Best Practices

Wrong Numbers and Class Actions

Many TCPA claims involve calls erroneously directed to the wrong phone number.  For purposes of the TCPA, a wrong number is defined as a misdialed number, or a number that belongs to someone other than the intended recipient of the call.  While mistakes can and do occur, of particular concern is whether wrong number calls can support a multimillion dollar class action lawsuit.

Class Action Primer
In a class action the plaintiff’s attorney is technically filing suit not just on behalf of the named plaintiff, but on behalf of all consumers who were harmed by the same defendant under similar circumstances.  The group of consumers on whose behalf the suit is filed is known as a “class,” and at some point in the litigation, the plaintiff’s attorney must file a motion requesting the Court to certify the class; essentially confirming that it does exist and that the plaintiff’s attorney is capable of representing it.

Among other requirements, to obtain certification the plaintiff’s attorney must demonstrate that the representative plaintiff’s claims meet the following standards:

  • Typicality:  The plaintiff’s claims are typical of the claims of the other class members in that they were generated under substantially similar circumstances.
  • Numerosity: There are so many consumers with identical claims that litigating each one on an individual basis would be impractical.

So the question is, can a class comprised of wrong-number call recipients meet the typicality and numerosity requirements for class certification? A recent decision by a federal district court in Illinois addressed that very issue.

Abdallah v. FedEx Corporate Services
In Abdallah v. FedEx Corporate ServicesInc., FedEx mistakenly called the representative plaintiff multiple times.  As a large, successful company with deep pockets, FedEx is a prime class action target, so Abdallah’s attorney filed suit as a putative class action, and litigated the case to the certification stage.

In ruling on class certification, the Court examined whether a class of wrong number call recipients could be determined.  On the issue of typicality, the Court found that Abdallah’s claims arose from a specific course of conduct that resulted in the erroneous calls. However, the plaintiff was unable to offer any proof that anyone else who might have been mistakenly contacted by FedEx were called under similar circumstances as he was. Simply put, his claims were too specificto qualify as typical of an entire class of plaintiffs.

The Court also found that Abdallah lacked sufficient proof to meet the numerosity requirement, because he could not demonstrate how many people received similar “wrong number” calls from FedEx.  Unlike most companies, FedEx maintained records of wrong number calls, but even armed with this information the plaintiff was unable to locate any evidence supporting the number of potential class members who were erroneously called by FedEx under the same circumstances as he was.

What Does This Mean to You?
From a practical standpoint, it is extremely difficult for prospective class action plaintiffs to obtain evidence sufficient to demonstrate the level of numerosity and typicality that is required to certify a class.

The Abdallah decision demonstrates the importance of individual fact patterns as they apply to class certification as a whole, and “wrong number” class certification in particular.  Wrong number calls result from a bewildering variety of causes- they can happen after a consumer mistypes a digit into an online form, or an employee makes a data entry error, or they could be the result of a random software glitch.

Compounding the difficulties inherent in wrong number cases is the fact that there exists no legal requirement for companies to maintain records of calls they erroneously placed to wrong numbers.  In the SMS context, senders are rarely made aware that they contacted the wrong number, as consumer responses to such messages are often treated like any other opt-out request.  No records means no evidence, and no evidence means no class.

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FCC Announces Robocall Enforcement Partnerships

On March 28, the FCC announced the execution of a Memorandum of Understanding (MOU) with the Attorney Generals of Connecticut, District of Columbia, Idaho, Kentucky, Minnesota, New Jersey, and Wyoming establishing formal robocall investigation partnerships with those states.  These new partnerships bring the total number of state-federal robocall partnerships to 22.

The MOU between the FCC and the states sets forth the parameters of a partnership between state robocall investigators and the FCC’s Enforcement Bureau, and establishes critical information sharing and cooperation structures to investigate spoofing and robocall scam campaigns. The FCC also noted that it expanded existing MOUs in Michigan and West Virginia with robocall investigations.

According to the press release, the MOUs help facilitate relationships with other actors, including other federal agencies and robocall blocking companies, and provide support for and expertise with critical investigative tools, including subpoenas and confidential response letters from suspected robocallers.

The FCC also noted that “during investigations, both the FCC’s Enforcement Bureau and state investigators seek records, talk to witnesses, interview targets, examine consumer complaints, and take other critical steps to build a record against possible bad actors,” which “can provide critical resources for building cases and preventing duplicative efforts in protecting consumers and businesses nationwide.”

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What Happened to the Numbers?

Subscribers accessing the TCPA case database module on our new Litigation Firewall system have doubtless noticed that plaintiff and attorney phone numbers identified by our research team are no longer displayed in case reports.  This is not a bug.  It is a regrettable but necessary response to the California Consumer Privacy Act (CCPA) and similar consumer privacy laws enacted by other states.

As detailed in prior articles, the CCPA applies to any company that derives 50% or more of its annual revenues from the sale of “personal information,” which is basically any information about a particular individual that is not in any public record.

The CCPA broadly defines the term “sell” to include any arrangement involving an exchange of value between a company and its customers for access to personal information.   Due to this broad definition (and the fact that we operate a subscription-based model in which all services are bundled together), we arguably derive more than half our annual revenue from the “sale” of personal information if we include consumer phone numbers in case reports.

Hence, we were forced to remove those numbers from view (you can still search for cases by phone number, and any reports that include the number will appear in search results).  We do not disclose or share any other type of consumer personal information in case reports- plaintiff and attorney names are part of the public record, so those can still be displayed.  The Litigation Firewall itself only removes or blocks numbers that match those in our databases but does not disclose or otherwise share them.

You may be asking yourself, why is this important?  The answer is simple: if a company is covered by the CCPA, the law gives consumers certain rights, including the following:

  • They can require the company to disclose what kind of personal information it collects about them and how it is used and shared.
  • They can demand that the company not sell any of their personal information; and
  • They can instruct the company to delete all their personal information.

If we fall under CCPA coverage, every lowlife in California (and in other states with similar laws) looking to profit from your calls and texts would have the right to instruct us to remove their numbers from our database, and we would have no choice but to comply with those instructions.  Such an outcome, which would leave our customers and friends open to such predation, is utterly intolerable.

We feel that removing phone numbers from the case reports is a small price to pay to keep that from happening, and we hope that you agree.

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Sweepstakes Disaster Leads to Company’s Downfall

Although sweepstakes are a time-honored, highly effective means to promote a company, product or service, anyone who has conducted one can attest to the many legal, technical and operational difficulties they can entail.  In a few rare instances, sweepstakes that are poorly conceived or improperly conducted can lead to disastrous consequences, a fact which a company called Artesian Builds recently learned the hard way.

Artesian Builds assembled customized computers and related products for gamers and streamers on platforms such as YouTube and Twitch, and like many companies operating in that space it employed gamers as “brand ambassadors” to help promote its products, offering them opportunities to earn credits toward future purchases and chances to win computers during monthly sweepstakes.

On March 1, 2022, Artesian held a live-streamed event to select the winner of its most recent monthly sweepstakes, during which CEO Noah Katz apparently elected to arbitrarily change the rules governing winner selection.   After randomly choosing a winning entry, Katz publicly discarded it because, according to him, the selected winner did not have a sufficient number of social media followers.  During the same live-streamed event, Katz then went on to disqualify other randomly-selected winners for being “too small.”

Unsurprisingly, this did not sit well with the entrants watching the live-streamed event, several of whom expressed their ire on Twitter.  These tweets and related social media posts garnered considerable attention in the gaming community, quickly resulting in a cascade of outrage and furious anger that eventually drew the attention of Intel, the sweepstakes sponsor, which issued the following tweet: “We strive towards welcoming streamers of all sizes to our programs and do not agree with recent negative comments directed toward small streamers.”

One week after this debacle, Artesian Builds abruptly announced it was “freezing/suspending all activities.”  While the company did not expressly state that it was closing its doors due to the prior week’s sweepstakes snafu, it is hard to believe that it didn’t factor into the decision in some manner.

This incident demonstrates the vital importance of having clear, written rules governing all aspects of a sweepstakes, and how critical it is to abide by them.   And, even if your sweepstakes rules include a provision allowing you to change them as you see fit, changing an element as important as the criteria for winning a prize after a promotion has launched is a never a good idea, and doing so during a live-streamed event being watched by hundreds of rabid gamers is an even worse one.

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How Professional Plaintiffs Inflate TCPA Damages

Although the TCPA’s statutory damages provision permits recovery of $500 per violation, which can be trebled for violations shown to be “knowing and willful,”  professional plaintiffs routinely request amounts that far exceed the maximum amount authorized by the statute, and some courts have given them what they asked for.  They manage this by creatively interpreting what constitutes a “violation” subject to statutory damages under the TCPA, and convincing the court that their interpretation is correct.

In our minds, the call (or text) is the “violation” subject to statutory damages under section 227(b) or 227(c) of the TCPA, which is the prevailing interpretation of the courts as well.   Naturally, professional plaintiffs take a far broader approach to what constitutes a “violation” subject to a statutory damages award, pointing to the various compliance obligations included in the statute and its enforcing regulations.   Such “violations” might include a defendant’s failure to provide the plaintiff with a written copy of its internal DNC policy upon request as required by CFR §64.1200(d)(1) or the failure to immediately identify the caller and the purpose of the call, as required by CFR 64.1200(b)(1).

A recent case filed by professional plaintiff Andrew Perrong in the Middle District of Florida helps illustrate how this works.   In Perrong v. MLA Int’l, the plaintiff alleged that MLA International at the direction of its purported owner, Jose Ayala, placed a total of 26 prerecorded calls to his DNC-registered number without his prior express written consent.  Unfortunately, the defendants failed to respond to the Complaint, which resulted in Perrong filing a motion for a default judgment, in which he was required to explain how much the defendants owe him, and the legal basis for each element of damages.

In a sane world, the most a plaintiff could request would be $39,000.00 for 26 calls to a number on the DNC, based on the following calculation: 26 x $500 = $13,000 x 3 for treble damages = $39,000.  Unfortunately the world in which Perrong resides is not a sane one.  In his motion, Perrong requested the Court to award him a grand total of $202,800.00 for those 26 calls, an amount that does not require a mathematician to determine far exceeds the maximum of $1,500 per call authorized by the TCPA.  Here’s how Perrong calculated how much he was owed:

$39,000 based on the fact that the calls were placed without his prior express written consent ($500 x 26 = $13,000 x 3 for willfulness).
Another $39,000 based on the calls being placed using an ATDS ($500 x 26 = $13,000 x 3 for willfulness).
Another $39,000 based on the calls being placed to a number on the National DNC ($500 x 26 = $13,000 x 3 for willfulness).
Yet another $39,000 based on the defendant’s failure to maintain an internal DNC policy in violation of CFR §64.1200(d)(1)($500 x 26 = $13,000 x 3 for willfulness).
And a further $39,000 based on the defendant’s failure to provide a copy of its internal DNC policy in violation of  CFR §64.1200(d)(1)($500 x 26 = $13,000 x 3 for willfulness).
$7,800 based on the calls violating the Pennsylvania Telemarketer Registration Act ($300 x 26 = $7,800)

In considering the motion, the Court agreed that the defendants used an ATDS, reasoning that any calls that feature a prerecorded voice must have been made using an automated telephone dialing system: “it would be illogical to call someone and play a prerecorded message other than randomly or sequentially.”  Although that analysis doesn’t make the slightest bit of sense, the Court also agreed to treble the ATDS damages as requested by the plaintiff.

Fortunately for the defendants, the Court declined to buy into the plaintiff’s absurd and repetitive DNC and non-consensual claims, and (being a Florida court) declined to consider an award under the Pennsylvania statute.

So Perrong ended up with a $39,000 judgment, which is the maximum amount authorized by the statute for 26 calls.  While that is not a small number, it is important to keep in mind that with a different judge or jurisdiction, things could have gone considerably worse for the defendants, and often do, particularly when a default judgment is being considered.

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Beware of the Clean Number Callback Request

New Litigant Tactic Can Circumvent the Litigation Firewall

Lead or Litigant?
When contacted by a lead vendor, both legitimate prospects and TCPA litigants will express interest in the offer and agree to be transferred, but of course, they do so for entirely different reasons.  Legitimate prospects do so because they are genuinely interested in the offer, while litigants are only interested in identifying a potential defendant for a TCPA lawsuit.  Some litigants will even go so far as to place an order for this same purpose.

Alliance members that only call their own data and diligently scrub against our litigant feeds are unlikely to encounter TCPA litigants, but for those who purchase transfers from third-party lead aggregators and other vendors, it is a different story.  While many of these entities are fully compliant in their dialing practices, others are not, and many of those do nothing to avoid contacting TCPA litigants and often disregard the National DNC Registry.

Even so, a rogue lead vendor who contacts a known litigant at a blacklisted number will still be unable to transfer the call to an Alliance member, as long as their dialing system is programmed to block such transfers.  Unfortunately, some of the savvier litigants have begun to notice these blocked transfer attempts and have come up with a new tactic that can circumvent the protection offered by our Litigation Firewall that we’ve dubbed the “Clean Number Callback Request.”  Here’s how it works:

Circumventing the Litigation Firewall
A lead vendor agent calls the blacklisted number of a known litigant, who feigns interest in the offer and agrees to be transferred.  The transfer is blocked.  If the call disconnects, the agent calls back and attempts to transfer the litigant again with the same result.  After a few attempts, the litigant instructs the agent to try calling them at another number, which is often a throwaway VoIP line that may not be in our feeds.  Some active litigants have obtained dozens of numbers for this very purpose, so if the attempt to transfer a callback to a new number is blocked, they will instruct the agent to call them back again at a different number until the transfer is finally successful.

After a brief conversation, the litigant has enough information to identify the lead buyer, who shortly thereafter receives a demand letter or a lawsuit summons for a call they never wanted and actively sought to avoid.  To make matters worse, litigants will often count each callback placed after a failed transfer attempt as a separate unsolicited call, resulting in a vastly inflated damages claim.  The following excerpt is from an actual demand letter sent by an attorney whose client employed this very tactic:

However, when the lead generator attempted to transfer my client, the calls would fail.  After these failed telephone transfers occurred several times, my client asked the lead generator for more details and was told that his telephone number was “blocked” by the “agent” so my client could not identify the source of these unsolicited telemarketing calls.  This forced my client to request the lead generator to call him back on his home telephone number, after which the call was successfully transferred to your company…

If the call was placed by an anonymous, judgment-proof offshore lead vendor, the unlucky lead buyer is left with few good options other than to write a hefty settlement check for a series of calls that never should have been made, much less transferred.

How to Thwart the Clean Number Callback Request 
Fortunately, this Clean Number Callback Request is relatively easy to thwart with some clear instructions and proper agent training.

Use Reputable Lead Vendors First, you should only accept transfers from reputable, compliant vendors that take the necessary steps to protect their customers.  Don’t take their word for it- ask for proof.

Instruct Lead Vendors to Abandon a Lead if a Transfer is Blocked: Next, be certain to clearly instruct all lead vendors to abandon the lead by politely disconnecting the call if an attempted transfer is blocked.  If an unsuccessful transfer attempt results in the call being disconnected, the agent should never call the same number back.

Never Call Back to a Different Number If for some reason an agent refuses to abandon a lead after a few blocked transfers, they should never, EVER agree to call the lead back at another number.

After one or two failed transfers, the odds of someone being a legitimate prospect are vanishingly remote.  No matter how enticing your offer may be, no legitimate prospect is willing to jump through that many hoops to find out more about it.

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Company Accused of Suppressing Negative Reviews Settles FTC Enforcement Action

In October 2021, the Federal Trade Commission warned more than 700 businesses that they could incur significant civil penalties (up to $46,517 for each violation) if they use reviews or other endorsements in an unlawful manner.

As proof of its intent to actively enforce truthful review and endorsement practices, on January 25, 2022 the FTC announced a $4.2 million settlement with Fashion Nova LLC to settle an enforcement action concerning allegations that the company routinely suppressed negative product reviews from being posted on its website.

According to the FTC complaint, Fashion Nova used a third-party online product review management interface to automatically post four- and five-star reviews to its website, while lower-starred reviews were withheld for the company’s approval. The FTC also alleges that from late 2015 until November 2019, Fashion Nova never approved or posted any of the hundreds of thousands of negative product reviews submitted by consumers. In addition to the monetary penalty, Fashion Nova is also prohibited from any further attempt to suppress negative customer reviews.

The FTC also announced that it is sending letters to 10 more companies offering review management services to place them on notice that avoiding the collection or publication of negative reviews violates the FTC Act.

The FTC has released new guidance for online retailers and review platforms regarding the agency’s key principles for collecting and publishing customer reviews in ways that do not mislead customers. “Deceptive review practices cheat consumers, undercut honest business, and pollute online commerce,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection.

The message is clear: The collection and promotion of online reviews and endorsements must be transparent and reliable. Companies that rely on customer reviews to promote their products or services should review their practices to ensure compliance with current FTC guidelines.

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Proposed New Law Targets Online Terms of Service

A bipartisan bill recently introduced by Congresswoman Lori Trahan (D-MA-3) and Senators Bill Cassidy (R-LA) and Ben Ray Luján (D-NM) requires companies conducting business online to fully explain certain business practices to consumers on their website.

Among other items, the Terms of Service Labeling, Design and Readability (TLDR) Act authorizes the Federal Trade Commission (FTC) to issue rules requiring online businesses to post a “short-form” terms of service summary on their website, which must be written in plain English and include the following:

  • A description of the effort required to read the full terms of service (i.e., a total word count or the approximate time it would take to read the terms).
  • The categories of sensitive information that the company processes.
  • An explanation of what sensitive information is required for the basic functioning of the service and what sensitive information is needed for any additional features.
  • Directions for how the user can delete their sensitive information or prevent the company from using their sensitive information.
  • A summary of legal liabilities and rights (including mandatory arbitration, class action waivers, licensing or waivers of moral rights).
  • A list of reported data breaches from the past three years.
  • Historical versions of terms of service and changes.
  • Anything else the FTC deems “necessary.”

The current version of the bill also requires companies to display their full terms of service in some kind of interactive data format on a permanent website page, with the summary statement at the top of that page.  It also authorizes the FTC to treat violations as an unfair or deceptive act or practice under Section 18(a)(1)(B) of the FTC Act. State attorneys general will also be able to pursue civil penalties.

Although it applies to any entity that operates a website or an online service for commercial purposes, the proposed law is clearly aimed at large technology companies, as it includes an exemption carved out for “small businesses,” defined as companies that are independently owned and operated and are not dominant in their field of operation.

The TLDR Act is just one of several congressional attempts aimed at improving online transparency by making online terms more easily understandable.  In announcing the bill, Senator Cassidy’s office referred to a 2012 study that determined it would take the average American 76 days to read the online agreements that many technology companies use, which is why most if not all consumers simply agree to the terms without reading any portion of them.

Although this bill is a long way from becoming a law, its introduction underscores the importance of online terms, and how they’re being perceived.

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Professional Plaintiff’s History of Deception Results in Summary Judgment for Defendant

A TCPA lawsuit in the Western District of Washington recently came to an ignominious end for professional plaintiff Kenneth Johansen.

In Johansen v. Efinancial LLC, Johansen filed a class action complaint, alleging that Efinancial violated the TCPA by calling his phone number, which was listed on the National Do-Not-Call Registry.  The Defendant filed a Motion for Summary Judgment (MSJ), arguing that it had express permission to contact Johansen by virtue of an online form submission from a lead vendor’s website that included Johansen’s name and contact information, including the phone number in question.  The website form included a properly placed and worded TCPA consent disclosure.

In the subsequent call triggered by the form submission, Johansen feigned interest in the final expense insurance offer and provided additional information, actions which Johansen later claimed were in furtherance of his “investigation” into who was calling him.  Johansen categorically denied submitting the form that led to the call, as detailed in the “Letter of Intent to File a Telephone Consumer Protection Act Claim” he sent to the Defendant after the call:

Thank you for providing the consent data you have related to my telephone number. The data you provided confirms that I could not have been responsible for the data entry. The IP address is a Google ISP located in Mountain View, California. I have no connection with Google and have not recently been in California. The Last Name is misspelled “Johanson”. The “dob”, the “height” and the “weight” data are not even close. You initiated a telephone call to me one minute after the data was received by your system. I did not provide my consent to your company to make telemarketing calls to me…

The Ruling
In ruling on the MSJ, the Court first confirmed that consent to be called can be properly obtained via an online disclosure, stating that “the FCC has determined that the “signed, written agreement” requirement may be fulfilled by submission of a website form. Applying this guidance, courts have found that a person can provide prior express permission by submitting a web form with personal information when the web form includes a notice that the person agrees to be contacted.

Although Johansen swore under oath that he never visited the website or provided his consent, the Court was not swayed, noting that Johansen did not object when he received the call and, instead, provided detailed personal information consistent with a consumer who was interested in the offer. Moreover, the email address submitted with the form was associated with a physical address that Johansen supplied during his call, which supported the contention that Johansen submitted the form.  The Court disregarded his sworn statement and ruled in favor of the Defendant.

Johansen’s History of Deception
Normally, a plaintiff’s sworn statement that he or she never visited a website or submitted a form is sufficient to overcome an MSJ, as it creates a question of fact for the jury to decide.  In this case, however, the Court elected to disregard Johansen’s statements and grant the MSJ based on Johansen’s long and consistent track record of deceptive behavior while “investigating” phone calls in connection with his “extensive and profitable history with lawsuits involving TCPA claims.”

The Court noted that Johansen was responsible for approximately 60 TCPA lawsuits, many of which involved deceptive conduct of a similar nature.  For example, in Johansen v. Bluegrass Vacations Unlimited, the court stated: “Plaintiff acknowledges that he has developed a “typical practice” of deceitful conduct used to succeed in prosecuting TCPA claims. Plaintiff poses as a customer of the entity responsible for initiating the telemarketing call and induces the representative into believing that he is, in fact, an established customer and genuinely interested in the product or service offer, thereby prolonging the purported injury that Plaintiff claims to have suffered and increasing the potential damages that he could, in theory, recover.”

Similarly, in Johansen v. Nat’l Gas & Elec. LLC, Johansen admitted that he posed as an interested customer when he received a telemarketing call and called the company back when the initial phone call was disconnected, and acknowledged that he never had any intention of placing an order, but played along “as he typically does” and affirmatively took the steps necessary to become a customer despite knowing that “no matter what happened, he would not receive the company’s services” because he deliberately provided the company with an incorrect address and an incorrect account number. 

In light of the false statements and deceptive conduct undertaken by Johansen in furtherance of his “investigations” the Court justifiably refused to believe his sworn statement that he did not submit the form that triggered the call from Efinancial.

The DNC Safe Harbor
Johansen v. Efinancial is also notable in that it applied the TCPA’s “safe harbor” defense to DNC violations when deciding on the Motion for Summary Judgment.  The DNC safe harbor offers an affirmative defense for companies that have adopted compliant DNC practices and procedures, for violations that arise from a good faith mistake.

In this case, the Court took note of Efinancial’s routine business practice of complying with the standards required by the safe harbor provision and had substantially complied with the purpose of the TCPA by only contacting consumers who consented to be called. Thanks to these procedures, the Court held that even if the claim was submitted fraudulently by a vendor, Efinancial could not be liable because it mistakenly believed it was a calling a consenting customer.

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