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Class-action Christmas in July

Gavel to Gavel

published in The Journal Record | July 23, 2015

By Jason A. McVicker

Your dentist, barber and bank send you text messages every day. Electronic communications are part of our lives and our business – but that may change if the Federal Communications Commission has its way.
The Telephone Consumer Protection Act was enacted in 1991 to combat abusive telemarketers, but electronic communications have changed. Congress has done little to update the statute, leaving the FCC to apply old law to new technology. Across the country, the plaintiff’s bar has been taking advantage of this antique.

The TCPA authorizes class-action lawsuits for people who receive calls or text messages sent by automated systems without consent. However, people switch cellphone numbers and providers all the time. Those numbers get reassigned. Companies may send text messages to consenting customers, without realizing the number has been reassigned, and accidentally contact a new, nonconsenting person. The concept of fault does not apply to TCPA lawsuits, so the company is on the hook for penalties even though it did not know about the reassignment and had no way to find out. Plaintiffs’ lawyers know that most businesses can’t afford litigation costs of a class-action lawsuit, so they can extract steep settlements.

These shakedowns have become increasingly common. Business giants like Twitter, United Healthcare Services, and Wells Fargo have turned to the FCC for relief. The FCC issued a new ruling this month, essentially telling businesses to drop dead.

The controversial new rule expands the scope of TCPA liability to new extremes. Though much of the new, 138-page decision deals with the technology of automated systems, the FCC specifically addressed the reassigned number issue. It determined that businesses get one free call or text message to a reassigned number, to determine if it has been reassigned. After that, businesses can be sued for virtually unlimited, fault-free damages. The FCC acknowledged that it was impossible to fully comply with the new regulation, but encouraged businesses to use best practices to minimize the damage.

The courts may have the final say on this new rule, but for now businesses should consult with counsel to adapt. If you use automated systems to communicate with your customers, this is not the last you’ve heard of the TCPA.

This article appeared in the July 23, 2015, issue of The Journal Record. It is reproduced with permission from the publisher. © The Journal Record Publishing Co.