Telemarketing Law

Domino’s Pizza Pays Almost $10 Million in TCPA Settlement

July 1, 2013 by David Klein

As many of our followers are already aware, the Telephone Consumer Protection Act (“TCPA”) is dominating the headlines with multi-million dollar class action settlements being reached almost weekly. By various accounts, TCPA filings are up 40-60% in 2013, when compared to the same period in 2012. On the heels of last month’s $16.3 million dollar TCPA settlement by Papa John’s Pizza, last week, Domino’s Pizza reached its own TCPA settlement for allegedly violating the TCPA.

Domino’s TCPA Settlement

On June 27, 2013, after several days of negotiation, Domino’s agreed to pay up to $9.75 million to settle a class action lawsuit involving residents of Alabama, Louisiana and Mississippi. The settlement, which was described by the parties as “complex and document intensive,” was finally reached after Domino’s general liability insurer agreed to contribute to the settlement amount. The terms of the TCPA settlement contain various redress provisions including:

Approximately $6,000,000+ worth of cash awards and free pizza vouchers to class members who submit valid claims;
$3,000,000 in payment of attorney’s fees to class counsel;
$5,000 to pay the representative class member; and
the remainder to pay court administration costs and the cost of notifying customers of the settlement;

Domino’s TCPA Case Details

Specifically, the robocalls advertised that the consumer would receive either $15.00 or a free one-topping pizza voucher. The Court certified two subclasses of people in Alabama, Louisiana and Mississippi who received at least one unsolicited text message or phone call on their cell phone that marketed a Domino’s branded product:

those who received robocalls between May 20, 2006 and May 19, 2009 (“Merchandise Voucher Sub-Class”); and
those who received robocalls between May 20, 2009 and May 20, 2010 (“Monetary Sub-Class”).

The individuals within the Monetary Sub-Class are entitled to recover the $15.00 monetary benefit of the robocalls and the individuals within the Merchandise Voucher Sub-Class are entitled to receive a free large pizza coupon.

What is interesting to note is the fact that the complaint alleged that Domino’s engaged in unauthorized text message violations of the TCPA, along with telemarketing calls, but the settlement agreement entered into between the parties does not make any mention of the alleged text messages and does not address any form of remuneration for these alleged violations of the TCPA.

TCPA Penalties

The TCPA provides for either actual damages or statutory damages ranging from $500 to $1,500 per unsolicited call and/or message. Considering that text message and telemarketing campaigns often yield thousands, and in this case over a million, calls and/or text messages, potential damages under the TCPA can escalate very quickly. Given the fact that Domino’s overall class size certified equaled 1,152,617, it was only a matter of time before a settlement was reached.

Should it opt to engage in this method of marketing in the future, as part of the TCPA settlement agreement, Domino’s also agreed to obtain consumers’ express consent, in writing, to receiving marketing messages and/or calls. For a brief description of how to handle a situation in which a TCPA action is brought against you, please see our post entitled, How to Defend a TCPA Lawsuit.

Domino’s TCPA Settlement should be of interest to telemarketers and those generally interested in the Internet and mobile marketing spaces. If you are interested in learning more about this topic or pursuing an advertising campaign, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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FTC Secures Record Breaking Settlement for Do-Not-Call Violation

June 27, 2013 by David Klein

Today, on the 10 year anniversary of implementing the National Do-Not-Call Registry within the Telemarketing Sales Rule (“TSR”), the Federal Trade Commission (“FTC”) announced its biggest Do-Not-Call related settlement to date: $7.5 million.

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Court Limits Reach of TCPA?

June 26, 2013 by David Klein

As stated on this blog, the Telephone Consumer Protection Act (“TCPA”) was passed into law in 1991 and empowers the Federal Communications Commission (“FCC”) to issue rules and regulations regarding unsolicited telemarketing calls, texts, faxes, pre-recorded calls and autodialed calls. Furthermore, the TCPA allows for private rights of action, which has resulted in several high profile class action judgments of late.

What is an Autodialed Call under the TCPA?

As described in the TCPA, an autodialed call is a phone call, involving a live person or pre-recorded message, that is placed using an “autodialer,” or automatic telephone dialing system, that can produce, store and call telephone numbers using a random or sequential number generator. As a best practice, we have advised our clients to broadly construe the definition of “autodialed call” to avoid unwanted litigation and regulatory action. For instance, if you are utilizing any type of call center software as part of your telemarketing operations, you may be using an autodialer within the FCC’s definition.

Recent Court Case Limits Definition of “Autodialer”

While it is still a best practice to broadly construe the definition of “autodialer” under the TCPA, the U.S. District Court for the Western District of Wisconsin has limited its previously decided definition of autodialer. In a case decided on March 8, 2013 that we previously blogged about, the Western District Court of Wisconsin found that use of telephone equipment capable of placing autodialed calls violates the TCPA (unless prior express consent was obtained), even if the call was placed by a live telemarketer. The telephone system at issue in the case had a “preview” function, which generated telephone numbers and a live telemarketer could choose which number to dial by clicking on a computer screen.

The defendant asserted that the calls to the plaintiff were made by a live person using the preview dialing function of its telephone system, which it claimed are not autodialed calls within the meaning of the TCPA. The Court disagreed, relying on the FCC’s expansive interpretation of the term “automatic telephone dialing system” in finding that “the question is not how the defendant made a particular call, but whether the system it used had the ‘capacity’ to make the automated call.” As a result, the Court awarded the plaintiff $571,000 in statutory damages.

However, on June 7, 2013, the same Court vacated and set aside its prior judgment without explanation. While the Court has remained silent as to its reason for vacating its previous decision, it can be speculated that a phone that merely has the capacity to make an autodialed call is insufficient to create liability under the TCPA. It must be proven that the defendant actually utilized the autodialing capabilities of the phone or device in question.

Whatever the case may be, it is clear that the TCPA has become a hotly contested and complex area of the law. As such, an experienced attorney familiar with the intricacies of the TCPA should be consulted with prior to commencing any telemarketing operation that makes use of a telephone, fax machine or text message.

If you are interested in learning more about this topic or need to review your telemarketing practices, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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TCPA Class Action Against Redbox Dismissed

June 25, 2013 by David Klein

On June 20, 2013, the United States District Court for the Southern District of California dismissed a putative TCPA class action that had been filed against Redbox Automated Retail, LLC (“Redbox”).

TCPA Class Action Facts and Analysis

The Redbox plaintiffs alleged that they each received a text message from Redbox, to which they responded “STOP.” One text message response was then sent by Redbox to each of the plaintiffs confirming that they had unsubscribed from the service. The plaintiffs alleged that this text message violated the TCPA because they did not expressly consent to receive it. Redbox filed a motion to dismiss the TCPA class action complaint for failure to state a claim.

In ruling in favor of Redbox and dismissing the TCPA class action, the Southern District of California looked at both the timing of the text message (sent in response to an opt-out request) and the substance of the text message. The Court relied principally on two decisions: the Court’s own ruling in Ibey v. Taco Bell Corp., (“Ibey”), and the FCC’s declaratory ruling on the petition of SoundBite Communications, Inc. (“SoundBite).

The Ibey ruling held that a single, confirmatory text message sent after an opt-out request was received did not violate the language or spirit of the TCPA. The SoundBite ruling further clarified that the sending of a one-time text message confirming a consumer’s request that no further text messages be sent does not violate the TCPA as long as the confirmation text does not contain any marketing or promotional information.

Importantly, both SoundBite and Ibey were premised on the consumer’s prior express consent to the initial receipt of text messages. In its decision, the Redbox Court specifically noted that the plaintiffs did not allege one way or another whether they consented to the initial text messages received from Redbox. The only allegation in the TCPA class action complaint was that no consent was given for the final opt-out confirmation text message.

Further, in examining the text messages themselves under the scope of the SoundBite ruling, the Redbox Court held that although they contained a link to the Redbox website, the messages themselves did not, on their face, contain marketing or promotional information. Therefore, the Court held that as a matter of law, the content of the opt-out text messages could not form the basis for liability under the TCPA.

TCPA Class Action Dismissed Without Leave to Amend

Interestingly, the Redbox Court noted that any amendment to the TCPA class action complaint by plaintiffs would be futile and, therefore, rejected the plaintiffs’ request for leave to amend. However, based on the Court’s reliance on the SoundBite and Ivey decisions, the mere addition of the allegation, if applicable, that the plaintiffs did not give Redbox prior express consent to send the initial text messages would, arguably, have salvaged the complaint on failure to state a claim grounds.

The bottom line – According to the Redbox Court, a text message sent in response to an express opt-out request is permissible under the TCPA as long as: (1) that text message does not include marketing or promotional information; and (2) express consent was previously given for the sending of text messages.

If you are interested in learning more about this topic or need to review your telemarketing practices, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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Privacy Policies for Websites and Mobile Applications

June 17, 2013 by David Klein

While some businesses might be under the impression that posting a privacy policy on their web venue or mobile application (“app”) is of little importance, in truth, a well-crafted privacy policy is a key aspect of any Internet or mobile venture. Letting website/mobile app visitors know, via your privacy policy, what personally identifiable information you collect, how you use that information, to whom you disclose that information and the security measures taken to protect that information, is not only good policy from a customer-relations perspective, it is also required by state and federal law.

In addition to making sure that your online data collection activities are compliant with state and federal law (including the recently amended Children’s Online Privacy Protection Rule (COPPA)), a well-written privacy policy can form a key feature of your online business strategy.

Monetize Your Database

If proper disclosures are included in your privacy policy and above the “Submit” button on your website, you can monetize user data through e-mail marketing, telemarketing and, where permitted by law, mobile/text message marketing, to end-users. On the other hand, if you do not properly inform end-users of your intention to use their data for marketing purposes, any attempt to do so would almost certainly violate applicable law.

While properly collected end-user data may provide your business with a valuable revenue stream, collecting data also imposes a responsibility on your employees to safeguard such data. Various state and federal statutes require that you distribute to your employees a written manual on data security procedures, and that you notify end-users in case of any breach of security with respect to their data.

Help Is on the Way

With all the rules and regulations governing the collection and use of personally identifiable information – and given the potential financial benefits derived from a database of consumer information – it makes good business and legal sense to craft a privacy policy that is well-suited to the needs of your business, and that provides your website/mobile app visitors with the information they require to make an informed decision.

If you are interested in learning more about this topic, need a privacy policy for your web venue or mobile app, or need to review your privacy practices, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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Papa John’s To Pay $16.335 Million To Settle TCPA Class Action

June 10, 2013 by David Klein

In the marketing space, the Telephone Consumer Protection Act (TCPA) is dominating the headlines. By various accounts, TCPA filings are up 40-60% in 2013, compared to the same period in 2012.

Papa John’s TCPA Settlement

On May 17, 2013, Papa John’s delivered the latest headline, agreeing to pay up to $16.335 million to settle a nationwide class action for allegedly advertising pizza promotions via text message. The terms of the settlement contain various redress provisions including:

– $2,860,000 worth of free pizza vouchers to class members who submit valid claims;

– $11,000.000.00 to pay cash awards to class members who submit valid claims;

– $250,000.00 in court administration costs;

– $2,450,000.00 in payment of attorney’s fees to class counsel; and

– $25,000.00 to pay representative class members.

Papa John’s TCPA Case Details

In November 2012, the Court certified a national class and a Washington State subclass of all persons who received at least one unsolicited text message that marketed a Papa John’s branded product through Papa John’s affiliate marketer, OnTime4u. In light of the size of the class, and the substance of the Judge’s ruling, a settlement appeared inevitable. A large number of interesting issues were addressed by the Court in its class action ruling, including the following:

First, the Court noted that plaintiff had Article III standing. Despite Papa John’s claims to the contrary, Papa Johns produced documents to indicate that it did play some role in the franchise-level decisions to hire the marketer that sent the subject text messages. The actual degree of such role would be left for factual determination at trial.

Second, the Court found that plaintiff had statutory standing to sue under the TCPA, despite the fact that she was not the primary account holder of her shared cellular plan and did not pay the bill. The Court found that, since she was the intended recipient of the text message, she had the right to sue Papa John’s under the TCPA. The Court also noted that because plaintiff was the authorized and sole user of the telephone number at issue, she had standing to sue on the basis of unsolicited text messages.

Third, the Court dismissed Papa John’s argument that individualized issues of whether recipients were charged for text message advertisements would overwhelm the class action “common question” requirement. The Court reasoned that the TCPA does not require plaintiffs to show that they were charged for text message advertisements to recover damages, so the factual issue was irrelevant.

Take Away

Bottom Line: Once again, a penny of prevention is worth a pound of cure. The best way for any marketer or advertiser to succeed in a TCPA class action is to never be named in a TCPA class action lawsuit. In the case that you are named, it is imperative to take the proper first steps.

If you are marketing products or services directly or indirectly via text message, you should be working with experienced Internet marketing counsel on a regular basis. Working with counsel fully familiar with the intricacies and nuances of the TCPA, Internet practices and online marketing, to advise you on an ongoing basis, will go a long way toward making sure a class action complaint, or regulatory complaint, never gets filed in the first place.

This topic should be of interest to any company or individual engaging in a commercial venture within the United States, especially those involved in online and offline marketing, text message marketing, telemarketing, and/or consumer product industries.

If you are interested in ensuring that you are compliant with current regulations or if you are facing an investigation from the FTC or other regulatory agency, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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Recent TCPA Case Is a Cautionary Tale for Telemarketers

June 5, 2013 by David Klein

The Telephone Consumer Protection Act (TCPA), which allows individuals to file lawsuits and collect damages for receiving certain unsolicited commercial text messages, faxes, pre-recorded calls or autodialed calls, has made headlines again. The Federal Court for the Western District of Wisconsin recently ruled that a defendant may be held liable for violating the TCPA, even if the call was dialed by a live person, so long as the telephone had the capacity to make an autodialed call.

Wisconsin TCPA Case

In Nelson v. Santander Consumer USA, the plaintiff alleged that the defendant, an automobile refinancing company, called her cell phone more than 1,000 times and left over 100 pre-recorded messages over the course of a year using an autodialer, in an attempt to collect an outstanding debt on two vehicles. The Court granted the plaintiff’s summary judgment motion, finding that the defendant violated the TCPA and awarding the plaintiff $571,000.

This would seem like a common fact pattern, except for the fact that it was never proven that the defendant called the plaintiff using autodialer technology. The judge found that it was sufficient that the telephone equipment used by the defendant had the capacity to produce, store and call telephone numbers. Specifically, the Court found that:

[i]n making these calls, defendant used the Aspect telephony system, a computer telephone software system that routes and places inbound and outbound calls. Aspect has the capacity to (1) store telephone numbers and then call them; and (2) perform “predictive dialing” and “preview dialing.”

In predictive dialing, the system times the dialing of numbers using an algorithm to predict when an agent will become available to receive the next call. To facilitate that method of dialing, defendant created lists of customer telephone numbers to be called on a particular day. In preview dialing, an employee chooses a telephone number by clicking on a computer screen and the system calls it (emphasis added).

The defendant asserted that the calls to the plaintiff were made by a live person using the preview dialing function of the Aspect telephony system, which it claimed are not autodialed calls within the meaning of the TCPA. The Court disagreed, relying on the FCC’s expansive interpretation of the term “automatic telephone dialing system” in finding that “the question is not how the defendant made a particular call, but whether the system it used had the ‘capacity’ to make the automated call.” For defendant’s multiple violations of the TCPA, the judge awarded the plaintiff $571,000 in remedial damages.

Wisconsin TCPA Case Takeaway

While the Court’s ruling regarding autodialed calls and the large award of remedial damages is somewhat jarring, it is not inconsistent with the TCPA advisory report and commentary issued by the FCC. As we discussed in our TCPA white paper, “[t]he autodialed call definition should be broadly construed in an effort to avoid unwanted litigation and regulatory action. For instance, if you are utilizing any type of call center software as part of your telemarketing operations, you may be using an autodialer within the FCC’s definition.” Despite the fact that this is the first case in which a court has explicitly ruled that a potentially live dialed call falls within the scope of the TCPA, it is not as surprising as some legal commentators have described.

How to Protect Your Business

If a dispute in which consumer consent was not obtained under the TCPA arises, the marketer bears the burden of proof to demonstrate that the calls were made by a live person using telephones that do not have the capacity to make autodialed calls. If the marketer cannot prove this, it must show that a clear and conspicuous disclosure was provided to the consumer and that the consumer unambiguously consented to receive robocalls or text messages (as applicable) to the number he/she specifically provided.

It is a best practice for marketers to get in the practice of collecting written consent from consumers as soon as possible. Not only will businesses be required to do so beginning in October, but having written consent provides a tangible and strong defense that adequate consumer consent was obtained. Furthermore, it is recommended that records of each consumer’s consent be maintained for at least four (4) years, which is the default federal statute of limitations to bring an action under the TCPA. For examples of acceptable evidence of consent, please see our previous post.

TCPA Penalties

The TCPA provides for either actual damages or statutory damages ranging from $500.00 to $1,500.00 per violation. In determining the final amount of statutory damages to award, courts analyze whether the defendant “willfully” or “knowingly” violated the TCPA. Considering that telemarketing and text message campaigns often involve thousands and, in some cases, millions, of calls/text messages, potential penalties sought by the FCC under the TCPA may escalate very quickly. Moreover, companies that fail to comply with the TCPA may find themselves facing consumer class action litigation. If you find yourself facing a TCPA investigation or class action litigation, you should be sure to take the appropriate steps and contact experienced counsel.

If you are interested in learning more about this topic or need to review your telemarketing practices, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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How to Obtain Consumer Consent under the TCPA

June 3, 2013 by David Klein

If you have been regularly following this blog or have received a copy of our recent publication, you are aware that the Federal Communications Commission (FCC) has been strictly construing and enforcing the Telephone Consumer Protection Act (TCPA), oftentimes securing multi-million dollar judgments against the defendants. In this post, we address the consent requirements for robocalls and text messages under the TCPA, which have caused industry-wide concerns.

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