EFC/NCHER Student Loan Legal Meeting: TCPA Litigation Update Arthur J. Rotatori McGlinchey Stafford PLLC arotatori@mcglinchey.com

Telephone Consumer Protection Act What does it apply to? Automatic telephone dialing systems Artificial or prerecorded messages Calls to landlines Calls to cell phones Who does it apply to? Anyone – not just for telemarketers But life just got a little harder for telemarketers

Telephone Consumer Protection Act TCPA defines “automatic telephone dialing system” 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. As long as the equipment has the capacity to perform both functions, it is considered to be an “automatic telephone dialing system” for TCPA purposes, even if the function is not used.

Telephone Consumer Protection Act Conflict between the FCC’s 2012 Report and Order containing the amended regulations and the text of the TCPA and the regulations themselves. Deals with calls to residential landlines using an automatic telephone dialing system. Unclear whether prior express written consent is required for autodialed telemarketing calls to residential landlines if there is no artificial or prerecorded voice message.

Telephone Consumer Protection Act Report and Order: “…we require prior express written consent for all telephone calls using an automatic telephone dialing system or a prerecorded voice to deliver a telemarketing message to wireless numbers and residential lines.” Regulation: No person or entity may initiate any telephone call to any residential line using an artificial or prerecorded voice to deliver a message without the prior express written consent of the called party …

Telephone Consumer Protection Act Effective October 16, 2013 – calls to residential landlines using artificial or prerecorded messages and calls or text messages to cell phones that use ADAD equipment or prerecorded message that contain an advertisement or constitute telemarketing require the called party’s prior express written consent

No Advertisement or Telemarketing Prior Express Written Consent Old Rules New Rules Type of Call Advertisements/ Telemarketing No Advertisement or Telemarketing CELL PHONE CALL Using Automatic Telephone Dialing System OR Artificial or Prerecorded Message Prior Express Consent Prior Express Written Consent LANDLINE CALL Using Artificial or Prerecorded Message No Prior Express Consent Required •Because of Established Business Relationship •Also because no Advertisement or Telemarketing NOTE: Unclear whether prior express written consent is required for calls using automatic telephone dialing system only. •Because no Advertisement or Telemarketing

Some Case Law Considering Auto-Dialers Case law concerns either: The capacity issue: the ability to store numbers or The consent issue: What did the consumer authorize

Some Case Law Considering The Capacity Issue Boyd v. Gen. Revenue Corp., 2013 WL 866944, at *12 (M.D. Tenn. March 7, 2013) – Granting the defendant’s motion for summary judgment because the defendant’s business records reflected that the calls to the plaintiff's cell phone number were manually dialed by an individual debt collector, not by an auto-dialer.

Ploch v. FirstSource Advantage, LLC, 2012 WL 5384876, at. 4 (E. D. Mo Ploch v. FirstSource Advantage, LLC, 2012 WL 5384876, at *4 (E.D. Mo. Nov. 1, 2012) – Denying defendant’s motion for summary judgment based on a genuine issue of material fact despite defendant’s declaration that all calls to the plaintiff’s cell phone number were manually dialed through a PBX phone system that does not have the capability to store or produce telephone numbers to be called, using a random or sequential number generator, or to dial such numbers.

Meyer v. Portfolio Recovery Associates, LLC, 707 F Meyer v. Portfolio Recovery Associates, LLC, 707 F.3d 1036, 1043 (9th Cir. 2012) – Reaffirming the Ninth Circuit’s earlier decision in Satterfield v. Simon & Schuster, 569 F.3d 946, 951 (9th Cir. 2009) that “the clear language of the TCPA ‘mandates that the focus must be on whether the equipment has the capacity ‘to store or produce telephone numbers to be called, using a random or sequential number generator.’”

Ibey v. Taco Bell Corp. , 2012 WL 2401972, at. 2-3 (S. D. Cal Ibey v. Taco Bell Corp., 2012 WL 2401972, at ** 2-3 (S.D. Cal. June 18, 2012) – “[A] system need not actually store, produce, or call randomly or sequentially generated numbers, it need only have the capacity to do it” but dismissing plaintiff’s TCPA claims for failure to adequately plead the elements of the claim. And at least 11 more cases on point.

Capacity And Expansive Liability Nelson v. Santander Consumer, USA, Inc., No. 11-CV-307-BBC, 2013 WL 1141009 (W.D. Wis, Mar. 8,2013) A person who receives a call has a private right of action under the TCPA, even if the person is not the telephone account holder or subscriber. The private right of action under the TCPA is not limited to the subscriber or person named on the bill. Instead, any person who answers or receives the call has a private right of action.

Nelson v. Santander Santander asserted the consumer did not have a right to sue because the TCPA protects the “called party” and should be limited to the person named on the bill, which was the plaintiff’s husband. The court disagreed noting nothing in the statute limits the protections to the owner. Distinct from the rule that an owner is the only party that has the right to provide consent under the TCPA.

Nelson v. Santander Technology that pulls numbers from internal database of numbers is a “predictive dialer” An employee that provides testimony about internal practices and how employer uses devices will be deemed sufficiently competent and qualified. In response to deposition notice that requires testimony regarding certain topics related to Santander’s use of predictive dialers, Santander cannot later assert the employee it offer to provide testimony is not qualified.

Nelson v. Santander Court reiterates that the TCPA considers whether a device has the capacity to store, produce, or call randomly or sequentially generated numbers, not whether it actually does so. Santander used the Aspect system, which offers predictive dialing (algorithm times when an employee will be ready to receive a called number) and preview dialing (employee will select a telephone number on a computer screen and the system calls it). Although the plaintiff did not identify which of the 1,000+ calls were placed using the predictive dialing method, this issue was irrelevant because the Aspect system had the capacity to do so even if most calls were made using the preview method.

Spoiler Alert Nelson decision was vacated by a joint stipulation of the parties and the case was dismissed with prejudice, June 7, 2013 But the facts and theory in Nelson provide a blueprint for copycat cases

Cases on the Consent Issue Whether consent was given Scope of the consent Whether consent can be revoked

Revocation of Prior Express Consent Courts have reached different conclusions regarding the consumer’s ability to revoke prior express consent and, when allowed, whether the revocation must be in writing or verbal. Consumer cannot revoke prior express consent. Gager v. Dell Financial Services, 2012 WL 1942079 (M.D. Pa. May 29, 2012) Oral statement that calls to cell phone are inconvenient is not a sufficient revocation. Cunningham v. Credit Mgmt., 2010 WL 3791104 (N.D. Tex. Aug. 30, 2010) Revocation must in writing. Starkey v. Firstsource Advantage, 2010 WL 2541756 (W.D.N.Y. Mar. 11, 2010).

Effective Prior Consent Mais v. Gulf Coast Collection No. 11-61936-CIV-Scola (S.D. Fla. May 8, 2013)

Case deals with the collection of a health care bill Consumer gave consent to the hospital, not to the health care provider seeking payment Debt collector working for health care provider called the consumer using a predictive dialer

Mais Court Held: Court had authority to determine validity of the 2008 FCC Ruling on consent FCC interpretation of express consent was really implied consent not authorized by TCPA Implied consent applies only to consumer credit transactions Any consent given ran to the hospital, not the health care provider

Another Potential Attack Lynn v. Monarch Recovery Management 1:11-CV-0284-WDQ (N.D. Md. March 25, 2013)

Collection calls regarding delinquent credit card Consumer’s phone line was originally a residential line but the consumer changed it to a VOIP subscription Consumer is charged $0.0149 per minute for each incoming call, in six-second increments Consumer is also charged $0.00149 for each caller ID transmission

Consumer was not the debtor The debtor was the consumer’s brother, who listed the consumer’s telephone number as his, or was the prior resident of the consumer’s house Consumer told debt collector that he was charged for the incoming calls; denied giving permission for the calls Debt collector left Foti messages on consumer’s voicemail Debt collector used the same dialing system used in Nelson

The Court and the parties treated this as a residential land line case, so the consent issue was not relevant Debt collector relied on the fact that its calls weren’t telemarketing calls Consumer alleged that the debt collector violated the TCPA prohibition on making calls that result in the called party being charged for the call

The Court interpreted the TCPA call charged provision to apply to: Residential telephone lines which use VOIP This appears to be the first case to squarely address this issue

Lessons from the TCPA Litigation A steady flow of new cases Some decisions are on appeal or may be vacated Reported cases provide a road map for future litigants No pro-industry trends – 500+ cases seeking between $500 and $1500 per call

Possible Solution FCC action is necessary to resolve these issues Preferred FCC response is to remove predictive dialers, when used to place non-telemarketing calls, from the definition of auto-dialers in the TCPA FCC appears to have authority under the FCC to create such an exemption

Such exemption would sidestep the prior express consent issue Petitions to create that exemption are currently pending with the FCC

QUESTIONS Arthur J. Rotatori arotatori@mcglinchey.com 216.378.9932