To "Make" ... or Not to "Make" a Call Under the TCPA

The Telephone Consumer Protection Act ("TCPA") governs telephonic solicitations sent using specific telephonic equipment without consent. See, e.g., 47 U.S.C. § 277, et seq. And yet, the TCPA does not broadly restrict any and all communications; rather, the Act applies only to messages that meet the requirements articulated in the statute.

The applicable portion of the TCPA states in material part:

47 U.S.C. § 227 RESTRICTIONS ON THE USE OF TELEPHONE EQUIPMENT

(b) RESTRICTIONS ON THE USE OF AUTOMATED TELEPHONE EQUIPMENT

(1) PROHIBITIONS. – It shall be unlawful for any persons within the United States, …

(A) to make any call (other than a call .. made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice –

(iii) to any telephone number assigned to a … cellular telephone service… 47 U.S.C. § 227(b)(1)(A)(iii)

Therefore, in order to prevail under the TCPA a plaintiff must establish the following three elements:

(1). The defendant called a cellular telephone number;

(2). Using an automatic telephone dialing system or an artificial or prerecorded voice., and;

(3). Without consent.

Meyer v. Portfolio Recovery Assoc., LLC, 707 F.3d 1036, 1043 (9th Cir. 2012).

Agencies are more frequently "farming out" the processing and dialing of telephone numbers to outside third parties. On the surface, the utilization of third parties to process and make the actual calls is logical and cost effective. Third party debt collectors are in the business of collecting debt. Their systems are designed to provide accurate information to its collection associates to allow those associates the opportunity to work with debtors to retire their debts and assist the debtor in reconstructing their financial lives. With some agencies handling hundreds of thousands of accounts per day, the software and hardware necessary to handle, process and load these accounts into a system is often best left to companies that specialize in this business.

To implement a successful and cost-effective system, an employee of Defendant, more likely than not, the director of IT for that agency, on a daily basis uploads the telephone numbers to be called and transmits these raw numbers to a third party, hypothetically called ABC Corp. ABC Corp. then processes those telephone numbers, and adapts them into a format its hardware and software system understands. It may even utilize a “voice over internet protocol” system to process the raw data. ABC Corp. converts the raw data received from the agency into a format that its system understands and then passes this information along to its network of telephone carriers who then launch the calls. By way of example, the ABC Corp. software platform processes a telephone call and if a connection is made to a live person by the telephone carrier utilized by ABC Corp., the call is only then transferred to an employee of that agency. This system is being utilized by a number of agencies in the debt collection industry today.

Meanwhile, TCPA cases filed nationwide are increasing at an alarming rate. In 2008, there were 14 TCPA cases filed nationwide. In 2013, there were almost 1,900 lawsuits filed in federal courts alleging violations of the TCPA. (According to data provided by WebRecon, LLC) The reason for this explosion in growth is obvious. Liability under the TCPA is assessed at between $500 per call to $1,500 per call. If an agency makes 20 calls a month for 3 months, the agency could be looking at exposure of $90,000.00! If these calls were made to a cellular telephone without the debtor having previously given consent to either the underlying creditor or the agency, the agency's exposure could quickly become catastrophic.

In order for a plaintiff to prevail under the TCPA, she must prove that the agency itself, made the alleged offending calls. See, 47 U.S.C. § 227b(1)(A). This is how the farming out of raw data, i.e, the telephone numbers to be called, to a third party who processes and then makes the calls could provide a very strong defense to any TCPA lawsuit. The TCPA, by its plain language, makes it unlawful for anyone “to make any call” without consent, to a cellular telephone, using an automatic telephone dialing system or an artificial or prerecorded voice. Id. But, the TCPA, by its express language limits liability under § 227b(1)(A) to those entities which actually make the calls.

Conversely, liability for calls made “on behalf of” another party under the TCPA is limited to repeated calls made in violation of the “Do Not Call” registry. See, 47 U.S.C. § 227(c)(5). The plain language of the TCPA clearly delineates the entity which has potential liability for autodialed or prerecorded calls to wireless numbers, to wit, those entities which “make” the calls, not those entities for whom the calls were made “on behalf of.” See, 47 U.S.C. § 227(b)(1) and (c)(5). As such, Congress specifically did not intend for the phrase “on behalf of” to apply to autodialed or pre-recorded calls to wireless numbers as shown by the absence of the phrase in § 227(b)(1).

In reviewing construction of a statute that a federal agency administers, a Court should answer two questions. Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984). “First, as always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court … must give effect to the unambiguously expressed intent of Congress.” Id. “Only if the court determines Congress has not directly addressed the precise question at issue” should the court then ask the second question of “whether the agency’s answer is based on a permissible construction of the statute.” Id. at 843. “The judiciary is the final authority on issues of statutory construction and must reject administrative constructions which are contrary to clear congressional intent.” Id. at n. 9.

I believe that a Court’s inquiry must begin and end with the statutory text of the TCPA. Using basic tenets of statutory construction, Congress’ deliberate omission of the phrase “on behalf of” in § 227(b)(1) is particularly compelling. “Where Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.” Russello v. United States, 464 U.S. 16, 23 (1983).

Noting the difference in language between the two sections of the TCPA, district courts which have addressed this precise issue have held that there is no “on behalf of” liability for defendants under § 227(b). See, Mey v. Pinnacle Sec., LLC., 2012 WL 4009718, at 3-4 (N.D. W.Va. Sept. 12, 2012); Thomas v. Taco Bell Corp., 879 F.Supp.2d 1079, 1084 (C.D. Cal. 2012); Mais v. Gulf Coast Collection Bureau, Inc., et al, No. 0-11-cv-61936-RNS (S.D. Fla. May 8, 2013).

If Congress had meant to impose liability beyond those who “make” autodialed calls to wireless numbers to those to whom the calls were made “on behalf of,” then Congress would have done so. See generally, Russello, 464 U.S. at 16. This is particularly true since Congress created two separate and distinct private rights of action under the TCPA. See, 47 U.S.C. § 227(b)(3) compared to § 227(c)(5). “We have included a private right of action for consumers harmed by automated or prerecorded calls and a different private right of action for consumers who receive telemarketing solicitations” 137 Cong.Rec. S18781-02 (daily ed. November 27, 2001 – statement of Rep. Hollings).

The first private right of action contemplates calls alleging automated or prerecorded calls. See, 47 U.S.C. § 227(b). The second private right of action acts as a restriction on repeated, unsolicited telemarketing calls. 47 U.S.C. § 227(c). In drafting the TCPA, Congress delineated “privacy rights to include the concepts of privacy invasion and nuisance.” See, 137 Cong.Rec. S18781-02.

Therefore, Congress imposed separate restrictions in separate subsections, one designed to address the nuisance created by autodialed and prerecorded messages, the other designed to apply to the privacy invasion attendant with repeated telemarketing solicitations upon those who have indicated a desire not to receive such messages. 47 U.S.C. §§ 227(b),(c). When Congress created two separate causes of action in the TCPA, Congress assigned differing scopes of liability for each cause. Id. If Congress intended for “on behalf of” liability to be read into the TCPA’s provision against autodialed and prerecorded calls, then Congress either would have made one cause of action with the same standard, or two causes of action with the same explicit standard of “on behalf of” liability. Nothing in the legislative history or the wording of the TCPA supports such interpretation.

The plain language of the TCPA leaves no doubt who is to be liable for autodialed or prerecorded calls to wireless numbers. This potential class of persons is limited to those entities which actually “make” the calls, not those for whom those calls were made “on behalf of.”

Those third parties which provide the software and hardware to process telephone numbers to be called, or are capable of performing a scrub to detect numbers assigned to wireless cellular telephone numbers, and who can provide call reports could be an invaluable resource that agencies should consider in their continuing efforts to stay compliant with all federal and state regulations. Granted, the services provided by those third parties will come at a cost reflective of the services they do provide.

And yet, how many TCPA claims and lawsuits must an agency endure before the costs equalize and the agency is staring down the barrel of financial armageddon?

As always, consult your local and trusted attorney for a greater, in depth analysis of your unique situation.

Express Consent and the TCPA ... Is it Safe?

"In the 1976 movie, "The Marathon Man," Sir Laurence Olivier is torturing Dustin Hoffman attempting to determine if it is safe for Olivier to retrieve his cache of ill-gotten diamonds. Olivier believes Hoffman knows the location of the diamonds and whether the site is being watched. So as he drills into his teeth, Olivier continually asks Hoffman, "Is it safe?" At the time, Hoffman does not know.

In context, the issue of "express consent" under the Telephone Consumer Protection Act, 47 U.S.C. § 227 has recently been considered by two federal district courts. Perhaps it should not be surprising that the two courts came to polar opposite conclusions regarding the application of "express consent" to third party debt collectors and collection agencies are left to wonder, "is it safe?

The TCPA prohibits making a call to a cellular telephone using an automatic telephone dialing system (ATDS) without the prior express consent of the called party. 47 U.S.C. § 227(b). A debt collection company sued for violating the TCPA (either individually or in a class context) can defeat these TCPA claims by demonstrating the debtor gave "express consent" to be called on his/her cellular telephone.

The Federal Communications Commission has issued two relevant orders regarding consent to call a cell phone. In 1992, the FCC issued an order which stated that cellular carriers do not need consent from "their cellular subscribers prior to initiating autodialer ... calls for which the cellular subscriber is not charged." In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 7 FCC Reg. 8752, 8775. Thereafter in 2008, the FCC expanded the issue of "consent" by stating that if a party provides a cell phone number to a creditor, for example, as part of a credit application, they are deemed to have provided express consent to be autodialed by the creditor at that cell number. In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 23 F.C.C.R. 559, 564. The latter FCC ruling also states that calls "placed by a third party collector on behalf of that creditor are treated as if the creditor itself placed the call." Id. at 565.

These "express consent" provisions were tested in the case of Leckler v. Cash Call, 554 F.Supp. 1025 (N.D. Cal. 2008). The Leckler court held the FCC's declaratory ruling regarding express consent was "manifestly contrary to the statute and unreasonable." Id. at 1029. Fortunately, the Court vacated this order in November of 2008. The FCC rulings remained in tact and could be relied upon by courts when determining the issue of consent.

However, on May 8, 2013, a federal district court in Florida rendered its opinion in Mais v. Gold Coast Collection Bureau, Inc., 2013 WL 1899616 (S.D. Fla. May 8, 2013). The Mais court held the Hobbs Act does not deprive a federal district court of jurisdiction to review the FCC's 2008 Ruling. The court then determined that the provision in the 2008 FCC Ruling stating, "the provision of a cell phone number to a creditor, e.g., as part of a credit application, reasonably evidences prior express consent ... to be contacted at that number . . ." constitutes implied consent not express consent, and impermissibly amends the TCPA to provide an exception that Congress did not write in the TCPA. The court stated it could ignore the FCC's ruling. The court continued on its path of holding Gold Coast liable when it held that even if applicable, the FCC ruling did not apply to medical debt, that the ruling only pertained to consumer retail credit transactions, and that even if applicable, a defendant had the burden of proof to prove "express consent." The Mais court completed its autopsy on Gold Coast by holding that the FCC's 2008 ruling, even if applicable, only applied to the creditor and in attempting to expand protection to the agent, the FCC impermissibly added a vicarious liability provision to the TCPA when Congress did not. [Since the underlying creditors in the Mais case did not make the alleged offensive calls, their motion for summary judgment was granted.] My colleague, David Kaminski wrote a very thorough article on the Mais decision in insidearm.

Less than three weeks later, a federal district court in Missouri issued its opinion, O'Connor v. Diversified Consultants, Inc. No. 4:11-cv-1722-RWS (E.D. Mo. May 28, 2013). In the O'Connor case, the plaintiff sought certification of a nationwide class of those persons who received on their cellular phone any telephone call from Diversified wherein Diversified utilized an ATDS and where the consumer failed to provide express consent. The O'Connor court gave deference to the FCC's rulings and specifically held, "Diversified argues that in collecting the debt from these cellular customers it stands in the shoes of U.S. Cellular and is entitled to the shelter that the FCC has provided to cellular companies. I agree with Diversified's position. I find that a debt collector for a cellular company ma invoke the shelter given to the cellular company for calls to its subscribers." The O'Connor court then went one step further when it stated, "Because we find that autodialed and prerecorded message calls to wireless numbers provided by the called party in connection with an existing debt are made with the "prior express consent" of the called party, we clarify that such calls are permissible. [emphasis added] We conclude that the provision of a cell phone number to a creditor, e.g., as part of a credit application, reasonably evidences prior express consent by the cell phone subscriber to be contacted at that number regarding the debt."

Because of this language, the argument can be made that the FCC's rulings regarding express consent and the basis underlying the O'Connor decision can be applied to the collection of all consumer debts to which the TCPA may be applicable. The O'Connor case is the next step in "leveling the playing field" as advocated by Mr. Kaminski.

Summary Judgment Usage Defending FDCPA cases

Your collection agency has just been hit with another "generic FDCPA" lawsuit. The facts are similar to the thousands of other FDCPA lawsuits filed nationwide, "Collector Rocko was mean to me by threatening to make me go sleep with the fishes unless I paid my debt." Perhaps a nationwide FDCPA mill steps in and immediately files a lawsuit claiming statutory damages and attorney's fees.

Your agency is faced with the immediate decision... do we fight this lawsuit or do we pay a settlement in the range of $1,500 to $3,000? Communication between defense counsel and the client is extremely important in evaluating the case. And the use of summary judgment proceedings should never be overlooked and in fact, should often be considered as an effective trial tool.

In a recent case filed in the Northern District of New York, the plaintiffs claimed my client violated the FDCPA by using abusive language directed toward them and by calling repeatedly. (Hinderliter v. Diversified Consultants, Inc., 6:10-cv-01313-NAM-TWD, Northern District of New York.) We determined that the plaintiffs’ claims were very weak, engaged in written discovery and without deposing the plaintiffs, filed a motion for summary judgment.

In Hinderliter, Plaintiffs claimed my client violated the FDCPA § 1692d(5) by causing Plaintiffs’ telephone to ring repeatedly and continuously with the intent to annoy, abuse and harass. More specifically, plaintiffs alleged my client called in excess of three (3) times per day. However, the Account History notes indicated that they never attempted to call plaintiffs more then twice in one day and the only time two telephone calls were made was when the first attempt was not successful.

We filed our MSJ and argued whether there is actionable harassment [under § 1692d(5)] or annoyance turns not only on the volume of calls made, but also on the pattern of calls. Joseph v. J.J. MacIntyre Companies, LLC., 238 F. Supp.2d 1158, 1168 (N.D. Cal. 2002). Courts consider a range of facts as to the specific volume and pattern of calls sufficient to raise a triable issue of fact of a defendant's intent to annoy or harass and thus become actionable under the FDCPA. See Fashakin v. Nextel Communications, 2009 WL 790350, at *7 (E.D.N.Y. March 25, 2009). The FDCPA does not prevent a collector from calling multiple times in a week, or even in a day. Allegations of daily, or nearly daily, phone calls do not raise a triable issue of fact to claims under § 1692(d)(5). Arteoya v. Asset Acceptance, LLC, 773 F.Supp.2d 1218, 1229 (E.D. Ca. 2010).

Under the FDCPA, the plaintiff has the burden of proof to establish two elements to show a violation of § 1692d(5): (1). To show that Defendant caused a telephone to ring or engaged any person in telephone conversations repeatedly or continuously, and (2). That Defendant engaged in such conduct with the intent to annoy, abuse, or harass Plaintiffs. See, 15 U.S.C. § 1692d(5).

In Hinderliter, the plaintiffs did not demand my client to cease all communications either verbally or in writing. The Court, in its ruling held, “A number of courts have awarded summary judgment to the defendant even in cases of frequent calls, where the evidence demonstrates an intent to contact the plaintiff and does not support a finding of an intent to annoy, abuse or harass him.” Hinderliter v. Diversified Consultants, Inc., 6:10-cv-01313-NAM-TWD, Northern District of New York (Sep. 7, 20120[Doc. 33] citing Chavious v. CBE Group, Inc., 2012 WL 113509, 2-3 (E.D.N.Y. 2012); Carman v. CBE Group, Inc., 782 F.Supp.2d 1223, 1232 (D.Kan. 2011) and others. The Hinderliter court noted, “These courts based their determinations on undisputed evidence of factors such as the following: the plaintiff did not answer most or all of the defendant’s calls; the plaintiff did not ask the defendant to stop calling; the defendant did not make numerous calls in a single day; the defendant did not call third parties such as plaintiff’s employer; the defendant did not immediately call back if a plaintiff hung up the telephone; and the defendant did not otherwise engage in egregious conduct.” Hinderliter, at p. 5.

The summary judgment evidence in Hinderliter showed that the collection associate only spoke with the plaintiff on one occasion, on August 23. After that communication, the collector attempted to call the plaintiff 4 times the following week, 17 times in September and fifteen times in October. The plaintiffs did not answer any of those calls. The Court found that the collection associate handled the case in accordance with her training, that the volume and pattern of calls was consistent with an intent to contact the plaintiff to arrange for payment and that no evidence existed supporting an intent to annoy, abuse or harass the plaintiff.

The court in Hinderliter ultimately held, “The undisputed factual record, interpreted most favorably to plaintiffs, would not permit a rational trier of fact to find that [Defendant] made the unanswered telephone calls to plaintiffs “with intent to annoy, abuse or harass” them in violation of section 1692d(5).” and granted our summary judgment motion.

In many cases, I recommend you file your MSJ to put the plaintiff on his burden to show that your client had the requisite intent to annoy, abuse and harass. Intent is the key. If there is no history of numerous calls made every day and if calls are made in accordance with the standard operating procedures of the agency, the plaintiff’s burden to show intent becomes problematic. If nothing else, it gives you a blueprint as to the manner in which the plaintiff intends to present its case. A little hard work and coordination with your client are the keys to defeating these generic FDCPA claims

Materiality Evolving as a Viable Defense in FDCPA suits.

The proliferation of lawsuits filed in federal courts in the United States is burgeoning. According to WebRecon, LLC, a respected company tracking FDCPA lawsuits filed in the United States, lawsuits alleging violations of the FDCPA rose from 3,710 in 2006 to 10,914 in 2010. Reasons for this significant increase vary depending on the source.

Regardless of the reasons, lawsuits alleging technical violations of the FDCPA and conduct in which debtors do not even claim actual damages as a result of communications with debt collectors are rising. By its express terms, the purpose of the FDCPA is to eliminate abusive debt collection practices by debt collectors. See, 15 U.S.C. § 1692(e). However, an equally important purpose as set forth by Congress is that the FDCPA is also designed to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged. Id.

The FDCPA is a "strict liability" statute, see Russell v. Equifax A.R.S., 74 F.3d 30, 33 (2d Cir. 1996) and a “Plaintiff need only prove one violation to trigger liability.” See Cavallaro v. Law Office of Shapiro & Kreisman, 933 F. Supp 1148, 1153 (E.D.N.Y. 1996). With the FDCPA being a technically vague statute in many respects and with seemingly contradictory provisions providing traps for both the learned and unwary, defensible cases are being settled and the consumer filing mills are emboldened by the mandatory attorney's fee provision of the FDCPA. See, 15 U.S.C. § 1692k(a)(3).

However, in the past few years, the industry is beginning to see federal courts giving FDCPA cases greater scrutiny. Beginning in 2009, courts which have considered a "materiality defense" have granted summary judgment for defendants and have dismissed debtors' cases in which a violation of the FDCPA has allegedly occurred, but has not been considered material. These courts have held that a false but non-material statement is not actionable under the FDCPA.

The first reported decision was Hahn v. Triumph Partnerships, LLC, 557 F.3d 755, 758 (7th Cir. 2009). This case was followed by Miller v. Javitch, Block & Rathbone, 561 F.3d 588 (6th Cir. 2009), Neill v Bullseye Collection Agency, Inc., 2009 U.S. Dist. Lexis 41931 (D.Minn. 2009) and Donohue v. Quick Collect, Inc., 592 F.3d 1027 (9th Cir. 2010). The most recent court to follow this trend was a district court in the Northern District of Florida in the case of VanGlider v. Lazarus Financial Group, Inc., Case No. 4:10-cv-527-RH/WCS (April 8, 2011).

As the courts in Hahn and Donohue noted, materiality is an ordinary element of any federal claim based on a false or misleading statement. Hahn, 557 F.3d at 757 citing Carter v. United States, 530 U.S. 255 (2000); Neder v. United States, 527 U.S. 1 (1999). In accordance therewith, the materiality element was made applicable to FDCPA actions.

The court in Donohue noted, “In assessing FDCPA liability, [courts] are not concerned with mere technical falsehoods that mislead no one, but instead with genuinely misleading statements that may frustrate a consumer's ability to intelligently choose his or her response.” Donohue, 592 F.3d at 1034.

In Neill v. Bullseye Collection Agency, Inc., the plaintiff received three separate collection letters from the defendant, spread over a period of time. The third letter “contained the phrase ‘SECOND NOTICE!!!’” Id., 2009 U.S. Dist. LEXIS 41931 (D. Minn. May 14, 2009). The plaintiff filed suit alleging “that the phrase ‘SECOND NOTICE!!!’ in the October 21 letter addressed to him constitute[d] a false, deceptive, or misleading representation…because he had previously received two letters regarding his alleged debt, making the October 21 letter his third notice from Bullseye.” Id. at 6-7. Although conceding that the statement was false, the court nonetheless dismissed the case stating that as “matter of law any misrepresentation was immaterial and therefore not actionable.” Id.

In Donohue v. Quick Collect, Inc., the debtor filed suit claiming that a complaint filed by the debt collector was misleading. Id., 592 F.3d 1027 (9th Cir. 2010). Specifically, the plaintiff alleged that statement in the complaint that she “owed an interest payment of $32.89 calculated by applying 12% annual interest to the principal owed.” Id., at p. 1031. The court found this statement misleading since “$32.89 is actually comprised of two components: $24.07 in pre-assignment finance charges assessed by Children's Choice and calculated at the rate of 1.5% per month, and $8.82 in post-assignment interest calculated at an annual rate of 12%.” Id. Nonetheless, the court found no FDCPA violation. In reaching its decision, the court relied on the fact that the misstatement was not “material.” The court stated that “the purpose of the FDCPA, to provide information that helps consumers to choose intelligently, would not be furthered by creating liability as to immaterial information because by definition immaterial information neither contributes to that objective (if the statement is correct) nor undermines it (if the statement is incorrect).” Id. (internal citations omitted). While the complaint did contain a misrepresentation, that misrepresentation was not material.

In VanGlider, the plaintiff asserted the initial dunning letter violated the FDCPA since the letter stated that verification would be "furnished" to the debtor instead of "mailed" to the debtor. See, 15 U.S.C. § 1692g(a)(4). The court held the difference in wording was not material and the least sophisticated debtor would not be confused or mislead by the language and dismissed plaintiff's case.

Armed with this line of cases, defendants can utilize the "materiality" defense in many FDCPA cases. As with other federal statutes, debtors should, and are required to prove materiality of the violation. Whether conduct violates the FDCPA requires an objective analysis that considers whether the “least sophisticated debtor would likely be misled by a communication.” Donohue, 592 F.3d at 1034, citing Guerrero v. RJM Acquisitions, LLC, 449 F.3d 926, 934 (9th Cir. 2007). “In assessing FDCPA liability, [courts] are not concerned with mere technical falsehoods that mislead no one, but instead with genuinely misleading statements that may frustrate a consumers ability to intelligently choose his or her response.” Donohue, 592 F.3d at 1035.

Debtors should be put on their proof to show, by a preponderance of the evidence that their ability to intelligently choose his or her response was negatively impacted by a defendant's conduct. Absent this proof, violations of the FDCPA cannot be found.

Certainly, the materiality defense is not a panacea for all the explosion of FDCPA cases. However, it is one more tool to use to obtain a just, equitable result in accordance with the legislative purpose behind the FDCPA.