Over the past ten years, new technologies have forced a dizzying pace of evolution in advertising and marketing.  All of this change begs the question:  what will the next ten years bring?  How will AI eliminate inefficiencies and create new challenges?  In what ways will advertising enable access to content and enable consumer purchase decisions?  What role will biometric data play in accessing, personalizing, and securing products and services?  And how will companies meet the expectations of post-Millennial generations?

These questions have been addressed thoughtfully by Kate Scott Dawkins of Essence Global.   Kate’s insights are summarized in her article The “Dynamic” Future of Advertising.

 

She will be a featured speaker at next week’s NAD conference, which offers a three days of great content.  The conference agenda and registration page can be accessed here.

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The full Essence Global report Advertising in 2030 – Expert Predictions on the Future of Advertising is available here.  

This summer, the NCAA suspended its long-standing policy that restricted student-athletes from being able to generate income from their name, image, and likeness (commonly referred to as “NIL”). It didn’t take brands long to take advantage of the new opportunities. In the short time since the NCAA made its announcement, a number of companies and student-athletes have announced endorsement and influencer deals. We’re likely to see a lot more as the school year kicks off.

If your company is thinking of engaging a student athlete, you should keep in mind that there are some unique considerations in this area. This post includes some of the highlights.

NCAA’s policy states that “individuals can engage in NIL activities that are consistent with the law of the state where the school is located.” Almost 20 states have enacted laws in this space (with more on the way), and those should be your first stop. Note that although the laws are very permissive, they do contain some boundaries. For example, many laws prohibit student athletes from entering into deals that conflict with their school’s sponsorship deals. Some also require specific disclosures in contracts.

Keep in mind that schools may have their own rules, as well. For example, some schools may need to review the agreements to make sure that there aren’t any conflicts. Some schools may also prohibit certain types of deals they think could harm the school’s reputation. (Think gambling, alcohol, or tobacco, for example.) Also note that a sponsorship deal with an athlete isn’t going to get you access to the school’s logos or other trademarks.

Although there is something unique about students athletes, keep in mind that the new NIL rules aren’t the only things you need to worry about. We’ve written extensively about other requirements that apply to influencer marketing – including, for example, the requirement that influencers clearly disclose their relationship to the brands they promote – and those will apply here. Monitoring compliance will be especially important.

If all goes well, a lot of people will be watching your campaign. Keep in mind, though, that your audience may not just include friendly spectators – it could also include regulators and competitors closely watching for any fouls.

In an aggressive expansion of its security and privacy enforcement programs, on September 15, 2021, the FTC issued what it characterized as a “Policy Statement” reinterpreting an old rule about personal health records.

First, some background. In 2009, Congress directed the FTC to create a rule requiring companies to provide notice when there is an unauthorized acquisition of certain health information not covered by HIPAA.  At the time, the FTC explained that its Health Breach Notification Rule was narrow, consistent with the text of the law, applying only to security breaches by vendors of certain health data repositories (called “personal health records” or “PHRs”) and certain companies that work with PHR vendors.

Flash forward to September 2021. The FTC’s Policy Statement declares a broad range of health, fitness, wellness, and related technologies to be covered by the Rule if they can draw information from “consumer inputs” and APIs that include “personal health records.”  This scope is markedly broader than the agency’s previously-issued guidance, which reiterated the narrow application of the Rule. To further illustrate, the FTC now says that health apps, such as glucose monitors or fitness trackers, are subject to the Rule if they draw information from a device or wearable and a phone calendar. In an unprecedented, expansive application of a narrow breach notice rule to consumer privacy, presumably to address what Chair Khan characterizes as “surveillance-based advertising,” the Statement also asserts that the “sharing of covered information without an individual’s authorization” triggers breach notification obligations. The FTC issued this policy statement even as the Commission was in the midst of seeking public comment on the rule as part of its periodic rule review process.

Companies violating the Rule face civil penalties of $43,792 per violation.

Commissioners Wilson and Phillips issued strong dissents, calling the Commission majority to task for abandoning prior business guidance and ignoring the Administrative Procedure Act’s notice and comment requirements.  FTC Chair Khan, in turn, lamented the fact that the Commission had not brought an enforcement action under the Rule, cautioning that “the Commission should not hesitate to seek significant penalties against developers of health apps and other technologies that ignore [the Rule’s] requirements.”

App developers and other companies providing health, wellness, fitness, and related apps should consider the implications of the FTC’s Statement, and assess the potential applicability to their business, even if they do not normally view themselves as covered by HIPAA or operating in an adjacent space.  Indeed, the FTC’s Policy Statement underscored that its guidance was intended to sweep broadly, noting its relevance for apps and other technologies that “track diseases, diagnoses, treatment, medications, fitness, fertility, sleep, mental health, diet, and other vital areas.”  Unfortunately, the Policy Statement raises more questions than it answers. For example:

  • Is all personal information collected by such technologies subject to the FTC’s new interpretation of the Health Breach Notification Rule?
  • Do current data governance policies and practices provide appropriate safeguards?
  • Are existing consumer disclosures and consents adequate to mitigate risk?  For example, what level of “authorization” would be required for sharing personal information for interest-based advertising and analytics purposes?

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We will closely monitor developments and post updates as they occur.

Last year, we posted about how some companies had retroactively changed their refund policies after COVID-19 hit, and we noted some of the potential pitfalls associated with that strategy. Lawsuits and regulatory investigations soon followed, and many have been working their way through the system. This week, ten states and DC announced that StubHub had agreed to pay over $9.5 million in refunds to end one such investigation.

Before the pandemic, StubHub offered consumers cash refunds for tickets to events that were later canceled. As we noted in our post, StubHub later changed its policy to state that “if the event is canceled and not rescheduled, you will get a refund or credit for use on a future purchase, as determined in StubHub’s sole discretion (unless a refund is required by law).” Other communications omitted that parenthetical, suggesting that all consumers would get a coupon.

Although StubHub argued that it was forced to change its policy due to a near complete loss of revenue during the pandemic, regulators didn’t think that justified a retroactive application of the changes in a manner that shifted StubHub’s burden to consumers. For example, the Virginia Attorney General said that “the COVID pandemic should not be used as an excuse to withhold refunds owed to customers for cancelled events.”

If events over the past year have made you rethink whether your cancellation policy still makes sense, it’s fair to consider making changes to the policy, even if those changes limit consumers’ rights. But while those changes can be applied to future purchases, you generally should not apply them to purchases that were made while the previous policy was in effect.

The future composition of the FTC became a bit clearer on Monday, as the White House announced that President Biden will nominate privacy expert and scholar Alvaro Bedoya as FTC commissioner.  If confirmed, Bedoya would take the seat currently held by Commissioner Rohit Chopra, whose nomination as CFPB Director remains pending, and serve in a term that ends in September 2026.

Bedoya is currently a Visiting Professor of Law at Georgetown and is the Founding Director of Georgetown’s Center on Privacy & Technology (CPT).  Before moving to Georgetown, Bedoya served as Chief Counsel of the U.S. Senate Judiciary Subcommittee on Privacy, Technology and the Law.  Bedoya’s background as a privacy expert sends a supportive signal from the White House of broader privacy initiatives at the FTC and bolsters privacy expertise at the Commission level.

With bipartisan support at the Commission  for a privacy rulemaking and more aggressive agency enforcement against “data abuses,” Bedoya could push the FTC to take an even broader view of its role in privacy enforcement and policy development.  To this point, Chair Lina Khan’s statement on Bedoya’s nomination cites his “expertise on surveillance and data security” as being “enormously valuable” to the FTC.

Under Bedoya’s leadership, CPT has tackled a wide range of privacy issues, including commercial practices that are squarely within the FTC’s focus.  For instance, CPT joined more than two dozen organizations on a September 2020 letter urging the FTC to “support further study of data and discrimination in any and all forthcoming 6(b) investigations undertaken by the FTC.”  (In December 2020, the FTC announced that it had sent orders to nine online platforms seeking information about their use of race, ethnicity, and several other factors for ad selection, content selection, and other purposes under Section 6(b) of the FTC Act, which authorizes the FTC to require annual or special reports from entities.)  Two years earlier, CPT joined a 2018 comment encouraging the FTC to examine the role of “tech giants” in allegedly causing or facilitating discrimination, the spread of misinformation, and other qualitative, broadly distributed hams.

CPT under Bedoya’s watch has also studied privacy and data-related issues that fall outside the FTC’s ambit.  For example, CPT scored law enforcement agencies’ use of face recognition technologies along civil rights and data protection dimensions and filed an amicus brief in federal district court arguing that aerial surveillance conducted by the Baltimore Police Department is unconstitutional.  In writings published under his own name, Bedoya has criticized government agencies’ use of commercial technologies and data for law enforcement and immigration purposes.  In a September 2020 op-ed, for example, Bedoya described a “panoply” of companies that provide data and software that support federal agencies’ immigration enforcement actions.

In addition to pursuing privacy and data security policy under the FTC Act, it’s also likely that Bedoya will examine how the FTC enforces specific privacy laws, such as the Gramm-Leach-Bliley Act, the Fair Credit Reporting Act (FCRA), and related rules.  The Commission recently finalized changes to five rules implementing the FCRA. While those changes were largely technical, they serve as important reminders regarding the host of overlapping obligations imposed on entities under FCRA and FTC and CFPB implementing regulations.

The timeline for Bedoya’s confirmation process is unclear and is likely to depend on further action on Commissioner Chopra’s CFPB nomination.  We will post updates as they occur.

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Privacy Expert Alvaro Bedoya Nominated to FTC

Subscribe here to Kelley Drye’s Ad Law News and Views newsletter to see another side of the team in our second annual Back to School issue. Subscribe to our Ad Law Access blog here.

As they often have done in the past, the FTC and the FDA issued joint cease and desist letters last week to 10 companies suspected of making unproven health claims – in this instance, claims that dietary supplements treat or cure diabetes. The FTC and the FDA join forces on such letters in order to deliver a strong and consistent message that unsubstantiated health claims are illegal under the laws enforced by both agencies.

The FTC warned that the claims do not appear to be supported by competent and reliable scientific evidence, in violation of the FTC Act. The FDA warned that the products are being marketed as drugs that could cure, treat, mitigate, or prevent disease, but are not generally recognized as safe and effective for the marketed uses and not approved by the FDA. As such, the products are misbranded and illegal under the Food Drug and Cosmetic Act (FD&C Act).  The letters demanded that the companies cease and desist from making unsubstantiated claims within 15 days.

Deceptive Claims under the FTC Act

To be sure, these letters are noteworthy for companies making diabetes-related claims, but their importance is not necessarily limited to that. Advertisers should pay attention more broadly to the FTC section of the letters, as it may signal the FTC testing its authority to seek penalties under Section 5(m)(1)(B).

In particular, in describing how and why the claims violate the FTC Act, the letters cite to cases holding that unsubstantiated disease claims of various types are unlawful, and appear to be styled as so-called Section (5)(m)(1)(b) letters laying the groundwork for civil penalties – similar to letters the FTC has sent companies making allegedly unsubstantiated claims that their products are made from bamboo. In general, the FTC has limited authority to obtain civil penalties. However, Section (5)(m)(1)(b) of the FTC Act authorizes the agency to seek penalties when the FTC has (1) previously determined in a litigated administrative proceeding that a practice is unfair or deceptive (2) issued a final cease and desist order with respect to such practice, and (3) put a company on notice of this fact (such that it has “actual knowledge) via warning letter.

It’s not clear yet whether the FTC will actually seek civil penalties based on these letters. But if it does, it would be testing the limit of its authority under Section 5(m)(1)(b). That’s because the law arguably contemplates that the “final cease and desist order” cited in a Section 5(m)(1)(b) letter be more specific to the practice being warned about than the potpourri of health cases cited in these current letters. Put another way, to confer “actual knowledge” on the companies, the cited cases should address unsubstantiated diabetes claims, not wholly different health claims about heart disease, cancer, erectile dysfunction, etc. Indeed, the language of Section (5)(m)(1)(m) and precedent from the bamboo cases support this narrower reading. Top FTC officials have called for more frequent and aggressive use of the FTC’s Section 5(m)(1)(b) authority, and this appears to be a move in that direction.

Misbranding Under the FD&C Act

The FDA section of the letters doesn’t break new ground, but it does provide a helpful gauge for risk and a reminder about the importance of context.

Companies marketing supplements and foods to people with diabetes or pre-diabetes should review the claims cited in the letters to help assess risk of their current marketing. For example, some letters cite to claims that clearly exceed the bounds of structure function claims, e.g., claiming that the ingredients or products produced quantifiable improvements in fasting blood sugar, A1C levels, and reduced blood pressure as well as risk of heart attacks. However, other letters cite to claims that many marketers may think fall more squarely on the structure-function side of the line, e.g., “promote healthy glycemic response” and “supports healthy glucose tolerance.”  In addition to product labels and websites, the letters also cite to claims on social media – including testimonials dating as far back as 2018 – and to Amazon store fronts.

As is standard, the letters cite to specific claims, but it’s important to also consider the broader context. When marketing diabetes-related products, it’s risky to position any product as the fix for a condition that likely requires medication along with constant dietary discipline and monitoring. Even if the product claims are substantiated and within structure-function limitations, the context of positioning the product as one part of an overall diabetes management plan is key to managing risk.

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We will closely monitor developments in these matters, as well as the agencies’ future use of warning letters and sources of legal authority, and post updates as they occur.

Subscribe here to Kelley Drye’s Ad Law News and Views newsletter to see another side of the team in our second annual Back to School issue. Subscribe to our Ad Law Access blog here.

 

This summer, a plaintiff filed a class action lawsuit against Allbirds, alleging (among other things) that the company’s environmental claims – including claims about its “sustainable” practices, the “low carbon footprint” of its shoes, and its other “environmentally friendly” initiatives – are false and misleading.

The complaint – which is based largely on a PETA article – alleges that the life cycle assessment tool Allbirds uses to identify theAllbirds-Carbon-Footprint-Image carbon footprint of its products does not assess the environmental impact beyond the manufacturing of the shoes. Because it excludes things like the impact of wool production on the environment, it understates the environmental impact. Moreover, the complaint alleges Allbirds bases its carbon footprint figures on “the most conservative assumption for each calculation,” so that it can make more aggressive claims.

The plaintiff also argues that Allbirds makes “misleading animal welfare claims,” including by advertising “happy sheep” that live the “good life.” Based on the PETA article, the plaintiff alleges that the sheep may not be quite so content.

Although the FTC’s Green Guides provide guidance on various types of environmental claims, there isn’t a lot of clarity on the types of claims mentioned in this complaint. It’s too early to predict how this case will turn out, but this case and others like it – such as the lawsuit against Coca-Cola we wrote about this summer – suggest that plaintiffs will take advantage of that lack of clarity and continue to challenge ESG initiatives.

Jessica L. Rich and Laura Riposo VanDruff, Two Former Senior FTC Officials Further Bolstering Kelley Drye’s Privacy and Advertising PracticesWe are thrilled that Jessica Rich and Laura Riposo VanDruff have joined the firm’s Privacy and Advertising practice groups. Both attorneys are former top officials at the Federal Trade Commission (FTC), with Rich having served as Director of the Bureau of Consumer Protection (BCP) and VanDruff as an Assistant Director in BCP’s Division of Privacy and Identity Protection (DPIP).

Jessica and Laura join our impressive list of former FTC officials, including the firm’s managing partner, Dana Rosenfeld, who served as Assistant Director of BCP and attorney advisor to FTC Chairman Robert Pitofsky, former Bureau Directors Bill MacLeod and Jodie Bernstein, as well as Aaron Burstein,  having served as senior legal advisor to FTC Commissioner Julie Brill.

Jessica served at the FTC for 26 years and led major initiatives on privacy, data security, and financial consumer protection.  She is credited with expanding the FTC’s expertise in technology and was the driver behind FTC policy reports relating to mobile apps, data brokers and Big Data, the Internet of Things, and federal privacy legislation.  She also directed the agency’s development of significant privacy rules, including the Children’s Online Privacy Protection Rule and Gramm-Leach-Bliley Safeguards Rule. She is a recipient of the FTC Chairman’s Award, the agency’s highest award for meritorious service and the first-ever recipient of the Future of Privacy Forum’s Leadership Award.  Jessica is also a fellow at Georgetown University’s Institute for Technology Law & Policy. Prior to joining Georgetown, she was an Independent Consultant with Privacy for America, a business coalition focused on developing a framework for federal privacy legislation.

Laura also brings significant experience to Kelley Drye. As Assistant Director for the FTC’s Division of Privacy & Identity Protection, Laura led the investigation and prosecution of matters relating to consumer privacy, credit reporting, identity theft, and information security.  Her work included investigation initiation, pre-trial resolution, trial preparation, and trial practice relating to unreasonable software security, mobile operating system security update practices, and many other information privacy and identity protection issues.  She joins the firm from AT&T where she served as an Assistant Vice President – Senior Legal Counsel advising business clients on consumer protection risks, developing and executing strategies in response to regulatory inquiries, and participating in policy initiatives within the company and across industry.

Jessica and Laura are an impressive duo and are sure to be an asset to our clients as they prepare for the future of privacy and evolving consumer protection law.

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Subscribe here to Kelley Drye’s Ad Law News and Views newsletter to see another side of Jessica, Laura and others in our second annual Back to School issue. Subscribe to our Ad Law Access blog here.

The August issue of Kelley Drye’s TCPA Tracker newsletter is here:

TCPA (Telephone Consumer Protection Act) Tracker Newsletter is a cross-practice effort produced to help you stay current on TCPA (and related) matters, case developments and provide an updated comprehensive summary of TCPA petitions pending before the FCC.

Recent News

FCC Opens Proceeding to Determine if VoIP Providers Should Have Additional Anti-Robocall Obligations

On August 6, 2021, the FCC adopted a Further Notice of Proposed Rulemaking to consider additional anti-robocall requirements for interconnected VoIP provider that seek direct access to telephone numbers.  Among the changes, the FCC proposes to require interconnected VoIP provider seeking access to numbers to “certify that it will use numbering resources lawfully; will not encourage nor assist and facilitate illegal robocalls, illegal spoofing, or fraud; and will take reasonable steps to cease origination, termination, and/or transmission of illegal robocalls once discovered.”  Comments on this proposal will be due 30 days after publication of the FNPRM in the Federal Register.

CGB Issues its Second Annual Report on the Status of the Implementation of Call Blocking Technologies

On June 29, 2021 the FCC’s Consumer and Government Affairs Bureau released a Second Call Blocking Report, as required by the 2019 Call Blocking Declaratory Ruling.  This Report, a follow up to the June 2020 First Call Blocking Report, provides (1) a detailed description of call blocking services offered by voice service providers, third-party analytics companies, and device manufactures (2) an in-depth evaluation of the effectiveness of call blocking tools (3) information on the state of deployment of caller ID authentication through implementation of the STIR/SHAKEN framework and (4) an analysis of the impact of call blocking on 911 services and public safety.

FCC Adopts Rules to Create an Online Portal for Private Entities to Report Robocall Violations

On June 17, 2021 the FCC’s Enforcement Bureau released a Report and Order implementing section 10(a) of the Pallone-Thune Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act), which directs the Commission to “prescribe regulations to establish a process that streamlines the ways in which a private entity may voluntarily share with the Commission information relating to violations of section 227(b) or 227(e) of the Communications Act.” The Report and Order establishes procedures for private entities may submit information about suspected robocall and spoofing violations.  The rules do not supplement the complaint procedures available to consumers, and thus the portal is not open for consumer complaints of illegal robocalls.  Similarly, government entity reports of robocall or spoofing violations should be submitted via other methods as well.

FCC Issues Further Notice of Proposed Rulemaking for Implementing STIR/SHAKEN

On May 20, 2021 the FCC’s Wireline Competition Bureau released a Third Further Notice of Proposed Rulemaking (FNPR) to consider accelerating its STIR/SHAKEN requirements for a subset of small voice service providers believed to be likely to originate illegal robocalls. In its Second Caller ID Authentication Report and Order, the FCC granted some small voice service providers an additional two years to implement the STIR/SHAKEN caller ID authentication framework.  According to the FCC, a subset of these providers is originating an increasingly disproportionate amount of illegal robocalls.  The NPRM outlines a proposal to “shorten the extension for small voice service providers most likely to originate illegal robocalls by one year, so that such providers must implement STIR/SHAKEN in the IP portions of their networks no later than June 30, 2022.”  It also seeks comments on (1) “how best to identify and define the subset of small voice service providers that that are at a heightened risk of originating an especially large amount of illegal robocall traffic” and (2) “whether to adopt additional measures, including data submissions, to facilitate oversight to ensure that small voice service providers subject to a shortened extension implement STIR/SHAKEN in a timely manner.” Comments were due on or before July 9, 2021; reply Comments were due on or before August 9, 2021.

ZipDX Submits Letter of Intent to Serve as Registered Industry Consortium

As required by the Pallone-Thune Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act), the FCC must annually select “a single consortium to conduct private-led efforts to trace back the origin of suspected unlawful robocalls.” On May 27, 2021 ZipDx LLC (ZipDX) submitted a Letter of Intent to apply for this role. The Enforcement Bureau released a Public Notice on June 17, 2021 seeking comments on the matter.  The current designated  registered consortium, USTelecom – the Boadband Association’s Industry Traceback Group (USTelecom ITG) was not required to file another Letter of Intent, as its initial application and certifications continue for the duration of subsequent years, however it did submit a Comment reaffirming its commitment to the role.  The Bureau will select the registered consortium by August 25, 2021.  Comments were due July 2, 2021.

FCC Petitions Tracker

Kelley Drye’s Communications group prepares a comprehensive summary of pending petitions and FCC actions relating to the scope and interpretation of the TCPA.

Number of Petitions Pending

  • 30 petitions pending
  • 1 petition for reconsideration of the rules to implement the government debt collection exemption
  • 1 application for review of the decision to deny a request for an exemption of the prior express consent requirement of the TCPA for “mortgage servicing calls”
  • 1 request for reconsideration of the 10/14/16 waiver of the prior express written consent rule granted to 7 petitioners

New Petitions Filed

  • Enterprise Communications Advocacy Coalition – Petition for Declaratory Ruling

On July 30, 2021, the Enterprise Communications Advocacy Coalition (ECAC) filed a Petition for Declaratory Ruling seeking federal preemption of portions of recently enacted Florida legislation (SB 1120), which amends the Florida Do Not Call Act and the Florida Telemarketing Act.  The ECAC contends that portions of SB 1120 imposes obligations more restrictive than the TCPA Regulations and impose additional prohibitions on calls and the use of dialing equipment that are legal under federal law.  The Petition relies upon a 2003 Commission TCPA order which states that “that any state regulation of interstate telemarketing calls that differs from our rules almost certainly would conflict with and frustrate the federal scheme and almost certainly would be preempted.”

  • Perdue for Senate, Inc. – Petition for Declaratory Ruling

On July 2, 2021 Purdue for Senate, Inc. (Purdue for Senate) filed a Petition for Declaratory Ruling, asking the FCC to confirm that the Telephone Consumer Protection Act (TCPA) does not regulate ringless voicemail technology (RVM).  Specifically, Purdue for Senate wants the FCC to rule that “the delivery of a voice message directly to a voicemail box through RVM technology does not constitute a ‘call’ subject to prohibitions on the use of an automatic telephone dialing system (“ATDS”) or an artificial or prerecorded voice under Section 227(b)(1)(A)(iii) of the TCPA or Section 64.1200(a)(1)(iii) of the FCC’s rules.”  In the lead up to the January 2021 Senate runoff elections in Georgia, Purdue for Senate employed vendors that used RVM technology to deliver voice messages directly to potential voters’ voice mailboxes.  According to Purdue for Senate, these RVM transmissions fall outside of the scope of the TCPA and other FCC rules because, not only are they not “calls,” they are also not transmitted via a wireless network, and the technology does not bill the recipients of the messages.  Purdue for Senate claims that RVM technology is a “beneficial alternative” to robocalls, in that it allows non-profit organizations to relay important information without disrupting the lives of message recipients and/or adding charges to their bills.

This is the third petition to be presented to the FCC involving ringless voicemail technology.  Two prior petitions relating to ringless voicemail were filed and subsequently withdrawn by the petitioners prior to a Commission decision.

Upcoming Comments

  • None

Decisions Released

  • None

​Click here to see the full FCC Petitions Tracker.

Cases of Note

Common Ownership Does Not Establish Agency Relationship, Offer to Purchase Not “Telephone Solicitation” Under TCPA

The District of Arizona has held that common ownership of an agent and principal may not be enough to establish an agency relationship nor, therefore, vicarious TCPA liability. Rather, the plaintiff must plead specific facts showing that the purported agent controlled or directed the calls that plaintiff alleges violated the TCPA. It further held that an offer to purchase property—rather than an offer to sell a product or services—does not qualify as a “telephone solicitation” under § 227(c) of the TCPA.

In Jance v. Homerun Offer LLC, Plaintiff filed suit against Homerun Offer alleging that he received 29 calls from the company making “a generic and cursory inquiry” into purchasing his house in violation of the TCPA. After conducting his own online research into the state corporate records, he learned of a second company, All Star Investments, owned by Homerun Offer’s registered agent, President, and CEO, that had made six property purchases between October 2019 and June 2020. Plaintiff hypothesized that the property purchases made by All Star Investments came about as Homerun Offer’s telemarketing efforts, and named both in his TCPA complaint.

All Star Investments moved to dismiss, arguing that Plaintiff failed to plausibly allege that it could be held vicariously liable for Homerun Offer’s calls. Defendants also both moved to dismiss Plaintiff’s § 227(c) claim prohibiting continued “telephone solicitation” after an individual requests to be put on a company’s internal do-not-call list, arguing that the calls fell outside the statutory definition of “telephone solicitation.” As to both, the Court agreed.

The Court held that Plaintiff failed to make a prima facie showing that All Star Investments had the right to substantially control Homerun Offer, and that Homerun Offer acted as All Star Investments’ agent. “The simple fact that the same individual . . . is the President and CEO of both [Defendants] as well as the parent company for both the agent and principle” was “[in]sufficient to show that All Star Investments controlled or directed Homerun Offer’s phone calls to Plaintiff.” With no agency relationship plausibly alleged in the complaint, the Court dismissed the claims against All Star Investment.

Separately, the Court dismissed Plaintiff’s claim for damages under § 227(c) of the TCPA, which prohibits an entity from continuing to initiate “telephone solicitation” after an individual requests to be put on a do-not-call list. Referencing the statutory definitions of “telephone solicitation” and “telemarketing,” the Court noted that the TCPA protects individuals from calls placed with the “purpose of encouraging the purchase of . . . property, goods, or services” by the recipient. Because the calls in question constituted an offer to purchase (rather than an offer to sell), the Court found the Complaint failed to state a claim under § 227(c) and dismissed those claims.

Not all Plaintiff’s claims were dismissed. His claims under § 227(b), which prohibits the use of an “automatic telephone dialing system” (ATDS) without the recipient’s consent survived. Noting that whether a defendant has used an ATDS is “often a fact exclusively within the defendants’ possession,” the Court found that Plaintiff’s allegations—that he had no business relationship with Defendants nor provided them with his contact information, that the caller’s numbers were attributed to a VoIP and had misleading caller ID information, that there was a brief pause before the caller began speaking on certain calls, and that the calls were generically formatted and scripted—were sufficient to plausibly allege use of an ATDS.

Jance v. Homerun Offer LLC, No. CV-20-00482-TUC-JGZ, 2021 WL 3270318 (D. Ariz. July 30, 2021)

Court Rejects Plaintiff’s Argument to Expand ATDS Definition Based on Duguid Footnote

In Hufnus v. DoNotPay, Inc., the Northern District of California granted Defendant company’s motion to dismiss after Plaintiff alleged that he had been contacted in a manner that violated the TCPA. In the June 24, 2021 order, the court found that Plaintiff’s interpretation of footnote 7 of Facebook, Inc. v. Duguid, 141 S. Ct. 1163, 1173 (2021) conflicted with Duguid’s “holding and rationale,” since Defendant in this case did not “dial random or sequential blocks of telephone numbers,” but instead used numbers provided by consumers during the registration process.

The dialing system that Defendant “used to contact [Plaintiff] merely processe[d] phone numbers supplied by consumers while signing up for [Defendant’s] services.” Plaintiff’s complaint alleged that Defendant’s dialing system stored the telephone numbers “in a random and/or sequential way; uses a random and/or sequential generator to pull from the list of numbers to send targeted text messages; and uses a random and/or sequential generator to determine the sequence in which to send messages.”  Specifically, Plaintiff relied on footnote 7 in Duguid, which states that “an autodialer might use a random number generator to determine the order in which to pick phone numbers from a preproduced list. It would then store those numbers to be dialed at a later time.” Plaintiff argued that footnote 7 expanded the definition of an ATDS to include Defendant’s dialing system.

The court disagreed, stating “the [Supreme] Court employed the quoted line to explain how an autodialer might both ‘store’ and ‘produce’ randomly or sequentially generated phone numbers[.]” The court looked to the amicus curiae brief cited in footnote 7, which “makes clear that the ‘preproduced list’ of phone numbers referenced in the footnote was itself created through a random or sequential number generator.” The list of numbers used by the Defendant however, were “obtained in a non-random way (specifically, from consumers who provide them).”

Thus, because the platform solely used phone numbers that had been supplied by consumers, “and not phone numbers identified in a random or sequential fashion,” the court found that Defendant’s platform did “not qualify as an autodialer under the TCPA.” The court therefore dismissed Plaintiff’s complaint with prejudice.

Hufnus v. DoNotPay, Inc., No. 20-CV-08701-VC, 2021 WL 2585488 (N.D. Cal. June 24, 2021).

Court Finds Standing Sufficient But Dismisses TCPA Action For Insufficient Facts Alleged

In Camunas v. National Republican Senatorial Committee, the Eastern District of Pennsylvania dismissed a TCPA case for failure to adequately plead sufficient facts showing that an ATDS was used to send the text messages at issue.

Plaintiff alleged that he received “at least six messages” from a political organization, and that the messages were “generic and obviously pre-written.” The complaint further alleged that Defendant’s website “states that its opt-in messaging program communicates using ‘recurring autodialed marketing messages.’” Defendant moved to dismiss the complaint for lack of subject matter jurisdiction, arguing that Plaintiff failed to plead an injury-in-fact, and for failure to state a claim.

Defendant challenged the Plaintiff’s standing to assert a claim based on a handful of text messages.  In denying Defendant’s motion to dismiss for lack of subject matter jurisdiction, the court held that Plaintiff “plausibly alleges he suffered an injury” and “also plausibly alleges that the injury is fairly traceable to [Defendant’s] conduct and that a favorable judicial decision would redress the alleged injury.” On this point, Defendant argued against Plaintiff’s position that the six messages should be sufficient for the injury-in-fact standing requirement. Defendant sought “to distinguish [Susinno v. Work Out World Inc., 862 F.3d 346 (3d Cir. 2017)], from the instant action by arguing that Susinno ‘involved a phone call and a one-minute prerecorded voicemail – not a small number of text messages’ and still ‘required the plaintiff actually assert and plead an injury – such as nuisance and invasion privacy.’” The court found that in this case, Plaintiff had similarly alleged that “he found [Defendant’s] unsolicited communication ‘annoying, disruptive, frustrating and an invasion of his privacy.’” Thus, the court found that it had subject matter jurisdiction over the claim.

On the 12(b)(6) motion to dismiss for failure to state a claim, the court held that Plaintiff had not plausibly alleged that Defendant “used an ATDS to send the messages at issue.” The court found that the complaint had not identified what was contained in the text messages at issue, had not identified “the phone number from which the messages were sent,” and had failed to “indicate whether that number was a short code.” The court noted that “[i]n cases involving text messages,” courts “‘have considered the nature of the message, the length of the sending number, the number of messages, and the relationship between the parties.’” Specifically, the court pointed out that “several courts have concluded that a ‘short code’ number supports an inference of ATDS use.” As such, Plaintiff had had not alleged sufficient facts “to ‘nudge’ his claim ‘across the line from conceivable to plausible.’”

Ultimately, the court denied Defendant’s motion to dismiss for lack of subject matter jurisdiction, but granted the motion to dismiss for failure to state a claim, dismissing the complaint without prejudice.

Camunas v. National Republican Senatorial Committee, No. 21-1005, 2021 WL 2144671 (E.D. Pa. May 26, 2021).

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As AMG recedes further into the past, lower courts are becoming more comfortable disposing of 13(b) actions where the proceedings are attempting to obtain monetary restitution as a matter of course. In many instances below, the FTC has conceded its inability to obtain monetary relief and has focused on the injunctive relief it seeks. However, there are still outstanding cases wherein, despite AMG, the FTC refuses to concede defeat on the issue of monetary relief under Section 13(b).

 

Latest update follows. Continue Reading Post-AMG Scorecard (Updated): FTC Claims for Monetary Relief in 13(b) Actions Dwindle