April 05, 2017
Class Action Alert
Class Action Alert
Author(s): Dan Deane
The new pro-business, anti-regulation Trump administration appears to be on a collision course with the Telephone Consumer Protection Statute (TCPA), a consumer protection juggernaut that has been wreaking havoc for consumer-facing businesses for the past several years. This article explores the challenges the TCPA is likely to face in the months and years ahead.
During President Obama’s two terms, the Telephone Consumer Protection Act (TCPA) grew from an archaic and nearly forgotten relic of the early 1990’s 2G wireless era, to a muscular consumer protection juggernaut. The statute has become a favorite weapon for consumer class action lawyers, so much so that commentators have sardonically recast the statute’s acronym: “Total Cash for Plaintiff’s’ Attorneys.” But the winds of change are blowing: a Republican businessman sits in the White House, Congress remains firmly in Republican hands (for now), new Republican leadership has taken the helm at the Federal Communications Commission (FCC) and a business-friendly conservative has been appointed to fill the vacancy on the United States Supreme Court.
The election of 2016 may mark a pivot point with respect to the push and pull between consumers and businesses. An early centerpiece of President Trump’s agenda is rolling back what he deems to be government overreach. He has promised to revive the economy by removing regulatory impediments to business success and growth. While initial efforts have focused on immigration and health care reform, a rollback of broader consumer protections appears to be underway.
Only two weeks following his inauguration, President Trump signed the Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs. Among other things, that order mandates that federal agencies must cut two regulations for every new one they wish to create. Less than a month later, he went a step further with the Presidential Executive Order on Enforcing the Regulatory Reform Agenda, which directs federal agencies to create task forces to identify burdensome regulations so that they can be brought to the chopping block.
President Trump’s outline for his proposed 2018 budget includes deep cuts to several federal departments and agencies known for their strict regulatory regimes aimed at protecting individuals against business interests, including the EPA and the Departments of Labor, Health and Human Services and Housing and Urban Development.
More recently, in March of this year, President Trump signed an executive order rolling back President Obama’s regulatory efforts to slow climate change through restrictions on power plant emissions. Meanwhile, Republicans in Congress voted to repeal landmark internet privacy protections. The new legislation, which President Trump is expected to sign, overrules nascent FCC rules that were intended to protect the privacy of internet users. If the repeal becomes law, internet service providers will be able to sell browsing history to businesses without consumer consent.
It is likely these initial steps are only the beginning. At a White House signing ceremony on March 27, 2017, at which President Trump signed legislation rolling back some other Obama-era regulations, the president stated his intentions bluntly: “I will keep working with Congress, with every agency and most importantly, the American people, until we eliminate every unnecessary, harmful and job-killing regulation that we can find. . . . We have a lot more coming.”
While TCPA reform has not yet been specifically mentioned as a Trump priority, it seems likely that the president and his political allies see the statute and the FCC’s rules as a governmental overreach that has created an undue burden on business. Indeed, given that Donald Trump’s campaign was itself sued for TCPA violations in 2016, it stands to reason that the new president is no fan of the statute.
The TCPA, enacted in 1991, is a federal statute created to protect consumers from overzealous telemarketers using invasive mass telemarketing practices, such as “autodialers” (technology that stores and dials huge lists of phone numbers randomly or sequentially) and artificial or prerecorded voices (so called, “robocalls”).
Many of the issues that first prompted passage of the TCPA have, however, been ameliorated through smarter technologies and a shift away from mass marketing strategies. Notwithstanding these advances, FCC and court rulings have interpreted the TCPA in an increasingly expansive way. These rulings, coupled with the lure of uncapped statutory damages (as much as $1,500 for each call in violation), have encouraged consumer lawyers to file more and more TCPA claims. Class actions that can aggregate the claims of thousands of consumers can potentially be worth hundreds of millions of dollars—a tempting enticement for class action lawyers who ordinarily take home a percentage of that recovery.
The result has been an explosion of TCPA litigation. According to litigation analyst WebRecon LLC, only 16 plaintiffs nationwide filed TCPA claims in federal court in 2008. That number climbed to 1,136 plaintiffs in 2012. Steady increases continued each year of Obama’s presidency, topping out at 4,860 TCPA claims in federal court by 2016. Because the TCPA is a strict liability statute and violations are relatively easy to prove, businesses facing potentially ruinous class action liability have been quick to settle claims with substantial payouts. For example, in just the past few years, Capital One settled a TCPA class action for $75 million, several cruise lines settled claims for $76 million and AT&T and Bank of America settled cases for $45 million and $32 million, respectively.
Thus, the biggest factor driving increased TCPA litigation is most likely the lure of easy money for lawyers, rather than an increase in vexatious telemarketing practices. Not surprisingly, the business community has taken notice and has been lobbying the FCC and Congress to scale back the reach and impact of the TCPA. While those efforts have been largely unsuccessful, the landscape has shifted.
The FCC implements the TCPA through its rulemaking and assists the courts in interpreting the TCPA through its rulings. But the FCC’s most recent rulings have only added fuel to the fire of TCPA litigation. The FCC’s 2015 Omnibus Declaratory Ruling and Order (FCC Order) further expanded the sweep and scope of the TCPA. Most significantly, it expanded the definition of “automatic telephone dialing system” (i.e., autodialer) to such an extent that the TCPA now arguably applies to nearly any modern telecommunications device (including smart phones). The FCC Order also included several other rulings and clarifications that generally favored consumer interests over business interests. These rulings spurred a court challenge, which led to oral arguments before the D.C. Circuit in October 2016. Many of the questions at oral argument indicated skepticism of the FCC’s interpretation of the TCPA, particularly the FCC’s broad definition of an “autodialer,” and hinted that the court may send the FCC back to the drawing board. That decision remains pending.
Regardless of how the D.C. Circuit rules, the FCC may take a fresh look at the TCPA on its own initiative. The FCC Order was implemented under the former chairman of the FCC, Tom Wheeler, a Democrat appointed by President Obama. Chairman Wheeler stepped down in January of this year and President Trump immediately elevated Republican Commissioner Ajit Pai to the chairman position. Due to one other recent departure by a Democrat, the FCC, which is ordinarily directed by five commissioners, currently has two Republican commissioners to just one Democrat. With a Republican president making future appointments, the FCC will remain in Republican hands for at least four years.
Pai’s appointment as the FCC Chairman is significant. In 2015, Commissioner Pai vigorously dissented from two of the more controversial aspects of the FCC Order, harshly criticizing the FCC’s interpretation of the TCPA. Pai believed the FCC Order dramatically expanded the TCPA’s reach, which he wrote was “sure to spark endless litigation, to the detriment of consumers and legitimate businesses that want to communicate with them.” Speaking of the abuses he saw in TCPA litigation, Pai observed that “in practice the TCPA has strayed far from its original purpose. And the FCC has the power to fix that.”
Since taking over as chairman, Pai has not yet publicly addressed the TCPA or any plans to curtail its reach, focusing his initial efforts in other areas. For example, Pai moved aggressively to roll back Obama-era consumer protection regulations designed to ensure equal access to the internet (so called “net neutrality” rules). But Pai’s sympathetic stance toward business interests, coupled with his 2015 dissent, strongly suggest that he will take steps to reform the FCC’s approach to the TCPA. Nevertheless, while Chairman Pai will bring a new perspective to the TCPA, he is unlikely to seek its wholesale destruction. Rather, Pai’s previous comments suggest he will seek to reform the regulations so that plaintiffs will be incentivized “to go after the illegal telemarketers, the over-the-phone scam artists and the foreign fraudsters[,]” rather than “legitimate, domestic businesses.”
Indeed, reforming the TCPA is not a zero sum game, nor is it necessarily a partisan issue. Both Democrats and Republicans have constituents who resent invasive telemarketing. In recent years, there has been legislative activity in Congress both to strengthen the TCPA’s consumer protections and to reign in its excesses. Currently before Congress is the Help Americans Never Get Unwanted Phone Calls (HANGUP) Act. While HANGUP was authored by Massachusetts Democratic Senator Ed Markey, Republican Senator Michael S. Lee co-sponsored the bill. The bill strikes a provision of the Budget Act of 2015 that exempts from TCPA liability callers collecting debt owed or guaranteed by the federal government. The HANGUP bill illustrates that Democrats and Republicans may be able to work together to reform the TCPA so that it works for both consumers and legitimate businesses.
Although not directly addressed at the TCPA, a bill quietly introduced in February—the Fairness in Class Action Litigation Act of 2017—may have the greatest impact on TCPA litigation. Should this bill become law, it will enact wide-ranging changes to the procedural rules governing class and multi-district litigation. While the rule changes may seem technical and abstract to most lay observers, the practical results could be significant. In short, the various proposed revisions would make it much harder for plaintiffs’ lawyers to certify a class in federal court. Defense attorneys would be given a slew of new tools to defeat class certification, which would incentivize defendants to fight rather than settle, and may discourage the filing of borderline suits. President Trump could be expected to sign the bill, which has already passed the House and is currently under consideration in the Senate.
Finally, to the extent that any matters bearing on the TCPA, or the FCC’s authority to enforce it, end up before the Supreme Court, Justice Scalia’s successor may prove critical. The current unconfirmed appointee, Tenth Circuit Judge Neil Gorsuch, is an originalist in the tradition of his predecessor. His conservative judicial philosophy has caused him to rule in favor of business interests more often than individuals. In fact, commentators have remarked that Judge Gorsuch “has not hesitated to take stands that critics say have a partisan edge,” including by criticizing judicial activism and calling for “limiting the power of federal regulators.”
Limiting the power of regulators is exactly what Judge Gorsuch proposed in a concurring opinion in Gutierrez-Brizuela v. Lynch, 834 F.3d 1142 (10th Cir. 2016). In the opinion, Judge Gorsuch challenged the doctrine that compels courts to defer to the rulings of federal agencies in certain circumstances—so called “Chevron deference.” Judge Gorsuch criticized the doctrine for allowing “executive bureaucracies to swallow huge amounts of core judicial and legislative power” and for “concentrat[ing] federal power in a way that seems more than a little difficult to square with the Constitution of the framers’ design.” In sum, his opinion strongly suggested that the time had come to discard deference to regulators. With ACA International currently pending before the D.C. Circuit Court of Appeals, Judge Gorsuch’s skeptical stance regarding federal regulators, such as the FCC, might prove decisive.
The Trump presidency is still in its infancy and the fate of the TCPA has yet to be discussed. But the tea leaves indicate that the TCPA is likely to get caught up as part of the new administration’s broad-based effort to deregulate. President Trump’s appointees to the FCC and the Supreme Court appear to have ideologies and philosophies that align with these goals. The precise contours of the changes that are coming remain to be seen. But interested businesses and individuals should stay tuned as TCPA reform appears inevitable.
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.
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