Appeals Court Refuses to Enforce Mandatory Arbitration Provision in Website Terms of Service
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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 Among other requirements, to obtain certification the plaintiff’s attorney must demonstrate that the representative plaintiff’s claims meet the following standards:
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 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? 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?
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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
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Beware of the Clean Number Callback Request
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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.
Background 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 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 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 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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