A recent ruling under the Telephone Consumer Protection Act (TCPA) from the Southern District of New York addresses critical TCPA compliance issues, specifically focusing on the transferability of exemptions to the general prohibition against sending marketing messages to consumers listed on the National Do-Not-Call Registry (“National DNC”).
TCPA Compliance: Key Exemptions for Marketing to Do-Not-Call Numbers
Section 227(c) of the TCPA and its enforcing regulations prohibit unwanted telephone solicitations to persons whose numbers are on the National DNC unless an exemption applies. A “telephone solicitation” is defined as a “message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services,” but does not include messages sent to “any person with that person’s prior express invitation or permission” or “to any person with whom the caller has an established business relationship.”
For TCPA compliance, the “prior express invitation or permission” exemption requires a “signed, written agreement” between the consumer and the caller, explicitly stating that the consumer consents to being contacted by that caller and includes the specific telephone number to which the calls may be made. This express consent must be clearly and unmistakably given, and the consumer must fully understand that by providing consent, they are agreeing to receive telemarketing calls and texts.
For the established business relationship (EBR) exemption to apply, the caller must demonstrate a relationship formed by a voluntary two-way communication between caller and consumer based on either: (1) the consumer’s purchase or transaction with the caller within the previous 18 months; or (2) the consumer’s inquiry regarding products or services offered by the caller within the previous three months.
With that understanding in mind, let’s move on to the case at hand.
Watson v. Manhattan Luxury Vehicles
Watson v. Manhattan Luxury Vehicles, Inc. arose out of text message solicitations sent to the representative plaintiffs by Manhattan Luxury Vehicles Inc., dba Lexus of Manhattan. The Plaintiffs were all former customers of Honda of Manhattan, a separate company that closed in January of 2017. Apparently, Honda of Manhattan provided the Defendant with its customer list, which included names and cellphone numbers. Lexus of Manhattan then proceeded to engage in a texting campaign directed to Honda of Manhattan’s former customers, three of whom elected to file a class action lawsuit based in part upon their numbers being on the National DNC, and they never consented to the texts.
The Defendant filed a Motion for Summary Judgment, seeking dismissal of all claims. Among other arguments, the Defendant maintained that: (1) the Plaintiffs consented to the texts at issue; and (2) the Plaintiffs had an EBR with Honda of Manhattan that extended to Acura of Manhattan.
The DNC Argument: With respect to the DNC claim, the Defendant argued that the Plaintiffs signed a written form presented to them by Honda of Manhattan that clearly granted express consent to receive marketing messages from that company, which extended to Lexus of Manhattan by virtue of its acquisition of the former’s customer list.
The form included the following consent language: “We would like to be able to contact you in order to ensure that you are happy with your purchase, keep you informed of new product offerings and promotions, remind you of necessary maintenance or service your vehicle may need, and for other reasons. You agree that we may try to contact you in writing, by e-mail, or by using prerecorded/artificial voice messages, text messages and automatic telephone dialing systems, as the law allows… at any address or telephone number you provide us.”
In a separate paragraph preceded by a checkbox, the form stated, “By checking this box, you also authorize us to call your home phone number and your mobile phone number provided above using an automatic telephone dialing system or a prerecorded message for sales purposes. You are not required to provide this authorization as a condition of purchasing any goods or services.” Although none of the Plaintiffs checked the box, they all signed the form.
The court rejected the DNC argument, stating that no reasonable jury could conclude that any consent obtained through the plaintiffs’ agreement could extend to any party other than Honda of Manhattan. This ruling emphasizes the need for strict TCPA compliance, as consent can only be transferred to an affiliate or third party if the written agreement clearly specifies all parties to which the consent may apply. In this case, the form signed by the plaintiffs defined “we,” “us,” and “our” as referring solely to Honda of Manhattan, with no mention of any other party, making it non-compliant with TCPA standards.
The EBR Argument: The court soundly rejected the EBR argument based on the plain language of the regulation governing EBR, which states that a consumer’s established business relationship with a particular business entity does not extend to affiliated entities unless the consumer “would reasonably expect them to be included given the nature and type of goods or services offered by the affiliate and the identity of the affiliate.”
Although an EBR existed between the Plaintiffs and Honda of Manhattan, the first contact between them and Lexus of Manhattan was when it sent messages to them after Honda of Manhattan shut down. Therefore, the court concluded, the Plaintiffs would not have reasonably anticipated that their relationship with a Honda dealership would also extend to a Lexus dealer by virtue of the fact that they both were located in Manhattan.
In other words, a Honda is not a Lexus, and the text of the regulation makes it clear that the key question is whether a Lexus dealership was the type of affiliate that Plaintiffs would expect “to be included” in their business relationship with a Honda dealership given the nature and type of goods offered by Honda of Manhattan.
Key Takeaways: Consent, EBR, and DNC Compliance
The Watson case offers clear guidance for businesses, particularly those that acquire customer lists from other entities. Lexus of Manhattan probably spent good money to acquire Honda of Manhattan’s customer list, but that does not automatically give them the right to contact those people, particularly those whose numbers are on the National DNC.
The Court’s ruling clarifies that TCPA compliance requires strict adherence to consent and EBR exemptions, which cannot be casually transferred to a third party. For proper TCPA compliance, the language in the written agreement must explicitly identify any affiliates or other third parties to whom the consent may apply.
Likewise, an EBR does not automatically extend to a third party affiliated with the company that established the relationship with the consumer. For that argument to work, the caller must be able to clearly demonstrate that anyone would reasonably expect it to be included, given its identity and the nature and type of goods or services it offers.
