[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]




        LAWSUIT ABUSE AND THE TELEPHONE CONSUMER PROTECTION ACT

=======================================================================

                                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

                              ----------                              

                             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

                              ----------                              


                         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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