The Risks of Taking a TCPA Case to Trial
Class action lawsuits brought via the Telephone Consumer Protection Act, 47 U.S.C. Section 227, et seq., (the “TCPA”) have become increasingly common, in part due to the drastic increase in mobile device advertising. TCPA exposure can create tremendous liability for companies due to statutory penalties, and other low-threshold obstacles enabling plaintiff classes.
The 1991 TCPA governs the reach and use of telephonic, text message, e-mail, and fax communications, as well as pre-recorded voice messages and automated dialing systems, which have become the focal point of recent litigation. Businesses engaged in industries ranging from healthcare to hospitality to telecommunications, frequently utilize one or more of TCPA-covered marketing methods, making them potential targets.
In recent years, the volume of TCPA litigation, now handled by both state and federal courts, has ballooned. Enhanced public enforcement efforts, easily satisfied filing, class certification, and proof standards, in addition to limited defenses, have created a frenzy of litigation, resulting in outcomes costing defendants hundreds of millions of dollars. Furthermore, the law’s statutory damages provision can saddle defendants with $500 per violation and up to $1,500 per willful violation penalties. These statutory penalties, coupled with the lack of a ceiling on total recovery, can wreak havoc on companies.
A Tale of Three TCPA Trials
McMillion et al. v. Rash Curtis & Associates, 4:16-cv-03396 (N.D. Cal. 2016) (“Rash Curtis”) is a particularly illustrative case. The classes won a $267 million jury verdict after it found Rash Curtis, a nationwide debt collection agency, guilty of using pre-recorded voice messages and auto-dialing systems to pursue and harass consumers without their consent and after they asked the debt collector to desist, in violation of the TCPA.
Meeting the procedural requirements for class certification is easier in TCPA cases than other common law claims. In considering the requirements of Federal Rule of Civil Procedure 23, the court had little trouble concluding that individualized questions did not present insurmountable hurdles. As to the defendant’s argument that class certification could result in “excessive statutory damages,” the court was unpersuaded. It reasoned that courts routinely certify class actions that expose defendants to substantial liability and that the average consumer could not reasonably be expected to bring an individual action to pursue his or her claim because the statutory damages are insufficient to compensate a lone claimant for the required time, money, and effort expenditure.
In the 2018 trial, the federal jury found that Rush Curtis had violated the TCPA and imposed the statutory penalty of $500 for each of the over 500,000 illegal calls made to class members. Rash Curtis sought to reduce the award to $1 per call made on the basis that the $267 million verdict was unconstitutionally extreme, out of proportion with its transgressions, and that plaintiffs’ counsel misconduct improperly swayed the case.
Judge Gonzales-Rogers rejected each of Rash Curtis’ arguments. She recognized that though the award was substantial, it reflected the TCPA’s intent to deter telephonic harassment. Rather, the court applied the statute as written and imposed the statutory penalty without any reduction.
In another 2019 TCPA case, Wakefield v. ViSalus Inc., 3:15-cv-01857 (D. Or. 2015) (“ViSalus”), the federal jury found ViSalus, a multi-level marketing firm that sells lifestyle merchandise like dietary supplements and shakes, liable for making nearly 2 million unsolicited robocalls. The jury settled on a $925 million figure for the class. When asked, the district court declined to treble the damages, finding that the verdict constituted a sufficient deterrent.
When entering the judgment – which was based upon the largest single privacy verdict to date – Judge Michael Simon noted that the “jury found that ViSalus committed a stratospheric number of TCPA violations” and, as a result, it came as “no surprise that the TCPA’s constitutionally valid minimum penalty of $500 for each violation [had] catapulted ViSalus’ penalty into the mesosphere.”
The power of the TCPA’s statutory damages is similarly reflected in Krakauer v. Dish Network LLC, 1:14-cv-00333 (M.D.N.C. 2014) (“Dish Network”). In May 2017, the jury returned a $20 million verdict against Dish Network. Here, the district court trebled the damages finding that the conduct rose to the level of “willful” violation because the satellite television provider chose to look the other way while knowing one of its marketers was making illegal robocalls on its behalf. Last year, the Fourth Circuit affirmed the $61 million verdict.
The TCPA is not the only consumer protection law companies are wary of. Other consumer protection laws that can put businesses at great financial risk include the Fair Credit Reporting Act (FCRA), the Truth-in-Lending Act (TILA), and Fair and Accurate Credit Transactions Act (FACTA). Too, privacy-oriented statutes like the Federal Wiretap Act, state laws like the California Consumer Privacy Act (CCPA) and Biometric Information Privacy Act (BIPA), invasion of privacy, and contract law claims can come into play in class actions that pose multimillion- dollar risk in either trial or settlement.
Managing Consumer Litigation Risk
As the foregoing cases illustrate, TCPA trials can have catastrophic outcomes that may seem initially incomprehensible. In addition, the uncertainty of settlements presents another source of strain for companies being sued. Notable TCPA settlements include Caribbean Cruise Line Inc. and others ($76 million), CapitalOne ($75 million), Jiffy Lube ($47 million), Lifequotes ($44 million), Interline ($40 million), and Alarm.com ($28 million).
How can companies effectively assess the TCPA or other consumer litigation liability they face? What options do they have when confronted with a range of potentially extreme outcomes?
An emergent risk transfer option available to businesses under threat is Class Action Settlement Insurance (“CASI”). Corporate businesses with pending suits elect CASI, a unique product offered by Risk Settlements, for a one-time premium, to efficiently resolve costly litigation by transferring the entire aggregate settlement liability. CASI’s custom policies, guaranteed by preeminent national underwriters, give defendants a court and class counsel-approved alternative to the pursuing the unknown path of litigation.
For each policy, underwriters analyze a wide variety of qualitative and quantitative variables based on historical class action data and case-specific factors. CASI provides indemnity for 100% of valid claims and significant savings compared to the use of a Common Fund settlement. Ultimately, CASI offers something that moving ahead with litigation cannot: certainty.
This is an especially appealing option in lawsuits like those faced by the defendants in Rash Curtis, ViSalus, and Dish Network because of the eventual financial exposure they experienced. Instead of facing possible eight or nine-figure judgments, viral settlements, reputational damage, adverse impacts to liquidity, cash flow, enterprise value, assets, litigation defense costs, and other unintended consequences, CASI gives companies the ability to operate with assurance about the litigation’s impact on the business’s future.
Statutory damages cases make the point convincingly: predicting and mitigating class action exposure can be as difficult as it is disastrous. On the other hand, CASI allows company executives and in-house legal and financial teams to avoid the needless distraction, stress, and consequences of a pending class action. CASI gives businesses finality over costs and payouts while allowing them to reengage in their work, possibly even prompting positive business impacts.