telephone numbers from a stored list or devices that dial telephone numbers produced from a random or sequential number generator. Now, in Glasser v. Hilton Grand Vacations and Gadelhak v. AT&T Services, Inc., the Eleventh and Seventh Circuits have taken the opposite approach and found that an ATDS only includes equipment that dials randomly or sequentially.

The Eleventh Circuit, in Salcedo v. Hanna, has concluded that receipt of a single unsolicited text, allegedly sent in violation of the Telephone Consumer Protection Act (the "TCPA"), does not constitute a sufficient "concrete injury" to confer standing under Article III of the United States Constitution.

In 2018, the D.C. Court of Appeals issued ACA International, et al. v. FCC that set aside key determinations of the FCC's interpretations of what qualifies as an automated telephone dialer service (ATDS). The D.C. Circuit concluded that the focus of the Telephone Consumer Protection Act's (TCPA) definition of an ATDS should be on the device's "present capacity" to store and produce telephone numbers, as opposed to its "potential functionalities" or "future possibility." Since this decision, courts have remained split as to what qualifies as an ATDS, although there is a growing trend of courts concluding that a predictive dialer is not an ATDS unless it has the present capacity to store and produce phone numbers randomly and sequentially. On July 30, 2019, the Northern District of Texas joined that trend with its decision in Adams v. Safe Home Security Inc.

TCPA litigators have been closely monitoring the U.S. Supreme Court's docket waiting for a ruling in the PDR Network case. At stake is what kind of judicial deference should be given to the FCC's interpretation of the Telephone Consumer Protection Act (TCPA). Specifically, the Court was set to decide whether the Hobbs Act required the District Court to accept the FCC's legal interpretation of the TCPA. Numerous decisions at both the District Court and Circuit levels have held that trial courts have no discretion to review an FCC order interpreting the TCPA, meaning that courts must provide these orders complete deference.

Yesterday, the United States Supreme Court heard oral argument on appeal from the Fourth Circuit's decision issued in PDR Network, LLC v. Carlton & Harris Chiropractic, Inc. The issue is whether a district court must accept the Federal Communication Commission's (FCC) rule interpreting an "unsolicited advertisement" under the Telephone Consumer Protection Act (TCPA). The district court held that PDR Network, LLC did not violate the TCPA when it faxed an unsolicited advertisement to Carlton & Harris Chiropractic for a free Physicians' Desk Reference. In doing so, the district court declined to apply the FCC's 2006 rule that interpreted an unsolicited advertisement under the TCPA to include fax messages that promote goods or services at no cost. On appeal, however, the Fourth Circuit reversed concluding that the district court should have applied the FCC's rule because the Hobbs Act, which establishes judicial review for final orders of certain federal agencies, requires a party to first challenge an agency rule with the respective agency before challenging the rule in court. The Supreme Court is left to decide whether the district court has authority to hear PDR's challenge to the FCC's rule in its defense of this TCPA lawsuit without any prior agency challenge.

The Second Circuit, in King v. Time Warner Cable, Inc., and the Third Circuit, in Dominguez v. Yahoo!, Inc., relied upon the D.C. Circuit's decision in ACA International v. FCC in limiting the definition of an autodialer under the Telephone Consumer Protection Act. Dominguez found that Yahoo's text message system did not fit the definition of autodialer, while King emphasized that only a device that currently has the ability to perform autodialing functions can qualify as an autodialer system.

In Nicole Rando v. Edible Arrangements, International, LLC, a consumer sued Edible Arrangements under the Telephone Consumer Protection Act (TCPA) arguing that the company sent her text messages after she had revoked her consent. The New Jersey federal court granted Edible's Motion to Dismiss, finding that the consumer's revocation was not "reasonable." The consumer was prompted to text "STOP" if she wished to revoke her consent, but the consumer responded instead with long sentences such as "Thank you. I'd like my contact info removed" or "I asked to be removed from this service a few times. Stop the messages."

In a case we have been tracking closely, a unanimous panel of the D.C. Court of Appeals set aside two key determinations of the FCC's interpretations of the Telephone Consumer Protection Act. In ACA International, et al. v. FCC, Judge Sri Srinivasan found that the FCC's "explanation of what qualifies" as an automated telephone dialer service (ATDS) and its one-call safe harbor for calling a phone number that has been reassigned to a non-consenting person was arbitrary and capricious. However, the Court sustained the FCC's rulings on revocation of consent "through any reasonable means clearly expressing a desire to receive no further messages" and the scope of the exemption for "time-sensitive healthcare calls."

The year of 2017 was highly volatile for the consumer financial services industry and featured significant court rulings, regulatory changes, and other developments.

A leading Plaintiff's TCPA firm filed a class action against the Buccaneers in 2013, arguing certain company faxes violated the TCPA. The faxes in question contained advertisements promoting football ticket sales, and were alleged to have been sent without consent. While the class certification motion was pending in the original class action, one of the plaintiff's attorneys left the firm and moved to another Plaintiff's firm.

In another court's journey into the murky waters of constitutional standing post-Spokeo, the Third Circuit Court of Appeals concluded that one single voicemail on a consumer's cell phone is sufficient to confer standing under the Telephone Consumer Protection Act (TCPA). In Sussino v. Work Out World, Inc., the plaintiff alleged that she received an unsolicited call on her cell phone from Work Out World (WOW). When she did not answer, WOW left a prerecorded promotional offer lasting more than one minute on her voicemail. WOW moved to dismiss for lack of standing under Article III. The district court granted WOW's motion on the grounds that a single solicitation was not "the type of case that Congress was trying to protect people against," and in any event, the call and voicemail did not cause a concrete injury. Sussino appealed.

In a cautionary tale for the defense bar, the Third Circuit recently upheld a consumer's TCPA claims and reversed summary judgment on the FDCPA claims in Daubert v. NRA, Nos. 16-3613 and 16-3629 (3d Cir. July 3, 2017).

The Second Circuit Court of Appeals has split with the Third Circuit, the Eleventh Circuit, and the Federal Communications Commission (FCC), and utilized contract principles to hold that a consumer may not necessarily have the ability to unilaterally revoke consent to contact under the Telephone Consumer Protection Act (TCPA). The decision shifts the focus of a TCPA claim from simply deciding whether the consumer revoked consent to whether consent to contact could be revoked by contract standards.

A judge in the Southern District of New York recently held that an automated, pre-recorded message sent on behalf of Rite Aid informing recipients to obtain a flu vaccine shot was exempted from the Telephone Consumer Protection Act (TCPA), by virtue of the FCC’s Health Care Rule exemption. The exemption permits health care providers to contact customers in order to convey important "health care messages" as defined and covered by HIPAA.

After a car dealership (allegedly) texted a person who listed a car for sale on Craiglist, the would be seller filed a class action suit against the dealer claiming the texts were unsolicited, made without consent, and violated the Telephone Consumer Protection Act (TCPA).

We return to the issue of retail debt collection with a case out of Illinois in which a federal judge has asked a jury to decide if a debt collection agency’s constant calling to a Banana Republic credit card holder violated the Fair Debt Collection Practices Act (FDCPA). The debt collector called the cardholder three to five times each day, with no two calls made less than two hours apart, for a total of eighty-seven calls between December 5 and December 23. On the 87th call, the cardholder answered and told the debt collector she could not pay the debt and to stop phoning her. Even though the debt collector did not call the cardholder again, the federal court refused summary judgment and decided a jury should review whether the volume and pattern of calling amounted to harassment under the FDCPA. We previously reported on a case out of California where a federal judge dismissed an FDCPA claim under the same circumstances and against the same debt collector.