Despite holding that cellphone users are not “categorically excluded” from the TCPA, a New York federal court granted a defendant’s motion to dismiss after determining the complaint failed to allege that the defendant was directly or vicariously liable for the calls at issue.
In his lawsuit against law firm McCarthy & Kelly LLP, Joshua Cacho claimed that he received unsolicited calls for legal services on his cell phone, which he used “for personal, family and household purposes.”
Cacho alleged that, between June 1 and July 20, 2023, he received at least 33 calls asking whether he or any family member had been to Camp Lejeune between 1953 and 1987 and suffered from a disease such as cancer.
Although he said he repeatedly told the callers to stop calling, he continued to receive the calls until he tried a different approach, using a pseudonym and telling the caller that his father had spent time at Camp Lejeune and suffered from a disease.
The caller transferred Cacho to a partner at the law firm, who then sent Cacho a series of emails and a representation agreement to review and sign.
Rather than sign the contract, Cacho filed a TCPA action against the law firm.
McCarthy & Kelly responded with a motion to dismiss on three separate grounds: (1) that Cacho’s cellphone use did not render him a “residential telephone subscriber” for purposes of the TCPA and its implementing regulations; (2) that the calls were not actionable telephone solicitations or telemarketing; and (3) that the complaint did not adequately allege that the law firm initiated any calls to Cacho or that it was vicariously liable for the actions of the telemarketers who did.
While U.S. District Court Judge Lewis J. Liman rejected the first two arguments, the third was enough to dismiss the plaintiff’s lawsuit.
The court first tackled the issue of whether calls to a cell phone, rather than a landline, could render Cacho a “telephone subscriber” eligible for relief under the TCPA’s Do Not Call (DNC) provisions.
McCarthy & Kelly argued that the FCC’s interpretation of “residential telephone subscriber” to apply to both wireless and landline subscribers is contrary to the plain text of the TCPA’s implementing regulations.
The court acknowledged that the U.S. Supreme Court’s recent decision in Loper Bright Enters. v. Raimondo meant that it was not required to give deference to the FCC’s interpretation of the TCPA. However, the court noted that this case “highlighted the disruption that the Supreme Court’s recent decision in Loper Bright protends” as “[r]egulatory regimes that have been settled for decades are now subject to de novo review. . .without the benefit of briefing from the expert agency tasked with administering the relevant statute.”
Nonetheless, the court applied its own independent judgment and conducted an extensive statutory analysis, finding that McCarthy & Kelly’s interpretation of “residential subscriber” in the TCPA would have sweeping practical consequences, as cellphone users have relied upon the protections of the TCPA and registration on the National Do Not Call Registry to ensure their privacy.
The TCPA’s definition of a “residential subscriber” does not refer to the specific phone technology, but to the type or identity of the subscriber to the technology, the court said. Additionally, the court rejected the law firm’s position that presumed the term “residential” denoted a landline, not a cellphone: “Under [the law firm’s] interpretation, an individual who eschews landline service and who uses a cellphone exclusively in his residence (perhaps because he is homebound) would be deprived of the TCPA’s protection simply because his phone lacks a cord,” the court wrote. “Congress’s language does not lead to that result.”
Instead, the court construed the statute according to its plain language, holding that a “residence” is simply “[t]he place where one actually lives,” and a “subscriber” is “[a] person who makes a regular payment in return for entitlement to … access to a commercially provided service.”
“Thus, a residential subscriber is one who maintains a phone ‘for residential purposes,’ i.e., for personal activities associated with his or her private, domestic life,” the court said, and “users of cellphones are not categorically excluded from the definition of ‘residential subscriber’ under the TCPA.” This result is consistent with the FCC’s interpretation of the term.
Due to this consistency, the court determined that it did not need to address the question of whether the Hobbs Act would constrain the court’s review of the FCC’s determination.
Cacho’s complaint provided ample examples of the domestic tasks that he performed with his phone, including sending and receiving emails, timing food when cooking and sending and receiving text messages. Averring that the phone was not primarily used for any business purposes, the court declined to dismiss the suit on this ground.
The court then turned to the issue of whether calls from the law firm offering to represent Cacho in a class action were “telephone solicitations” made to encourage the purchase of goods or services, concluding that these calls “clearly” qualified as an offer of services.
Then, despite rejecting McCarthy & Kelly’s first two grounds for dismissal, the court found Cacho failed to allege either direct or vicarious liability against the law firm and granted the motion to dismiss on this basis.
The court held that Cacho did not allege the law firm was directly liable for the calls, finding Cacho’s allegations that McCarthy & Kelly hired anonymous telemarketers to place the telephone solicitation phone calls undermined his allegation that the law firm itself called Plaintiff at least 35 times.
As for vicarious liability, Cacho’s “conclusory allegations” that the law firm had the right to control the telemarketers, without more, was insufficient to plead an agency relationship; similarly, the allegations that the telemarketers acted with apparent authority or ratification also fell short, the court said.
While Cacho claimed that the law firm accepted his live-transferred call, Cacho did not allege that the law firm had indicated the telemarketers were authorized to act on its behalf nor that the law firm had knowledge the telemarketers were engaged in unlawful activities. This failure was fatal to Cacho’s TCPA claims, the court found, granting the law firm’s motion to dismiss.
To read the opinion and order in Cacho v. McCarthy & Kelly LLP, click here.
Why it matters
The decision provides early insight into courts’ application of Loper in TCPA cases. Here, the court made clear that, even in the post-Loper landscape where courts are not required to provide deference to FCC determinations, they may continue to follow FCC guidance to avoid unsettling years of precedent.
Further, while the court did not analyze the Hobbs Act, it acknowledged this potential issue. Under the Hobbs Act, courts of appeals have exclusive jurisdiction to determine the validity of the FCC's “final” orders (which include regulations). See 28 U.S.C. § 2342(1). The Hobbs Act requires that challenges to the validity of a covered FCC order be brought in a court of appeal “within 60 days after” the entry of the order in question. Where the Hobbs Act applies, a district court is required to follow the FCC order, rather than permit the challenge to its validity, unless the challenging party can establish that it was deprived of a prior and adequate opportunity to seek judicial review under the Hobbs Act procedures.
If a district court applying the analysis now required under Loper were to reach a conclusion that differs from or conflicts with the FCC interpretation, or otherwise questions the FCC’s authority to issue the order in the first place, it may also need to conduct a Hobbs Act assessment. As the court in Cacho acknowledged, it remains to be seen how this analysis will be reconciled with Loper.