[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
LAWSUIT ABUSE AND THE TELEPHONE CONSUMER PROTECTION ACT
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HEARING
BEFORE THE
SUBCOMMITTEE ON THE CONSTITUTION
AND CIVIL JUSTICE
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
JUNE 13, 2017
__________
Serial No. 115-21
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://judiciary.house.gov
______
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COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan,
Wisconsin Ranking Member
LAMAR S. SMITH, Texas JERROLD NADLER, New York
STEVE CHABOT, Ohio ZOE LOFGREN, California
DARRELL E. ISSA, California SHEILA JACKSON LEE, Texas
STEVE KING, Iowa STEVE COHEN, Tennessee
TRENT FRANKS, Arizona HENRY C. ``HANK'' JOHNSON, Jr.,
LOUIE GOHMERT, Texas Georgia
JIM JORDAN, Ohio THEODORE E. DEUTCH, Florida
TED POE, Texas LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah KAREN BASS, California
TOM MARINO, Pennsylvania CEDRIC L. RICHMOND, Louisiana
TREY GOWDY, South Carolina HAKEEM S. JEFFRIES, New York
RAUL LABRADOR, Idaho DAVID N. CICILLINE, Rhode Island
BLAKE FARENTHOLD, Texas ERIC SWALWELL, California
DOUG COLLINS, Georgia TED LIEU, California
RON DeSANTIS, Florida JAMIE RASKIN, Maryland
KEN BUCK, Colorado PRAMILA JAYAPAL, Washington
JOHN RATCLIFFE, Texas BRAD SCHNEIDER, Illinois
MARTHA ROBY, Alabama
MATT GAETZ, Florida
MIKE JOHNSON, Louisiana
ANDY BIGGS, Arizona
Shelley Husband, Chief of Staff & General Counsel
Perry Apelbaum, Minority Staff Director & Chief Counsel
------
Subcommittee on the Constitution and Civil Justice
STEVE KING, Iowa, Chairman
RON DeSANTIS, Florida, Vice-Chairman
TRENT FRANKS, Arizona STEVE COHEN, Tennessee
LOUIE GOHMERT, Texas JAMIE RASKIN, Maryland
TREY GOWDY, South Carolina JERROLD NADLER, New York
C O N T E N T S
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JUNE 13, 2017
OPENING STATEMENTS
Page
The Honorable Steve King, Iowa, Chairman, Subcommittee on the
Constitution and Civil Justice................................. 1
The Honorable Steve Cohen, Tennessee, Ranking Member,
Subcommittee on the Constitution and Civil Justice............. 2
The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the
Judiciary...................................................... 4
WITNESSES
Rob Sweeney, Founder & CEO, Mobile Media Technologies LLC
Oral Statement................................................. 6
Becca Wahlquist, Partner, Snell & Wilmer LLP
Oral Statement................................................. 8
Hassan Zavareei, Partner, Tycko & Zavareei LLP
Oral Statement................................................. 10
Adonis Hoffman, Founder & Chairman, Business in the Public
Interest
Oral Statement................................................. 11
ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
Letters Submitted by The Honorable Steve King, Iowa, Chairman,
Subcommittee on the Constitution and Civil Justice. This
material is available at the Committee and can be accessed on
the committee repository at:
http://docs.house.gov/meetings/JU/JU10/20170613/106106/HMTG-
115-JU10-20170613-SD002.pdf
Statement submitted by the Honorable John Conyers, Jr., Michigan,
Ranking Member, Committee on the Judiciary. This material is
available at the Committee and can be accessed on the committee
repository at:
http://docs.house.gov/meetings/JU/JU10/20170613/106106/HMTG-
115-JU10-MState-C000714-20170613.pdf
LAWSUIT ABUSE AND THE TELEPHONE CONSUMER PROTECTION ACT
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TUESDAY, JUNE 13, 2017
House of Representatives
Subcommittee on the Constitution and Civil Justice
Committee on the Judiciary
Washington, DC
The subcommittee met, pursuant to call, at 2:06 p.m., in
Room 2141, Rayburn House Office Building, Hon. Steve King
[chairman of the subcommittee] presiding.
Present: Representatives King, Goodlatte, Franks, Gohmert,
Cohen, Nadler, and Raskin.
Staff Present: John Coleman, Counsel; Jake Glancy, Clerk;
James Park, Minority Chief Counsel, Subcommittee on the
Constitution; Matthew Morgan, Minority Professional Staff
Member; and Veronica Eligan, Minority Professional Staff
Member.
Mr. King. The Subcommittee on the Constitution and Civil
Justice will come to order. Without objection, the chair is
authorized to declare a recess of the committee at any time.
We welcome everyone to today's hearing on the lawsuit abuse
and the Telephone Consumer Protection Act. And I now recognize
myself for an opening statement.
Today's hearing will examine lawsuit abuse of the Telephone
Consumer Protection Act, or TCPA as we will likely refer it.
The TCPA was enacted in 1991 that established several
enforcement mechanisms, including a private right of action for
consumers to bring claims for receiving certain auto-dialed
calls, prerecorded calls, and faxes they did not consent to
receive.
This law also established a private right of action for
certain telemarketing calls made in violation of a consumer
status on the Federal do-not-call list. At the time of its
passage, the TCPA was a sensible legislative response to
consumers and businesses who were overwhelmed with unwanted
calls and faxes. But with advances in technology, government
regulators have struggled to interpret the TCPA's antiquated
language to new situations.
An increasing amount of regulations and court
interpretations has produced a lack of clarity that is
empowering plaintiffs' attorneys to sue companies that are
contacting their customers for legitimate reasons. Damages can
easily become expotential given that each violation can amount
to $500, even if no actual harm to the consumer was caused.
Plaintiffs' attorneys are encouraged to use abusive litigation
tactics such as waiting for these violations to pile up.
A lawsuit against Rubio's restaurant provides an
unfortunate example of these tactics. Rubio's is a California-
based restaurant chain that uses a messaging system to send
food safety alerts to its employees. When an employee's cell
phone number was reassigned to a person who was not an
employee, the messaging system continued sending alerts to that
number. The restaurant didn't know that the number had been
reassigned, because the telephone company is not required to
notify the business. Over time, the person with this phone
number waited to accumulate 876 alerts before filing a $500,000
TCPA lawsuit. This is clearly an abuse.
Rubio's restaurant isn't the only business that has been
unfairly targeted with TCPA litigation. According to the U.S.
Chamber of Commerce's Institute for Legal Reform, American
businesses are besieged with lawsuits brought under the TCPA,
with many attorneys and individual consumers making their
living through suing companies for any text, any call, or any
facsimile placed to numbers that had been provided to those
companies for such communication purposes.
Indeed, it is not rare for alleged statutory damages for
punitive class actions brought under the TCPA to be billions of
dollars when large companies with millions of customers are
sued.
Small businesses too are finding that their very existence
is threatened by the TCPA lawsuits. The Federal Communications
Commission, which is tasking--which is tasked with interpreting
and enforcing the TCPA, has noted an increasing number of TCPA-
related lawsuits in recent years and believes this is due to a
lack of clarity in the law's interpretation.
In 2014, Commissioner Michael O'Rielly stated: ``Over time,
as the FCC and the courts have interpreted the TCPA, business
models and ways of communicating with consumers have also
changed. As a result, the rules have become complex and
unclear.''
In addition to prohibiting abusive robocalls and junk
faxes, which was the original intent, the rules are creating
situations where consumers might not receive notifications and
offers that they want and expect and where new and innovative
services and applications that help friends and family members
communicate with each other could be restricted.
My hope is that today's hearing will explore the unintended
consequences of the TCPA and the lawsuit abuse, which has grown
into an industry and arisen from it. And although this law may
require an update, we must keep in mind the original goal of
the TCPA, which is to protect the privacy interests of this
Nation's consumers.
I want to thank our witnesses for being here today. I look
forward to your testimony.
Mr. King. The Chair now recognizes the ranking member of
the Subcommittee on the Constitution and Civil Justice, Mr.
Cohen of Tennessee, for his opening statement.
Mr. Cohen.
Mr. Cohen. Thank you, Mr. Chairman.
This committee today will--subcommittee--consider a topic
we have never considered before, which is somewhat refreshing,
even if it is a question which probably shouldn't come here in
the subcommittee, because it normally would fit into Energy and
Commerce. Somehow it got in Civil Justice and the Constitution,
which probably should be dealing with something concerning
maybe obstruction of justice or other issues of our democracy.
But we are here with this bill today, by this hearing--this
issue, and it would weaken the private right of action under
the Telephone Consumer Protection Act, a statute over which
this committee has no jurisdiction.
The truth of the matter is, this committee, if it came to
the Judiciary Committee, this should be in the Criminal Law
Subcommittee, in my opinion, because I think anybody that
violates this probably shouldn't be sued and shouldn't
necessarily pay civil damages. They should be sentenced to a
life in a small room with one telephone that rings constantly
with recorded messages.
I detest these calls. And now that we have cell phones, my
landline, which resides in Memphis, Tennessee, in my home with
my cat, who is probably disturbed as well by the calls that
come when I am not there, when I check my service, the only
calls I get are from these automatic callers. It is rather
inconvenient. And I have to go through and erase them before I
might find one constituent.
The TCPA prohibits the use of certain automation
technologies, like auto dialers or predictive dialers, to call
or fax a person with, allegedly, prior express consent. And
sometimes that is pretty loose. And it could be just providing
one's phone number to a potential caller, and sometimes you
kind of get hooked into that. I might have done that this
morning. I hope not. But they said, what is your phone number,
and I thought, what business is it of yours. But I decided it
would be nice to give them my number. I am sure I will now get
phone calls forever from them.
The Act has been rightfully interpreted to cover text
messages and calls to cell phones now. So we might get one
right here. I should turn my dialer on, alarm. When harmed by
violations is the time of injunctive relief and the greater of
actual monetary damages or statutory damages of $500 per
violation and a strict liability.
For years now, corporate defendants who come before the
subcommittee to attack the robust use of private civil
litigation to enforce various Federal statutes ranking from
civil rights statutes to the False Claims Act to people with
disabilities in violations of the disabilities law. These
corporate interests seek to paint lawsuits as somehow
illegitimate and unfair to well-intentioned businesses that
simply made an honest mistake in failing to comply with the
law. Yet such arguments ignore the central role that private
rights of action play in the enforcement of these type of
Federal laws.
Congress' intent and the way this works in structuring the
TCPA and these other laws that we had come before us, strict
liability, is statutory damages for any violation, which was to
put the onus on the business, not the consumers, to comply with
the TCPA and to force businesses, not consumers, to bear the
risk association--associated with such noncompliance. Indeed,
without the incentives contained in the TCPA to bring private
lawsuits against violators, there may well be little
enforcement.
According to one law review article, private parties have
largely been responsible for the enforcement of the TCPA
because of the relatively large statutory damages amount,
especially when compared to actual harm and the lack of
enforcement by government agency. Without this, you really
wouldn't have the enforcement, and you would have more and more
phone calls and people that did honest--not honestly maybe make
a little mistake, like that restaurant, but these other awful
people that call you and tell you about getting a--your order
for a hearing aid or your monitor to keep depressed when you
fall in your home. It is really galling to get those, because
they assume that you are going to fall soon, which is certainly
something that comes when they find that you are over 65 years
of age.
Few would quarrel with or admit to quarreling with the
policy goals underlying the TCPA. No one wants to be flooded
with hundreds of robocalls and spam text messages. Congress
passed the TCPA to protect consumers from extreme nuisance and
invasions of privacy caused by such activities.
And while the TCPA enforcement through private litigation
has been relatively successful, the Federal Trade Commission
still received more than 5 million TCPA-related complaints in
2016, 5 million. It would have been 4 million if I didn't file
my complaints, but it was included, so it is 5 million.
So the last thing Congress should be doing is weakening the
private right of action. If anything, we should be incurring
more, not less, vigorous litigation to enforce the Act, and we
should be including criminal damages of being isolated in that
room with that one phone that rings every 30 minutes.
I thank our witnesses, and I look forward to today's
discussion. And I look forward to the day that there are no
automatic phone calls ever again.
I yield back the balance of my time.
Mr. King. The gentleman makes his point and returns his
time.
The Chair now recognizes the chairman of the full
committee, Mr. Goodlatte of Virginia, for his opening
statement.
Chairman Goodlatte. Thank you, Mr. Chairman.
The Telephone Consumer Protection Act was enacted in 1991
to stem the tide of unsolicited calls and fax advertisements
that consumers were receiving on a daily basis. While well-
intentioned, this law, unfortunately, reflects the dangers of
legislation with broad intent but narrow application to
specific technologies.
One legal scholar has pointed out that a major concern
raised during Congress' consideration of this legislation was
that fax recipients were bearing the cost of ink and paper for
the fax advertisement they received. Indeed, in the early
1990s, three-fourths of facsimile machines in the United States
printed faxes on rolls of costly thermal transfer paper. A fax
machine that printed on regular copier paper existed but cost
over $2,000. Ten years later, the average price of a fax
machine that used copier paper dropped to around $100. Today,
fax machines are much less frequently used, and many have been
replaced with servers that allow recipients to view faxes on
computers without printing them at all. Just as technology has
changed since the early 1990s, so has litigation surrounding
the TCPA.
According to the FTC, an increasing number of TCPA
violations involve internet-based calls generated from outside
the United States. The FTC has also reported that approximately
59 percent of phone spam cannot be traced or blocked because
phone calls are routed through a web of automatic dialers
called ID spoofing and Voice over Internet Protocols. In
contrast, a report cited in Ms. Wahlquist's written testimony
states that between 2010 and 2016, there was a 1,372 percent
increase in case filings.
If advances in technology have made it more difficult to
find intentionally--intentional violators to the TCPA, then who
is being sued? The answer could be U.S. businesses that are not
actually violating the law. In many cases, TCPA litigation is
arising from a lack of clarity in the law's application, which
is being exploited by attorneys seeking big payouts.
Unfortunately, the TCPA neither anticipates the effects of new
technology nor these emerging legal trends.
I hope that today's hearing sheds some light on the lawsuit
abuse of the TCPA and what Congress can do to modernize and
improve it. We must protect consumers from being forced to foot
the bill for unsolicited advertisements, and we must also
ensure that the law is not abused by a cottage industry of
overaggressive trial lawyers seeking to line their own pockets.
I want to thank all the witnesses for testifying today, and
I looked forward to their testimony.
Mr. Chairman.
Mr. King. I thank the gentleman of Virginia, and the
gentleman returns his time.
The Chair would now recognize the ranking member for a
request.
Mr. Cohen. Thank you, Mr. Chair. I would like to request to
enter the statement of the ranking member of the committee,
Conyers, on this subject.
Mr. King. Without objection, so ordered. His statement will
be entered into the record.
[The information follows:]
CONYERS STATEMENT
Ranking Member Conyers statement submitted byd by Mr. Cohen
of Tennessee. This material is available at the Committee and
can be accessed on the committee repository at: http://
docs.house.gov/meetings/JU/JU10/20170613/106106/HMTG-115-JU10-
MState-C000714-20170613.pdf.
Mr. King. And I now--without objection, other members'
opening statements will be made a part of the record.
Okay. And by request of staff, before I introduce the
witnesses, I would like to enter into the record a letter from
trade associations and business groups representing hundreds of
thousands of U.S. companies in support of this hearing: a
letter from the Credit Union National Associations; the written
statement of Richard Worick, President and CEO of the MSR Group
based in Omaha, Nebraska; a statement from the American
Association of Healthcare Administrative Management; and a
statement from the Electronic Privacy Information Center.
I request to enter it into the record.
Hearing no objection, so ordered.
KING INTRODUCED LETTERS
Letters from various Trade Associations submitted by Mr.
King of Iowa. This material is available at the Committee and
can be accessed on the committee repository at: http://
docs.house.gov/meetings/JU/JU10/20170613/106106/HMTG-115-JU10-
20170613-SD002.pdf.
Mr. King. And now I would like to introduce the witnesses.
Our first witness is Mr. Rob Sweeney. He is the founder and CEO
of Mobile Media Technologies LLC.
Mr. Sweeney.
And our second witness is Becca Wahlquist, a partner at
Snell & Wilmer LLP. And our third witness is Hassan Zavareei, a
partner at Tycko & Zavareei LLP. And our fourth witness is
Adonis Hoffman. And Mr. Hoffman is the founder and chairman of
Business in the Public Interest, Incorporated.
Each of the witnesses' written statements will be entered
into the record in its entirety. I ask that each witness
summarize his or her testimony in 5 minutes or less. To help
you stay within that time, there is a light in front of you.
And the light switch will turn from green to yellow, indicates
you have a minute left. We would ask you to summarize your
statement at that point. When the light turns red, it indicates
that the witness's 5 minutes have expired.
Before I recognize the witnesses, it is the tradition of
this subcommittee that you all be sworn in. So please stand to
be sworn in.
Do you swear that the testimony you are about to give
before this committee is the truth, the whole truth, and
nothing but the truth, so help you God?
Thank you. You may be seated.
Let the record show that all the witnesses responded in the
affirmative.
And now, I would like to recognize our first witness, Mr.
Sweeney. Please turn on your microphone, and we will be happy
to hear your testimony.
TESTIMONY OF ROB SWEENEY, FOUNDER AND CEO, MOBILE MEDIA
TECHNOLOGIES LLC; BECCA WAHLQUIST, PARTNER, SNELL & WILMER LLP;
HASSAN ZAVAREEI, PARTNER, TYCKO & ZAVAREEI LLP; AND ADONIS
HOFFMAN, FOUNDER AND CHAIRMAN, BUSINESS IN THE PUBLIC INTEREST
TESTIMONY OF ROB SWEENEY
Mr. Sweeney. Chairman King, Ranking Member Cohen, members
of the subcommittee, I am grateful for the opportunity to
address you today and tell you my story about how the TCPA has
deeply harmed my business.
I am an entrepreneur. I am a small businessman. I had an
idea, 2003, to invent a permission-based mass text messaging
solution--I did so--primarily for noncommercial messages to be
sent by schools and hospitals, TV stations, newspapers, just
nonprofit organizations. And they would send the content out to
people who would opt in. And the process they used to opt in we
refer to as a two-step out-of-band authentication process. It
is probably a process you have all used at some point in your
life. It includes opting in, having a code sent to your phone,
and then entering that code back into a website.
That is what we used to enable web-based opt-in for our
clients. That process is part of the patent that I was issued
in 2007. It is also the process used by the wireless carrier
CTIA Mobile Marketing Association's best practices for web-
based opt-in.
A little bit about TextCaster and who uses us. Like I said,
schools use us. If you have children in school and there is an
issue or emergency, it would be used to communicate that to the
parents and to other members.
TV stations use it to send out weather alerts and breaking
news. If about 11 o'clock at night and you are in bed and there
is a tornado warning, and you are opted into your TV station or
newspapers news alerts, you are going to get a message that is
going to wake you up. You have opted in. You have gone through
that two-step process and authenticated yourself as who you
are, and you have control of that phone number.
The TCPA declaratory ruling order in 2015 included some
language that was onerous, it was very broad, about the ability
to opt out using any reasonable means. Well, one lawyer, one
plaintiff, decided to opt into 99 of our clients. And when they
would get the first message, they would revoke consent by
replying ``stop.'' Now, we didn't support the stop request at
that time because we didn't need to. The carriers didn't
require it. And so they just kept going and going and receiving
these.
And by the way, when they opted in, they opted in and
immediately opted out. So this was nothing more than a
manufacturing scam to create potential lawsuits.
Well, that person that did that used six different numbers
under six different names and, basically, was--when the
attorneys got ahold of this, they decided to send out threat
letters to our--to our customers demanding payments into the
millions.
And we had been working on the stop request, but I am a
little company, and I have got 120 wireless carriers that I
have got to work with, and I had a plan to support stop long
before the DRO was issued in July. So it took us 120 days. In
the meantime, the threat letters started coming in.
We recognized the threat letters as serious. We hired
counsel, very competent counsel, to help us address the issue.
Developed--our counsel developed six defense points, shared
them with the counsels of our media properties who were being
sued. Our media properties were getting these demand letters,
and these demand letters were into the millions of dollars, all
by a shakedown. That is what was happening.
At the end of the day, no lawsuits have been filed. One
customer chose to settle a $1 million demand for $15,000. My
company lost $300,000 a year in business from media clients who
did not want to wade back into this because of an onerous
statute. I have incurred over $100,000 in legal expenses, and I
have had a reduction in force to deal with this.
You know, to the lawyer, it is all about money. To me, it
is about my livelihood. It is about my livelihood for the--for
the employees who work for me. To our customers that were
getting these messages, they are not getting them anymore
because their media properties choose not to participate
anymore.
So I am just asking you to consider and be thoughtful of
the kind of language that is used when you are putting this
into place and putting small businesses like us at risk to
perform a service that, again, I would bet that all of you and
your families have probably used at some point or other.
Thank you.
Mr. King. I thank the gentleman for his testimony.
And now recognize the gentlelady, Ms. Wahlquist, for her 5
minutes.
TESTIMONY OF BECCA WAHLQUIST
Ms. Wahlquist. Thank you.
Good morning, Chairman King, Ranking Member Cohen, members
of the subcommittee. My name is Becca Wahlquist. I am a partner
at Snell & Wilmer. I am chair of the firm TCPA defense practice
group. I am honored to represent the U.S. Chamber Institute for
Legal Reform and testifying before you today.
For over 15 years now, I have defended various companies
sued under the TCPA for a variety of communications made via
phone, text, or facsimile. So I have been a firsthand witness
to the growing cottage industry of TCPA plaintiff lawyers and
plaintiffs targeting American businesses. I can confirm that in
the past few years, the problems with TCPA litigation abuse do
continue to worsen.
TCPA litigation is booming. It is less about protecting
consumers and more about driving a multimillion dollar
commercial enterprise of TCPA lawsuits using the statute's
private right of action.
Indeed, the lawsuits filling up our court dockets, for the
most part, are not even about the spammed marketing calls that
Mr. Cohen mentioned that annoy and harass persons with
marketing messages and with spoofed caller IDs in a manner that
flouts all regulations. Those are the overseas-based aggressive
spam robocallers. That is what is causing most of the
complaints to the FCC. That is not what is being targeted in
the many thousands of TCPA actions brought in our courts every
year.
Instead, the primary targets of the TCPA litigation are
legitimate American businesses trying to comply with the law
and to contact their own customers in a matter consented to by
that customer. The lawsuits are frequently about informational
and transactional calls, not marketing: flu shot reminders,
credit card reject notifications, suspensions of account
warnings, not marketing calls for the most part.
It takes just one text or call or fax to form the basis of
a nationwide class action lawsuit alleging damages on behalf of
millions of people for potentially billions of dollars.
Every 10,000 communications alleged to violate the TCPA
puts $5 million of statutory damages at issue. Not great news
for one restaurant that I work with who sent text messages only
to people who went through the double opt-in process described
by Mr. Sweeney, who wanted to get notifications and coupons
and, hey, here is a deal at the restaurant today, and they
signed up for this text program.
There was an issue where the vendor who had been handling
the program was losing the business, a new vendor was going to
be coming in. The old vendor, angry, one would have guessed,
that he was losing his business, provided the list of members.
Here is the text club members, but it was an inaccurate list.
And so unknown to this company, they sent one text message to
what is alleged to be 64,000 people in that group who had not--
should not have been on the group, and now they are facing
themselves for one text message that one person complained
about a lawsuit alleging $32 million of statutory damages.
And that is just one example. My testimony speaks of
others.
The problem is that there is no cap on TCPA damages, as
with all the other consumer private right of action statutes
that don't require any kind of actual damages. And so with that
uncapped damages available, you just find lawsuits being
brought against very well-intentioned companies that, as with
the restaurant example I gave you, you know, one complaint, one
mistake, $32 million in allegations.
And there are multiple law firms that are joining up,
often, to bring these lawsuits against the deeper pocket
companies. So TCPA class actions are driven by the desire for
attorneys' fees awards that will be pulled from common class
funds, and these attorneys fees dwarf the recovery for
individual consumers.
And in my written testimony I speak of the statistics about
the average cost member recovery versus the millions of dollars
recovered by the attorneys.
Importantly, it is not just large companies that find
themselves targeted. Businesses of all sizes have--I have
worked with in my TCPA defense work: social media companies,
electric companies, banks, sports teams, pharmacies, plumbing
companies, ski resorts, accountants, school boards, local
dentists office, a blood bank, they have all found themselves
defending against TCPA litigations and facing potentially
annihilating statutory damages.
The TCPA, importantly, is not just a liability trap but a
vicarious liability trap as well, as I discuss in my statement.
Lawyers on the TCPA front do tend to sue the deepest pockets.
So companies who never sent or retained anyone to send a text
message or a call find themselves being sued potentially
because their product was mentioned in a communication sent by
someone else. And when they get these lawsuits, the pressure to
settle is enormous, even without--even if you have a
meritorious defense, because there are potentially billions of
dollars of statutory damages that could be in play.
So TCPA litigation is not decreasing. My statement
highlights that it continues to pick up steam year after year,
and more people are catching on to funds that could be sought
through TCPA litigations.
So I cover most of this in my written testimony and would
be happy to answer any questions later on in the proceeding.
Mr. King. Thank you. The gentlelady's time has expired.
The Chair now recognizes the gentleman, Mr. Zavareei, for
his 5 minutes.
TESTIMONY OF HASSAN ZAVAREEI
Mr. Zavareei. Chairman King, Ranking Member Cohen, and
members of the subcommittee, thank you for inviting me to
testify here today. I am the founding partner of Tycko &
Zavareei LLP, which is a private-public interest law firm that
represents small businesses, consumers, and whistleblowers.
Before founding Tycko & Zavareei, I worked for years at
Gibson, Dunn & Crutcher representing corporate clients. Since
then, I have litigated class actions and individual actions in
State and Federal court across the country.
I would like to begin by addressing why we are here today.
Ostensibly, this hearing is about lawsuit abuse, but we must
ask, what constituents are complaining about this supposed
abuse? Are constituents, in fact, calling your offices and
complaining that they want to receive more robocalls and more
unsolicited text messages?
I submit to you that the reason we are here is because
there is a powerful business interest in opening up the
floodgates to our last bastion of privacy, which is our
cellular telephones. The TCPA has succeeded in keeping invasive
telemarketing at bay, and some businesses don't like that. The
real question is, do American people want Congress to make it
easier for businesses to flood their cell phones with
telemarketing calls and text messages?
The most commonly abused trope of opponents to the TCPA is
that the TCPA is being abused to inhibit the actions of
legitimate businesses. We have already heard that today. But
the TCPA is not concerned with the legitimacy or illegitimacy
of the business. The TCPA is concerned with the legitimacy or
illegitimacy of the conduct. Legitimate businesses can and do
engage in illegitimate communications, and legitimate
businesses are not prohibited from engaging in legitimate
communications. All they need to do is obtain consent, and that
is not too much to ask.
Moreover, exceptions do exist for almost every important
communications. There is an exception for medical messages.
There is an exception for school closings. There is an
exception for emergencies. There is an exception for utilities
who want to notify constituents about power outages. There is
an exception for fraud verification. Quite simply, this is a
narrow statute.
As you consider tinkering with the TCPA, I ask you to
imagine a world where our cell phone privacy has no
protections. Imagine your cell phone ringing with calls from
banks, cable companies, phone companies, gyms trying to sell
their goods and services. Imagine calls from businesses you
have no relationship with. Imagine text messages from every
company you ever thought about doing business with, and then
imagine more calls and text messages from companies you never,
ever thought of.
Now, imagine the calls from your constituents about their
cell phones, which have now become virtually useless because
you removed the protections of the TCPA.
The TCPA has protected cell phones as the last bastion of
privacy since their introduction into society. Relaxing those
restrictions would turn this personal space into nothing more
than a nonstop advertising nuisance. Congress deliberately
crafted a free-market approach to curtail runaway
telemarketing, and private enforcement is working.
Yes, the numbers of suits are, in fact, going up, but that
is not because of bad actors or abuse by plaintiffs, as the
opponents would have us believe. It is because of the
skyrocketing numbers of robocalls and text messages. It is true
that there were 4,800 suits in 2016, but that is only .1
percent of the over 4 million complaints to the FTC and the FCC
in the same time period.
Yes, there are bad actors, but there are ways to control
that, and courts have addressed these. Courts have sanctioned
bad actors. They have dismissed their claims from the very
beginning, and they found that they are inadequate to be class
representatives.
I want to just give one example of how TCPA class actions
actually do work. A lawsuit was brought by two law firms
against Caribbean Cruise, which is a legitimate business, which
began making phone calls to people that--whose phone numbers
they obtained, robocalls where they pretended, falsely, to be
engaging in a survey. And once people--and promising a free
cruise if they engaged in a survey. This was a fraudulent
practice. I got the text messages--I got the robocall, and I
imagine--Mr. Cohen is indicating he received it. I imagine many
others received that same text message. Fifty million calls
made by that company.
That company was sued. It took 4 years to bring that
company to justice. Those attorneys expended over $5 million in
attorneys' fees without any guarantee of compensation before
finally obtaining a settlement in the amount of 56--a minimum
of 56 million with a maximum of $76 million. The class members
from that settlement will receive $135 per call.
The TCPA is not perfect, but the free market private
enterprise mechanism works. If Congress fiddles with it, it
risks removing the best and last line of defense of one of our
few remaining realms of privacy.
I thank you for the opportunity to testify, and I look
forward to answering any questions you may have.
Mr. King. Thank you, Mr. Zavareei.
And I now recognize Mr. Hoffman for his 5-minute testimony.
Mr. Hoffman.
TESTIMONY OF ADONIS HOFFMAN
Mr. Hoffman. Good afternoon, Mr. Chairman and members of
the committee. I appreciate the opportunity to appear before
your subcommittee to discuss the important issues surrounding
lawsuit abuse and the TCPA.
I am here today in my individual capacity, although I serve
as chairman of Business in the Public Interest, and teach as an
adjunct professor at Georgetown. I am not representing any
company, client, firm, organization, trade association, or
entity concerning this issue, and I have not received any
compensation from anyone concerning this matter, nor am I
arguing for or against any specific legislation that is pending
before Congress.
It is a special honor for me to return to these hallways. I
spent several years as a legislative director, committee
counsel, and subcommittee staff director in the House during
the 97th, 98th, and 102nd Congresses. Serving during those
times changed my life and my career, and I have the greatest
affinity and highest regard for this institution and the work
that you do.
In addition to Congress, I spent 30 years as a lawyer in
Washington, D.C., working in private practice at a policy think
tank and as in-house counsel for a trade association. But most
relevant to this hearing, I recently served as chief of staff
and senior legal adviser to FCC Commissioner Clyburn from 2013
to 2015 during the pendency in consideration of the TCPA.
In 2015, I coined the phrase, ``TCPA, total cash for
plaintiffs' attorneys.'' It was a little flippant remark, but
it signified to me what the TCPA has come to--come to signify
under its current interpretation.
In 2015, the FCC noted that it has sought to reasonably
accommodate individuals' rights to privacy as well as a
legitimate business interest of telemarketers and other
callers. But all is not well. Somewhere along the line, the
balance that was originally intended shifted from business
concerns and consumers into the hands of plaintiffs' lawyers.
I met with dozens of interested parties as part of the FCC
review of petitions. We heard from banks, credit agencies, debt
collectors, educational institutions, financial institutions,
healthcare providers, insurance companies, retailers, service
providers, utility companies, and other commercial entities. We
also heard from trade associations representing numerous
industries. And last but not least, we heard at the FCC from
attorneys and law firms representing classes of consumers suing
under the TCPA.
The business voices told the--told us that the TCPA was
harming business because it paralyzed their ability to
communicate effectively and efficiently with consumers and
customers by telephone. The consumer voices told us what Mr.
Zavareei has said.
Let me give you the names of a few companies that might be
household names for you: Capital One, $75 million settlement;
ATT Mobility, $45 million settlement; SiriusXM, $35 million
settlement; JPMorgan Chase, 34 million; Bank of America, 32
million; MetLife, 23 million; Wells Fargo, 16 million; Papa
John's Pizza, 16 million; Walgreens Pharmacy, 11 million, and
scores of others below.
These are not bad companies. They were not doing,
necessarily, anything consciously incorrect or unlawful. In
fact, most of these companies came to the FCC to say, we want
to comply with the TCPA, but we don't know how because it is so
ambiguous. The least misstep can lead us to strict liability.
The proliferation of class-action lawsuits under TCPA has
been tracked and well documented by others at the Institute for
Legal Reform. I pointed out in a recent article in The Wall
Street Journal, the average recovery for a consumer in TCPA
class-action settlement was $4.12, $4.12. You can't even get
Starbucks for $4.12. Their lawyers, by contrast, received an
average of $2.4 million. Something is wrong with this picture.
As a lawyer, as a consumer, and as a citizen I think that
the system needs to be adjusted. We tend to focus on the
sensational settlements reached by big companies, as well as we
should--as we should, but there is another dimension of the
TCPA, and that has a potentially devastating effect on a
small--on small, minority, and community-based businesses. For
these organizations, a TCPA claim could mark the end of their
existence due to the strict liability mandate, which can mean
millions of dollars or hundreds of thousands of dollars in fees
for their companies that can least afford it.
Let's be honest, nobody here likes robocalls. None of us
relish intrusive calls from telemarketers, even if their data
show that we might be interested in what they have to say. But
on the other hand, there is a valuable function and utility to
allowing companies to communicate with their customers, their
clients, their patients, or patrons without fear of costly
legal action. In essence, business should be able to talk to
the people they serve.
In summary, Mr. Chairman, members of the committee, I would
recommend the Congress has the authority to end this burden on
American businesses large and small. There are three things
that you can do to change what is a growing problem for U.S.
companies under the TCPA: One, impose a liability cap on TCPA
awards; amend key provisions of the TCPA; and, three, provide a
safe harbor for substantial compliance.
I appreciate the opportunity to talk with you and stand
ready to answer any questions.
Mr. King. Thank you, Mr. Hoffman, and all the witnesses for
your testimony.
The Chair will now recognize himself for my 5 minutes. And
I appreciate your recommendations on what we should do. And I
will try to circle back to you at the end of my time here.
I first wanted to turn to Ms. Wahlquist and ask you if you
have any data or you can give us, this committee, a sense of
how many of these cases that are filed actually go through the
full litigation, and what percentage of them dollarwise or
plaintiffwise or attorneywise are settled out of court.
Ms. Wahlquist. The problem is--the problem is that that
kind of data doesn't really exist. I am working on putting
together an analysis of about 3,000 filed litigations that were
filed in a 17-month period. And I speak about some of the early
findings in my testimony and will have more information later
this year. But the prelitigation demands aren't reported
anywhere.
I know from clients that I have and some of the bigger
companies, they are receiving anywhere from 20 to 50 letters a
month saying, you have called me. I have a TCPA cause of
action. And, again, these are calls that are made with what the
company believes to be the prior consent. So it might be
someone saying, I revoked. Might be somebody saying, my number
is a new number, and you were trying to reach someone else. But
there is significant amounts of demands.
Something else that is hard to track that plays into what
companies are dealing with are arbitrations. And I have one
company that is a bank that is, right now, dealing with over
120 individual arbitrations. So that is not anything that is
tracked in the court system as well. And many companies that
have arbitration clauses are dealing with their TCPA litigation
there.
Mr. King. Then could I just ask you, what is your judgment
on this? I mean, is it a number over or under 50 percent? What
is your--if I picked a number, can you give me which side you
would be on for over or under on this? As I am listening to
your testimony and the balance of the testimony that is here, I
get the sense that a lot of this is settled out of court. And
if that is the case, I am going to follow up with a question of
why don't we have more people fighting this more?
Ms. Wahlquist. I can tell you there is only one company
that I am aware of that, after a class was certified, went to
trial on TCPA litigation, and it didn't settle. So pretty much
everyone settles. The one company that did go to litigation was
Dish Network, and it went to litigation on a small group of
only 51,000 calls. And with the trouble damages it just got
from the jury verdict, it just got hit with $61 million on
51,000 calls. And so----
Mr. King. Are you aware, is there any professional
liability insurance that a company can buy to protect
themselves from this?
Ms. Wahlquist. One massive problem with the TCPA is that as
soon as these litigations really started being brought in 2001
to 2004, almost every insurance policy started putting specific
carve-outs in their insurance policies for TCPA. So many
companies that come to me are clients who are like, I have got
this lawsuit. Can I turn this into insurance? I say, give me
your insurance policy. We look at it, specific carve-outs, the
insurance companies don't want to touch these.
Mr. King. The answer is, is that insurance that did exist
is disappearing as more of this accelerates?
Ms. Wahlquist. Exactly. And the problem with that is that
companies who believe that they would have coverage for
something like a mistake, or let's say like the MetLife
settlement you were discussing, where you have one agent who
has gone rogue and is sending out facsimiles in violation of
company policy, you know, you end up in a settlement of $23
million.
Mr. King. Thank you.
My clock is ticking, and I wanted to make sure I give Mr.
Sweeney an opportunity to vent himself a little bit more.
I want to propose an idea to you, and I will do it in a
quick form. But what if you had an opportunity, if someone
filed, say, a $10 million claim against you, if you had an
opportunity to recover that from the other side, would that
make it more interesting to----
Mr. Sweeney. I would do it in a heartbeat.
Mr. King. And any----
Mr. Sweeney. Quite interested.
Mr. King. And in your case, it is settled?
Mr. Sweeney. We were never sued. Our customers were sued.
But in the data that we have pulled from our--from--from the
one person and the one attorney, we feel pretty strongly that
there might even be a claim for some civil RICO in here on how
the collusion went down to go against our customers,
significant dollars.
At the end of the day, I am the one that has lost the most
money. So, you know, I would welcome that opportunity.
Mr. King. And just it is so often I see that--the reason I
ask the insurance question is so often the insurance company
will come in and advocate for a settlement and then just adjust
their premiums accordingly, and the insured professional is,
essentially, out the equation, except for the premiums they get
charged.
So it doesn't quite apply in this case, but I have in the
past drafted a legislation, not introduced here in this
Congress, that would allow the subject of litigation to post a
bond for the claim and recover that off of their insurance
company if the insurance company decided to settle. But that is
getting narrower, and that won't solve this problem.
I see that my clock has run down. I thank all the
witnesses. And I wish I had a little more time.
I would recognize the ranking member from Tennessee for his
5 minutes--from New York now. The gentleman from New York, Mr.
Nadler.
Mr. Nadler. No one has ever suggested before that I was
from Tennessee. Nothing wrong with Tennessee, but not as good
as New York. Thank you.
Mr. Zavareei--I hope I pronounced it right.
Mr. Zavareei. Zavareei.
Mr. Nadler. Mr. Zavareei. I am sorry. We have heard the
criticisms of the burden this places on businesses. I presume--
let me just say, Mr. Hoffman complained that in a lot of cases
the average recovery is $4.12, and the attorneys made a lot of
money. Let me just say that that doesn't impress me, even if
true, because the aim is not to recover the $4.12. The aim is
to stop the conduct. And if a class action suit in which lots
of $4.12 claims, which no one is going to pursue through the
courts as a class action can be pursued and stop the conduct,
which is annoying thousands and millions of people, that is
well worth it.
Would you comment on that, Mr. Zavareei?
Mr. Zavareei. Yes. I agree completely that the primary
purpose here is deterrence, and that is working. I would also
take issue with the statistic, which dates back to a letter
drafted by a law firm. And when you go back to the source of
that statistic, there is no data to support it. It covers 1
year. It only includes class actions, and it is--I believe it
is just, frankly, untrue.
And class actions only account for 24 percent of all cases.
So it doesn't include settlements that are individual cases. It
is just--it is a--it is a number that keeps being thrown about
that has zero basis.
Mr. Nadler. Thank you.
Ms. Wahlquist, you have been quite eloquent about some of
the problems here. But I gather that your solution is to repeal
the law, stop the class actions, and subject Americans to all
the problems that cause the enactment of the law in the first
place, namely, the millions of robocalls.
What do you think specifically should be done, briefly, in
a way that wouldn't undo the purpose of the law?
Ms. Wahlquist. Yes. I think that some of the main things
that need to be put into place would be a damages cap of some
sort, because there is no other consumer statute like this with
a private right of action, no actual damages, and no damages
cap. There should be affirmative defenses put into the statute
for companies that are trying to comply with the law, have
policies and procedures to comply----
Mr. Nadler. Wait a minute. Cap on damages, affirmative
defenses.
Ms. Wahlquist. Then the statute of limitations should be
put into the statute. The problem was there was none put in, so
the default of 4 years has been applying. I have cases that
have been brought 3 years and 11 months after a call or a text
message, and that is----
Mr. Nadler. You think 3 years and 11 months is
unreasonable. What would you say about a reasonable statute?
Ms. Wahlquist. I think most other statutes of this kind
have a 1-year statute of limitations. So a statute of
limitation would make a big difference. I have in my written
testimony about nine suggestions at the end.
Mr. Nadler. Okay.
Ms. Wahlquist. We don't want to change and make this a
giant----
Mr. Nadler. Thank you.
Mr. Zavareei, would you comment on the impact of what Ms.
Wahlquist just said, should we enact that?
Mr. Zavareei. First, with respect to a cap on damages, what
you end up with is, basically, it becomes a cost of doing
business. And a cap on damages would basically just be an,
essentially, an annulment of the statute. It is the risk of----
Mr. Nadler. Why would it be an annulment of the statute?
Mr. Zavareei. Because it is the risk of getting hit hard
that makes these companies pay attention and do the right
thing. That is the only thing that keeps them in the
guardrails.
The second thing, with respect to these affirmative
defenses, what they are basically talking about is defenses
that would swallow the entire rule. She is saying cell phones,
in her paper, that cell phones should be exempted. I mean, that
is the whole kit and caboodle.
And then with respect to a 4-year statute of limitations,
there is no reason to change the statute of limitations.
Mr. Nadler. I agree. It is certainly----
Let me ask, what would be the effect, Mr. Zavareei, on the
consumers if Congress altered the private right of action and
limited the ability in any of the ways that are being
suggested?
Mr. Zavareei. I think it would be the wild west. I think
our cell phones would become virtually unusable. There would
be--there is almost no government enforcement. It is the--it is
deliberately set up for private enforcement, and without
private enforcement, it would cause an amazingly negative
impact on the economy, our privacy, and our ability to conduct
private and personal affairs on our phones.
Mr. Nadler. And would you comment on Mr. Sweeney's
predicament?
Mr. Zavareei. Look, I think that is awful. But I would note
that he was not sued. And I would note that it appears to be
one bad actor. And he has already expressed that he does have a
means of redress that he is already considering, which is a
RICO action. I do not in any way condone what happened to Mr.
Sweeney, but I do believe that there are avenues in the law to
deal with that.
Mr. Nadler. And do you believe that Rule 11 is one of those
avenues?
Mr. Zavareei. Absolutely.
Mr. Nadler. Thank you very much.
I yield back.
Mr. Franks [presiding]. Is the gentleman from Texas
prepared? If not, I can go ahead and go from here.
Okay. Thank you.
Thank you all for being here. I will now recognize myself
for questions.
Mr. Hoffman, there are apps, I understand, that can be
downloaded to your smartphone that completely automate the
lawsuit process. They let the user select any incoming calls to
be sent to the sponsoring law firm. And the following is from
one of the app websites and it says, quote, ``If you receive a
robocall, a telemarketing call, or a debt collection call, the
app is ready. When you respond to a few quick prompts, the app
creates a legal documentation of the call,'' unquote.
And then the call--and the law firm reviews the call log,
quote, The firm evaluates the documentation for violation of
the Telephone Consumer Protection Act. If there is a violation
of the law, you take the caller to court for up to $1,500 per
call. And remember, this is zero out-of-pocket costs to you to
bring this TCPA claim, because even the app is free.
So I guess I would ask you, do you think the TCPA creates
incentives for attorneys to prey on the very people they claim
to seek to protect? And how can well-intentioned businesses be
protected from those such claims?
Mr. Hoffman. Thank you, Mr. Franks, for that question. I
just would like to pick up just for a moment to the previous
answers.
If this is not about money, then why has the--why has there
been such a proliferation of sort of entrepreneurial and sort
of enterprising, not only attorneys, but others seeking to
really leverage the TCPA in the last 5 to 10 years--5 years or
so, since there has been such an ambiguity in the
interpretation of the TCPA?
We have a cottage industry, Mr. Chairman, that has sprung
up, essentially, helping to inform otherwise individuals to
come into the fold of enterprising plaintiffs attorneys. There
is now, if you go online, there is a how-to--a how-to manual on
how to successfully bring a TCPA action and reap hundreds of
thousands of dollars.
Clearly, this is not what Congress intended in 1991 to
guard against telemarketers. And so I would suggest that the
committee and Congress, this committee and the committee of
jurisdiction, the Energy and Commerce as well, look at--look at
these abuses of the statute and to seek some sort of measure to
adjust what really has been abuse.
It is quite ingenious what lawyers have done. They have
used now social media. They are using technology to leverage
the loopholes within TCPA. Not necessarily--again, my--my
primary issue, Mr. Chairman, is that this is not inuring to the
benefit of consumers. You know, if this were--if this statute
was being used to, you know, fight against the big bad
corporations who were harming consumers and really making those
consumers whole, that is a whole different story. But what we
have is a small group, growing group of plaintiffs lawyers--and
I have nothing against lawyers. I happen to be one and I
married one. But the fact of the matter is these guys are
getting rich using this statute that was intended for something
else all together.
Mr. Franks. Thank you, sir.
Ms. Wahlquist, do you have any thoughts that you might want
to add to that?
Ms. Wahlquist. You know, that----
Mr. Franks. Get that microphone on.
Ms. Wahlquist. Thank you.
The app that you are talking about is used by a firm, in
particular, that is very active in the TCPA front. And it has
been interesting to watch as the head of that firm and one of
the associates have been in a lawsuit with each other and the
disclosures they are talking about in some of the pleadings
that they are bringing lawsuits on behalf of people who might
not even know that they are in a lawsuit. And, you know----
Mr. Franks. That really is automation, isn't it?
Ms. Wahlquist. I am sorry?
Mr. Franks. That really is automation, isn't it?
Ms. Wahlquist. And sometimes they find out that they have
sued a company when they find out that there is a settlement to
be had. So it is not inuring to the benefit, really, of those
consumers who use the app.
But more than the apps, I mean, generally, that firm brings
a lot of individual actions. It is the class actions that get
to the point where, as soon as you have a big enough company
with a big enough bulk of calls, it almost doesn't matter if
they have a good defense, unless they are willing to just dig
in and fight, which I have had some clients that do, and then
you have to go all the way through summary judgment or class
certification. The settlements just roll through and happen.
And I do want to point out that the Caribbean Cruise
settlement that Mr. Zavareei talked about, I don't know if
those numbers were adding up, because it was a $76 million
settlement involving 50 million calls. I don't think that is
really $135 per person.
So I get the point that maybe the individual per-person
damages doesn't matter as much as deterrence, but the issue
here is that what these lawsuits can't deter, unless you just
stop all communications with customers and your clients, and
especially necessary communications that they need. If you want
to keep communicating about things that need to be
communicated, you are at risk of a TCPA lawsuit.
Mr. Franks. Well, thank you all.
I am going to go ahead now and--let's see--I guess this is
the third ranking member we have had here today.
So I now recognize Mr. Raskin for 5 minutes.
Mr. Raskin. Mr. Chairman, thank you very much and thanks to
all the witnesses. I just want to ask a couple of general
questions just to see what the realm of consensus is on the
panel.
Does everybody still agree that unwanted robocalls and text
messages constitute an invasion of privacy? Is there anybody
that disagrees with that?
Ms. Wahlquist. I think it depends on what--when you say
``unwanted,'' if somebody has signed a contract with a company
and said, you can contact me if I am behind on my bills, or--
and then they get the text message, and at that point they say,
I didn't want this, that is a different thing, because then
they should be able to communicate and say, now I don't want
anymore----
Mr. Raskin. Okay. How about unauthorized and unwanted?
Ms. Wahlquist. Unauthorized and unwanted, I am okay.
Mr. Raskin. Okay. And does everybody agree that businesses
should not be able to send telemarketing robocalls and texts to
the cell phones of people who have not authorized it and with
whom they are not in a business relationship? Does everybody
agree with that?
Mr. Sweeney. Agree.
Ms. Wahlquist. Yes.
Mr. Raskin. Okay. And does everybody agree that a business
should not be able to robocall or text someone if the person
has revoked consent and then said, I don't want to receive
texts or calls? Everybody agrees to that? Okay.
So I suppose, then, the question is whether or not we have
sufficient authority within the courts to handle abusive
litigation practices. You know, when--Ms. Wahlquist, when you
say that, you know, there are cases of lawyers bringing
lawsuits on behalf of people who don't even know the litigation
exists, I mean, that is outrageous. But isn't that already a
violation of legal ethics for a lawyer to purport to represent
someone who's not engaged the person in a retainer agreement,
engaged a lawyer in a retainer agreement?
Ms. Wahlquist. I mean, I think the problem is that a
litigation can get really far down the road before that comes
out. So just a couple of weeks ago, there was a big class
action kind of victory on the defense side where a class was
denied certification because the main plaintiff was not an
adequate representative because of not really knowing what the
litigation was about and so forth. But to get to that point you
had to go through so much costs of defense, that that is the
problem with TCPA, that even if you think you have a good
claim, that the plaintiff is maybe abusing the system, there is
so much money at stake that the temptation to settle becomes so
enormous that it just keeps feeding the beast.
Mr. Raskin. I mean, there is one case that I see here from,
actually, February of this year in the Southern District of
California, where a plaintiff brought a TCPA claim alleging
unauthorized text messages after purportedly opting out, and
then it turned out that the person had not opted out but had
kind of arranged in such a way that there would be a lawsuit, a
cause of action. And the court rejected it, and the court said
that is not what the meaning of the statute. We are trying to
go after real abuses, and we don't want this to be, you know, a
trap for the unwary business any more than we want millions of
people to have their privacy and their solitude invaded by the
robocalls.
Ms. Wahlquist. I would say if all courts were like that
court, we probably wouldn't be here. But the problem is that
most courts--I have been defending these for more than a decade
and more than 15 years, and most courts do not take that stand
when things have been raised about the plaintiff.
Mr. Raskin. So let me just pursue it with you then. Is it
your contention, after spending a lot of time doing these
cases, that there really are no more abuses going on, that when
we look out on the landscape of the country, the real abuses
are taking place by lawyers and plaintiffs? It is no longer
taking place by businesses that are engaged in robocalling?
Ms. Wahlquist. There are definitely abusive businesses
involved in calling. I have stayed home from work and gotten
the phone ringing all day, and I know what is going on there.
Those are not the companies that are being sued. Those aren't
the companies that I am representing. Those are the generally
overseas-based, spamming kind of calls that are happening that
I don't see anybody going after or trying to stop through our
court system. I mean, I think everyone is being driven crazy by
those kinds of calls.
Mr. Raskin. Why are they not the subject of litigation?
Ms. Wahlquist. I don't think the money is there to sue
after it. It is hard to find out who is making the calls. They
are spoofed.
I can tell you who does get sued for those calls sometimes.
If the call uses a brand name, for example, GE, when they are
trying to sell some things, then GE will find itself getting
demands, and saying, we are going to sue you under the TCPA for
calls that had nothing to do with, but the calls are mentioning
its brand name.
So I think the problem is there are these spam calls, but
the identity of who is calling, and it is very hard to trace,
and it is not where the abuse of the litigation is coming from.
Mr. Raskin. Thank you very much.
I yield back, Mr. Chairman.
Mr. Franks. I thank the gentleman.
I now recognize the gentlemen from Texas, Mr. Gohmert, for
5 minutes.
Mr. Gohmert. Thank you, Mr. Chairman. And I appreciate the
witnesses being here. It is an interesting subject.
Until I was preparing for this hearing, I didn't realize
that this had been a source of great litigation. It surprised
me. I have gotten a message from my eye doctor, I haven't been
in a number of years, and they say, hey, it is really time you
come back. I am glad they let me--I hadn't even thought about
it.
So when it comes to healthcare-related communications, that
can really be a great help to get notices like that. So I am
wondering, for anybody, how can the FCC be more clear that
healthcare-related communications, though they technically may
not have been requested or may fill out--we may not have--I
don't know if I filled out anything indicating I am open to
getting notices of the need for appointments. But how can they
make it more clear that that would be an exception and be okay,
for anybody?
Ms. Wahlquist. I can tell you, the problem is that there
are a few exceptions that were listed in 2015 related to
healthcare, but they are very narrow exceptions.
Mr. Gohmert. And they are specifically listed.
Ms. Wahlquist. They are specific. So the problem is when
Walgreens settled for $11 million recently, as Mr. Hoffman
noticed, that was for flu shot reminder text messages. I am
sorry. No, that was prescription refill reminder text messages.
Rite Aid right now is being sued for flu shot reminders.
I have worked with various people in the medical profession
who want to do as your eye doctor did and send text messages,
and are so nervous to do it because of the TCPA and the
litigation that can ensue. I have represented a blood bank that
had people sign up to get text messages every time you were
available again, and then that phone number was provided for a
relative and not the person who was actually signing the form.
And then the relative said, now I am going to sue you because I
am not one who said tell me when I can deliver blood again.
Mr. Gohmert. So what would be the remedy to making clear
that these should be exceptions?
Ms. Wahlquist. That it is not marketing calls. That when
they are about health and reminders and something to do with
your health process, that it shouldn't be covered in here. And,
of course, people can always retain the ability to opt out if
they don't like those messages. So you could have replied stop
to that, and at that point it becomes a different ballgame.
Mr. Gohmert. As we are talking, I am wondering if
plaintiffs might have a claim--plaintiffs who get the flu
because they didn't get notices because the plaintiff's firm
sued, if they might have a claim against the plaintiff's firm
because if the plaintiff's firm hadn't sued they would have
gotten a flu shot notice, they would have gotten a shot, and
wouldn't have gotten the flu. Anyway, just thinking out loud.
Should the FCC release some kind of information to indicate
existing emergency exemptions are available to allow
communications for those emergency situations? Do you think
that would be helpful?
Mr. Hoffman. Mr. Gohmert, you put your finger on two of the
big issues that surround this TCPA matter altogether. One is
the ambiguities that exist with the statute. And two is, how do
you really put into policy some common sense?
So you are talking about the ability to have your eye
doctor or some healthcare provider contact you with a very
reasonable, legitimate purpose. Mr. Sweeney talked about his
capacity to provide emergency information to his clients. These
are all basic fundamental functions of what we want. I mean,
when we sign up for things, we can certainly opt out, but we
want that information.
I think with respect to the FCC, I am no longer there, so I
am not speaking on their behalf, but just based on my short
time there, I would suggest that this line of inquiry is ripe
for further review by the Commission as it looks at TCPA
another time, the second time around. We are waiting for a
circuit court opinion, as you know, to come out. And I think
that given a newly constituted FCC, there may be a different
approach. So I would suggest that any encouragement that you
might provide this body to that independent agency.
Mr. Gohmert. And you want the FCC to clarify?
Mr. Hoffman. Absolutely, sir. I think the FCC should do so.
I think it is given the authority under the statute to
promulgate the rules and the regulations.
Mr. Gohmert. So that's something you'd like to see.
Mr. Hoffman. Yes, sir.
Mr. Gohmert. Thank you. I appreciate your being here. Thank
you.
I yield back.
Mr. Franks. I thank the gentleman.
The Chair now recognizes the distinguished chairman of the
full committee, Mr. Goodlatte.
Chairman Goodlatte. Well, thank you, Mr. Chairman. I
appreciate your holding this hearing. I am fascinated by it. I
certainly am one of those who complain about unwanted phone
calls coming into my home. When the Caller ID says Unknown
Name, I turn to my wife and say, well, if they don't know their
name, why are they calling me?
But it is very frustrating, and I am not opposed to trying
to have a Federal remedy for this. But I am very disturbed
about what I perceive to be a consequence of this, which is
that important information going out to people that may need to
have it, sometimes commercial information, sometimes
noncommercial, but important information is going to be
increasingly discouraged if these lawsuits can arise and the
size of the damages that seem to come down in some of these
cases can occur with a legitimate company that simply wants to
remind you that you need to have your prescription refilled.
That cost them $11 million.
Mr. Hoffman, what were some of the other ones you cited,
the large damage amounts?
Mr. Hoffman. Give me a moment, sir. So we have--this is, I
think, going back to about 2012--Capital One for $75 million,
AT&T Mobility for $45 million, Sirius XM for $35 million,
JPMorgan Chase for $34 million, Bank of America for $32
million, MetLife, an insurance company, for $23 million.
Chairman Goodlatte. That is enough. Let me just ask you,
what did these companies do that caused them to deserve a $34,
$35, $45, $75 million judgment against them?
Mr. Hoffman. Mr. Chairman, I am going to punt to Becca over
there who probably has a better recollection.
Ms. Wahlquist. I was working on a couple of those. There is
only, of the ones that he just listed, there were only two that
involved marketing calls or marketing communications. One that
he mentioned, MetLife, was, as I already said, it was one agent
in an office in Florida who knew that he wasn't supposed to
send marketing faxes, and set up a fax server in his garage and
managed to send millions of faxes, because he was on a
commission basis and wanted to encourage that. So it was a one-
person thing.
With Sirius XM, that was also a telemarketing, where they
were calling people who had gotten the free trial when you get
a new car, to see if they wanted to continue their service, and
they were sued by somebody who said, I gave the number to the
dealer, but I didn't tell the dealer----
Chairman Goodlatte. So why did that cost them $35 million?
What was the calculation behind why asking, if you have got a
service in your car, do you want to continue it or not, because
it is going to automatically terminate if you don't, so we are
calling you to remind you, why would that cost them $35
million?
Ms. Wahlquist. These settlements are all just indicators of
the potential size of the class and the value at which----
Chairman Goodlatte. Why wouldn't a judge just say, what is
the big deal here? We are sorry. Maybe that is technical
violation of this law, but it is not worth $35 million.
Ms. Wahlquist. Unfortunately, all the violations of this
law for the most part are technical violations because you
don't have to have any actual damages.
Chairman Goodlatte. Okay. So let me ask you about that. The
court determines--or there is a settlement, I don't know which
one--a $35 million payment. How much of that money actually
reaches the hundreds of thousands or millions of plaintiffs in
that class action lawsuit who had no idea that this was even
going on?
Ms. Wahlquist. It depends on the take rate for the
settlement. So the attorneys will usually ask somewhere between
25 or 30 percent of that fund, which is----
Chairman Goodlatte. That they get for attorneys' fees?
Ms. Wahlquist. For attorneys' fees, even though the statute
doesn't have an attorneys' fees provision.
Chairman Goodlatte. Nine or 10 million dollars? Did they
put $9 or $10 million worth of legal work into doing that? It
sounds like a lot of money for people who are going to get--and
what did the people who got--what did the people who were
Sirius XM customers, I assume they continue to, in many
instances, to be customers?
Ms. Wahlquist. I could find out and report back to you the
exact amount that people that ended up sending in claims got
from that settlement, because I'm not sure offhand. But I know
that there is a--depending on how many--what percentage of the
class members turned in forms, they would have gotten a
different amount of money.
Oftentimes, a lot of settlements that I have been involved
with, the ending result, if everyone would have turned in their
forms, would be somewhere between like $3 and $12, but then,
because maybe only 8 percent of the people turn in their forms,
they get a larger chunk. It just depends.
Chairman Goodlatte. Why would they get a larger chunk?
There is a certain amount of damage that occurred to them, and
that presumably was the basis for the overall settlement or the
overall judgment. Why would they get a larger piece of the pie
if other people said, I'm not going to bother with that?
Ms. Wahlquist. Because the way you are doing the
settlements for the most part is, here is the big amount of
money that we are going to give you to buy ourselves out of
this litigation, and that is it. And so it is just going to be
pro rata split up.
Chairman Goodlatte. This whole litigation wouldn't exist if
this statute were clearly drawn to acknowledge that there are
different kinds of phone calls, both commercial and
noncommercial, legitimate purposes and nonlegitimate purposes,
and so on, and fraud or not fraud. I mean, the ones who are
actively--the ones that bother me the most, both faxes and
telephone calls, are the people who are obviously trying to
commit fraud.
Frankly, I don't see as much of that, particularly on the
fax machine, as I used to. I used to file these complaints
myself with the government.
But it disturbs me that we would think that this law should
be used to stop people from attempting to communicate for
legitimate purposes. If that purpose is one that somebody
doesn't want to have, yes, there should be some kind of penalty
for that. I don't disagree with that. But enormous judgments or
forced into settlements because they are going before some
judge or jury that is not recognizing the importance of
communications in our society, that really bothers me. I don't
know what the solution is at this point, but I think we ought
to try to find one.
Ms. Wahlquist. I can tell you, in the recent Dish order
that came out of Illinois with the judge, this is an action--
because regulators do bring actions under the TCPA from time to
time. And she said that the amount of damages, looking at the
amount of allegations, that the damages would have been $8.1
billion just for the TCPA claims alone, and then carved it down
into the hundreds of millions instead, adding everything up.
But you really can get to billions of dollars. I have
several cases I am on where the actual damages would be
billions of dollars.
Chairman Goodlatte. Actual claimed damages?
Ms. Wahlquist. The actual claimed damages are billions of
dollars.
Chairman Goodlatte. Not actual lost--I don't know what the
lost value of my annoyance and inconvenience of picking up the
phone or looking at my Caller ID and not picking up the phone
but hearing the phone ring is, but I don't think it is worth
some of the risks that we take by discouraging communications
like this.
My time is greatly expired. So I thank you, Mr. Chairman,
for your forbearance.
Mr. Franks. And I thank the gentleman. And I would thank
the witnesses for attending today. I thank the audience and the
members. And this concludes today's hearing.
Without objection, all members will have 5 legislative days
to submit additional written questions for the witnesses or
additional materials for the record.
And with that, this hearing is adjourned.
[Whereupon, at 3:20 p.m., the subcommittee was adjourned.]
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