Editor’s Note: The average cost of a Telephone Consumer Protection Act (TCPA) settlement is estimated at $6.6 million—and healthcare is among the top three industries being targeted for TCPA litigation. Though its sponsors in 1991 intended it for small claims court, the TCPA has turned into high-cost litigation with serious business, and even personal, consequences. Last year, an Illinois federal judge ruled that the CEO of a medical supply company was personally liable for $7.8 million in TCPA violations.
How can you protect your organization—and yourself? Manatt shared the answer at its recent webinar. In part one of our article summarizing the webinar, below, we provide an overview of the TCPA; examine consent requirements; and explain how an auto-dialer is defined, including relevant litigation. Watch for part two of our summary in our February “Health Update,” explaining informational vs. marketing calls, consent standards, the primary exemptions for healthcare calls and risk mitigation strategies.
Click here to view the full program free on demand, download a free copy of the presentation and access our new TCPA Quick Reference Guide. (Available free, the new TCPA Quick Reference Guide includes easy-to-use flow charts that help guide you to the right decisions around TCPA consent rules, as well as a valuable list of TCPA “dos and don’ts.”)
What Is the TCPA?
The Telephone Consumer Protection Act (TCPA) of 1991 is a federal statute that:
- Regulates and restricts the use of automated technology to initiate outbound phone calls
- Applies to voice calls, voice messages, SMS text messages and faxes
The TCPA does not regulate inbound telephone calls. When a patient calls a provider or another entity covered by the Health Insurance Portability and Accountability Act (HIPAA), the TCPA does not apply.
It is important to note that the TCPA is a federal law. There are state laws that can be even more restrictive than the federal TCPA. Therefore, when making outbound calls—or sometimes even inbound calls—it is critical to understand both the TCPA and state law requirements.
Many of those who have dealt with the TCPA believe it would be more accurate to say that it stands for Tread Carefully Piranhas Ahead. The “piranhas” are professional serial plaintiffs who make a living out of filing TCPA lawsuits. Of course, the piranhas also include the lawyers who represent the serial plaintiffs. The TCPA has become a very lucrative area for many plaintiffs and their attorneys—and as long as that is true, we will continue to see a large amount of TCPA litigation filed every year.
In 2016, we saw the number of TCPA cases hit an all-time high. Although things have slowed down a bit in the past couple of years, there are still thousands of TCPA suits filed across the country every year, most as class actions. The lawyers file class actions because they believe they can get more money for a settlement. Companies fear class actions, because costs can grow quickly if per-call damages are multiplied across every member of a class.
In the healthcare space, TCPA also could stand for Totally Confusing Protection Act. One of the most difficult challenges to deal with is navigating the intersection of the TCPA and healthcare. In healthcare, we must try to make several different laws coexist. For example, HIPAA rules are far more established and stringent than the TCPA—and it can be tricky to put HIPAA and the TCPA together.
TCPA Damages
The glut of TCPA litigation is no surprise, given the statutory damages available to TCPA plaintiffs. The limit is $500 per call—not per person or per entity—or actual damages, whichever is greater. Damages can aggregate quickly. If a pharmacy or a provider makes multiple telephone calls to a single patient, each call is eligible for statutory damages.
The TCPA also includes a provision for treble damages. Therefore, damages can be up to $1,500 per call—three times the $500 statutory limit per call—for willful or knowing violations. And there is no cap on statutory damages. It is not uncommon to see multimillion-dollar settlements. A case that involves 2,000 calls at $500 a call quickly reaches the $1 million mark—and that number soars to $3 million if treble damages apply.
That’s why it is so crucial to have a solid, well-executed TCPA compliance program in place. It just takes one disgruntled patient to file a class action that can cost an organization millions of dollars.
Overview of Consent Requirements
The TCPA requires consent for certain types of automated calls, including text messages, to residential landlines and mobile phones. The level of consent that’s required may vary depending on whether a business is calling a residential landline or a mobile telephone.
For residential calls, the TCPA regulates artificial voice or prerecorded voice messages. Calls made by live operators or auto-dialers do not trigger TCPA consent requirements for residential landlines.
For mobile calls, the TCPA does regulate artificial voice calls, prerecorded voice messages or auto-dialer calls. Calls made by a live operator that are manually dialed do not trigger the consent requirements of the TCPA.
What Is an Auto-dialer?
In 2015, the Federal Communications Commission (FCC) issued a lengthy ruling that included a definition of an automatic telephone dialing system (ATDS). The FCC ruling said that a system is an ATDS if it has the “potential capacity” to store or produce telephone numbers to be called through a random or sequential number generator and to call those numbers. That means that even if an organization is not using a system for auto-dialing—and even if implementing a software fix or unlocking a dormant ATDS is needed to perform auto-dialing—the system is considered an auto-dialer. Basically, under the rule, the only thing that was not an auto-dialer was a rotary phone. The FCC did say, however, that mere theoretical capacity is not enough to classify a system as an auto-dialer.
That rule led to several conflicting decisions. Many parties felt that the ruling was unfair and overbroad, and there were appeals before the D.C. Circuit Court of Appeals. In 2018, the D.C. Circuit vacated the FCC’s 2015 rule, calling it “utterly unreasonable.” The judges said that the FCC’s “potential capacity” definition was overly broad and could mean that anyone with a smartphone is violating the TCPA.
Federal Appellate ATDS Decisions
Unfortunately, there is still no clear FCC guidance. We do, however, have three major federal appellate court rulings from the Third Circuit, the Second Circuit and the Ninth Circuit.
The Third Circuit issued the most favorable ruling. In Dominguez v. Yahoo (June 2018), the decision states that capacity means the system’s present capacity to do auto-dialing. More importantly, it also says that, to be an auto-dialer, the system needs to have the present capacity to generate random or sequential numbers and to dial those numbers. The language around random or sequential numbers actually comes from the statute itself, but, over time, the FCC has interpreted that phrase out of the statute. The Third Circuit honored the language that’s in the statute, saying a system does need to generate random or sequential numbers to be an auto-dialer. It also says that human intervention is important. If there is evidence that the numbers were manually input, the system may not qualify as an auto-dialer.
In King v. Yahoo (June 2018), the Second Circuit also adopted a present capacity standard that looks at the functions a device is currently able to perform. Unfortunately, that decision doesn’t address random or sequential number generation or the role of human intervention.
States in the Ninth Circuit, such as California, are facing the toughest TCPA environment. The Ninth Circuit seems determined to hold on to the FCC order from 2015. In Marks v. Crunch San Diego (September 2018), the Ninth Circuit declines to address capacity, but cites its prior decisions which support a potential capacity standard. Therefore, the Ninth Circuit appears to support the same standard that the D.C. Circuit already found unreasonable. The Ninth Circuit also says that random or sequential number generation is not required for a system to be considered an auto-dialer, calling Dominguez “unpersuasive.” In addition, the Ninth Circuit states that a system can still be an ATDS even if there is some human intervention in the calling process.
Clearly, decisions about what is and is not considered an auto-dialer are all over the map. Whether or not a system is considered an auto-dialer really depends on where a lawsuit is filed.
The FCC Notice Post-Marks
Within days of the Ninth Circuit issuing the Marks decision, the FCC issued a notice for public comment. Noting that the “court interpreted the statutory language expansively,” the FCC insinuated that it did not agree with the Marks decision. All comments were due by October 24, 2018. We still have no further guidance around auto-dialers, though the FCC has been working on other issues related to the TCPA, such as blocking calls.
Note: Watch for part two of our article summarizing our TCPA webinar in the February “Health Update,” explaining informational vs. marketing calls, consent standards, the primary exemptions for healthcare calls and risk mitigation strategies.
Click here to view the full webinar free on demand, download a free copy of the presentation and access our new “TCPA Quick Reference Guide.” (Available free, the new TCPA Quick Reference Guide includes easy-to-use flow charts that help guide you to the right decisions around TCPA consent rules, as well as a valuable list of TCPA “dos and don’ts.”)