TCPA Connect

Manatt’s Reilly and Roth Join Faculty of the 2015 PACE Washington TCPA Summit, Sept. 29

Christine Reilly and Marc Roth, co-chairs of Manatt’s TCPA Compliance and Class Action Defense practice, have been invited to speak at the Professional Association for Customer Engagement (PACE) TCPA Summit in Washington, D.C., at a session titled “Staying Compliant in a Sea of Change.” Marc and Christine will discuss recent developments in the teleservices industry, share war stories, and provide practical guidance on how to mitigate risks and remain ahead of the curve in meeting TCPA challenges.

For more information, click here.

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No Need to Wait for the U.S. Supreme Court—Seventh Circuit Rules on Mooting Offers in TCPA Suits

The latest court to weigh in on an offer of judgment in a Telephone Consumer Protection Act Suit: the Seventh Circuit Court of Appeals, which reversed itself to hold that an offer for the full amount requested does not moot the case.

Previously, Seventh Circuit precedent held that when a defendant made an offer of judgment for the full relief requested, the claim became moot.

In the new decision, Arnold Chapman filed suit against First Index for allegedly sending fax advertisements without consent. A federal court judge denied multiple attempts by Chapman to certify a class of plaintiffs in the suit, and First Index made an offer of judgment for $3,002, an injunction, and costs. The plaintiff failed to accept within 14 days and the defendant moved to dismiss the case. A federal court judge granted the motion, finding the action moot.

But the Seventh Circuit reversed. A case “becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party,” the court explained. “By that standard, Chapman’s case is not moot. The district court could award damages and enter an injunction. Chapman began this suit seeking those remedies; he does not have them yet; the court could provide them.”

Many courts, including the Seventh Circuit, have applied the label “moot” to a situation where a plaintiff declines an offer that would satisfy his or her entire demand, the panel said. However, Justice Elena Kagan’s dissent in Genesis Healthcare Corp. v. Symczyk, a 2013 U.S. Supreme Court decision addressing the impact of a full offer of judgment made to a plaintiff in a Fair Labor Standards Act case, “shows that an expired (and unaccepted) offer of a judgment does not satisfy the Court’s definition of mootness, because relief remains possible.”

The Second and Ninth Circuits have considered the issue since the Genesis decision and “uniformly agree” with Justice Kagan, the court said. And although the issue is currently pending before the Supreme Court, “we think it best to clean up the law of this circuit promptly, rather than require Chapman and others in his position to wait another year for the Supreme Court’s decision,” the panel declared.

“If an offer to satisfy all of the plaintiff’s demands really moots a case, then it self-destructs,” the court wrote. “Rule 68 is captioned ‘Offer of Judgment.’ But a district court cannot enter judgment in a moot case. All it can do is dismiss for lack of a case or controversy. So if the $3,002 offer made this case moot, then even if Chapman had accepted it the district court could not have ordered First Index to pay. It could have done nothing but dismiss the suit. Likewise with First Index’s offer to have the district court enter an injunction. As soon as the offer was made, the case would have gone up in smoke, and the court would have lost the power to enter the decree. Yet no one thinks (or should think) that a defendant’s offer to have the court enter a consent decree renders the litigation moot and thus prevents the injunction’s entry.”

Reversing the dismissal based on mootness, the court reinstated Chapman’s individual TCPA claim. It also overruled its prior decisions “to the extent they hold that a defendant’s offer of full compensation moots the litigation or otherwise ends the Article III case or controversy,” noting that the panel circulated its decision to all the judges in the circuit and none favored an en banc hearing.

To read the decision in Chapman v. First Index, Inc., click here.

Why it matters: Joining the other federal circuits that have found a complete offer of judgment does not moot a case (including the Eleventh Circuit), the Seventh Circuit decision did recognize that rejecting a fully compensatory offer may have consequences other than mootness. For example, the court raised the question of whether a spurned offer of complete compensation should be deemed an affirmative defense, perhaps based on a waiver or estoppel. And the panel seemingly frowned upon the use of judicial resources for such situations, particularly in single-plaintiff cases when the defendant has offered more than the plaintiff requested. “Ordering a defendant to do what it is willing to do has no legitimate claim on judicial time,” the court wrote. “Why should a judge do legal research and write an opinion on what may be a complex issue when the plaintiff can have relief for the asking?” For now, all eyes are on the U.S. Supreme Court, with the justices set to consider these issues next term.

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Does the TCPA Cover Efaxes? FCC Says Yes

In a new declaratory ruling, the Federal Communications Commission stated that efaxes fall under the purview of the Telephone Consumer Protection Act.

Responding to a 2009 petition from Westfax, Inc., a fax broadcasting company, the agency focused on the means of transmission and not the ultimate destination of a facsimile. “Efaxes are sent as a fax over a telephone line to a telephone facsimile machine and are thus subject to TCPA and the Commission’s rules,” the FCC wrote. “By contrast, a fax sent as an email over the Internet—e.g., a fax attached to an email message or a fax whose content has been pasted into an email message—is not subject to the TCPA.”

Westfax provides an efax service that transmits messages to fax machines or fax servers on another entity’s behalf. The company described an efax as a document that is sent as a fax over a telephone line to the recipient’s fax number that becomes an efax when a fax server on the receiving end converts the fax transmission into a digital image or PDF that is then sent to the recipient as an attachment to an e-mail message.

The FCC had no trouble finding that efaxes meet the statutory requirements of the TCPA, as they are both sent as faxes over telephone lines (satisfying the need to be a fax on the originating end) and remain a fax on the receiving end.

“The definition of ‘telephone facsimile machine’ sweeps in the fax server and modem, along with the computer that receives the efax because together they by necessity have the capacity to ‘transcribe text or images (or both) from an electronic signal received over a telephone line onto paper,’” the agency wrote. “Westfax’s description of efaxes makes clear that the recipient computers are attached to fax servers or services that convert the fax into a format that is attached to an email received by the computer.”

Just because the fax is converted into an email does not remove it from the TCPA’s reach, the Commission said, and efaxes implicate the statute’s consumer protection concerns just like a traditional printed fax. “Efaxes, just like paper faxes, can increase labor costs for businesses, whose employees must monitor faxes to separate unwanted from desired faxes,” the FCC said. “Moreover … it would make little sense to apply a different set of rules (or, in this case, no rule at all) to faxes sent to one type of device (a standalone fax machine) versus another (a computer and its attachments) when the sender generally does not know what device will receive the fax.”

The declaratory ruling also stated that the “recipient” of the fax is the consumer for whom the content is intended and to whom the content was sent by dialing that consumer’s fax number. Entities that convert faxes to email are not “recipients” of such faxes under the TCPA because they are not the intended audience, the FCC clarified.

Declining to provide safe harbor language for fax op-out notices, the agency said existing Commission rules and orders already identify the legal requirements. “We note that the fax opt-out notice requirements have been in place for more than seven years and we have no evidence that other fax senders have struggled with finding language that would satisfy those requirements,” the FCC wrote.

The Commission also refused to make a generalized conclusion about the potential TCPA liability of fax broadcasters like Westfax who are retained to accept opt-out requests and possibly give advice on compliance with statutory rules. “Neither Westfax’s petition nor the comments provide a record sufficient to support the kind of fact-specific inquiry required to determine when a fax broadcaster’s involvement in sending faxes is so substantial that the fax broadcaster is liable,” the agency said.

The agency noted that seven comments were filed on the Westfax petition, all supporting a finding that efaxes were fully subject to the TCPA.

To read the FCC’s declaratory ruling in In the Matter of Westfax, Inc., click here.

Why it matters: Focusing on the means of transmission and not the ultimate destination, the declaratory ruling makes clear that efaxes fall under the scope of the TCPA and that all statutory requirements and regulations apply to such faxes. However, the ruling did leave open the question of potential liability for fax broadcasting services such as Westfax.

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California Court: Shopkick’s Invitational Texts Didn’t Violate TCPA

Mobile shopping app Shopkick prevailed in a Telephone Consumer Protection Act suit when a California federal court judge held that the app’s “invite your friends” feature did not violate the statute.

The putative class action complaint was filed by two consumers who received what they alleged were unsolicited text messages in violation of the TCPA from Shopkick. The texts, purportedly sent by a friend including a link to Shopkick’s website, read: “Hey, just gave you 50 bonus points on shopkick—a cool new app that rewards you for shopping. Check it out.”

Shopkick countered with a motion for summary judgment, arguing that the plaintiffs failed to establish the company violated Section 227(b)(1)(A)(iii) based on the Federal Communications Commission’s Declaratory Ruling and Order issued in July.

In a section of that ruling titled “Maker of the Call,” the FCC addressed a petition by messaging app provider TextMe. The company requested a finding that it was not the “maker” of calls when users of the TextMe app caused “invitational texts” to be sent to third parties. The FCC agreed.

Applying a test to determine when a call is initiated, the FCC said it looked “to the totality of the facts and circumstances surrounding the placing of a particular call to determine: 1) who took the steps necessary to physically place the call; and 2) whether another person or entity was so involved in placing the call as to be deemed to have initiated it, considering the goals and purposes of the TCPA.”

Although TextMe controlled the content of the text messages (“a reason for concern”), the Commission found that the app user decides whether to send an invitational message, to whom to send the message, and when that message is sent. “These affirmative choices by the app user lead us to conclude that the app user and not TextMe is the maker of the invitational text message,” according to the FCC order, even though the invitational text messages “are, in essence, advertisements of the app.”

Deferring to the FCC’s interpretation of the app, U.S. District Court Judge Maxine M. Chesney granted Shopkick’s motion for summary judgment.

As was the case with TextMe, Shopkick controls the content of the invitational messages at issue which were at least in part, if not wholly, an advertisement that invites the recipient to download Shopkick’s app. These two factors weighed in favor of finding Shopkick to be the sender of the messages, the court said.

But as explained by the FCC, “an app user nonetheless is considered the sender where the app user is required to make ‘affirmative choices’ in determining whether to send invitational text messages, to whom to send such messages, and when to send the messages,” the judge wrote. Shopkick demonstrated to the court that its app users must proceed through a multistep process for invitational messages to be sent to third parties.

First, the user must affirmatively grant the Shopkick app permission to access the phone’s contacts; second, the user must select “Continue” instead of “No, thanks” to the app’s option to “Invite Friends.” Next, a user works his or her way through a series of screens to select the contacts to receive invitations, followed by a screen listing the chosen contacts and the format in which the invitations would be sent (via e-mail, for example, or Facebook message) and a button to push stating “Invite Friends.” Only once all of these steps have been completed can the invitational messages be sent.

“The Court finds the steps the user must have taken to cause the Shopkick invitational text messages to be sent are indistinguishable in all material respects from the steps a user of the TextMe app must take to cause the TextMe invitational texts to be sent,” Judge Chesney wrote.

Although the plaintiffs argued the TextMe messages were “personal and non-commercial” while Shopkick’s were paid advertisements, i.e., “generic and commercial,” the court was not persuaded of their difference. “As to ‘non-commercial’ versus ‘commercial,’ the Court finds there is no material difference between an offer of free texts and an offer of free shopping points.”

A contention that Shopkick should be held vicariously liable under an agency theory also failed, the court said, as the plaintiffs made no showing that an agency relationship existed between Shopkick and any of its users, let alone that any such user is a telemarketer.

“In sum, plaintiffs having failed to demonstrate a material difference between the circumstances presented here and those addressed in the FCC Order, the Court finds the FCC’s determination therein is equally applicable to the instant claims, and, accordingly, finds Shopkick has not violated the TCPA,” the court concluded.

To read the order in Huricks v. Shopkick, Inc., click here.

Why it matters: One of the few favorable rulings found in the FCC’s July Order, the Commission’s finding that TextMe did not initiate the invitational texts sent to third parties by users of its app proved just as beneficial for Shopkick.

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