What's Terrible About the TCPA? Almost Everything

The TCPA is the worst law. Ever. Okay, that’s hyperbole. Roman Law once condemned Christians to damnatio ad bestias—being fed to lions. In the Middle Ages, suspected witches were thrown in water to see if they could swim, and if they could, they were promptly burned at the stake. Today, you should assiduously avoid selling pot in Singapore.

These laws are, or were, worse than the Telephone Consumer Protection Act (TCPA), 47 U.S.C. §227. Yet, if you are a U.S. business, you will be hard pressed to identify a worse law than the TCPA. U.S. courts have seen a tidal wave of TCPA litigation, and new text and robo-call regulations from the FCC, effective on October 16, 2013, have set the stage for even more because many businesses simply do not know that they need to comply or how.

The TCPA comprehensively regulates telecommunications, but the statute and its implementing regulations are obscure, labyrinthine and, worse, extremely boring. The regulated activity involves technology that has evolved rapidly, making it difficult for corporate counsel to stay abreast of all applications that might trigger liability. You will search the Federal Communication Commission’s (FCC) website in vain for any convenient, user-friendly “guidance for industry” of the sort that other good-natured agencies, like the Federal Trade Commission, the Food and Drug Administration or the Environmental Protection Agency, routinely make available.

Insufficient attention has been devoted to explaining to the uninitiated why the law is so horribly unjust, approximating road rage in the guise of consumer protection. Even if you do not practice in this area, you should care about this if: a) fairness matters to you; b) you hate economic waste; or c) you have an ounce of empathy for the private sector. And if none of these things matter, you should still care about the TCPA if your company uses telecommunications or engages in marketing. What you do not know can hurt you. Badly. In addition to developing a foolproof compliance plan, though, another great idea would be to ask your federal legislators to amend the law. The TCPA can easily accomplish its objectives without terrorizing business.

Worthy Objectives, Irrational Remedy

Privacy is a good thing. The TCPA, rightly, aims to eliminate cumulative telecommunication practices that can saturate consumer phone lines. Still, most consumers, especially businesses, are unlikely to be miffed by an occasional fax, text or robo-call. Rather, it is the 157th unwanted fax of the week that puts consumers over the edge.

The problem with the TCPA is that it gives the impression of having been written by, and for, people who just received their 157th fax. The result is legal napalm—a law calculated to kill all in its path and, too often, even those standing nearby. Passed in 1991 and updated in 2006, it prohibits the transmission of unsolicited fax advertisements, pre-recorded phone messages, the use of automated telephone dialing systems and some text messaging. Its private right of action makes it a business killer.

What’s so bad about it? Let’s review some of the TCPA’s most odious features:

Harsh Penalties: An impermissible transmission carries a minimum $500 penalty—pretty severe, given that the cost of an unsolicited fax to a consumer is about four cents, and many mobile phone plans have flat rates. The statutory award may be increased to $1,500 when the defendant acts willfully. Several courts have construed a “willful” violation to be one where the defendant merely intended to send a fax.

What other types of things might one do in life to be penalized $1,500? Here are a few items to orient your moral compass: You can be fined $1,500 for rolling back an odometer in violation of federal law. In Minnesota, $1,500 is the base fine for soliciting prostitution in a public place. In California, those who embezzle money or property worth up to $950 can be fined up to $1,000 dollars. Other fun facts about $1,500: Did you know that $1,500 is roughly the annual per capita income of the world’s fourth largest economy, India? It is also the average monthly rent for a three-bedroom apartment in Atlanta, and it buys good seats for two to both days of the NCAA Final Four.

Killer Aggregation: Unlike the odometer fraudster or even the most prolific Minnesota “John,” a TCPA defendant often faces the same penalty hundreds, thousands or even hundreds of thousands of times. Most TCPA cases are brought as class actions, and often seek tens or hundreds of millions of dollars. Hilton Worldwide Inc. has just dodged class certification in a robo-call case seeking up to $54 billion!

Strict Liability: The business risks of violating the TCPA are so profound that no one in their right mind would knowingly violate the law. That the TCPA litigation is on the upswing more than 20 years after the law’s enactment merely underscores that businesses simply do not know any better. Small to mid-size businesses may not have compliance counsel. Large companies can find themselves being sued for conduct that should fall outside the statute, such as informational transmissions that may have some commercial dimension. Companies of all sizes have marketing departments that make simple mistakes.

Financial Risk Inverse to Culpability: The main determinant of a defendant’s exposure is the number of transmissions. When a defendant learns that it has been accused of violating the TCPA, it usually stops its conduct. Ironically, a defendant that has overtly violated the statute can wind up with lesser exposure than a defendant that sends communications with real value to recipients. The former will often get sued quickly by a serial TCPA plaintiff, while the latter may continue sending faxes for months or years before a recipient perceives a TCPA violation and decides to institute suit.

Avoiding the Least Cost Avoider: A fundamental principle of efficient legislation is to place regulatory burden on those who, at least cost, can avoid the harm. Nevertheless, the TCPA imposes no obligation on broadcasters (companies hired to perform the transmission) to “Mirandize” the “senders” (their often unsophisticated customers) about TCPA requirements and risks. Nor does the law require that plaintiffs who do not want to receive faxes to call the opt-out number that appears on their faxes. TCPA plaintiffs often sue for the receipt of multiple faxes, even though they could have avoided all but the first.

Annihilation Without Representation: The TCPA’s proscription on faxes applies only to “unsolicited advertisements,” so a plaintiff who has consented to receive faxes should have no claim. It does require, however, that unsolicited faxes sent under the “established business relationship” exception contain opt-out language (informing recipients how to avoid receiving future faxes.) In 2006, the FCC, with a Bronx salute to “inclusio unius, exclusio alterius” and to the limits of its statutory mandate, promulgated a rule that requires opt-out language for faxes to which the plaintiff expressly consented. So, if you want to prank your plaintiff class action lawyer friends, all you have to do is ask them to fax you their firm brochure. Then you can sue them for $1,500 if they do not put opt-out language in their one-time fax!

Rendered Speechless: The U.S. Constitution may afford less protection to commercial speech than non-commercial speech, but even commercial speech has value. Moreover, commercial entities can engage in non-commercial speech, and not everything a company says is an “advertisement.” Suppose a drug company finds a new treatment for hypertension—a major risk factor for stroke, heart attack and aneurysm. It sends a fax to doctors, inviting them to medical education programs to learn about the treatment and how it works. Unfortunately, the fax goes to a serial TCPA plaintiff, who files a lawsuit alleging that the fax is an advertisement because the sender also makes the drug. Should the drug company face crushing penalties for speech reasonably calculated to save lives? Is this speech that should be deterred? Sound ridiculous? Keep an eye on St. Louis Heart Center v. Forest Labs, 4:12-cv-2224, Eastern District of Missouri.

One more thing: the plaintiff and every other member of the proposed class gave express written consent to receive the faxes.

The Law Should Be Amended