"'Class Dismissed': Avoiding Liability," Developments Magazine

October 13, 2016

The Telephone Consumer Protection Act (TCPA) was enacted in 1991 amid growing cries from the U.S. public concerned about phone calls to their residences that, beyond interrupting their family dinner, were becoming so commonplace as to constitute harassment. The TCPA, passed at a time when most cell phones were the size and weight of a brick, has continually struggled to stay current with the waves of technology that have crashed since its initial passage.

The result for affected businesses has increasingly led to millions of dollars in class-action verdicts, and even more paid out in confidential settlements. In essence, the TCPA has mutated from a flyswatter initially crafted to handle pests on a case-by-case basis into a legal nuclear bomb. Legitimate concerns have arisen regarding the possibility that one improper phone call could lead to the eventual downfall of an entire company. The timeshare industry, whose business and marketing depends so much on direct telephone communications with its consumers, has arguably suffered the most damaging consequences of the TCPA, and its wrath only appears to be growing.

On the most basic of levels, the TCPA prohibits the initiation of phone calls, texts, and faxes using an automatic telephone dialing system (ATDS) to a consumer who has not already consented to receive that communication. Its most common applica-tion is to prevent a business from contacting a consumer in an attempt to sell its goods or services by calling that consumer’s cell phone without his/her “prior express written consent.” Since interpretation of the TCPA seemingly differs from jurisdiction to jurisdiction, and since the statute is constantly being shaped by the latest tech-nological advances, its terms are routinely ill-defined and unpredictably applied.

Indeed, even a cursory search of the term “ATDS” under TCPA jurisprudence will bring up thousands of pages of case law and guidance from the Federal Communications Commission that can be completely at odds. While some courts have held that only a sophisticated computer-based dialing platform administered completely without human intervention can constitute an ATDS, other courts have held that any consumer-based smartphone (like every iPhone on the market today) can meet that same definition. The repercussions of these types of ambiguities for the timeshare industry can be disastrous.

Specifically, as it relates to the timeshare industry, it is not uncommon for businesses to seek interested consumers by calling or hiring a third-party to call consumers with whom that business believes would be interested in purchasing a timeshare product. Many times, these calls will concern free trips, cruises, or other product incentives provided to encourage the consumer to either purchase or obtain additional information regarding a timeshare product. But, if such calls are not in compliance with the TCPA, the consequences can be serious.

Namely, the TCPA provides statutory damages of $500 or $1,500 (if the call was found to have been made “knowingly” or “willingly”) per an unlawful phone call. While that range of damages may not appear to be overly concerning at first blush, the potential range of damages increases exponentially when considered against the thousands of phone calls that can be made to garner interest in a timeshare product on a daily basis. A single phone call in violation of the TCPA can legally serve as the basis for asserting a much larger class-action lawsuit.

Consequently, the simple mistake of accidently keying the wrong digit into an ATDS from a list of previously vetted phone numbers of consumers granting the required consent can not only serve as the basis for a long, expensive litigation, it could theoretically put the continued operation of a business into considerable jeopardy.

Plaintiff’s attorneys have noticed the increasingly low threshold needed to satisfy a claim under the TCPA, and dockets throughout the country have recently been bombarded. In fact, a cottage industry of “enterprising” professional plaintiffs has been conceived, with some plaintiffs going so far as to purchase several cell phones in hopes of obtaining a covered call to a reassigned cell phone number (a number whose previous owner consented to receive such phone calls but, under the TCPA, whose consent would not automatically be assumed by the new  owner). Or, even purchasing several cell phones in targeted geographical areas where they believe economic conditions will result in calls in violation of the TCPA.

For instance, in Stoops v. Wells Fargo Bank NA, No. 3:15-83 (W.D. Pa. June 24, 2016), the named plaintiff (who was a Pennsylvania resident) purchased 35 cell phones for the sole purpose of seeking calls in violation of the TCPA so as to initiate litigation. At deposition, the plaintiff was forced to admit seeking out Florida-specific phone numbers, due to an understanding that Florida residents were more likely to experience “economic hardships,” and they would therefore be more likely to receive phone calls from mortgage and/or credit card companies seeking to collect on defaults. When professional plaintiffs are actively gaming the system to assert claims under the TCPA, businesses that are most likely to be affected by their targeted conduct need to engage in significant due diligence to avoid the specter of litigation.

While this article seeks to provide helpful information to assist in the avoidance of costly litigations under the TCPA, the best (and simplest) guidance is to immediately contact the persons who engage in such phone calls to determine the process of how such phone calls are made. Once that information is obtained, the company should then consult with an attorney familiar with the rules and regulations of the TCPA to ensure it remains in compliance.

While there is no “silver bullet” to defeat any and all claims asserted under the TCPA, the best way to insulate from the most common form of liability is to ensure that documentation demonstrating a consumer’s prior express written consent to be contacted by an ATDS is being maintained. That documentation should (1) be specific to the consumer (and the consumer’s phone number); (2) identify the company on whose behalf the targeted phone call(s) will be made; (3) specify that such phone call(s) can and will be made via an ATDS; and (4) contain a statement that the providing of such consent is not a precondition to purchasing any goods or services from the company. A document retention policy should also be instituted where a consumer’s prior express written consent is maintained for at least four years—the statute of limitation for asserting a claim under the TCPA.

A related issue that timeshare businesses should also consider involves the acts of vendors and/or marketers that are expressly engaged to conduct calling campaigns on their behalf. Unfortunately, this particular issue is complicated and fact-intensive. Usually, such vendors/marketers are judged to be independent contractors and, as a result, phone calls made in violation of the TCPA by those vendors/marketers are not attributed to the company engaging their services. However, with an increasingly plaintiff-friendly TCPA environment, several recent decisions have held that a company merely selling or fulfilling a timeshare product can be held liable for the calls made in connection with that product—even when that company was not the one actually initiating the offending phone calls to consumers.

While those court decisions cannot be fully explained without an in-depth discus-sion of the facts, circumstances and legal precedent of the deciding courts, one way to combat such liability is to contractually mandate that any outside vendor/marketer abide by the terms and conditions of the TCPA in their dealings with consumers and to specifically ascribe any liability under the TCPA to that outside vendor/marketer.

Given the current trend of intensifying claims being asserted under the TCPA, it is not a question of “if ” your company will be sued under the statute if it actively engages in phone communications with consumers, but “when.” Knowledge of the TCPA and how to remain compliant with its terms are the first steps to ensure your experience with such litigations are as quick and cost-efficient as possible.

Reprinted with permission from ARDA, copyright 2016.

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