Federal judge: Telecom carriers (1) not routinely liable for telemarketing violations committed by customers and (2) not subject to private suit for alleged violations of Truth in Caller ID Act.
Increasingly, telephone carriers may find themselves unexpectedly on the wrong end of lawsuits alleging violations of the telemarketing laws. Fortunately, at least one federal judge has recognized that such suits are off the mark.
Unsolicited marketing calls are like weeds – nobody likes them, they seldom do any good, and they’re almost impossible to get rid of. But Congress tried. In 1991 it enacted the Telephone Consumer Protection Act (TCPA), which perhaps most famously created the “Do Not Call” list. The TCPA also created a “private right of action” that allows consumers – individually or, increasingly, as an entire class – to sue telemarketers who break the rules.
That right to sue can be effective when directed against the proper targets (i.e., the wrongdoing telemarketer), but it can also be misdirected toward blameless parties, with unhappy results – much like a flame thrower which is effective at killing the occasional dandelion, but which wreaks havoc when pointed at the rose bushes. The universe of innocent bystanders in the TCPA context includes telephone carriers. You might think that no penalty could legitimately be imposed on carriers whose only involvement is the happenstance that a telemarketer used the carriers’ services. But aggrieved consumers (and their deep-pocket-seeking counsel) probably think otherwise.
Take, for example, the case of Flowroute, a telecommunications provider.
The plaintiff there had received a single telemarketing call on his cellphone from a telemarketer in the Philippines, so he brought a TCPA action in the U.S. District Court in Houston. In addition to naming the telemarketer as a defendant, the plaintiff alleged that Flowroute was jointly and severally liable for the violation as well. That’s because, having provided the telemarketer with the underlying phone service for the call and the Houston-area local number used, Flowroute had – in the plaintiff’s view of things – conspired to aid and abet the telemarketer in its violation.
The plaintiff tried to bulk up his case by seeking class action status, with an aggregate claim of at least $5 million in damages. Since – again, strictly according to the plaintiff – Flowroute was supposedly jointly and severally liable, Flowroute would be left on the hook for the whole $5 million if (a) the plaintiff were to prevail and (b) the Philippines telemarketer were to be dismissed from the case (because of defective service of process in the Philippines).
Faced with potential multi-million dollar liability, many defendants might be open to settlement overtures. Litigation is, after all, a notoriously costly and uncertain process. Even when a targeted defendant is confident that it should not – in a just world – be held liable, even a considerable settlement can sometimes make sense as a means of avoiding the expensive distraction of litigation. The fact that settlement provides a tempting path of least resistance even for the most innocent of defendants is not lost on class action plaintiffs.
Flowroute, however, confronted the plaintiff’s claims head-on by asking the Court to toss them. Flowroute pointed out that the TCPA imposes liability only on entities that “make a call” which, obviously, Flowroute had not done. Moreover, the legislative history shows that Congress did not intend for liability to be imposed on the carrier whose role was limited to providing the network used to make telemarketing calls. Flowroute’s motion to dismiss also demonstrated that there was no basis in the statute or case law for carriers to be liable as conspirators for aiding or abetting a TCPA violation.
The Court fully agreed with Flowroute’s arguments. In a decision that should gladden carriers everywhere, it held that the TCPA imposes liability on entities that make a prohibited telemarketing call, not on the underlying carrier:
Plaintiff cites no legal authority to support the argument that, without more, the TCPA imposes liability on the telecommunications carrier whose systems are used by another to make an unlawful call to a cellular phone. This Court’s research has revealed none.
The Court also concluded that no basis exists in the TCPA or elsewhere to impose joint and several liability on Flowroute for “conspiring” with Avatar to violate the TCPA.
Undeterred, the plaintiff then amended its complaint (with the Court’s permission) to take a different tack relying not on the TCPA, but on the separate but somewhat related Truth in Caller ID Act (TCIA). The TCIA makes it unlawful to “cause any caller identification service to knowingly transmit misleading or inaccurate caller identification information with the intent to defraud, cause harm, or wrongly obtain anything of value.” In his amended complaint, the plaintiff argued that Flowroute’s provision of a local Houston telephone number to the Philippines-based telemarketer was intended to mislead the plaintiff into answering unsolicited telemarketing calls and that Flowroute was, as a result, liable for private damages under the TCIA.
Flowroute moved to dismiss the amended complaint, arguing that, unlike the TCPA, the TCIA does not provide individuals with a private right of action. Rather, the TCIA allows only the government to pursue penalties for any alleged violations. Moreover, the legislative history demonstrates that the TCIA was intended to protect legitimate Caller ID management services, such as provision of local telephone numbers for telemarketers to use. Indeed, the use of a local number facilitates compliance with FCC regulations that require that the called party be able to readily return a call to the same number in order to make a “do-not-call” request.
The Court agreed with Flowroute again, holding that neither the plain words of the TCIA nor its legislative history reflect any Congressional intent to create a private right of action to enforce the TCIA. The Court dismissed, with prejudice, the amended Complaint in its entirety, a decision which effectively barred the Plaintiff from bringing any further suits against Flowroute in connection with these claims.
The Court’s two rulings reflect judicial endorsement of two important points that are good news for telecommunications carriers:
Carriers that do nothing more than provide the underlying telephone service (including telephone numbers and Caller ID management services) are not directly or indirectly liable for any TCPA violations by a telemarketer, nor are they joint and severally liable under a conspiracy or aiding/abetting theory; and
There is no private right of action to enforce alleged violations of the TCIA. Unlike the TCPA, individuals cannot seek to recover damages under the TCIA.
These points are especially important in light of the burgeoning cottage industry of TCPA-based litigation. Brandishing the TCPA-created private right of action, eager plaintiffs are flocking to file class action suits against entities large and small. Those efforts have almost certainly been goosed by reports of multi-million dollar settlements of TCPA suits brought against the likes of Bank of America and Papa John’s. The Flowroute case suggests that TCPA plaintiffs are trying to shake similar settlements out of unsuspecting carriers by invoking new theories of liability.
Fortunately, the Flowroute decisions are solid evidence that the TCPA was not intended to be used against carriers in this way. Those decisions provide a useful road map for other carriers confronted by the TCPA plaintiffs. And they highlight the need for all companies to redouble their efforts to comply with the requirements of the TCPA and the TCIA in order to reduce exposure to potentially significant liability.
[Blogmeister’s Note: We are pleased to report that our blogger, Paul Feldman, as well as our colleagues Jamie Troup and Cheng Liu, represented Flowroute in its successful effort to have the TCPA, and then the TCIA, claims against it dismissed. Jamie, Cheng and Paul developed and presented the prevailing arguments. Of course, past performance is no guarantee of future results.]