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ABC's of the TCPA, Part 2

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Part I of this article provided a basic legislative history of the TCPA, including why it was enacted and against whom it was intended to apply.  Part I also examined one key element of the TCPA’s regulatory scheme, that is, what constitutes an automatic telephone dialing system. Part II analyzes the essential requirements that must be established in order to find liability under the TCPA.  The TCPA’s remedies, potential defenses, and the unique importance of California law to the statutory scheme are also all addressed.)

E. UNDER CALIFORNIA LAW AND THE LANGUAGE OF THE STATUTE, DEBTORS CLAIMING DAMAGES UNDER THE TCPA MUST BE CHARGED AND SUFFER INJURY IN FACT

As we have seen, the TCPA ostensibly provides a private right of action for actual and statutory damages.  But, the statute itself contemplates that an essential element of the claim is that the “called party is charged.”  (See, e.g., TCPA, 47 U.S.C. § 227(b)(1)(A)(iii); 2008 TCPA Order, ¶ 3 at p. 4.) 

No court has apparently addressed the “charged for the call” issue in the debt collection context, although several courts have referred to Congressional intent to avoid shifting the cost of “advertising” to the recipient.  However, in interpreting similar consumer protection statutes, California courts have repeatedly rejected the proposition that anyone who is merely “exposed” to a statutory violation, without more, has standing to sue under the regulatory scheme.  Several decisions stand for this proposition: Meyer vs. Sprint Spectrum, L.P. (2009) 45 Cal.4th 634; Jones v. The Lodge at Torrey Pines (2008) 42 Cal.4th 1158; Hale v. Morgan (1978) 22 Cal.3d 388; Starbucks Corp. vs. Superior Court (4th Dist. 2008) 168 Cal. App. 4th 1436. 

In construing the TCPA consistent with California law, in my judgment, a debtor must first establish that he or she suffered “actual injury” as the result of a collector’s conduct in order to possess standing to sue for actual, or even statutory, damages under the TCPA.  Actual damages have been defined as follows:  “Compensation for actual injuries or loss. (Citations.)  Term used to denote the type of damage award as well as the nature of injury for which recovery is allowed; thus, actual damages flowing from injury-in-fact are to be distinguished from damages which are nominal, exemplary or punitive.  (Citation.)  ‘Actual damages’ are synonymous with compensatory damages.”  (Black’s Law Dictionary. (6th ed. 1990) p.35, col. 1.)

In Starbucks, the defendant coffee company was sued because it included certain statutorily prohibited questions in its form job applications.  The statute at issue there, similar to the TCPA, provided that a plaintiff could recover actual damages, statutory damages and treble damages.  Starbucks, supra, 168 Cal.App.4th at 1442.  As noted by the Appellate Court, the plaintiff’s request for statutory damages of $200 per applicant exceeded a whopping $26 million.   However, none of the applicants had suffered any actual damage.  The Superior Court nevertheless denied Starbucks’ motion for summary judgment, and Starbucks sought review by the Appellate Court.

The Court of Appeals reversed the trial court.  In an analysis equally applicable to the TCPA, the Starbucks court found that the Legislature could not have intended to impose such “potentially severe adverse effects” of ruinous liability for a mere technical violation of the statute, regardless of actual damage or harm.  Significantly, the court opined:  “We see nothing in the statute to support plaintiff’s claim . . . that would turn the statute into a veritable financial bonanza for litigants. . .”.  (Id.at 1449; emphasis added.)

The court rejected the proposition that “Starbucks job applicants are automatically entitled to a minimum of $200 simply because they filled out the [violative] job application.”  Starbucks, supra, 168 Cal.App.4th at 1448 (some citations omitted; emphasis added.)  The court concluded its analysis by citing to Hale v. Morgan, supra, as follows:

Any other construction would produce the absurd result of turning the statute into the veritable “adding machine” . . . If the legislators who enacted the reform legislation. . . intended to confer a right to automatic damages. . . regardless of actual injury, we doubt they would have been so opaque in their draftsmanship. “The Legislature ‘does not, one might say, hide elephants in mouse-holes.’”  (Starbucks, supra, at 1451.)  

And, so it is here with the TCPA.  Even if a collector is somehow deemed to have technically violated the TCPA in some way, it would appear self-evident that the recipient of a cell phone call would first be required to demonstrate cognizable injury, that is, that he or she was both (1) charged, and (2) paid, for the call.  See TCPA, 47 U.S.C. § 227(b)(1)(A)(iii). 

F. PHONE CALLS MADE WITH PRIOR “EXPRESS CONSENT” ARE NOT ACTIONABLE

There can be no violation of the TCPA where prior express consent is given by the called party to call his or her cell phone.  47 USC § 227(b)(1)(A).  Whether the called recipient or the caller has the burden of proof on this issue has not yet been conclusively determined.  Compare 2008 TCPA Order at ¶ 10 (calling party bears burden) with G.M. Sign, Inc. v. Franklin Bank SSB (N.D. Ill. 2008) 2008 WL 2410427, at *2 (“lack of permission or consent . . . is an element of the prima facie  case of plaintiff for a TCPA claim”).

On January 4, 2008, the FCC issued its most recent ruling and order.  In that order, the FCC declared that: “Although the TCPA generally prohibits autodialed calls to wireless phones, it also provides an exception for autodialed and prerecorded message calls for emergency purposes, or made with the prior express consent of the called party.” (2008 TCPA Order at ¶ 9, p. 3.) The Order continues:

Because we find that autodialed and prerecorded message calls to wireless numbers provided by the called party in connection with an existing debt are made with the “prior express consent” of the called party, we clarify that such calls are permissible. (Id.)

The Order reasoned that:

We conclude that the provision of a cell phone number to a creditor, … reasonably evidences prior express consent by the cell phone subscriber to be contacted at that number regarding the debt.  In the 1992 TCPA Order, the Commission determined that “persons who knowingly release their phone numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary.  The legislative history in the TCPA provides support for this interpretation.  Specifically, the House report on what ultimately became section 227 states that: [¶] [t]he restriction on calls . . . does not apply when the called party has provided the telephone number of such a line to the caller for use in normal business communications.

2008 TCPA Order, ¶  9; (footnotes omitted; emphasis added).

In other words, if a debt collector is provided a cell phone number by its creditor client (who in turn was provided the number by the debtor) this constitutes prior express consent.  Likewise, it appears clear that consent to call a cell phone given directly to the collector by a debtor should also be sufficient.  2008 TCPA Order, ¶ 9 (“persons who knowingly release their phone numbers have, in effect, given their invitation or permission to be called at the number which they have given.”); 1992 TCPA Order, ¶ 31.

G. REMEDIES UNDER THE TCPA

47 U.S.C. § 227(b)(3) of the TCPA provides for injunctive relief, but it also permits damages.  As such, the TCPA allows a prevailing plaintiff to recover for:

(1) “actual monetary loss” (47 U.S.C. § 227(b)(3)(A)); and/or
 
(2) a $500 statutory damage for each violation (47 U.S.C. § 227(b)(3)(B)); and

(3) a penalty of treble statutory damages up to $1,500 in the court’s discretion where an individual plaintiff is able to establish that the defendant knowingly or willfully violated the TCPA.

(TCPA, 47 U.S.C. § 227(b)(3)).

As we have seen, the Legislative history of the TCPA demonstrates that in enacting the legislation, Congress intended to create a private right of action which afforded an individual remedy for alleged violations of the TCPA by telemarketers.  See, e.g., Murphy v. Lainer, supra, 204 F.3d at 914.  In interpreting the TCPA, many courts have observed that  the Legislative history supports the intent that private actions under the TCPA were to "be treated as small claims best resolved in State Courts designed to handle them. . .”  Ibid.; International Science & Technology Institute, Inc. v. Inacom Communications, Inc. (4th Cir. 1997) 106 F.3d 1146, 1152. 

Jurisdiction consequently resides in the state courts, and federal courts normally decline federal-question jurisdiction over TCPA cases, instead relegating the cases to the purview of the state courts.  Murphy, supra, 204 F.3d at 914

Notably, in this regard, there is no provision to be found within the TCPA expressly authorizing class actions, or authorizing the payment of fees to attorneys.  Without a doubt, when viewed in the context of the legislative history, these omissions must be deemed deliberate.  Senator Fritz Hollings, a co-sponsor of the Act, remarked:

The . . .[Act] contains a private right-of-action provision that will make it easier for consumers to recover damages from receiving these computerized calls.  The provision would allow consumers to bring an action in State court against any entity that violates the bill. … [I]t is my hope that States will make it as easy as possible for consumers to bring such actions, preferably in small claims court. . .

Small claims court or a similar court would allow the consumer to appear before the court without an attorney.  The amount of damages in this legislation is set to be fair to both the consumer and the telemarketer.  However, it would defeat the purposes of the bill if the attorneys’ costs to consumers of bringing an action were greater than the potential damages.  (Remarks of Sen. Hollings, 137 Cong. Rec. 30821-30822 (1991); emphasis added.)

From reviewing Senator Hollings’ remarks, it seems abundantly clear the TCPA was designed and intended to be enforced efficiently by individuals in small-claims court, without the need for costly attorneys.  Ibid.  And while it is true that class certification can be beneficial where numerous parties suffer injury of insufficient size to warrant individual action, the TCPA poses no such risk.  Rather, the remarks of Senator Hollings demonstrate that the statutory damages ($500) and the treble damages penalty ($1,500) were calculated to be sufficiently large to entice individuals to enforce their own specific and individual rights under the TCPA.  As one Federal District Court has recognized: “A class action would be inconsistent with the specific and personal remedy provided by Congress. . .”  Foreman, supra,  164 F.R.D. at 405 (emphasis added.).

The structure of the TCPA’s remedy provisions also evidence Congress’s expectation that TCPA actions would be pursued, so as to be limited and “fair.”  For example, the TCPA also authorizes state attorney general’s to bring civil actions on behalf of their state’s residents to obtain an injunction against such calls and to recover monetary damages.  47 U.S.C. § 227(f)(1).  The TCPA provides that the federal district courts have “exclusive jurisdiction” over actions brought by state attorney generals.  47 U.S.C. § 227(f)(2).  Likewise, the TCPA also authorizes the Federal Communications Commission to bring suit, or to intervene, as of right in any state attorney general’s action.  47 U.S.C. § 2327(f)(3).  It thus appears that the State attorney general’s and the FCC were intended to address any widespread violations through their enforcement powers in federal court – as opposed to personal efforts by individuals in State small claims courts.  See Schulman v. Chase Manhattan Bank (2000) 268 A.D.2d 174, 178, 710 NYS.2d 368, 371.

Moreover, other notable “consumer protection” statutes include the Fair Debt Collection Practices Act, 15 U.S.C. 1692, et seq., and the Truth in Lending Act, 15 U.S.C. 1601, et seq.  Both of these statutory schemes expressly provide for class treatment, but significantly, both also contain a cap on  maximum class-wide recovery in the event of class-action litigation.  See, e.g., FDCPA, 15 U.S.C. § 1692k(a)(2)(B), and TILA, 15 U.S.C. § 1640(a)(2)(B) (both setting a maximum statutory recovery for class as the lesser of $500,000 or 1% of the class-defendant’s net worth).  Notably, both statutes also expressly grant the court discretion to award less than the maximum permitted statutory damages to any or all prevailing plaintiffs.  These features prevent excessive damages.

The TCPA contains no such statutory damage limitations.  Conspicuously missing from the TCPA is any mention of the availability of a “class action.”  Nor does the TCPA afford a court the discretion to award any amount less than the fixed $500 per violation.  And while this alone would not necessarily demonstrate ‘that a class action was not contemplated, when the structure of the TCPA and the absence of any mention of a right to attorneys fees or the availability of a class action, are considered together with Senator Hollings’ remarks (that the TCPA was designed to be “fair”), it becomes more apparent that Congress never contemplated the potential for thousands (if not hundreds of thousands, or, even millions) of putative class-members to threaten a defendant, especially a non-advertising debt collector, with amalgamated statutory damages beyond any actual loss and vastly exceeding the net worth of the defendant itself.   See Jones, supra, 42 Cal.4th at 1171 (“The Legislature does not, one might say, hide elephants in mouse holes.”).

Because Congress established a specific remedy that was intended to be enforced in small claims court, the class action device, in conjunction with the TCPA, is not “superior” to other available methods for the fair and efficient adjudication of the controversy.  Forman, supra,  164 F.R.D. at 404-05 (denying class certification in TCPA case because class action is not a superior method of adjudication where certification would be inconsistent with the specific recovery provided by Congress).

H. APPLICATION OF THE TCPA IS LIMITED BY STATE LAW

A key consideration in enacting the TCPA was the difficulty states had encountered in attempting to enforce their own statutes regulating the use of automated telephone dialing equipment against telemarketing firms making interstate calls.  See, e.g., Senate Report No. 102-178, October 8, 1991, 1991 U.S.C.C.A.N. 1968, 1973.  The TCPA was intended to facilitate the states’ ability to regulate interstate telemarketing calls (that is, calls from outside of a state to residences within a state).  See Murphy, supra, 204 F.3d at 914-15.  As discussed above, 47 U.S.C. § 227(b)(3) of the TCPA provides for enforcement actions to be brought in State courts, but only “ if otherwise permitted by the laws or rules of courts of [the] State.”  Murphy, supra, 204 F. 3d at 914-15 (states may refuse to exercise the jurisdiction authorized by statute.); Intern.  Science & Tech. Institute, supra, 106 F.3d at 1156-58 (states retain the ultimate decision of whether private TCPA actions will be cognizable in their courts).

As we have seen, the TCPA was not originally designed, or intended, to impose restrictions on the commercial activities of debt collectors who otherwise lawfully seek to contact debtors by phone on behalf of creditors with whom the debtors have pre-existing business relationships.  See generally 2008 TCPA Order.  The TCPA should continue to be construed in light of this original intent.  Kinney v. Vaccari (1980) 27 Cal.3d 348, 357. 

Restrictions and limitations on damages under the TCPA are issues that, in my view, should be addressed to our California Legislators by the CAC.  Reasonable restrictions on collection calls to cell phones are one thing, potential extinction of a collector’s business by the imposition of huge statutory damages is another.

I. CALIFORNIA DEFENSES APPLY TO THE TCPA

As we have seen, Congress included a provision to allow the states to restrict, limit, or even prohibit, private TCPA actions.  Kauffman v. ACS Systems, Inc. (2003) 110 Cal.App.4th 888.  Consistent with the above observations, it seems clear that all of the usual and well-recognized affirmative defenses, jurisdictional and standing rules and other procedural limitations applicable to California litigation equally apply to limit or defeat claims brought in California under the TCPA.  For example, recently, in Kinder v. Allied Interstate, et al. (consolidated cases), Judge Ronald Styn of the San Diego County Superior Court ruled the California defenses of assumption of the risk and collateral estoppel, as well as the jurisdictional doctrine of  lack of standing applied to defeat Mr. Kinder’s claims.  (Minute Order, and slip op.. dated May 5, 2008.)  Judge Styn’s decision is currently on appeal.  But given the authorities discussed above, as well as the language embodied in the TCPA at 47 USC § 227(b)(3), Judge Styn’s ruling seems clearly correct.

Additionally, insofar as the TCPA is intended to protect a consumer’s right to privacy from abusive telemarketing or phone calling practices by entities with whom the consumer has no relationship, those considerations are clearly not implicated by an otherwise legal debt collection communication.  Indeed, California courts have repeatedly limited liability for communications by collectors to debtors, treating these communications as privileged. See, e.g.,  Bundren v. Superior Court (1983) 145 Cal. App. 3d 784, 789  There, the Court of Appeal wrote: “When one accepts credit, the debtor impliedly consents for the creditor to take reasonable steps to pursue payment even though it may result in actual, though not actionable, invasion of privacy.  In the debtor-creditor situation, the right of a debtor to privacy is subject to the right of a creditor to take reasonable steps to collect the debt.”  Accord Ross v. Creel Printing & Publishing Co. (2002) 100 Cal. App. 4th 736, 744-45 (Debt collector’s demand for payment is subject to a qualified privilege unless conduct is abusive and outrageous, meaning that it “goes beyond all reasonable bounds of decency.”) 

J. POTENTIAL DEFENSES TO TCPA LIABILITY

There are several defenses to TCPA liability taking the form of either necessary elements of a prima facie violation, or more traditional “affirmative” defenses. 

First, as discussed above, it is not unlawful to make any call to a cell phone using an automatic telephone dialing system or an artificial or prerecorded voice if the call is made with the consent of the called party.  See 47 U.S.C § 227(b)(1)(A)(iii).

Second, manually dialed calls to cell phones are not regulated by the TCPA.  See 47 U.S.C. § 227.  Likewise, the leaving of “live” messages is not regulated, much less prohibited, if the call is not made using an ATDS.

Third, there is no liability for calling a cell phone using either (a) an “automatic telephone dialing system” or (b) an artificial or prerecorded voice - so long as the recipient is not "charged" for the call.  See 47 U.S.C. § 227(b)(1)(A)(iii)

Fourth, there is no liability for calls to residential (non-cell phone) lines even where an artificial or prerecorded voice leaves a message, so long as the call is made for a commercial or business purpose and does not include or introduce an unsolicited advertisement, or otherwise constitute a telephone solicitation.  See  47 C.F.R. § 64.1200 (a)(2)(iii). Collection calls do not fall within the definition of telephone solicitation.  See, e.g., 2008 TCPA Order, ¶ 11 at p. 7.

Finally, there is also no liability under the TCPA for calls to residential lines where the caller has an established business relationship at the time the call was made.  See 47 C.F.R. § 64.1200(a)(2)(iv).

K. CONCLUSION

The TCPA, unlike other statutes which regulate collectors, is troublesome because damages seem virtually limitless.  But, as we have seen, although created by Congress, California law relating to, among other things, standing, procedure, and the like, is nonetheless applicable.  Moreover, the statute must be construed consistently with California’s public policy which is designed to avoid the imposition of ruinous liability for statutory violations.  Happily, this policy is entirely consistent with the intent of the TCPA’s sponsors when they put forward the original Legislation.

As the important issues relating to the TCPA continue to evolve, we will continue to report to you.

The above article and all articles in this website are not intended to be legal advice. Readers should consult an attorney to determine how the law applies to their particular circumstances. Also, please understand that the law constantly evolves and changes. Certain of the decisions and legal propositions quoted in the above article may be out of date or superseded. Questions or comments about the above article can be directed to its author, Mark E. Ellis.

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