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TCPA Tarnished: Opportunist Litigants Abuse Telemarketing Statute For Statutory Damages

· September 2, 2014

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A decades-old statute is being taken advantage of by opportunist litigants to extract statutory damages or settlements from companies.  Sound familiar?

While this could easily describe the phenomenon of copyright trolls or even patent trolls, I’m referring to the Telephone Consumer Protection Act of 1991 (TCPA).  Like copyright and patent statutes, the TCPA also serves a noble purpose: penalizing misleading and abusive telemarketing practices.  Unfortunately, like copyright, the TCPA grants plaintiffs large statutory damages per violation.  The availability of these awards, which require no proof of any actual harm, has incentivized class action litigants to seek out opportunities to allege technical violations of the statute.  In many cases, these claims don’t even address telemarketing activities at all, let alone abusive practices, but a class action can impose such substantial legal costs that opportunistic claims can coerce settlements where the costs of reaching a judge who can throw out abusive claims is high.  As we’ve seen in the copyright context, statutory damages deter investment in new technology; the same thing happens to TCPA defendants, stifling innovation and development in tools for communication.

Some companies are starting to fight back against TCPA misuse.  Several companies whose businesses clearly don’t constitute telemarketing have petitioned the FCC over the last few months in the TCPA docket regarding overbroad interpretations of the TCPA, including TextMe, an app for free messaging and calling; Stage Stores, a clothing retail company; and Santander Consumer USA, an automotive finance company.  Additionally, some of these cases do make it to trial; Twitter and Path joined an amicus brief in August supporting Yahoo in the Third Circuit Dominguez v. Yahoo case.

Guidance from the FCC, courts, or Congress could help relieve the uncertainty over the reach of this 1991 telemarketing statute, and prevent it from being read so broadly as to deprive consumers of innovative new products and services for communicating in the 21st century.

Innovation

New technologies are constantly emerging that promise to change our lives for the better. These disruptive technologies give us an increase in choice, make technologies more accessible, make things more affordable, and give consumers a voice. And the pace of innovation has only quickened in recent years, as the Internet has enabled a wave of new, inter-connected devices that have benefited consumers around the world, seemingly in all aspects of their lives. Preserving an innovation-friendly market is, therefore, tantamount not only to businesses but society at large.