Law360 - May 1, 2015

The Federal Communications Commission, the agency which Congress gave authority to implement regulations and enforce the Telephone Consumer Protection Act, expressly exempts common carriers who transmit prohibited fax messages absent “a high degree of involvement or actual notice of an illegal use and failure to take steps to prevent such transmissions.” In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 7 F.C.C. Rcd. 8752, ¶ 54 (1992); In the Matter of Enforcement of Prohibitions Against the Use of Common Carriers for the Transmission of Obscene Materials, 2 F.C.C. Rcd. 2819, ¶ 9 (1987). Courts have analogized the common carrier exemption in the fax context to the phone call and text message context, opining that common carriers act as passive middlemen for their creators of the messages, but have never applied the theory to support summary judgment in a call or text message case. See, e.g., Clark v. Avatar Technologies Phl Inc. (S.D. Tex. Jan. 28, 2014) (granting motion to dismiss on the grounds that the TCPA does not impose liability on telecommunications carrier for calls made by another).

The Rinky Dink Decision

The court in Rinky Dink Inc. v. Electronic Merchant Systems Inc. (W.D. Wash. Feb. 24, 2015), appeal dismissed (Mar. 6, 2015), took this step and held that the TCPA does not apply to common carriers in the call and text message context. “The TCPA was intended to ‘apply to the persons initiating the telephone call or sending the message and ... not to the common carrier ... that transmits the call or messages and that is not the originator or controller of the content of the call or message.’” Rinky Dink (citing Couser v. Pre-paid Legal Services Inc., 994 F.Supp.2d 1100, 1104 (S.D.Cal.2014)). CallFire is a company that provides an online platform for “voice and text connectivity” to thousands of customers who design calling or texting campaigns through its website. CallFire placed prerecorded calls, purportedly without the plaintiffs’ consent, on behalf of a company that identifies merchants who want to enter into agreements with banks to handle the processing and managing of the merchant’s retail credit card transactions. The company’s representatives did not meet with CallFire prior to its beginning to use CallFire’s services, but described CallFire as “an online provider” whose website contained the information the company relied upon.

The court ruled that CallFire was a common carrier and granted summary judgment to CallFire. The court relied on authority interpreting the Communications Act of 1934, 47 U.S.C. §§ 151 et seq., which considers whether (1) “the entity hold[s] itself out indifferently to all potential users or, if serving a legally-defined class, hold[s] itself out indiscriminately to serve all within that class; and (2) [whether] the entity allow[s] customers to transmit messages of their own design and choosing.” U.S. Telecom Ass’n v. FCC, 295 F.3d 1326, 1329–1330 (D.C.Cir.2002); see also Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC, 533 F.2d 601, 608–609 (D.C.Cir.1976). The court found for CallFire on the first issue, citing the fact that CallFire markets itself online primarily through its website and that its terms of service applied equally to each customer. The court also found that CallFire had no role in the creation, content, timing or location of the company’s messages, and that its customer was the sole architect of the calls to the plaintiffs. Further, because CallFire was not highly involved in the broadcast or aware of the company’s unlawful activity, it fell outside the FCC’s rules net liability for common carriers.

A “Carrier” Does Not Initiate Calls

The court also analyzed CallFire’s liability under Washington’s TCPA equivalent, the Automatic Dialing and Announcing Device (“WADAD”) statute, which does not contain an immunity provision for common carriers. Similar to the TCPA, the WADAD imposes liability for “the unsolicited initiation of a telephone conversation” using an automatic dialing and announcing device for telemarketing purposes. RCW 80.36.400(1). And, like the TCPA, the WADAD does not define what it means to “initiate” a phone call or text message.

The court looked to the dictionary definition of “initiate” and ruled that CallFire could only be liable if it “‘caused the beginning’ of the calls received by Plaintiffs.” The court distinguished message initiation and message transmission, and found that the CallFire system was automatic in nature in that it simply carried data from the original company at the original company’s direction. CallFire merely transmitted calls to the plaintiff, while CallFire’s client initiated the calls.

Concluding Observations

Rinky Dink is an important lesson for businesses and vendors alike.

• First, the Rinky Dink court finally acknowledged that technology has evolved beyond the carriers that have copper wire in the ground. The definition for who qualifies as a common carrier has evolved to include web-based companies who demonstrate “common carrier” characteristics.
• Second, the Rinky Dink court found that when the defendant (1) holds itself out indifferently to all its customers, (2) is not involved in authoring the messages and selecting the numbers to be called, nor the timing and location of the calls, and (3) is neither highly involved nor has any knowledge of the sender’s allegedly illegal calling activities, it is a “common carrier” under the TCPA and therefore exempt from liability. Importantly, the Court held that even though CallFire advertised its own robo-dialing capabilities, and had previously been sued for TCPA violations, such evidence was insufficient to demonstrate that it had actual knowledge of its client’s alleged improprieties.
• Third, for businesses that facilitate the transmission of voice calls or text messages on behalf of other businesses, the Rinky Dink decision sketches a roadmap to reduce risk. Of course, the FCC may weigh in on this and other issues involving intermediary liability under the TCPA. Until then, this case will hopefully deter the initiation of lawsuits against companies that merely facilitate calls and messages on behalf of others.

“How 'Common Carrier' Defense Applies to TCPA Class Actions,” by Joshua Briones, Ana Tagvoryan, and Harrison Brown was published in the May 1, 2015, edition of Law360. To learn more, please click here or visit www.law360.com. Reprinted with permission from Law360.