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Off the hook lawsuits

The Hill, June 16, 2017

By: Lisa Rickard

Should dialing a wrong number put you at risk of being sued?

This might sound like an absurd question, but unfortunately enterprising plaintiffs’ lawyers are finding equally unbelievable ways to sue businesses under a technologically ancient telecommunications law that was designed to protect consumers, the Telephone Consumer Protection Act (TCPA). The terrible irony is that consumers end up paying higher prices for goods and services thanks to the tremendous cost of these opportunistic lawsuits.

The good news is that the U.S. House Judiciary Subcommittee on the Constitution and Civil Justice held a hearing this week to examine the improbable and abusive lawsuit industry that has been unintentionally fueled by TCPA – a law that was passed in 1991 when the word “telephone” referred to something substantively different from the ubiquitous wireless smart phones of today.

At the hearing, the outdated nature of the law was brought to full and unflattering light. When the TCPA became law in 1991, only three percent of Americans subscribed to a wireless telephone service, as compared to 95 percent of the public as of January, 2017. At the time, landlines often were abused by telemarketers as direct channels to consumers. As a result, our phones were ringing off the hook (an expression that has little meaning today); it was a nuisance epidemic.

Written for the times, TCPA restricted telemarketing calls, junk faxes, and the use of automated telephone equipment. It enabled consumers to sue companies for a nominal amount of damages ($500-$1,500) for each prerecorded call, specified autodialed call, and unsolicited fax they did not consent to receive.

The intention of the law was to end a type of consumer harassment. But the law’s intent has since been perverted. It was never intended to do what it’s doing today: enrich plaintiffs’ lawyers. In fact, at the time the TCPA was created, its sponsor, Sen. Ernest “Fritz” Hollings (D-S.C.), explained the law was intended to facilitate actions in state small claims courts, which involve smaller sums and often do not require (or even allow) the participation of attorneys.

Today, TCPA cases are instead frequently filed as class actions. Defendants in these cases are a diverse group of businesses, large and small, who are threatened with owing damages in the millions or billions of dollars for engaging in normal business communications. Often, the alleged actions are out of their control – like dialing a number provided by a customer that was later reassigned to another party (essentially dialing the wrong number!). They are forced to choose between settling cases or spending huge sums defending themselves in court over a long period of time.

For example, the drug store chain Walgreens was sued under the TCPA for providing a customer service: prescription pick-up reminders. Attorneys claimed there was no prior consent for such calls. Facing an estimated class of nine million plaintiffs, rather than fight, Walgreens settled for $11 million.

The NBA’s L.A. Clippers and Los Angeles Lakers were both sued for sending promotional texts to around 130,000 people who had first texted the team in response to a big screen message at a game. For the Clippers, their case was resolved in a $5.3 million settlement in which class members received the option of either two tickets to a home game in October or one ticket and a $20 credit for Clippers’ merchandise. The attorneys, meanwhile, received $600,000 in fees.

Class action attorneys have more recently filed a $5 million suit against Facebook for sending this text message, clearly intended to protect its users: “Your Facebook account was accessed from [Internet browser] at [time]. Log in for more info.” This case is still pending, but when cases like this go to trial and settlement, the average TCPA plaintiff is awarded $4.12, while the average attorney payout is $2.4 million, according to a 2015 filing with the Federal Communications Commission.

It is easy to see why this widespread litigation abuse has already led some companies to consider discontinuing providing helpful information to customers, such as prescription availability, credit card fraud alerts, or airline changes or cancellations.

The question facing Congress now: How to update a law that preserves the protections consumers need and deserve, while cutting off trial lawyer loopholes? The answer should be grounded in the concept of modernization – a new law made for the wireless, texting, wonderfully connected world we live in today.

Lisa A. Rickard is U.S. Chamber Institute for Legal Reform president.