A recent decision out of the United States District Court for the Southern District of New York provides a great opportunity to discuss the Telephone Consumer Protection Act’s (“TCPA”) National-Do-Not-Call-Registry (“DNC”) rule and some applicable exceptions. In Waston v. Manhattan Luxury Autos., Inc.,[1] the defendant was accused of making telephone solicitations to persons registered on the DNC in violation of the TCPA.[2] The defendant argued that its calls fell within the DNC rule’s exceptions. But the court left it up to the jury to decide that issue, a decision we dig into below.
The TCPA’s DNC Rule and Applicable Exceptions
To better understand the court’s holding in Watson, we briefly discuss the TCPA’s DNC rule.
Under the Federal Communication Commission’s (“FCC”) TCPA-implementing regulations, callers are prohibited from making a “telephone solicitation to . . . a residential telephone subscriber who has registered his or her telephone number on the” DNC.[3]
The term “telephone solicitation” is a key part of that rule. The definition of “telephone solicitation” is “the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services, which is transmitted to any person.”[4] A call that otherwise meets that definition is not considered a “telephone solicitation” if the called party provided his or her “prior express invitation or permission” (“PEIP”), or if it was made pursuant to an “established business relationship” (“EBR”) with the called party (or if the caller has a “personal relationship” with you).[5]
- PEIP
PEIP is a bit confusing because it is referenced in two separate places in the TCPA’s DNC rule. The first reference is in the definition of “telephone solicitation,” where it states that a call made with the called party’s PEIP does not constitute a telephone solicitation.[6] The second reference provides that a person will not be liable for making a telephone solicitation to a residential telephone subscriber who has registered his or her telephone number on the DNC if that person “has obtained the subscriber’s [PEIP]. Such permission must be evidenced by a signed, written agreement between the consumer and seller which states that the consumer agrees to be contacted by the seller and includes the telephone number to which the calls may be placed[.]”[7] The second reference to PEIP appears redundant because the type of call it describes is not a “telephone solicitation” in the first place based on the applicable definition that contains the first reference to PEIP.
These two references create confusion as to whether there is a requirement that PEIP, under the TPCA’s DNC rule, must be documented in a signed, written agreement. The argument for such requirement comes from the second reference to PEIP. An argument for why there is no such requirement comes from the TCPA’s definition of “unsolicited advertisement.” The TCPA defines “unsolicited advertisement” as “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person’s [PEIP], in writing or otherwise.”[8] Since Congress expressly provided that PEIP can be provided in forms other than writing, it appears clear that there is no requirement that PEIP must be in a written, signed form.
A recent case from the Middle District of Florida has recognized that PEIP can be valid when there is an oral component. In Harrell v. Aquion, Inc., the plaintiff completed a survey that informed her she was providing permission to be contacted by telephone.[9] The plaintiff then “provided her telephone number orally at the end of the survey” and clicked a green button that said “Thank You & Good Luck.”[10] The court found that, through that interaction, the plaintiff had sufficiently provided her PEIP, despite that interaction involving an oral communication and the plaintiff not providing a traditional signature.[11] The court also found that the “clear and conspicuous” standard, which applies when obtaining prior express written consent,[12] does not apply when obtaining PEIP.
- EBR
The applicable definition of EBR is:
A prior or existing relationship formed by a voluntary two-way communication between a person or entity and a residential subscriber with or without an exchange of consideration, on the basis of the subscriber’s purchase or transaction with the entity within the 18 months immediately preceding the date of the telephone call or on the basis of the subscriber’s inquiry or application regarding products or services offered by the entity within the 3 months immediately preceding the date of the call, which relationship has not been previously terminated by either party.[13]
A business’s EBR with a person “does not extend to affiliated entities unless the [person] would reasonably expect [the affiliate] to be included given the nature and type of goods or services offered by the affiliate and the identity of the affiliate.”[14]
Watson v. Manhattan Luxury Autos., Inc.
In Watson, the defendant, Lexus of Manhattan (“LOM”) was a sister car dealership of Honda of Manhattan (“HOM”).[15] When HOM closed, it notified its existing customers that LOM was capable of servicing their Hondas.[16] HOM then provided LOM with a list of its customers’ contact information.[17] LOM proceeded to text the persons on that list, which included the Plaintiffs.[18] It was alleged that those LOM texts were sent to telephone numbers registered on the DNC, in violation of the TCPA. LOM argued that those texts did not violate the TCPA because it had the called parties’ PEIP or the texts were sent pursuant to an EBR between LOM and the called parties.
- LOM’s PEIP Argument.
For PEIP, LOM argued that the customers on HOM’s list signed two documents where they “granted express permission to receive advertisements from HOM and” LOM.[19] The first document, titled “Contract Authorization,” included language where the customers agreed to be contacted by HOM and was signed by the customers.[20] The court found that any customer’s PEIP arising from that document did not extend to LOM because the language limited such PEIP to only HOM.[21]
The second document was a notice HOM provided to its customers.[22] The court found that notice to be insufficient because it did not meet the requirements for PEIP. Specifically, (1) it did not contain the customer’s telephone number he or she authorized HOM to contact and (2) the document was a notice to HOM’s customers regarding what HOM may do with its customers’ information, not an agreement between HOM and its customers.[23]
- LOM’s EBR Argument.
For EBRs with the called parties, LOM argued that HOM’s EBR with its customers extended to LOM.[24] As mentioned above, an EBR “does not extend to affiliated entities unless the [person] would reasonably expect [the affiliate] to be included given the nature and type of goods or services offered by the affiliate and the identity of the affiliate.” The court decided to leave it for the jury to decide whether HOM’s customers should have reasonably expected their EBR with HOM to extend to LOM. The court believed it was possible a reasonable jury could find that a person “would not reasonably anticipate that their relationship with HOM would include a relationship with a Lexus dealer in Manhattan as an affiliate of HOM.”[25]
On a positive note for LOM, the court held that LOM could not be found to have willfully or knowingly violated the TCPA.[26] The court reasoned that because it was an open question as to whether HOM’s EBRs with its customers extended to LOM, it could not be said that LOM “should have been aware that it was violating the” TCPA.[27] Thus, even if LOM’s text message are found to have violated the TCPA, LOM cannot be subject to treble damages.
Watson provides solid insight into the application of the exceptions to the TCPA’s DNC rule in practice. It also serves as a good reminder that when obtaining a person’s PEIP or forming an EBR with them, it is important to consider whether you wish for such PEIP or EBR to extend to an affiliate. If so, for PEIP, remember to review any applicable language to ensure it is broad enough to encompass such affiliate. For an EBR, remember to consider whether the person would reasonably expect their EBR with you to extend to the relevant affiliate.
More information on the TCPA’s DNC rule and the types of consent relevant to the TCPA can be found here and here.
[1] 20 Civ. 4572 (LGS), 2024 U.S. Dist. LEXIS 170155 (S.D.N.Y.).
[2] 47 U.S.C. § 227.
[3] 47 C.F.R. § 64.1200(c)(2).
[4] 47 C.F.R. § 64.1200(f)(15).
[5] 47 C.F.R. § 64.1200(f)(15)(i)-(ii).
[6] 47 C.F.R. § 64.1200(f)(15)(i).
[7] 47 C.F.R. § 64.1200(c)(2)(ii).
[8] 47 U.S.C. § 227(a)(5).
[9] Case No.: 3:23-cv-1222-WWB-LLL, 2024 U.S. Dist. LEXIS 164951, at *6-7 (M.D. Fla. Sept. 13, 2024).
[10] Id. at *3, *7
[11] Id. at *9.
[12] A called party’s prior express written consent is required when making certain calls with an automated telephone dialing system or an artificial or prerecorded voice. See 47 U.S.C. § 227(b)(1)(A)-(B); 47 C.F.R. § 64.1200(a)(2)-(3).
[13] 47 C.F.R. § 64.1200(f)(5).
[14] 47 C.F.R. § 64.1200(f)(5)(ii).
[15] 2024 U.S. Dist. LEXIS 170155 at *2.
[16] Id.
[17] Id. at *3
[18] Id.
[19] Id. at *10.
[20] Id. at *10-11.
[21] Id. at *11-12.
[22] Id. at *12.
[23] Id. at *13-14.
[24] Id. at *14.
[25] Id. at *15.
[26] Id. at *18.
[27] Id. at *19.