Over the past several years, the Federal Communications Commission (“FCC”) took an expansive view of its rules under the Telephone Consumer Protection Act of 1991 (“TCPA”). The TCPA bars certain calls, texts and faxes without prior express consent and requires disclosures and opt-out procedures. While the FCC and state attorney generals may enforce the TCPA, the law’s truth “teeth” come in the form of private lawsuits where statutory damages allow up to $1500 per call/text/fax advertisement. Organizations in every industry, including hospitality, financial services, retail, and healthcare, have settled TCPA lawsuits for millions of dollars.
Businesses viewed recent FCC rulings for the most part as pro-plaintiff, encouraging additional class action lawsuits. In July 2015, for instance, the FCC issued an “omnibus” declaratory ruling in which it expanded certain definitions and interpreted the TCPA in ways seen as empowering the plaintiffs’ bar. However, the FCC’s TCPA rules do not go unchecked, as they are subject to challenge in the courts. The D.C. Circuit recently sent a message to the FCC, ruling in Bais Yaakov of Spring Valley v. Federal Communications Commission that the agency’s 2006 rule requiring an opt-out notice on “solicited” facsimile advertisements ignored clear statutory language. The D.C Circuit’s ruling demonstrates that the court will invalidate FCC rules and interpretations when the agency exceeds statutory authority, even if the FCC may think it is making good policy. It also suggests that the D.C. Circuit may be ready to give a defiant “thumbs down” to significant parts of the FCC’s July 2015 order. A decision is expected on that appeal at any time and we anticipate that the D.C. Circuit will invalidate several aspects of that ruling. This action would have a tremendous impact on pending TCPA litigation and may curb the TCPA gravy train on which several class action firms have already ridden.
The TCPA, as amended by Congress through the Junk Fax Prevention Act, prohibits (among other things) sending an unsolicited advertisement to a fax machine. An “unsolicited advertisement,” as defined in the TCPA is “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person’s prior express invitation or permission, in writing or otherwise.” Thus, the law allows fax advertisements transmitted with permission (“solicited faxes”). The law also contains another exception to the unsolicited fax advertisement ban where there is an established business relationship with the recipient (“EBR faxes”), provided the recipient voluntarily communicated the fax number or made it available, and a conspicuous opt-out notice meeting certain statutory requirements appears on the fax.
In 2006, the FCC ruled that “solicited” faxes – i.e. those fax advertisements for which the sender received prior consent – require the opt-out notice and associated opt-out procedures. The TCPA, in contrast, only mandates the opt-out notice for the EBR faxes. The 2006 ruling resulted in litigation against companies like Anda (a generic drug seller) that had permission to fax advertisements. Anda had valid permission from pharmacies to fax advertisements regarding time-sensitive topics such as pricing information and weekly specials. Plaintiffs nevertheless sued Anda in a $150 million class action lawsuit because Anda allegedly had not included the opt-out notice. Anda subsequently sought a ruling from the FCC clarifying that solicited faxes did not require the opt-out.
In the category of “sometimes when you ask, you get the answer you don’t want,” the FCC ruled that the opt-out notice applied to solicited and EBR faxes. However, the FCC stated it would waive application for faxes sent before April 30, 2015. The two Republican commissioners (including now Chairman Pai) vigorously dissented. Anda then appealed to the D.C. Circuit.
Late last month, the D.C. Circuit vacated the 2006 solicited fax rule and remanded it to the agency. The court focused on the TCPA’s statutory language, noting that the opt-out notice requirement only appears in the EBR fax provision. “Although the Act requires an opt-out notice on unsolicited fax advertisements, the Act does not require a similar opt-out notice on solicited fax advertisements…Nor does the Act grant the FCC authority to require opt-out notices on solicited fax advertisements.” The appeals court concluded that the case was quite simple – the FCC can only take action that Congress authorized. Congress did not authorize an opt-out notice requirement for solicited fax advertisements. Under an existing rule, senders must still allow recipients to opt-out if they no longer want to receive solicited faxes. But the FCC cannot require the opt-out notice on those solicited fax advertisements. Consequently, companies should not be liable under the TCPA for not including the opt-out notice on solicited fax advertisements.
While the FCC understandably wants to protect consumers and businesses from unsolicited calls, texts, and faxed advertisements – the agency must respect its authority and the limits to that authority. In other words, the FCC cannot choose how the TCPA “should” read. Congress made that choice.
With TCPA litigation continuing to explode, this ruling provides some comfort that the FCC will not go unchecked in its recent, broad TCPA interpretations. And, with the high stakes appeal of the 2015 Omnibus Ruling pending before the same court, there are strong signs that the D. C. Circuit will push the FCC back on its expansive interpretations of autodialer and liability for calls to reassigned numbers, among other challenged rules. Companies involved in ongoing TCPA litigation involving the challenged interpretations may want to seek stays from their courts or arbitrators pending the outcome of the next appeal.
In the past few years, many organizations such as Capital One, Bass Pro Outdoor, and the Cosmopolitan Hotel have faced class actions alleging violations of California’s call recording law. This week, California’s Attorney General demonstrated that her office, working with state prosecutors, will also vigorously enforce the law under the state’s criminal statutes. Attorney General Harris announced an $8.5 million dollar settlement with Wells Fargo Bank, N.A. over the alleged failure to provide call recording announcements to California consumers.
The complaint alleged violations of Sections 632 and 632.7 of California’s Penal Code, including the purported failure of Wells Fargo’s employees to “timely and adequately disclose the recording of communications with members of the public.” These laws form part of California’s Invasion of Privacy Act. Section 632 makes it illegal to eavesdrop (monitor) or record a “confidential communication” without the consent of all parties. The statute defines a “confidential communication” as including “any communication carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto.“ The law specifically excludes communications in circumstances “in which the parties to the communication may reasonably expect that the communication may be overheard or recorded. “ Section 632.7 bars the recording of cell phone conversations, without the consent of all parties.
Wells Fargo Bank settled the case, agreeing in a stipulated judgment to the $8.5 million settlement and certain compliance requirements. Specifically, Wells Fargo must make a “clear, conspicuous, and accurate disclosure” to any consumer in California of the fact that Wells Fargo is recording the call. The settlement requires that this disclosure occur “immediately at the beginning” of the call, but allows Wells Fargo to precede the disclosure with an introductory greeting identifying the customer service representative and the entity on whose behalf the call is made (presumably, a Wells Fargo-affiliated entity). Wells Fargo also committed to a compliance program for one year and periodic internal testing of its employees’ and agents’ compliance with the call disclosure requirement. The bank agreed to appoint an officer or supervisor with specific oversight responsibility for compliance with the settlement obligations. Within a year following the stipulated judgment, Wells Fargo must provide the Attorney General with a report summarizing the testing.
Interestingly, the Attorney General previously pursued a similar action against home improvement platform Houzz Inc. for allegedly failing to notify all parties of its recording of incoming and outgoing telephone calls. In that case, Houzz agreed to appoint a Chief Privacy Officer to oversee Houzz’s compliance, a first for a California Department of Justice settlement.
As we have advised before, all organizations recording calls – whether inbound or outbound – should immediately disclose to called parties that the call is being recorded. The disclosure should occur at the outset of the call. One type of introduction could be, “This is Michelle, calling on behalf of XYZ Company. This call is being recorded and/or monitored.” Some companies may wish to announce the option of a non-recorded line, available via a key press. It is also important to time the recording to begin after the announcement, to avoid potential liability based on even a few seconds of a recorded call before an announcement is given.
A few important reminders are worth repeating:
- The announcement requirement applies to inbound and outbound calls, including requested return calls.
- Recording announcements apply to all types of calls – not just sales calls.
- Maintain proof of the announcement.
- Implement a short, written call recording policy.
- Train customer service representatives to understand the call recording policies.
- Periodically “test” call recording procedures.
- Promptly investigate any call recording complaints and take appropriate corrective action.
- Have customer service representatives sign an acknowledgment that they understand they are being monitored and/or recorded.
The recording of customer service and other calls is an important component to prevent fraud, fulfill legal requirements and augment customer service, among other reasons. Companies can implement call recording effectively, but must comply with announcement requirements and should take proactive measures, such as training and testing, to protect against civil and criminal liability and to safeguard consumer goodwill.
A class action lawsuit recently instituted in federal court in the Northern District of California, Hunter v. Lenovo et al., alleges that Lenovo Inc., a computer manufacturer, violated its customers’ rights by selling computers which came preinstalled with alleged spyware manufactured by Superfish Inc., another named defendant. The purported class alleges that the Superfish software monitors user activity and displays pop-up ads, among other things, as part of an “image-based search” function which identifies images on the user’s screen and seeks out similar images on the web. The complaint states causes of action for violations of the Electronic Communications Privacy Act and the Stored Communications Act, as well as unjust enrichment.
The Stored Communications Act (“SCA”), 18 U.S.C. §§ 2701-2712 provides criminal penalties for anyone who “intentionally accesses without authorization a facility through which an electronic communication service is provided” or “intentionally exceeds an authorization to access that facility.” The SCA has been cited by plaintiffs in other class actions in which users allege that a technology company has overstepped its bounds. For instance, in Perkins v. LinkedIn Corp., No. 13-CV-04303-LHK, 2014 WL 2751053 (N.D. Cal. June 12, 2014), a putative class of LinkedIn users alleged that the social networking company violated the SCA by collecting contacts from users’ external email accounts. The court granted LinkedIn’s motion to dismiss the SCA claims, noting that the users consented to the collection of email addresses in a prominent disclosure, and therefore LinkedIn was “authorized” to collect the information, an exception to the SCA pursuant to 18 U.S.C. §2701(c).
Although the suit is still pending, Lenovo has reversed course on the Superfish software. Lenovo has disabled Superfish on computers which came pre-installed with the software, its websites offer instructions for users to uninstall the software altogether, and Lenovo computers no longer come preinstalled with the program. While these remedial actions may be an appropriate response to user concerns, they do not constitute an admission of legal liability in the class action suit. The defendants may still argue that users consented to the software, even as they remove it from the computers.
Restaurant chain Applebee’s has joined other businesses such as Overstock.com, Hilton, Capitol One, and Bass Pro Shops as defendants in purported class action lawsuits alleging that they illegally recorded calls to or from California residents. In fact, plaintiffs have filed hundreds of individual and class actions in California courts under California’s various eavesdropping/call recording laws. Potential damages can include an award of $ 5,000 per violation – thus the damages in class actions could lead to multi-million dollar judgments and settlements. Capitol One recently settled a purported class action involving residents in California and several other states for $ 3 million dollars. Bass Pro Shops settled for $ 6 million, and Shell Oil forked out $ 2 million to resolve recent claims.
California is one of 12 states that require “two party” or “all party” consent to call recording. The majority of states (and the federal standard) only require that one party consent. So, in other words, if the recording party consents, that generally constitutes sufficient consent in most states. Further, in most states, if companies announce at the outset that the call is being monitored or recorded, that announcement has been sufficient to provide at least implicit consent where the parties continue with the call following the announcement. In the Appleee’s case, however, the plaintiff contends that she (and others) never received a notification that her call was recorded.
Applebee’s Suit Alleges Recording on Wireless Phone
Plaintiff Joneeta Byrd contends that in November 2013, she called Applebee’s customer service number from a wireless telephone. She alleges she was not aware that Applebee’s recorded the call, and that the customer service representative did not inform her that the call was being recorded. At some point after the call, Byrd claims she learned that Applebee’s records all incoming calls. Byrd contends that Applebee’s does not always disclose the recording to every caller. According to the complaint, “Plaintiff believes that the total number of Class members is at least in the tens of thousands and members of the Class are numerous and geographically dispersed across California.”
Byrd’s lawsuit is based on California’s Penal Code, Section 632.7, which prohibits the intentional recording of any telephone communication without the consent of all parties where at least one party is using a cordless or cellular phone. It also provides for criminal fines and imprisonment. It differs from, and has arguably broader coverage than another section of California’s law, Section 632, which bars the eavesdropping or recording of confidential communications (i.e., where the caller had a reasonable expectation of privacy), without the consent of all parties to the confidential communication. While some courts have dismissed claims under Section 632, they have allowed claims under Section 632.7 to go forward – often reasoning that the California legislature intended more stringent protections for mobile phone conversations.
Hilton Hotels Decision Holds the Law Not Intended to Cover Parties
A recent decision involving Hilton Hotels may provide some relief for companies in California Section 622.7 call recording suits. The district court (on remand) held that Section 632.7 only applies to third party recording of a wireless telephone conversation – and does not include recording by a party to the call. The order is available here. Specifically, the district court concluded that “[t]he statutory scheme makes it clear that these sections refer to the actual interception or reception of these radio signals by third parties and do not restrict the parties to a call from recording those calls.” The court further ruled that Hilton had consent and that California’s legislature “did not limit the service observing monitoring of calls that it is alleged in this case.” The plaintiff has appealed this decision.
Top “5” Recommendations When Recording Customer Service Calls
Applebee’s case and the other call recording cases serve as useful reminders on call recording. As counsel to many companies and call centers utilizing call recording for quality control and service monitoring, we generally recommend this top 5 list:
- Announce/Maintain — At the outset of a call, announce the call is being monitored and/or recorded. Maintain proof of the announcement in the event of litigation.
- Incoming & Outgoing Covered — Remember, both incoming and outgoing calls are covered, so make sure you inform all parties – whether they have called in or your company has called them – that the calls are recorded and/or monitored.
- Objections — If there is an objection, consider offering a non-monitored line. In any event, do not continue the call with the objecting party.
- Customer Service Rep Consent Form — Upon hire, consider having customer service representatives sign an acknowledgement and agreement that their calls may be monitored or recorded. Maintain copies of these consent forms in employee files.
- Train customer service representatives – Make sure customer service representatives can explain the call recording policy if asked. A consistent organization-wide message that accurately states the standard procedure helps ameliorate consumer concerns, and in the event of litigation, can bolster a defense.
In what could become the largest ever settlement in a case brought in the 22 year history of the Telephone Consumer Protection Act (“TCPA”), Capital One and three collection agencies agreed to pay over $75 million into a settlement fund to settle a consolidated class action lawsuit alleging that the companies used an automatic telephone dialing system (“ATDS”) or prerecorded voices to call more than 21 million consumers’ cell phones without their consent.
Although the settlement covers several different lawsuits that were consolidated, the allegations in those suits are largely the same. The plaintiffs alleged that Capital One and the other defendants violated the TCPA by using an ATDS or prerecorded voices to call the plaintiffs about debt collection. Debt collection calls are treated differently than other telemarketing calls under the TCPA, but still require a prior express consent from the consumer. The plaintiffs alleged that no consent was ever obtained by the defendants.
Capital One and the three collection agencies are not admitting any liability in the litigation. The settlement agreement also requires the defendants to conform their telemarketing practices and procedures to comply with the TCPA. Capital One has already developed and implemented changes to its calling systems designed to prevent future violations of the TCPA.
The U.S. District Court for the Northern District of Illinois offered its preliminary approval of the settlement last week and it must still be given final approval. The final approval hearing is scheduled for December 2, 2014. Opposition to the settlement terms and size could emerge in the meantime.
This settlement is a valuable reminder of the expensive consequences that can occur if a company’s marketing practices are not closely monitored for compliance with applicable laws. TCPA litigation has been . Settlements like the one in this case will further encourage plaintiff’s attorneys to bring additional cases. All companies should review their calling campaigns – whether telemarketing, appointment setting, customer service, debt collection, or otherwise to ensure RCPA compliance. With more and more consumers opting to rely on mobile phone over residential lines, it is increasingly important to obtain prior consent for autodialed or prerecorded calls to mobile lines.
Sprint Gets a Wallop of a Reminder – Company-Specific Do Not Call Lists Still Matter – $7.5 Million Record Do Not Call Consent Decree
Yesterday, the Federal Communications Commission (“FCC”) announced a consent decree with Sprint Corporation for federal do not call violations. Specifically, under the terms of the agreement, Sprint will make a $7.5 million “voluntary contribution” to the United States Treasury. This payment represents the largest do not call settlement reached by the FCC. Sprint also agreed to various ongoing compliance initiatives, including enhanced training and reporting requirements. Importantly, the action also serves as an important reminder on an often overlooked section of the do not call rules – the requirement that companies maintain and abide by “company-specific” or internal do not call lists.
Under the federal do not call rules, organizations making telemarketing calls to residential customers (including mobile phones) are required to scrub the federal do not call database before initiating those calls, unless the calls meet certain exceptions – the called party has an existing business relationship (“EBR”) with the caller or has provided prior express consent for the calls or the call is from a tax-exempt non-profit. Of course, as we have written before, there are additional requirements for autodialed or prerecorded calls to mobile mobiles and prerecorded telemarketing calls to residential lines.
Another, sometimes overlooked requirement is that companies making permissible calls (for instance, after scrubbing the do not call database or with an existing business relationship or prior express consent) must maintain an internal, company-specific do not call list where companies log individuals’ subsequent requests not to be called. In other words, even if a consumer has an existing business relationship or has given prior express consent to be called, once the consumer tells the company not to call again, that request trumps the existing business relationship/prior consent or the do not call scrub. This company-specific do not call request must be implemented within 30 days and honored for five years from the date the consumer made the request. (The federal do not call registration, in contrast, lasts indefinitely). A company must also have a do not call policy, available upon request.
In 2009, the FCC investigated Sprint for do not call violations relating to the company-specific do not call list. Sprint subsequently settled that enforcement action in 2011 through a consent decree (which included a $ 400,000 payment). The decree required Sprint to report to the FCC’s Enforcement Bureau, for two years, any noncompliance with the consent decree or the FCC’s company-specific do not call rules.
In March 2012, Sprint disclosed to the FCC that it had discovered additional issues involving human error and technical malfunctions relating to Sprint’s or its vendor’s do not call processes that caused potential noncompliance with consumers’ do not call or do not text preferences, or prevented the timely capture of the preferences. Sprint represented that it had subsequently implemented improvements in its do not call data management systems. It had also ceased telemarketing and text campaigns to investigate the issues. The FCC investigated Sprint’s do not call compliance and ultimately entered into this record-setting $7.5 million settlement.
Under the terms of the consent decree, in addition to the settlement payment, Sprint will designate a Compliance Officer to administer a new compliance plan and to comply with the consent decree. Sprint also must implement a compliance manual which will instruct “covered personnel” (including Sprint personnel and independent contractors who provide telemarketing services for Sprint) on Sprint’s do not call policies. The consent decree further requires Sprint to establish and maintain an annual compliance training program, and to file several compliance reports with the FCC at designated time frames. Significantly, Sprint acknowledges that actions or inactions of any independent contractors, subcontractors, or agents that result in a violation of the company-specific do not call rules or the consent constitute an act or inaction by Sprint – in other words, Sprint is specifically on the hook for third parties’ actions.
The consent decree and $7.5 million payment serve as a useful reminder of the company-specific do not call rules. Once a consumer indicates they do not wish to receive further telemarketing calls or texts, the FCC’s rules require that the telemarketer place that consumer on its internal, company-specific do not call list. This consumer requests trumps even an established business relationship or prior express consent. It can only be revoked by subsequent express consent – which we would recommend be in writing. Even if a consumer does business with your company every day, if he or she has asked not to receive telemarketing calls – don’t call! Compliance with the company-specific do not call rule means your organization does not call someone who has indicated they do not want to be called. And, it can also save your company great time, resources, and money spent defending private litigation or an FCC enforcement action. Further, if your organization utilizes third parties for telemarketing campaigns, your company should make sure the third party is taking do not call requests, logging them, and passing those to your company for future campaigns.
In a recent case in the U.S. District Court for the Eastern District of Missouri, the district court held that the plaintiff’s Telephone Consumer Protection Act (“TCPA”) claim should be dismissed. The court ruled that the plaintiff gave prior express consent when she agreed to the terms of her health insurance plan, which stated that the company could share her number with other businesses who work for the plan.
The plaintiff Suzy Elkins enrolled to receive prescription benefit management services through a group plan offered by her employer. The plaintiff then reenrolled after her employer changed plans to receive prescription management services from the Defendant, Medco Health Solutions, Inc. (“Medco”) through Coventry Health of Missouri (“Coventry”). On the reenrollment form, Elkins provided her cell phone number as her home phone number and certified that the information she provided was true and accurate. Ms. Elkins refilled several prescriptions using Medco’s retail pharmacy network.
Elkins filed a complaint alleging that the automated and prerecorded calls she received from Medco through her enrollment in her employer’s health insurance plan, Coventry, violated the TCPA’s prohibition on autodialed/prerecorded calls to mobile phones and the federal “do not call” rules. Elkins had registered her number in the federal do not call database. Elkins alleged that Medco called her cell phone twice utilizing autodialed, prerecorded calls in an attempt to sell prescription medications. Medco claimed that it was attempting to make Elkins aware of certain pharmacy benefits, such as obtaining refills at reduced prices. Both parties disputed whether the calls were actually autodialed or prerecorded, and the court did not address that issue.
Instead, the district court found that the plaintiff’s TCPA claim was barred because she gave her express prior consent to be called at the number she provided when she gave that number at the time of enrollment as hercontact number related to healthcare benefits. The court noted that the Certificate of Coverage that the plaintiff agreed to with Coventry stated that Coventry could use or share her personal information with “other businesses who work for the Plan . . . [t]o tell you about treatment options or health related services.” The Certificate of Coverage also provided that members have certain rights including the right to ask for restrictions.However, the plaintiff never provided notice requesting that she not be contacted at that number with respect to her health benefits.
The court concluded that the calls that were the basis of the complaint were made by a pharmacy benefits specialist on behalf of her existing health plan regarding the pharmacy benefits she was receiving on an ongoing basis. The court reasoned that the provision of her cell phone number reasonably evidenced prior express consent by the plaintiff to be contacted at that number regarding pharmacy benefits.
The district court also found that the plaintiff had an established business relationship with the defendant which barred liability under the “do not call” rules. The court held that it was uncontroverted that there was an established business relationship since the plaintiff had utilized Medco’s prescription benefit management services to fill twelve prescriptions in a six month period before the calls that served as the basis for the complaint.
This decision represents a victory for TCPA defendantsin that the court found that prior express consent was given by the plaintiff when she gave her phone number and agreed to the terms of the Certificate of Coverage, which authorized Coventry to share her phone number. TCPA litigation has been increasing significantly in the past few years. While this court did not address the recent changes that have gone into effect that placed stricter requirements on businesses that engage in marketing via mobile messaging and prerecorded telephone calls, this decision does serve as guidance for consent, at least to non-telemarketing calls.
It is unclear whether the consent in this case would pass muster as “prior express written” consent for prerecorded or autodialed telemarketing calls to mobile phones and residential lines under the new rules, but since the calls at issue in this case predated the new rules the court did not need to address that point. We recommend businesses obtain “prior express written” consent for TCPA-covered calls and texts, consistent with the requirements under the new rules. It is important to note, however, this this court acknowledged that express consent can be extended to third parties through the plaintiff’s agreement to the terms if those terms are sufficiently broad to cover third parties. Finally, for non-autodialed or prerecorded telemarketing calls to mobile phone and live telemarketing calls to residential lines, this case is a useful reminder that an existing business relationship still constitutes a valid defense.
Advertisements for electronic cigarettes, or “e-cigarettes,” are increasingly drawing scrutiny from consumer advocates and public health groups who are calling for the federal government to regulate these advertisements in the same manner that traditional cigarette advertisements are regulated.
The e-cigarette industry is growing at a rapid pace, particularly among younger people. Last year, the industry generated roughly $2 billion and industry sources estimate sales are on pace to hit $5 billion this year.
Currently, there are no regulations governing advertisements of e-cigarettes. In contrast, advertisements of traditional cigarettes are heavily regulated. For instance, various federal laws and regulations prohibit cigarette manufacturers from sponsoring sporting events, and advertising cigarettes on television is also barred. Under the terms of a settlement from a lawsuit in 1998, tobacco companies agreed to not use cartoon characters to market cigarettes.
For roughly 10 years, the marketing team at R. J. Reynolds used the cartoon character “Joe Camel” to promote cigarettes. After years of pushback and under pressure from a pending lawsuit, Congress and various consumer groups, R.J. Reynolds announced that it would settle the pending lawsuit out of court and voluntarily end its use of Joe Camel.
BlueCigs, a leading manufacturer of e-cigarettes, uses a cartoon character named Mr. Cool in a television advertising campaign. Industry watchdogs have criticized the television ads, particularly given the growth of the industry and the regulations faced by traditional tobacco manufacturers. Some in the industry have noted the similarity between Mr. Cool and Joe Camel and worry that these advertisements will have the same effect of luring young people to try e-cigarettes that many believe Joe Camel had with traditional cigarettes.
Last month, a group of Senate Democrats introduced legislation to prohibit e-cigarette producers from marketing their products to children. This bill marked the first legislative attempt to regulate the e-cig industry. The bill would ban marketing e-cigarettes to children based on standards promulgated by the Federal Trade Commission (FTC), and would empower the FTC and state attorneys general to enforce the advertising ban.
Additionally, the White House Office of Management and Budget has been reviewing a rule proposed by the U.S. Food and Drug Administration that would bring e-cigarettes under its jurisdiction. The regulations have been under review since October. We have previously written about FDA plans to regulate the e-cigarette industry here.
The e-cigarette industry should be aware that their marketing and advertisements are being closely monitored. Regulation and potential lawsuits could be on the horizon and companies should review their policies and practices to make sure they are prepared. The use of cartoon characters may be one advertising method to forego at this point, instead focusing on mature individuals using the product.
A federal court in California recently ruled that a plaintiff who was required to enter her phone number to purchase a plane ticket online had consented to receive a text message, and dismissed her claim under the Telephone Consumer Protection Act (TCPA). A plaintiff’s prior express consent is a major issue in TCPA litigation and this decision represents a victory for companies that obtain phone numbers from consumers who are purchasing goods or services from them.
The plaintiff, Shaya Baird, booked flights online for herself and her family on the Hawaiian Airlines website. During the purchase, Baird was required to enter her contact information. The website required at least one phone number, which Baird provided by entering her mobile phone number. A few weeks later Baird received a text message inviting her to reply “yes” if she wanted to receive flight notification services. Baird did not respond and she did not receive any more text messages.
Baird then filed suit alleging that Sabre, which contracted with Hawaiian Airlines to provide traveler notification services to passengers, violated the TCPA by sending her the unsolicited text message. The TCPA bars the sending of autodialed or prerecorded “calls” (which the Federal Communications Commission (“FCC”) has interpreted to include text messages) to mobile numbers without “prior express consent.” An individual’s granting of consent to receive texts constitutes an affirmative defense in a TCPA lawsuit.
Sabre moved for summary judgment on the ground that Baird consented to receive its text message when she made her flight reservation on the Hawaiian Airlines website. Baird responded that she did not voluntarily provide her cell phone number, but was instead told that she was required to enter a phone number. She further argued that she was not informed that by providing her cell phone number she was consenting to receiving text messages.
The court rejected Baird’s argument and found that although she was required to provide her phone number to book a flight on the Hawaiian Airlines website, the act of providing her phone number was a voluntary act. Baird was not forced to book a flight on the Hawaiian Airlines website. The court found that under the FCC’s interpretation of the TCPA, Baird had consented to be contacted on her cell phone about flight related matters. The court looked to the FCC’s 1992 Order implementing the TCPA to determine if the act of providing a cell phone number in connection with a transaction constitutes the required consent under the TCPA to receive autodialed calls. The court found that since it was undisputed that Baird “knowingly released” her cell phone number when she booked her tickets, under the FCC’s 1992 TCPA Order she had consented to receiving text messages.
This decision represents a victory for TCPA defendants. TCPA litigation has been increasing significantly in the past few years and recent changes have gone into effect that placed stricter requirements on businesses that engage in marketing via mobile messaging and prerecorded telephone calls. While we recommend businesses obtain “prior express written” consent for TCPA-covered calls and texts, now at least one court has recognized the knowing provision of a mobile number as consent. However, companies engaging in text messaging should proceed cautiously as the new rules do impose strict requirements when it comes to telemarketing messages in particular, different from the informational text messages Ms. Baird received here. Under the new TCPA rules purely informational calls/texts and calls/texts to mobile phones for non-commercial purposes require prior express consent – oral or written. “Telemarketing” calls/texts to mobile phones require prior express written consent. Covered telemarketing calls include those made by advertisers that offer or market products or services to consumers and calls that are generally not purely informational (such as “mixed messages” containing both informational content and offering a product, good, or service for sale).
The U.S. Court of Appeals for the Sixth Circuit is currently hearing an appeal of a district court decision, which if upheld would have enormous ramifications for freedom of speech and the online service provider safe harbor under the Communications Decency Act (CDA).
TheDirty.com is a website run by Nik Lamas-Richie. The site allows users to submit gossip about anyone or anything and the site currently features hundreds of thousands of comments on a wide range of topics and users can also freely post comments on stories that are published on the website. Lamas-Richie then selects some of the user posts, and sometimes adds a little commentary to the user submission, which he then posts to the site. Sarah Jones, a former Cincinnati Bengals cheerleader, was featured twice on TheDirty.com including allegations that she was promiscuous and that she had a sexually-transmitted disease.
Jones then sued TheDirty.com and Lamas-Richie alleging defamation, libel and invasion of privacy. The first trial resulted in a hung jury, but in the second trial in July a jury of eight women and two men in a Kentucky federal court awarded Jones $338,000 in damages.
Typically, cases involving claims like Jones’ against websites are quickly dismissed under the CDA, which provides websites immunity from third party content. TheDirty.com filed a pre-trial motion to dismiss the case on the basis that the suit was barred by the CDA that was rejected by the district court, which held that the CDA did not offer protection because “the very name of the site, the manner in which it is managed, and the personal comments of defendant Richie, the defendants have specifically encouraged development of what is offensive about the content of the site.” The court reasoned that since the site served to encourage the comments then it was not entitled to immunity under the CDA. The CDA typically immunizes providers of interactive computer services against liability arising from content created by third parties if the provider is not also responsible in whole or in part or the creation or development of the offending content.
In August, after the jury verdict, the judge wrote a supplemental opinion reiterating the views expressed in the earlier opinion. In particular Judge William Bertelsman said that because Richie “played a significant role in developing the offensive content such that he has no immunity under the CDA.”
Richie appealed the decision to the Sixth Circuit, arguing that the case should have been dismissed because the CDA immunizes liability for users’ comments. Congress enacted the CDA to encourage website owners to actively screen, review, and moderate third party posts and to allow website operators to have the ability to remove offensive content when necessary without fear of liability. Richie argued that under the CDA website operators are free to edit, alter, or modify user-created content without losing immunity, as long as their edits do not materially alter the content’s original meaning.
Four separate amicus briefs were filed with signatories that included many of the biggest names on the Internet including Facebook, Google, Amazon, Microsoft, Yahoo, Twitter and eBay. The briefs argue that the district court ruling wrongly interpreted the CDA and that the consequences of upholding the district court’s decision would be enormous. The amicus brief submitted on behalf of Google, Facebook and others states that aspects of the district court decision “significantly depart from the settled interpretation of [the CDA] and, if adopted by this Court, would not only contravene Congress’s policies as declared in the statute, but also introduce substantial uncertainty regarding a law that has been a pillar for the growth and success of America’s Internet industry.” \
This case will be closely watched because of the far reaching consequences it would have if the district court ruling imposing liability of the website is upheld. A ruling from the Sixth Circuit that affirmed the district court’s ruling could chill the operation of online businesses that are open for users to create content. There is a long line of cases that have held that conduct similar to TheDirty.com’s in this case is protected by the CDA, but a decision from the Sixth Circuit finding TheDirty.com liable would uproot the well-established jurisprudence under the CDA.