FCC: U.S. Government Is Not a Person Under TCPA
In response to petitions filed by three government contractors seeking clarification that the federal government and its agents were exempt from liability under the Telephone Consumer Protection Act, the Federal Communications Commission issued a declaratory ruling on July 5, finding that the federal government is not a “person” as defined under the TCPA, and is therefore exempt from liability under the statute. The FCC also exempted agents of the federal government from the TCPA when (1) the call was placed pursuant to authority that was “validly conferred” by the federal government; and (2) the agent complied with the federal government’s instructions.
The TCPA prohibits any “person” from placing autodialed or prerecorded calls without the prior express consent of the consumer. The TCPA defines “person” as an “individual, partnership, association, joint-stock company, trust, or corporation.” The petitioners asked the FCC to clarify that the federal government and its agents are not included in the definition of “person” for purposes of the TCPA.
The FCC granted all three petitions. It exempted the federal government and its agents for three reasons: (1) the federal government is not explicitly included in the definition of “person” under the TCPA; (2) the federal government exemption is supported by the Supreme Court decision in Campbell-Ewald Co. v. Gomez; and (3) imposing TCPA liability on the federal government would significantly constrain the government’s ability to communicate with its citizens.
The FCC found that there is a “longstanding interpretive presumption” that the word “person” excludes the federal government unless stated otherwise. Because the definition of “person” under the TCPA did not explicitly include the federal government, the FCC determined that Congress intended to exempt the federal government from liability under the TCPA.
The FCC also clarified that this exemption applied to agents of the federal government, including private government contractors. However, the agency limited the scope of the exemption only to the federal government and did not expand its reach to the states or municipalities.
In arriving at these conclusions, the FCC considered its decision in DISH Network Declaratory Ruling, where it concluded that the TCPA “incorporate[s] the federal common law of agency” to both establish and excuse liability for third-party agents. There, the Commission held that the principles of agency allow a seller to be vicariously liable under the TCPA for calls placed on its behalf by third-party telemarketers. Likewise, a third party calling on behalf of a principal is able to invoke a privilege or exemption belonging to the principal to escape liability under the TCPA. As a result, the FCC ruled that government contractors are exempt from liability under the TCPA as long as they are acting within the scope of authority “validly conferred” by the federal government.
The FCC found that its interpretation of “person” was also supported by the Supreme Court’s decision in Campbell-Ewald. In Campbell-Ewald, the Supreme Court found that “[t]he United States and its agencies . . . are not subject to the TCPA’s prohibitions because no statute lifts their [sovereign] immunity.” The Court went on to find that government contractors may be eligible for “derivative immunity” when the government contractor acts within the scope of its agency. Therefore, the FCC found that Campbell-Ewald held that as long as the government contractor acts within the scope of its authority conferred by the federal government, it is exempt from the TCPA.
Last, the FCC found that imposing TCPA liability on the federal government would significantly constrain the government’s ability to communicate with its citizens, thus impairing its ability to collect data and make policy decisions. For example, Congress has statutorily mandated that some federal agencies conduct phone surveys to collect data needed for public policy decisions. Likewise, it found that if tele-town hall meetings or government-to-citizen communications were subject to the TCPA’s consent requirement, citizens would be less able to participate in government.
To read the FCC’s ruling, click here.
Why it matters: The FCC’s ruling is consistent with other of its rulings regarding the question of whether governmental entities and private companies acting on their behalf are subject to liability under the TCPA. Most important in this ruling is the granting of an exemption for private companies to reach consumers on their cell phones and landlines when acting within the “scope of ‘validly conferred’ ” authority. However, the ruling also raises some interesting questions, such as why the exemption only extends to the federal government and not states and municipalities. This intended exclusion leaves open the possibility of companies performing services for these smaller sovereigns to petition the agency to expand the exemption.
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Urging “Caution,” FTC Comments on FCC Debt Call Carve-Out
Weighing in on the Federal Communications Commission’s proposed carve-out for permissible robocalls made for debts owed to the federal government, the Federal Trade Commission encouraged its sister agency to “proceed with caution.”
Last month, the FCC initiated a rulemaking proceeding pursuant to the Telephone Consumer Protection Act to implement an amendment to the statute included in the 2015 Bipartisan Budget Act for calls made in connection with “a debt owed to or guaranteed by” the United States.
Commenting on the Notice of Proposed Rulemaking (NPRM), the FTC referenced its “extensive experience” related to debt collection and telemarketing and suggested the FCC move slowly. “The FTC’s experience shows that debt collection calls and robocalls raise significant consumer protection concerns and are often vehicles for abusive, deceptive, and unfair business practices,” the staff of the FTC’s Bureau of Consumer Protection wrote. It recommended “that the FCC attempt to harmonize its rules as much as possible with existing laws governing debt collection and telemarketing.”
Section 5 of the Federal Trade Commission Act, the Fair Debt Collection Practices Act (FDCPA), and the Telemarketing Sales Rule (TSR) all contain extensive restrictions governing when and how debt collectors can call consumers to collect debt, the agency said, and to the extent possible, “the FCC should create standards for the collection of government debt that are consistent with these existing laws.”
According to the FTC, consumer complaints document that consumers are “regularly barraged” with unwanted calls, which often occur in the context of debt collection. On top of these issues, government imposter frauds are on the rise. Historically, consumer protection agencies have advised consumers that the federal government will not call without first sending a letter, but because the TCPA amendments now allow robocalls to collect a debt owed to the U.S. government, it will be more challenging for consumers to distinguish between legitimate debt collection calls and scam attempts.
Debt collection robocalls themselves raise a number of distinct consumer protection issues and raise problems under the FDCPA. They include “dead air” or “hang up” calls, and unlawful disclosures made to third parties when someone other than the debtor answers the calls, both problems that run headlong into the FDCPA.
“These consumer complaints suggest that the FCC should exercise caution and restraint in this robocall rulemaking,” the FTC wrote. “These calls strike many consumers as abusive and harassing, particularly when they are frequent, and their use in debt collection threatens consumer privacy and poses significant compliance challenges under the FDCPA. FTC staff urges the FCC to adopt implementing regulations that mitigate as much as reasonably possible the risks of law violations and consumer harms associated with robocalls.”
Addressing specific questions posed by the FCC in the NPRM, the FTC proposed that robocalls should be limited only to collect debts in “default,” from those persons who actually owe the debt, to the federal government and not any other.
These standards would harmonize the regulation with existing laws such as the FDCPA and avoid expanding the amendment beyond what Congress intended. “The NPRM notes that the FCC is considering allowing robocalls ‘concerning other debts or matters about which the caller may want to speak with the debtor,’ ” the agency wrote. “FTC staff sees no justification for such an extension in the TCPA amendment enacted by Congress,” which permits collection robocalls “solely to collect” a covered debt or “solely pursuant to the collection” of a covered debt.
Similarly, the FCC should limit the definition of “debt servicing” to exclude calls that solicit fees or consideration for the goods or services, the FTC said. Otherwise, consumers could face robocalls “using the collection of government debt as a Trojan Horse to engage in otherwise prohibited sales calls regarding additional products or services or engage in the collection of non-government debts,” the agency cautioned. A broader definition could also run counter to the TSR.
The FTC also advocated that call recipients receive privacy protection and suggested that the FCC should require that reasonable security be maintained over the data collected during calls and that the information obtained during a covered call should be used solely for purposes of collecting debts on behalf of the government and for no other purpose. Such a use restriction is consistent with the scope of the TCPA amendment as well as consumer expectations, the agency said.
For additional protections, consumers should be provided with the power to stop robocalls at any time and be informed of this right, the FTC advised. Calls should only be permitted between the hours of 8:00 a.m. and 9:00 p.m., and debt collection callers should be required to transmit Caller ID information that includes a caller number that connects to a live agent representing the debt collector.
Why it matters: The FTC’s comment emphasized caution, and urged the FCC to limit the scope of the regulation and harmonize it with existing laws, including the FTC Act, the FDCPA, and the TSR. Warning of the dangers of robocalls, debt collection calls, debt collection robocalls specifically, and the rise of government impersonation scams, the FTC advised the FCC to “proceed with caution, and only incrementally, with any expansion of permissible robocalling.”
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iHeartMedia Hearts a Deal: $8.5M in TCPA Suit
Unsolicited text spam will cost iHeartMedia Inc. $8.5 million in a deal to settle a Telephone Consumer Protection Act class action against the company filed in an Illinois state court.
Listeners to the company’s radio stations were encouraged to text song requests or send a message to the station to enter a contest, according to the complaint. But the plaintiffs alleged iHeartMedia responded to such texts with advertising messages, such as “Hot 99.5: Get Xclusive Txt Alerts 4 your cellphone, reply HOT. Hot995.com 4 more. PWD BY Circle K Convenience Stores circlekmacs.com” and “KDWB & Sky Zone Indoor Trampoline Park thx U R ur txt! Reply ‘MORE’ if you would like 2 receive info from Sky Zone on bday party packages!”
After a full-day mediation—where the parties discussed the potential implication of the U.S. Supreme Court’s ruling in Spokeo, Inc. v. Robins—iHeartMedia and the plaintiffs reached a deal.
The defendant denied all allegations of wrongdoing and liability, but agreed to establish a settlement fund in the amount of $8.5 million. All settlement administration expenses, all approved claims made by class members, any incentive awards to class representatives, and class counsel fee award will be paid from the fund. In return, class members will release iHeartMedia from all TCPA-related claims.
Class members—those who received text messages from the defendant between October 16, 2013 and April 19, 2016 and did not provide consent—will receive a pro rata share of the amount remaining in the fund after payment of the settlement administration expenses, the requested $5,000 incentive award for the two named class representatives, and the class counsel fee award, not to exceed $3.4 million.
In addition, the defendant represented that it changed the process of sending advertising text messages as of July 2, 2015, “such that legal department approval is required for each message,” according to the settlement agreement. “iHeartMedia has also agreed that, to the extent it performs such text message advertising in the future, it shall maintain procedures to obtain message recipients’ prior express consent to receive such messages on their cellular telephones.”
To read the settlement agreement in Willis v. iHeartMedia, click here.
Why it matters: An Illinois state court judge granted preliminary approval to the multimillion-dollar deal, with a final hearing set for August 11. iHeartMedia’s alleged failure to obtain appropriate consent for its marketing text messages proved costly for the company and serves as a reminder about the importance of complying with the TCPA.
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TCPA Case Still Not Moot, California Court Holds on Remand
Telephone Consumer Protection Act defendant Campbell-Ewald Company, after losing in the Supreme Court, continued its losing streak in the courts with a district court judge refusing to find the case moot despite the defendant’s repeated attempts to pay the plaintiff.
The litigation involves Campbell-Ewald, an advertising agency, that allegedly sent unwanted text messages on behalf of the U.S. Navy to various recipients, including Jose Gomez. After Gomez filed his putative class action claim alleging violations of the TCPA, the defendant made an offer pursuant to Rule 68 of the Federal Rules of Civil Procedure, and a separate offer to pay Gomez $10,000—more than enough to cover even trebled damages under the statute.
Gomez rejected the offer and Campbell-Ewald moved to dismiss, arguing that its offer had rendered the case moot. A federal district court denied the motion and the Ninth Circuit Court of Appeals agreed. The U.S. Supreme Court granted certiorari due to a split in the circuits on the issue and sided with the plaintiff.
The Justices ruled in a 6-2 opinion that an unaccepted offer is a nullity. “[A]n unaccepted settlement offer or offer of judgment does not moot a plaintiff’s case, so the District Court retained jurisdiction,” Justice Ruth Bader Ginsburg wrote, adding that a class representative with a live claim “must be accorded a fair opportunity to show that certification is warranted.”
On remand, Campbell-Ewald pursued a pair of motions: one for leave to deposit funds with the court and a second to dismiss for lack of jurisdiction, since the defendant not only sent Gomez’s counsel a certified check, but also separately asked the court to accept a payment in the same amount.
U.S. District Court Judge Dolly M. Gee denied both motions.
For support, the court turned to a Ninth Circuit decision, Chen v. Allstate Ins. Co., decided since the Supreme Court’s ruling in Campbell-Ewald. In that case, a three-judge panel held that even where injunctive relief had been offered and funds deposited in an escrow account, the case was not moot because “relief has been offered, but it has not been received.”
“Chen makes explicit that funds deposited in an escrow account have not been ‘actually received’ for purposes of mooting an individual plaintiff’s claims,” Judge Gee said. “Nothing in the Supreme Court’s Campbell-Ewald opinion precludes this holding.”
The court was not persuaded by the defendant’s argument that a petition for rehearing en banc remains pending in the Chen dispute or that the check it sent to Gomez’s counsel was neither rejected nor returned.
Campbell-Ewald may not “force Gomez to accept a settlement which has not been negotiated for or accepted merely by sending his counsel an unsolicited check and deeming it ‘unconditional’ and ‘irrevocable,’ ” the court wrote. Even assuming, arguendo, that a district court could enter a judgment that provides complete relief on a plaintiff’s individual claims over plaintiff’s objections, and thereby moots those claims, the class claims remained viable.
Seizing on the “fair opportunity” language in the Supreme Court’s decision, the court said the matter remains “live” because the plaintiff has not accepted the settlement offer and the court has yet to enter judgment in his favor. “Gomez has not yet had a fair opportunity to show whether or not class certification is warranted, and it would not be appropriate under the circumstances for the court to enter judgment for Plaintiff against his wishes,” Judge Gee concluded.
To read the order in Gomez v. Campbell-Ewald Co., click here.
Why it matters: The order is a blow to TCPA defendants still clinging to hope after the Supreme Court’s Campbell-Ewald decision earlier this year. The Justices’ comment that a class representative with a live claim “must be accorded a fair opportunity to show that certification is warranted” was given full effect by the Ninth Circuit in the Chen decision as well as by Judge Gee in her latest ruling in the Gomez dispute. At least in the Ninth Circuit, it appears that defendants face a nearly insurmountable obstacle—a showing that plaintiffs were provided with a “fair opportunity” to demonstrate the requirements for certification—before they can moot a putative class action plaintiff’s individual claim.
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News and Views
Bloomberg BNA asked Manatt’s Richard Gottlieb, a partner in the firm’s consumer financial services practice, to comment on a class action filed in Illinois state court alleging that consumers received unsolicited fax messages from a consulting company. Upon being removed to federal court, the case revealed a disparity among courts’ ascertainability and consent standards in TCPA cases. Gottlieb asserts that this case “was bound to follow the Seventh Circuit,” which has established that as long as the class definition is spelled out clearly and objectively, ascertainability is met. Click here for more info on the article, “Junk Fax Class Certification Exposes Federal Consent Disparity.”
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