A recent decision by the U.S. Court of Appeals for the 11th Circuit held that auto-dialed calls made by a debt collector did not violate the Telephone Consumer Protection Act (TCPA), even though they went to an individual who did not owe the debts triggering the calls.

The TCPA prohibits non-emergency prerecorded calls to a residential telephone line without the called party’s consent unless the call is exempt under orders or rules of the Federal Communications Commission (FCC). In its unpublished decision in Meadows v. Franklin Collection Service, Inc., filed on February 11, 2011, the 11th Circuit found that the auto-dialed calls fell within two FCC exemptions. One exemption applies to calls made to a person with whom the caller has an established business relationship. The other applies to calls made for a commercial purpose that do not include an unsolicited advertisement or a telephone solicitation.

The telephone number to which the prerecorded calls were made in Meadows had been assigned to one of the actual debtors before it was transferred to the plaintiff. The other actual debtor, who was the plaintiff’s daughter, had previously lived with the plaintiff. According to the 11th Circuit, the exemptions applied because the caller had an established business relationship with the intended recipients of the calls (the actual debtors) and the calls were made for a commercial, non-solicitation purpose. The court also noted the FCC’s 1995 ruling in which it specifically found that the exemptions applied to debt collection calls.

While finding no TCPA violation, the 11th Circuit reversed the district court’s grant of summary judgment in favor of the debt collector on the plaintiff’s Fair Debt Collection Practices Act (FDCPA) claim. The plaintiff alleged that the calls violated the FDCPA provision that prohibits a debt collector from engaging in harassing, oppressive, or abusive conduct, and provides as an example of such conduct “[c]ausing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.” According to the 11th Circuit, a reasonable juror could conclude from the evidence that the debt collector intended to annoy, abuse, or harass the plaintiff.

Such evidence included the plaintiff’s testimony that she had received approximately 300 calls, and occasionally up to three calls a day, over two and a half years, and that the calls continued for almost three years after the plaintiff initially told the collector that she did not owe the debts and the debtors did not live with her. The district court had held that the calls were not unreasonable because of the lengthy period of time over which they were made, because many of the calls went unanswered, and because the debt collector was entitled to conduct a reasonable investigation to determine if the phone number was incorrect.

We are witnessing an avalanche of class actions against companies alleging that they have violated the TCPA. In part, this is a result of the fact that the penalties for such violations are draconian. Violations can result in damages equal to the greater of $500 or actual damages, triple damages for willful violations and unlimited class action liability.

The surge in litigation highlights the importance not only of having internal rules that are compliant with the TCPA, but also of conducting periodic audits to ensure the rules are being followed. For companies that have failed to comply with the strict requirements of the TCPA, the only defenses may be (1) motions to compel arbitration (for companies that have well-crafted arbitration programs in place), and (2) arguments (largely untested to date) that TCPA penalties violate the Due Process Clause of the U.S. Constitution, as suggested by U.S. Supreme Court cases addressing punitive damages.

Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). In addition to having vast experience in defending all manner of TCPA and FDCPA lawsuits, the Group has counseled a number of clients on establishing auto-dialing and monitoring protocols. For more information, please contact Group Chair Alan S. Kaplinsky, 215.864.8544 or kaplinsky@ballardspahr.com; Vice Chair Jeremy T. Rosenblum, 215.864.8505 or rosenblum@ballardspahr.com; John L. Culhane, Jr., 215.864.8535 or culhane@ballardspahr.com; Martin C. Bryce, Jr., 215.864.8238 or bryce@ballardspahr.com.;  Barbara S. Mishkin, 215.864.8528 or mishkinb@ballardspahr.com; or Mark J. Furletti, 215.864.8138 or furlettim@ballardspahr.com.

 


 

 

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