A merchant's prerecorded courtesy calls that provide reward program information to a customer enrolled in the program violate the Telephone Consumer Protection Act (TCPA) if the customer has not consented to the calls, the Ninth Circuit has ruled. In its decision in Chesbro v. Best Buy Stores, issued on October 17, 2012, the Ninth Circuit held that such courtesy calls are "unsolicited advertisements" for which the TCPA requires the customer's consent, even if the calls do not explicitly mention any merchandise sold by the merchant.

One of the calls in question alerted the plaintiff to the upcoming expiration of his rewards certificates, and a subsequent call described changes in the rewards program. The TCPA requires the "prior express consent of the called party” for prerecorded non-emergency calls to residential telephone lines that constitute "unsolicited advertisements.” The statute defines "unsolicited advertisements" as calls that advertise "the commercial availability or quality of any property, goods, or services.” In his putative class action, the plaintiff alleged that both calls violated the consent requirement in the TCPA and the Federal Communication Commission's TCPA regulation. He further alleged that because he had asked to be placed on the merchant's do not call (DNC) list seven months before the subsequent call, that call violated the FCC’s regulatory requirement for telemarketers to honor a DNC request within a reasonable time.

In reversing the district court's grant of summary judgment in the merchant’s favor, the Ninth Circuit rejected the merchant's argument that the calls did not violate the TCPA and FCC regulation because they did not explicitly reference any property, goods, or services. Stating that it was "approach[ing] the problem with a measure of common sense," the Ninth Circuit observed that the calls urged the plaintiff to redeem his rewards points, directed him to a website for further information, and thanked him for shopping at the merchant. Noting that redeeming reward points required going to the merchant's store and making a purchase, the court found that the calls "encouraged the listener to make future purchases." According to the court, "[n]either the statute nor the regulations require an explicit mention of a good, product, or service where the implication is clear from the context."

The Ninth Circuit also concluded that the calls constituted telemarketing for purposes of the FCC's DNC requirement because they "encouraged recipients to engage in future purchasing activity."

We continue to see a high volume of class actions against companies alleging TCPA violations. In part, this is because the penalties are draconian. Violations can yield damages equal to a minimum of the greater of $500 or actual damages per violation, triple damages for willful violations, and unlimited class action liability.

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, and its skill in litigation defense and avoidance. In addition to having vast experience in defending all manner of TCPA lawsuits, the group has counseled a number of clients on establishing auto-dialing and monitoring protocols.

For more information, please contact Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, Practice Leader Jeremy T. Rosenblum at 215.864.8505 or rosenblum@ballardspahr.com, John L. Culhane, Jr., at 215.864.8535 or culhane@ballardspahr.com, Christopher J. Willis at 678.420.9436 or willisc@ballardspahr.com, or Mark J. Furletti at 215.864.8138 or furlettim@ballardspahr.com.

Copyright © 2012 by Ballard Spahr LLP.
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