On June 22nd the Second Circuit Court of Appeals handed down an important Telephone Consumer Protection Act (“TCPA”) decision for clients performing automated calls to customers who have given consent by written contract. In Reyes v. Lincoln Automotive Financial Services, No. 16-2104-CV, 2017 WL 2675363 (2d Cir. June 22, 2017), the court held that consent to receive autodialed debt collection calls on a cell phone number given in a contract to lease an automobile could not be unilaterally revoked because the consent was given as bargained-for consideration in a bilateral contract.

The Reyes court distinguished prior circuit court cases and the Federal Communications Commission’s (“FCC”) liberal rules on consent revocation because those cases and rules deal with individuals providing voluntary consent to be contacted by giving telephone numbers to businesses in connection with loan and insurance applications, where the consent is not supported by consideration. While it’s unclear whether the FCC will agree with the conclusion, Reyes will be an important ruling in the defense of TCPA claims that arise in the performance of a contract in the Second Circuit and in jurisdictions that have not specifically ruled on the issue.

Stricter TCPA Rules Have Resulted in Increased Litigation

Enacted to curtail unwanted automated and prerecorded calls, the TCPA grants individuals a private right of action against violators, including monetary relief of up to $500 per violation (trebled to $1,500 for willful or knowing violations). Violators also face state and federal government enforcement actions with the potential for additional monetary penalties.

Generally, subject to limited exceptions, the TCPA prohibits any person within the United States from placing a so-called “robocall” without the prior consent of the party being called. In 2012 the FCC amended its TCPA rules—which apply to calls made using any automatic telephone dialing system or an artificial or prerecorded voice, as well as text messages—to require stronger evidence of consent. After the FCC tightened its “robocall” rules in 2012, TCPA suits by private litigants seeking the statutory $500-$1,500 per call penalties increased significantly, and numerous commercial callers filed petitions seeking clarification or waivers of the rules. On July 10, 2015 the FCC issued an order providing further guidance. Relying on Third and Eleventh Circuit case law, the FCC specifically ruled that a called party may revoke prior express consent at any time and through any reasonable means under the TCPA.

Reyes Provides Important Interpretation of the FCC’s TCPA Consent Rules

In Reyes, the Second Circuit reviewed a district court decision to grant summary judgment in favor of defendant Lincoln Automotive Financial Services on Mr. Reyes’s claim for damages under the TCPA. Mr. Reyes originally signed a lease agreement for an automobile from Lincoln and a condition of the lease agreement was consent to receive manual or automated telephone calls from Lincoln. After Mr. Reyes defaulted on his lease obligations, Lincoln called regularly, even after Mr. Reyes allegedly revoked his consent.

The Reyes court recognized that the TCPA is silent on whether a party may revoke consent when it previously gave prior express consent to live or prerecorded calls. While the court noted that the Third and Eleventh Circuits and the FCC concluded that a party can revoke prior consent, it disagreed with this conclusion under the facts of the case. The Reyes court pointed out that the other circuit case law and FCC guidance considered only the narrow question of “whether the TCPA allows a consumer who has freely and unilaterally given his or her informed consent to be contacted can later revoke that consent.” Id. at *4. But, the court noted, it was presented with a different question: “whether the TCPA also permits a consumer to unilaterally revoke his or her consent to be contacted by telephone when that consent is given, not gratuitously, but as bargained-for consideration in a bilateral contract.” Id.

The court initially found that Congress did not intend to deviate from the common law rules of consent when drafting the TCPA, and that the common law definition of the term “consent” has been applied when interpreting the TCPA. The court noted, however, the distinction between consent in contract law and in tort law, noting that consent is not always revocable under common law contract principles. Its sister circuits and the FCC, the court pointed out, dealt with a tort understanding of consent, where the release of a phone number to a third party constitutes implied express consent to receive telephone calls that could be revoked at any time. The consent given by Mr. Reyes, on the other hand, was not provided “gratuitously” but included in an express provision of a contract to lease an automobile supported by consideration. In holding that Mr. Reyes could not revoke consent, the court reasoned that under common law contract principles, consent is irrevocable when it is provided in a legally binding bilateral contract because a party cannot unilaterally revoke a term of the contract without the consent of the other party. Reading the TCPA’s definition of “consent” to permit unilateral revocation at any time, however, would permit Mr. Reyes “to do just that.”

The Takeaway: Commercial Callers Should Review Consent Provisions in their Contracts

Although the Reyes decision is not binding outside of the Second Circuit, commercial callers desiring to strengthen their defenses to potential TCPA claims should review their bilateral contracts to ensure that TCPA consents obtained in such contracts are explicit and consistent with the Reyes decision.

Additional Information

Compliance with the TCPA remains a complex topic, which cannot be comprehensively addressed in this summary format. If you would like additional information regarding TCPA compliance, please contact your Kutak Rock attorney or one of the authors.