Dish Could Face Billions in TCPA Liability
Dish Network is liable under the Telephone Consumer Protection Act not only for telemarketing calls made by the company, but for those a call center and other third parties made on its behalf, a federal court judge in Illinois has ruled.
The partial grant of summary judgment to the Federal Trade Commission as well as attorneys general in California, Illinois, North Carolina, and Ohio on more than 57 million illegal calls could cost Dish $725 billion, if the damages are trebled under the statute.
Originally filed in 2009, the action alleged that Dish violated the TCPA, analogous state statutes, and the Telemarketing Sales Rule by its own actions and those of retailers and other third parties that Dish rewarded for making calls on its behalf. The FTC filed a subsequent 2012 suit based on calls made in violation of Dish’s internal do-not-call list, which was joined with the earlier case.
In a 238-page opinion, U.S. District Court Judge Sue E. Myerscough determined that Dish made more than 5 million calls to numbers on the National Do Not Call Registry and that authorized retailers made 2.6 million more at the behest of Dish.
As for illegal prerecorded calls, Dish itself made 98,054 and directed two retailers to make an additional 49,738,072 more.
Judge Myerscough further wrote that the four state Attorneys General were entitled to a finding that Dish engaged in a pattern or practice of making prerecorded and outbound telemarketing calls to their residents whose numbers were on the National DNC Registry. Illinois and North Carolina established that Dish used autodialing equipment to make calls to their residents, the court added.
Although the defendant told the court it should not be held vicariously liable for calls made by retailers or other third parties, the judge said the governmental entities provided sufficient evidence that Dish had some knowledge of the unlawful activities through emails from Dish employees.
The court relied on a 2013 ruling from the Federal Communications Commission issued in response to a petition filed by Dish addressing the scope of vicarious liability for alleged violations of others. The FCC wrote that the standard to establish vicarious liability should be the federal common law of agency, although the Commission added that liability could also be based on principles of apparent authority and ratification.
Judge Myerscough also rejected Dish’s attempt to take advantage of the TSR’s safe harbor provisions. She held that the company did not meet the “basic requirement” of establishing written procedures and documentation to indicate that the company was following the law.
Having ruled on the parties’ summary judgment motion, the court proposed a bifurcated trial as the next step in the proceedings. First up: consideration of remaining liability issues, followed by a separate trial on the question of damages. Based on the findings already made by the judge, Dish is facing a potentially multi-billion dollar award.
In a statement, Dish said it “respectfully disagrees with the bulk” of the court’s decision and “looks forward to defending itself in court.”
To read the opinion in U.S. v. Dish Network, click here.
Why it matters: TCPA litigation rose to record numbers in 2014 and the Dish case ended the year with a bang. Companies should take note of the court’s ruling on the issue of vicarious liability as a cautionary tale and keep an eye on the upcoming trial.
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California Court Rejects Twitter’s Consent, ATDS Arguments in TCPA Suit
A Northern District of California judge denied Twitter’s motion to dismiss a Telephone Consumer Protection Act lawsuit, rejecting the company’s arguments that recipients had consented to the text message and that Twitter’s system did not constitute an automatic telephone dialing system (ATDS) under the statute.
The lawsuit was filed by the recipient of text messages from the popular microblogging site. She claimed that Twitter should have checked for “recycled” numbers, or cellular telephone numbers that have been deactivated by a user and then reassigned to a new subscriber before sending its messages.
Twitter responded with a motion to dismiss the California federal court putative class action. The company should not be held liable under the statute when a former user of a cellphone number provides consent to receive text messages and the phone number is later transferred, Twitter told the court, asking how a defendant could be aware of such a switch.
But U.S. District Court Judge Vince Chhabria sided with the plaintiff. “This argument fails,” the court said. He cited a decision from the Seventh U.S. Circuit Court of Appeals in Soppet v. Enhanced Recovery Company, where the federal appellate panel explained that “only the consent of the subscriber assigned to that cell number at the time of the call (or perhaps the person who answers the phone) justifies an automated or recorded call.”
Turning to the issue of whether Twitter’s system constituted an ATDS, the plaintiff contended the company’s equipment “stores” telephone numbers and then “dials” those numbers without human intervention.
Twitter said the statute additionally requires that the equipment must have the “capacity” to “generate” numbers using a “random” number generator or a “sequential” number generator. Because the company’s equipment simply stores and dials numbers from a database, it does not have the capacity to generate numbers and therefore is not an ATDS, Twitter argued.
Section 227(a)(1) of the statute defines an ATDS 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.”
In orders released in 2012, the Federal Communications Commission construed the provision to cover “any equipment” with the capacity to “generate numbers and dial them without human intervention regardless of whether the numbers called are randomly or sequentially generated or come from calling lists,” including “hardware [that], when paired with certain software, has the capacity to store or produce numbers and dial those numbers at random, in sequential order, or from a database of numbers.”
Taking an expansive view of the FCC’s interpretation of Section 227(a)(1), Judge Chhabria found that Twitter’s system constituted an ATDS. Although the language from the FCC “is not crystal clear, it appears to encompass any equipment that stores telephone numbers in a database and dials them without human intervention,” he wrote. “This appears to be the way predictive dialers worked (the technology at issue in the FCC orders), and it is the way [the plaintiff] alleges that Twitter’s equipment works in this case.”
Two other federal courts have held that the FCC orders unlawfully expanded the statute’s definition of an ATDS, the court noted, in California and Pennsylvania. But Twitter did not explicitly request that the court reject the FCC’s interpretation of the statute, the judge said, simply asserting that the orders were distinguishable. Therefore, “the court declines to consider at this stage whether the FCC’s definition constitutes an unlawful expansion of the statute, particularly where Twitter has not made that argument and courts are in disagreement about it.”
To read the order in Nunes v. Twitter, click here.
Why it matters: Not only did the Twitter decision produce a bad result for the defendant seeking to dismiss the suit, it continued the conflicting results in federal court decisions construing the definition of what constitutes an ATDS under the statute. While Judge Chhabria noted that California and Pennsylvania courts have found the FCC orders unlawfully expanded the understanding of the term under the TCPA, his opinion joins other courts – including in Illinois – tracking the language of the FCC. The various holdings provide an important reminder to businesses to be cognizant of the equipment used to send text messages or place telephone calls, given the current uncertainty about how a judge may rule on the issue.
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TCPA Claims Not Mooted by Offer of Judgment, Says 11th Circuit
Reversing dismissal and reinstating a Telephone Consumer Protection Act suit, the Eleventh U.S. Circuit Court of Appeals ruled that unaccepted offers of judgment to the named plaintiffs – but not to class members – did not render the case at hand moot.
Jeffrey Stein and five other plaintiffs filed a putative class action suit against the Buccaneers Limited Partnership (BLP), the corporate entity behind the National Football League’s Tampa Bay Buccaneers. The complaint alleged that BLP sent unsolicited faxes advertising tickets to Buccaneers games to more than 100,000 recipients, in violation of the TCPA.
The plaintiffs demanded statutory damages of $500 per violation, trebled to $1,500 based on BLP’s willfulness, as well as an injunction against future statutory violations. Process was served on BLP on August 1, 2013. On August 16, BLP removed the suit to federal court. Three days later, BLP served each of the six named plaintiffs an offer of judgment pursuant to Federal Rule of Civil Procedure 68.
Among other terms, the offer was “intended to fully satisfy the individual claims” of each plaintiff, but was “not to be construed as either” an admission of liability by BLP or that the plaintiff “has suffered any damage.” Further, the terms of the offer prohibited plaintiffs from filing it with the Court unless it was accepted or filed in a proceeding to determine costs.
The offers were identical except for the proposed dollar amounts, which varied based on the number of faxes allegedly received by the plaintiffs, ranging from $1,500 to $7,500. None of the plaintiffs accepted the offers, which were deemed rejected after the Rule’s proscribed 14-day period.
BLP then moved to dismiss the lawsuit for lack of jurisdiction, asserting that the unaccepted offers rendered the case moot. Although the plaintiffs moved to certify a class, the court denied their motion to certify and, in a later order after the deadline to accept the offers, dismissed the case as moot, which prompted the plaintiffs’ appeal.
Addressing an issue of first impression in the circuit, a unanimous panel of the Eleventh Circuit held first that an individual plaintiff’s claim does not become moot when the plaintiff does not accept a Rule 68 offer of judgment that, if accepted, would have provided all the relief the plaintiff sought.
Secondly, the court said that even if such offers are made to all the named plaintiffs in a proposed class action before they move to certify a class, the named plaintiffs may nonetheless go forward as class representatives.
The panel explained that Rule 68 is designed to require a party who rejects an offer, litigates, and does not get a better result, to pay the other side’s costs. “Giving controlling effect to an unaccepted Rule 68 offer – dismissing a case based on an unaccepted offer as was done here – is flatly inconsistent with the rule,” the court said. “When the deadline for accepting these offers passed, they were ‘considered withdrawn’ and were ‘not admissible,’” pursuant to Rule 68(b).
As a result, “the plaintiffs still had their claims, and BLP still had its defenses,” the court added. “BLP had not paid the plaintiffs, was not obligated to pay the plaintiffs, and had not been enjoined from sending out more faxes. The named plaintiffs’ individual claims were not moot.”
The Eleventh Circuit cited a four-justice opinion from the U.S. Supreme Court that adopted a similar position in the context of a 2013 Fair Labor Standards Collective Action decision. In that case, Genesis Healthcare Corp. v. Symczyk, the majority accepted the parties’ stipulation that the defendant’s offer of judgment mooted the plaintiff’s individual claims.
But the dissent wrote that the “thrice-asserted view [that the defendant’s offer mooted the plaintiff’s individual claims] is wrong, wrong, wrong,” later adding “So a friendly suggestion to the Third Circuit: Rethink your mootness-by-unaccepted offer theory. And a note to all other courts of appeals: Don’t try this at home.”
“BLP invites us to try this at home,” the Eleventh Circuit wrote. “We decline.”
The court drew further support from the language of the offer itself, which made clear it would have no effect and would not even be filed unless accepted or used in a proceeding to determine costs.
“The court did not enter a judgment for the named plaintiffs,” the panel said. “The court did not issue an injunction. After the offers lapsed, and indeed after the district court entered its order dismissing the case, the legal relationship between BLP and the named plaintiffs was precisely the same as before the offers were made: the named plaintiffs had claims against BLP under the Telephone Consumer Protection Act; BLP retained all its defenses; no ruling had been made on the validity of the claims or defenses; and no judgment had been entered. BLP had not paid the plaintiffs, was not obligated to pay the plaintiffs, and had not been enjoined from sending out more faxes. The individual claims were not moot.”
As for the Rule 68 offers’ effect on the class claims, the panel reached the same conclusion. “[I]t is plain that this case still presents a live controversy,” the court said, noting Supreme Court precedent “that the necessary personal stake in a live class-action controversy sometimes is present even when the named plaintiff’s own individual claim has become moot.”
The named plaintiffs acted diligently to pursue the class claims, the panel added, refusing to draw a distinction as to when the motion for class certification was filed. Adopting an approach that would allow Rule 68 offers to moot class claims where a certification motion had yet to be filed would “produce unnecessary and premature certification motions in some cases and unnecessary gamesmanship in others,” the court said, following rulings from the Third, Fifth, and Ninth Circuits on the issue.
To read the opinion in Stein v. Buccaneers Limited Partnership, click here.
Why it matters: In finding that an unaccepted Rule 68 offer of full relief to named plaintiffs did not render the case at hand moot because the named plaintiffs had continued to diligently pursue class certification, the Eleventh Circuit joined a majority of circuits that have reached a similar conclusion.
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Noted and Quoted . . . Roth and Karl Pen Article for Executive Insight on Ambiguity at the Intersection of the TCPA and HIPAA
Manatt attorneys Marc Roth and Anne Karl recently coauthored an article for Executive Insight that explored the intersection between the Telephone Consumer Protection Act (TCPA) and the Health Insurance Portability and Accountability Act (HIPAA), which impacts healthcare providers and payers communicating health-related information to consumers.
The authors wrote, “[G]iven the ambiguity at the intersection of the TCPA and HIPAA, health care providers making certain types of automated calls must proceed cautiously and assess each type of call on a case-by-case basis.”
To read the full article, click here.
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