Operations: Don’t Get Blasted Over Your Club’s Text Blasts
As the owner of a fitness business, it’s likely that you’ve marketed your services through a targeted “text campaign.” Maybe you blasted out texts on your own; maybe you hired a third-party marketing company to do it for you. Either way, you should proceed with caution. If you’re not familiar with the law in this area, you could be putting your business at risk.
THE TELEPHONE COMMUNICATIONS PROTECTION ACT
The Telephone Communications Protection Act (47 U.S.C. § 227) is the federal law that applies in this area (although not discussed here, your state may have a TCPA equivalent that may also apply). Congress originally passed the TCPA in 1991 to protect consumers from unsolicited telemarketing calls and faxes, and later expanded the law’s protections to cover SMS text messages as well.
Enforced by the Federal Communications Commission, the TCPA prohibits the use of an “automated telephone dialing system” (ATDS) or an “artificial or pre-recorded voice” to make robocalls or send autodialed texts to wireless phone numbers without first obtaining the recipient’s prior consent. The TCPA doesn’t just regulate the activities of telemarketers and debt collectors – this law applies to any customer-facing business that uses autodialing technologies to communicate with its customers by wireless phone, whether the communication is considered for a telemarketing purpose or not. Confusion sometimes arises over the fact that the standard for prior consent is heightened when the content of the communication is promotional in nature. Unsolicited telemarketing or advertising calls or texts require the recipient’s express written consent, whereas non-telemarketing calls or texts — think, a purely informational or transactional communication — require simply the recipient’s consent, which may be provided verbally or through the existence of a previous business relationship.
It’s not surprising then that most TCPA litigation turns on whether a call or text was sent for a telemarketing purpose; and, if it was, whether the recipient of the communication provided the requisite level of consent.
WHY THE FITNESS INDUSTRY IS AT RISK
The fitness industry makes for particularly fertile grounds for a TCPA lawsuit, and there are several different factors that make it so.
First, text campaigns are common practice for the operators of fitness businesses. They’re easy, they’re far-reaching, they’re relatively inexpensive, and they can be effective in bringing in new business. While some gym operators may believe that the mere existence of a signed agreement with their member, or a prospective member, is enough to imply consent, that’s not necessarily true. The “preexisting business relationship” exception to the general consent rule went away in October 2013.
Second, the TCPA is a regulatory statute with some very sharp teeth. Damages are $500 per violation, but can soar to as high as $1,500 where the plaintiff can prove a willful or intentional violation. Each call placed or text sent will count as a separate violation, so damages can compound quickly. Add to this generous damages scheme the fact that the TCPA has no maximum damages cap. Although the statute’s language lacks an attorneys’ fees provision, consumer protection lawyers will often try to seek their fees through Rule 23, the federal law that governs class actions.
Third, cell phones are everywhere. Practically everyone has one, and uses them in ways Congress probably couldn’t have predicted when it passed the TCPA over 25 years ago. The legal effect of all these people using cell phones is it makes it that much easier to form a large class for litigation purposes.
And lastly, the opaque wording of the TCPA itself seems to stack the deck against business owners. Many courts, and even the FCC itself, can’t seem to agree on what some of the law’s provisions mean.
These factors, taken together, create the ideal conditions for a litigation bonanza, and, unfortunately, some within the fitness industry have already been swept up in the rising tide of TCPA litigation. The $15 million settlement involving Lifetime Fitness is the best known case, but others have been affected as well.
A DISTURBING TREND
Major TCPA lawsuits have also been brought against social media companies, pizza companies, cable providers, the circus, cruise lines, and companies offering financial services. In this last category, it’s worth noting the TCPA lawsuit and settlement involving Capital One Financial, which topped $75 million.
The amount of money at stake is disturbing. But, perhaps more troubling is the trend. According to the U.S. Chamber Institute for Legal Reform’s website, lawsuits involving TCPA claims have increased 265 times since a decade ago, ballooning from 14 lawsuits in 2007 to 1,910 in 2013 to 3,710 in 2015.
Understandably concerned by these facts and figures, business leaders sought clarification from the FCC on several of the TCPA’s key provisions. And on June 18, 2015, they got their answer. Much to the chagrin of the business community, however, the FCC’s Order did little to quell anxiety. In a split 3-2 ruling, the FCC in many ways compounded the problem by further expanding the law instead of reigning it in. Even the FCC’s Commissioner, Michael O’Reilly, came out after the ruling and admitted the Order’s “lack of clarity” and lamented the fact that the decision would “penalize businesses and institutions acting in good faith to reach their consumers using modern technologies.” In summary, the 2015 Order bolsters the right of consumers to opt out from receiving robocalls; it reinforces the consumer’s ability to revoke previously-provided consent; it describes a limited safe-harbor for contacting phone numbers that have been reassigned to new consumers; there are exemptions for certain types of emergency calls and texts; and it elaborates on the definition of an ATDS, which could include virtually any modern telephone device, yes, including your iPhone.
TCPA BEST PRACTICES
Although the picture here is grim, there are things you can do to mitigate your TCPA risk. Education about the law is key. So, while not formal legal advice — which you should only seek from a licensed attorney in your state of operation — the remainder of this article will focus on “best practices” pertaining to the TCPA. Consider the following before engaging in your next texting campaign.
- GET WRITTEN CONSENT. Written consent is required for unsolicited telemarketing calls or texts sent using an ATDS or artificial or pre-recorded voice to a wireless number. Written consent must be signed by the recipient (e-signatures are okay), it must disclose the use of ATDS technology when placing calls or texts, it must identify the phone number(s) where communications will be sent, and it must include a statement that the recipient’s consent is not a condition of purchase for any goods or services. All of this should be spelled out clearly, conspicuously, and using plain English.
- KNOW WHAT YOU’RE SENDING. It sounds obvious, but you should know exactly what you’re sending. Does the message contain anything that could remotely be considered a promotion? Are you trying to entice someone to buy something from you? If your communication is purely informational or transactional — for example, “this message confirms your personal training session at 10 am tomorrow” — then you’re probably fine. But, if your communication could be characterized as promotional, then the heightened “express written consent” requirement will apply, and it will be on you, as the one who initiated the communication, to establish you received the requisite consent. Both lead prospecting and mixed informational-promotional communications will be considered for telemarketing purposes. If there’s any doubt about the type of communication you’re sending, be cautious and get the recipient’s express written consent.
- CONSIDER YOUR SYSTEM. If ever you have the unfortunate experience of defending your company’s actions in a TCPA lawsuit, it will be critically important that you be able to retrieve sent communications, identify a recipient’s express written consent, and have a way to track revocation of previously-given consent. To do this effectively, you will need to invest in your system for transmitting communications, to one degree or another. The best systems will have a TCPA-compliant process built into them — for example, the ability to track and retrieve a recipient’s written consent — and it will have scrubbing technologies that make sure wireless numbers have not been re-assigned or are found on a Do-Not-Call registry.
- GIVE PEOPLE A WAY TO OPT-OUT AND BE ABLE TO TRACK IT. The FCC’s 2015 Order said a recipient could revoke previously-given consent through “any reasonable means, whether oral or written, at any time.” Given this broad standard, proving that a recipient failed to revoke consent can be an expensive and time-consuming proposition, especially since revocation-of-consent issues tend to be highly fact specific. One way to avoid these issues is to build revocation-of-consent into the process, and be able to track it using your systems. Maybe you include a link to an online form with your communication, maybe you allow the recipient to opt-out by replying to a text with the word “Stop” “End,” or “Unsubscribe.” It’s important to keep in mind though that you cannot limit revocation of consent to just the means you’ve provided — again, a recipient has a right to revoke consent through “any reasonable means” at any time.
- DON’T MAKE THE MISTAKE OF ASSUMING PREVIOUSLY-PROVIDED CONSENT REMAINS VALID TODAY. Yes, there used to be a “preexisting business relationship” exception that said if you had a contract with your customer which included his or her phone number, you could have the consent necessary to be able to contact him or her with unsolicited promotions. That exception, however, went away in October 2013. Today, you need to follow the FCC’s 2015 Order, which requires express written consent for unsolicited telemarketing communications sent via call or text using ATDS technology to a wireless number.
- BE CAREFUL OF RE-ASSIGNED NUMBERS. Say you’ve obtained your member’s express written consent, but the wireless phone number belonging to that member has been reassigned to someone else who has not provided written consent to be contacted. If you call or text this reassigned number, you get one strike to update your records and systems to remove it from your rolls. After this one strike, you could be liable. The FCC’s 2015 Order clarifies this “safe harbor” provision for re-assigned numbers.
- MAKE YOUR DEFAULT: “I’M USING AN ATDS.” Modern communication technology has changed a lot since the TCPA’s passage over 25 years ago. Since the TCPA only applies to autodialed calls or texts, then one big question on a business owner’s mind is: “Am I using an ATDS?” The statute defines an “automated telephone dialing system” as“equipment which has the capacity to store or produce telephone numbers to be called, using a random or sequential number generator; and to dial such numbers.” 47 U.S.C. § 227(a)(1). The FCC, in its 2015 Order, elaborated on this definition, choosing to focus on the operative word “capacity.” The FCC ruled that an ATDS would cover any equipment or software which has the capacity to generate numbers and dial them without human intervention, regardless of whether the numbers called are randomly or sequentially generated or come from a calling list, and that “capacity” included the equipment’s current configuration “or its potential future functionality.” An ATDS then would include virtually all forms of modern communication technology.
- KEEP YOUR TCPA-RELATED RECORDS FOR FOUR YEARS. The statute of limitations on a TCPA claim is four years. 28 U.S.C. § 1658(a). Your best practice here would be to keep relevant records at least that long.
- DON’T BANK ON THE “IT WASN’T ME” DEFENSE. If you’ve hired a third-party marketing company to manage your telemarketing campaign, don’t assume you’re in the clear for TCPA liability. In its 2013 Dish Network Order, the FCC made clear that vicarious liability could apply through common law agency principles to a seller who hires a third-party marketing company to send telemarketing communications on its behalf. See In re Joint Petition filed by Dish Network, LLC, 28 F.C.C.R. 6574 (2013). The factual agency question comes down to one of seller control, knowledge about what its third-party marketing company is doing, and affirming (or ratifying) the communications sent. Given the current state of the law regarding vicarious liability and TCPA claims, business owners are caught in a Catch-22: one the one hand, have zero input in hopes of being able to disclaim any sort of agency relationship, and, thus, vicarious liability; or, on the other hand, play a very active role in making sure the third-party marketing vendor gets it right, which arguably defeats the purpose of outsourcing the marketing task in the first place. So, two important take-aways: first, even if you outsource telemarketing activities to a third-party, you could still be liable because an agency relationship exists; and, second, if you hire a third-party marketing vendor, be sure you understand what they are doing to maintain TCPA compliance and pay close attention to the indemnity provisions in their agreement with you.
- IF YOU ARE USING ANOTHER COMPANY’S SERVICE OR TECHNOLOGY PLATFORM TO SEND OR MANAGE YOUR TELEMARKETING CAMPAIGNS, DON’T COUNT ON THEM TO BE LIABLE FOR YOUR TCPA VIOLATIONS. The TCPA applies to companies that “initiate” unsolicited calls or texts to wireless numbers using ATDS or an “artificial or pre-recorded voice,” and “common carriers” have been found not to initiate such communications. See Rinky Dink Inc. v. Electronic Merchant Systems Inc. (W.D. Wash. Feb. 24, 2015) (finding “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.’” As explained in the Rinky Dink decision, a common carrier (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 time and location of the calls; and (3) is neither highly involve nor has any knowledge of the sender’s allegedly illegal calling activities.
Jonathan M. Hill is General Counsel for ClubReady, LLC. For questions email firstname.lastname@example.org.
 Huyge v. Gold’s Gym Franchising, LLC, No. CV-13-02378-PHX-SRB, 2014 U.S. Dist. LEXIS 188023 (D. Ariz. July 3, 2014); Malik v. F-19 Holdings, LLC, No. 5:15-130-KKC, 2016 U.S. Dist. LEXIS 66644 (E.D. Ky. May 19, 2016); O’Hanlon v. 24 Hour Fitness USA, Inc., No. 15-cv-01821-BLF, 2016 U.S. Dist. LEXIS 27509 (N.D. Cal. Mar. 2, 2016); Patten v. Vertical Fitness Grp., LLC, 22 F. Supp. 3d 1069 (S.D. Cal. 2014).