Last week, the US Court of Appeals for the DC Circuit issued a long-awaited decision on an omnibus challenge to the FCC’s interpretation of the TCPA. While the decision provides some relief for businesses, it does not eliminate the prospect of TCPA liability and leaves important TCPA interpretive questions unresolved. Businesses should continue to be vigilant regarding consent and opt-out procedures when sending automated text messages and automated or pre-recorded calls to consumers. Continue Reading
Throughout 2017, the health care and life sciences industries experienced a widespread proliferation of digital health innovation that presents challenges to traditional notions of health care delivery and payment as well as product research, development and commercialization for both long-standing and new stakeholders. At the same time, lawmakers and regulators made meaningful progress toward modernizing the existing legal framework in a way that will both adequately protect patients and consumers and support and encourage continued innovation, but their efforts have not kept pace with what has become the light speed of innovation. As a result, some obstacles, misalignment and ambiguity remain.
We are pleased to bring you this review of key developments that shaped digital health in 2017, along with planning considerations and predictions for the digital health frontier in the year ahead.
In a case that could shape the future of data privacy litigation, the Supreme Court recently agreed to review the decision by the U. S. Court of Appeals for the Ninth Circuit under the Fair Credit Reporting Act (FCRA) in Robins v. Spokeo, Inc. At issue is the extent to which Congress may create statutory rights that, when violated, are actionable in court, even if the plaintiff has not otherwise suffered a legally-redressable injury.
Spokeo is a data broker that provides online “people search capabilities” and “business information search” (i.e., business contacts, emails, titles, etc.). Thomas Robins (Robins) sued Spokeo in federal district court for publishing data about Robins that incorrectly represented him as married and having a graduate degree and more professional experience and money than he actually had. Robins alleged that Spokeo’s inaccurate data caused him actual harm by (among other alleged harms) damaging his employment prospects.
After some initial indecision, the district court dismissed the case in 2011 on the grounds that Robins had not sufficiently alleged any actual or imminent harm traceable to Spokeo’s data. Without evidence of actual or imminent harm, Robins did not have standing to bring suit under Article III of the U.S. Constitution. Robins appealed.
On February 4, 2014, the Court of Appeals for the Ninth Circuit announced its decision to reverse the district court, holding that the FCRA allowed Robins to sue for a statutory violation: “When, as here, the statutory cause of action does not require proof of actual damages, a plaintiff can suffer a violation of the statutory right without suffering actual damages.” The Court of Appeals acknowledged limits on Congress’ ability to create redressable statutory causes of action but held that Congress did not exceed those limits in this case. The court held that “the interests protected” by the FCRA were “sufficiently concrete and particularized” such that Congress could create a statutory cause of action, even for individuals who could not show actual damages.
Why Spokeo Matters
If the Supreme Court reverses the Ninth Circuit’s decision, the decision could dramatically redraw the landscape of data privacy protection litigation in favor of businesses by requiring plaintiffs to allege and eventually prove actual damages. Such a ruling could severely limit lawsuits brought under several privacy-related statutes, in which plaintiffs typically seek statutory damages on behalf of a class without needing to show actual damages suffered by the class members. Litigation under the FCRA, the Telephone Consumer Protection Act and the Video Privacy Protection Act (among others statutes) all could be affected.
Be Careful Who You Hire To Make Those Calls! Ninth Circuit Takes Expansive View of Vicarious Liability under the TCPA
A recent ruling by the Ninth Circuit took an expansive view of vicarious liability under the Telephone Consumer Protection Act (TCPA). Reversing the district court’s grant of summary judgment, the court in Gomez v. Campbell held that a marketing consultant could be held liable for text messages sent in violation of the TCPA, even though the marketing consultant itself had not sent the texts and even though the texts were sent on behalf of the marketing consultant’s client, not the consultant itself.
Among other things, the TCPA prohibits (with certain exceptions) the use of automatic telephone dialing systems in making calls to cellphones. Both the Federal Communications Commission (FCC) and the courts have interpreted this provision to bar the use of automated systems to send unsolicited texts to cellphones. In Gomez, the Campbell-Ewald Company had been hired by the Navy to conduct a multimedia recruiting campaign. Campbell-Ewald had then outsourced the text-messaging component of the campaign to a third party, Mindmatics. Mindmatics then allegedly sent text messages to the plaintiff and others who had not given consent.
On appeal, Campbell-Ewald raised two variations of the arguments that it should not be held liable for texts that it had not itself sent. First, Campbell-Ewald argued that it did not “make” or “initiate” any calls under the TCPA because Mindmatics had sent the texts. As the statue only provides for liability for those that “make” or “initiate” prohibited calls, Campbell-Ewald argued that it could not be held liable. Second, addressing another potential avenue of liability, Campbell-Ewald noted that the FCC had interpreted the TCPA to allow for liability against those “on whose behalf” unsolicited calls are made. But, Campbell-Ewald argued, it could not be held liable on this ground either because the texts had been sent on behalf of its client, the Navy, not Campbell-Ewald.
In the end, the Ninth Circuit sidestepped both these arguments and found Campbell-Ewald potentially liable on a third basis, “ordinary tort-related vicarious liability rules.” The court noted that where a statute is silent on vicarious liability—as the court judged the TCPA to be—traditional common law standards of vicarious liability apply. Thus, the court held, Campbell-Ewald could be liable under the TCPA based on the agency relationship between Campbell-Ewald and Mindmatics. The court further noted that FCC had stated that the TCPA imposes liability “under federal common law principles of agency,” and held that the FCC’s interpretation was entitled to deference.
Finally, the court noted that it made little sense to subject both the actual sender and the ultimate client to liability, while absolving the middleman marketing consultant, noting, “a merchant presumably hires a consultant in party due to its experience in marketing norms.”
The decision reinforces the importance for companies to closely monitor anyone sending texts or placing calls on their behalf or at their direction. Following Gomez, it is clear that any company that had a role in sending unsolicited calls or texts can potentially be held liable under the TCPA; and the company with the [...]
Boston-based litigation partner Matt Turnell shares his predictions about class action litigation under the Telephone Consumer Protection Act (TCPA) and Electronic Communications Privacy Act (ECPA) in 2014 and Boston-based white-collar criminal defense and government investigations partner David Gacioch shares his predictions about government responses to data breaches.
Class Action Litigation Predictions
2014 is already shaping up to be an explosive year for privacy- and data-security-related class actions. Last December’s data breach at Target has already led to more than 70 putative class actions being filed against the retailer. With recently disclosed data breaches at Neiman Marcus and Michaels Stores—and possibly more to come at other major retailers—court dockets will be flooded with these suits this year. And consumers are not the only ones filing class actions; banks that have incurred extra costs as a result of the data breaches are headed to court as well, with at least two putative class actions on behalf of banks filed so far against Target.
That volume of litigation related to the Target data breaches likely will be matched by a steady stream of class actions filed under the TCPA. 2013 was a busy year for the TCPA docket and I expect that the Federal Communications Commission’s (FCC) stricter rules requiring express prior written consent from the called party, which took effect in October 2013, means that 2014 will be just as busy since the majority of TCPA class actions seek statutory damages for companies’ failure to obtain consent before making autodialed or prerecorded voice calls or sending unsolicited text messages or faxes.
In 2014, I expect to see key decisions under the ECPA related to social media platforms and email providers capturing and using content from customers’ emails and other messages for targeted advertising or other purposes. One district court has already denied a motion to dismiss an ECPA claim challenging this conduct and I predict that other decisions are forthcoming this year. Needless to say, decisions in favor of class-action plaintiffs in this area could have major implications for how social media sites and email providers do business.
– Matt Turnell, Partner
Government Responses to Data Breaches
As significant data breaches continue to dominate the news, public awareness of data privacy and security issues will increase, as will their political appeal. I expect to see in 2014:
- Record numbers of breach reports to state and federal regulators, as awareness of reporting obligations spreads further and further across data owner, licensee, broker and transmitter groups;
- More states committing more enforcement resources to data privacy and security, including budget dollars and dedicated attorney general’s office units;
- More state/federal and multi-state coordination of investigations, leading to increased settlement leverage by enforcement authorities vis-à-vis firms under investigation; and
- Greater numbers and dollar values of settlements by the Federal Trade Commission (FTC) and state attorneys general than ever before.
Similarly, with the HIPAA Omnibus Final Rule going into effect on September 23, 2013, coupled with the late-2013 Department of Health and Human Services [...]
Last week’s Seventh Circuit ruling in Patriotic Veterans v. State of Indiana confirms that businesses should check both federal and state laws before using automatic dialing systems (ATDS) to deliver prerecorded or synthetic voice messages known as “robocalls”.
The Telephone Consumer Protection Act (TCPA) is a federal law that generally prohibits robocalls to residential telephone lines without the prior express consent of the party receiving the call. However, calls that are not made for a commercial purpose, including calls made for political purposes, are exempt from the TCPA.
The TCPA contains a preemption clause that states “nothing in this section . . . shall preempt any State law that imposes more restrictive intrastate requirements or regulations on, or which prohibits:
- the use of automatic telephone dialing systems;
- the of artificial or prerecorded or prerecorded voice messages;” (emphasis added)
Notably, the State of Indiana’s Automated Dialing Machine Statute imposes “more restrictive” requirements, because while it does have some limited exemptions, it does not contain the TCPA’s exemption for political calls.
In Patriotic Veterans, an Illinois based non-profit sought to make robocalls for political purposes across state lines to Indiana residents. Not wanting to pay for the live callers that would be required under the Indiana law, Patriotic Veterans filed a complaint in federal court against the State of Indiana and the Indiana Attorney General, seeking a declaration that the Indiana law was, among other things, pre-empted by the TCPA.
The District Court agreed with Patriotic Veterans, holding that the TCPA preempted the Indiana statute and granting Patriotic Veteran’s request for an injunction against enforcement of Indiana’s law with respect to political messages, but stayed the injunction pending the appeal.
The Seventh Circuit Court of Appeals reversed. The Court concluded that there was no express preemption in the statutory language because “the TCPA says nothing about preempting laws that regulate the interstate use of automatic dialing systems. Therefore, we must conclude that they are not preempted. The plain language of the text reinforced by the presumption against preemption prevents this court from looking any further[.]” The Court further concluded that there was no implied preemption for two reasons: (1) the federal regulatory scheme is not so pervasive or dominant as to make clear that Congress intended to occupy the entire legislative field, and (2) it is possible to comply with both laws (even if inconvenient or expensive for Patriotic Veterans).
What Does This Mean for Businesses?
The ruling in Patriotic Veterans further confirms that mere compliance with the TCPA is not enough. Courts are unlikely to strike down state laws that are more restrictive than the TCPA, so it is important for businesses that are developing a robocalling strategy to check the laws of the states where they plan to contact residents. Any such strategy should include a plan to comply with both the TCPA and the applicable state law requirements.
Consumer Data Privacy Update for Marketers, Part 2: New Telemarketing/Text Message Marketing Rules Effective October 16, 2013
The Federal Communications Commission (FCC)’s Report and Order 12-21 (Order 12-21), issued in February 2012, describes revised telemarketing rules that became effective during the past 12 months.
The FCC’s telemarketing rules are issued under the Telephone Consumer Protection Act (TCPA) and apply to a telephone call to a residential landline or wireless number or a text message that is initiated for advertising or telemarketing purposes and uses an “automatic telephone dialer system” (ATDS) or an “artificial or prerecorded” voice message.
The three major changes implemented during the past year are:
(i) Abandoned calls rule effective November 16, 2012: Telemarketers must ensure that no more than three percent of calls answered by a person are “abandoned” (i.e., not answered by the telemarketer within two (2) seconds after the called person answers) during a 30-day calling campaign period;
(ii) Opt-out mechanism effective January 14, 2013: Artificial or prerecorded telemarketing messages must include an automated, interactive mechanism that enables the called person to opt out of receiving future prerecorded messages; and
(iii) Prior express written consent rule effective October 16, 2013: “Prior express written consent” (as described below) of the called person is required[i] for:
- telemarketing calls to a wireless telephone number when an artificial or prerecorded message or ATDS is used;
- telemarketing text messages sent using an ATDS; or
- telemarketing calls to a residential landline telephone number using an artificial or prerecorded message.
“Prior express written consent” means a written agreement signed by the called person that clearly authorizes delivery of advertising or telemarketing messages using an ATDS or an artificial or prerecorded voice message and clearly states that agreeing is not a condition of buying any product or service. A written agreement may be “signed” electronically using any method recognized under the federal Electronic Signatures in Global and National Commerce Act (E-SIGN Act) or applicable state contract law. The E-SIGN Act recognizes a signature as an “electronic sound, symbol or process” that is “attached or logically associated with” an agreement and “adopted by a person with the intent to sign.”
Although industry standards have required express opt-in consent for recurring text messaging programs prior to implementation of the FCC’s prior express written consent rule, consent obtained under the old regulatory framework is not sufficient under the new FCC consent rule because (among other requirements) the “agreement” to which the consumer consents (i) must include reference to use of automated technology and (ii) “must be obtained without requiring, directly or indirectly, that the agreement be executed as a condition of purchasing any good or service.”
Action Step for Marketers: Obtain New Opt-in Consent for Telemarketing and Mobile Marketing
Obtaining new opt-in consent consistent with the requirements of the new FCC consent rule is best practice because the sender bears the burden of proving that it has obtained prior express written consent that meets the FCC standards. Relatedly, implementation of a record-keeping system through which evidence of compliant consent is retained for at least three years (i.e., the statute [...]