Class Action Lawsuits Inevitable with New Telemarketing Rules, Attorneys Say

"These new rules could launch a thousand lawsuits,” said Kevin Ranlett, a Mayer Brown partner who specializes in consumer litigation and class actions. The statute (http://1.usa.gov/16O1mTg) allows damages of $500 to $1,500 per violation, depending on whether the call or text was knowingly made in violation of the rules. Multiply the number of potential violations “that a clever plaintiff’s lawyer could imagine” by the prescribed statutory damages, and companies that attempt to contact their customers could be “threatened with eye-popping numbers” for something that’s “at most a technical violation of the TCPA,” he said.

"It’s only the companies violating the law that have to worry about a class action attorney,” said Steven Goren, managing partner of Michigan firm Goren, Goren and Harris, which handles class actions. Relying on regulatory agencies to protect consumers is not always enough, and class actions are one of the few enforcement mechanisms for rules that exist, he said. Telemarketer fears might be overblown, he said: Certain jurisdictions might not allow the statutory damages to be multiplied across the entire class. In some jurisdictions, though, it might be possible, he said. “Sounds like you could put a company out of business.”

The new rules require companies to make a “clear and conspicuous disclosure” that a customer is opting to receive telemarketing. At the moment, it’s an open question exactly what “clear and conspicuous” means, attorneys say. Ranlett expects an uptick in “gotcha” lawsuits against companies that made a good faith effort to comply with the rules. Lawyers will exploit ambiguities such as whether a disclosure was conspicuous enough, he said: “That’s kind of in the eye of the beholder.” Lawyers will file suits seeking billions in damages in the hopes that a company will settle to make the lawsuit disappear, he said. “There’s a long and sordid history of gotcha lawsuits under the TCPA and I don’t anticipate that going away."

"Class action trolls of the world are going to latch onto this pretty quickly,” said David Klein, managing partner at Klein Moynihan. Klein represents lead generators and telemarketers, and has been advising his clients of major implications of the new law. There’s the significant financial penalty if a company accidentally breaks the rule. Then there’s the effect on companies’ day-to-day business. Absent written consent, companies won’t be able to use auto-dialers to make pre-recorded calls to landlines or cellphones. “Without that consent, there’s going to be far fewer telemarketing calls of any variety going forward,” he said. That will impact his clients’ bottom lines, he said.

Klein has taken a strict reading of the new rules, advising his clients seeking consent online to put the relevant language directly above the submit button next to a check box that customers will have to click. “I have to do a strict reading” until the courts or the FCC interpret the rules less strictly,” he said. “You don’t want the client to be the test case.” And there will be plenty of cases, if not from FCC enforcement than from class action attorneys and state attorneys general. “Guaranteed,” he said. “I would bet my life on it."

The government shutdown won’t affect the start date of the rules, attorneys said, but it might make it harder for companies to seek guidance. “With the government closed, businesses will have to adapt to these new rules without the benefit of the FCC’s active guidance,” said Drinker Biddle partner Seamus Duffy, who concentrates on class actions and other complex business litigation. “Many businesses have been ramping up to meet the requirements of the new rules for months now, and for those we can hope the transition will be smooth. But there will surely be bumps in the road, questions to be resolved along the way, and I'm afraid some will be blindsided by these changes as they take hold in the marketplace.” One such question is what constitutes an automatic telephone dialing system, he said. There’s “wide disagreement” on that point, he said, with the broadest definition potentially reaching every iPhone.

The new rules change the relationship between businesses and their customers, attorneys said. Business will have to decide whether to get written consents from millions of customers, or -- just as difficult -- consider changing the equipment they use to make calls so they're not using an automated dialing system, Duffy said. “It’s a new ball game, and I'm afraid the big winners here are going to be the class action lawyers who have been cashing in on this statute for years,” he said. “There have been an avalanche of these lawsuits in the last year, and these new rules throw a can of gasoline on that fire.”