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Jury Awards $925 Million Against Company for Marketing Campaign that was not TCPA Compliant

A recent federal case presents a warning to businesses that market to potential customers through phone calls, texts or faxes. In Wakefield v. ViSalus, Inc., D. Org., No. 3:15-cv-1857 (April 12, 2019), the jury returned the largest damages award in history - $925 million - against a company for improper marketing under the Telephone Consumer Protection Act ("TCPA"). The award's size underscores the importance of TCPA compliance, which involves some unsettled legal issues.

TCPA Overview

The TCPA restricts the use of automatic telephone dialing systems or prerecorded voices to call, text, or fax consumers without prior express consent. The TCPA defines automatic telephone dialing systems as equipment that has the capacity (1) to store or produce telephone numbers using a random or sequential number generator and (2) to dial such numbers. This definition may potentially apply to a variety of technologies and what constitutes an autodialer remains in flux.

FCC Broadens View of Autodialers

The FCC has taken an increasingly broad view of what may constitute an autodialer over the last two decades. For example, in 2003, the FCC held that equipment that dials numbers and assists telemarketers in predicting when a sales agents will be available to take calls (predictive dialers) constitute automatic telephone dialing systems. Five years later, the FCC held that predictive dialers meet the definition of autodialers when they use customer lists to dial numbers even though the numbers are not randomly or sequentially generated. Finally, in 2015, the FCC issued an order finding that any equipment that had the potential capacity to dial random and sequential numbers, even if the device did not have the present ability to do so, is an autodialer subject to the TCPA.

FCC's View Meets Resistance

However, FCC's broadening view met some resistance last year. In ACA Int'l v. FCC, 885 F.3d 687 (D.C. Cir. 3/16/18), the D.C. Circuit Court set aside the FCC's 2015 ruling because the FCC's "utterly unreasonable" definition resulted in every smartphone qualifying as an autodialer. In reaching that decision, the court left unanswered whether the device itself must have the ability to generate random or sequential telephone numbers to be an autodialer.

Uncertainty for Louisiana Businesses

Since that ruling, courts throughout the country have split on the issue of whether equipment that dials stored numbers constitutes an autodialer. Fifth Circuit courts have not yet weighed in on this issue leaving Louisiana businesses uncertain as to whether they are complying with the TCPA.

Increased Risks

The uncertainty regarding autodialers is more alarming given increased risks. For example, filings of putative class-action TCPA complaints have increased in the last two years. Companies that have spent years developing customer lists and who use those lists to contact customers typically face multi-million dollar claims of statutory fines, including $500 to $1,500 per call. We had success for a client in the Western District of Louisiana, which refused to certify a TCPA class action seeking more than $50,000,000 in statutory damages because the company's policy required employees to contact individuals to obtain consent before fax advertisements were sent. To make matters worse, many insurance companies exclude coverage for TCPA claims leaving companies to shoulder the burden of defending against these claims and paying potential damages.

Some Steps to Consider

While courts sort out what constitutes an autodialer, how can your company avoid potential claims under the TCPA?

  1. Get consent to call, text, or fax all contacts. The TCPA exempts calls, texts, and faxes made with the express consent of the party contacted. Establishing a company policy of obtaining consent can be key in avoiding liability and in preventing class certification.
  2. Provide and respect opt-out notifications. The FCC has held that the TCPA permits revocation of prior express consent in any reasonable way at any time unless the parties have agreed to a procedure for revocation. Revocation may be made orally or in writing, and the TCPA may mandate certain notices in calls, texts, or faxes.
  3. Separate marketing from business-related contacts. The TCPA restricts certain calls, texts and faxes, but does not apply to attempts to collect debts or contacts made for purely informational or non-commercial purposes, with no included solicitations.
  4. Keep records of all calls, text messages, or faxes. While the burden of proving violations of the TCPA is on the plaintiff, once the plaintiff establishes a violation, it may seek to rely on telephone records to prove other contacts. Because those records do not include the content of the call, text, or fax, the plaintiff may argue that all contacts were in violation of the TCPA. Maintaining proof of non-marketing related contacts may reduce the potential statutory damages under the TCPA. 
  5. Do not call reassigned numbers. The FCC enacted a safe harbor rule allowing callers to avoid TCPA liability for the first call to a wireless number following reassignment. Recently, the FCC directed the establishment of a database of reassigned numbers. Once created, callers can avoid TCPA liability by showing that they checked the database and it showed that the number had not been disconnected or reassigned. Until the database is active, delete or do not call any wrong or reassigned numbers. 
  6. Verify compliance with other laws. In addition to complying with the TCPA, where applicable, companies should ensure compliance with state and federal Do Not Call laws, the Fair Debt Collection Practices Act, and other applicable laws and regulations.
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