The U.S. Court of Appeals for the Second Circuit held that a consumer who agrees to be contacted via telephone call or text messages as bargained-for consideration in a bilateral contract cannot subsequently revoke his or her consent in Reyes v. Lincoln Automotive Financial Services, Case No. 16-2104 (2nd Cir. June 22, 2017). Reyes is a significant win for the defense bar as it may reduce liability under the TCPA for transactional messages sent by businesses to consumers that have a "consent" provision in their consumer agreements.
The Telephone Consumer Protection Act
The TCPA of 1991 makes it "unlawful... to use any telephone facsimile machine, computer, or other device to send, to a telephone, facsimile machine, an unsolicited advertisement...." 47 U.S.C. § 227(b)(1)(C). The TCPA generally prohibits making nonemergency, unsolicited calls advertising "property, goods, or services" using automatic dialing systems and prerecorded messages to telephones and cellular phones. Id. at § 227(a)(5). The Federal Communications Commission has interpreted the TCPA's restriction to apply to both "voice calls and text calls to wireless numbers," including text messages. In re Rules & Regulations Implementing the Telephone Consumer Protection Act, 18 F.C.C. Rcd. 14014, 14115 (July 3, 2003). A call or text is not unsolicited if the recipient provided the sender "prior express consent." 47 U.S.C. § 227(b)(1)(A). The FCC's recent Omnibus Declaratory Ruling and Order provides consumers with the right to revoke consent by "any reasonable manner." In re Rule & Regulations Implementing the Telephone Consumer Protection Act, 30 F.C.C. Rcd. 7961 (July 10, 2015).
Background
Plaintiff-appellant Alberto Reyes, Jr. filed suit against Lincoln Automotive Financial Services in the U.S. District Court for the Eastern District of New York based on alleged violations of the TCPA. Reyes leased an automobile from Lincoln, and as a condition of the lease agreement, consented to receive manual or automated telephone calls from Lincoln. Specifically, the lease agreement contained the following provision:
After Reyes defaulted on his lease obligations, Lincoln called Reyes regularly. Reyes contended that he mailed a letter to Lincoln requesting that Lincoln cease contacting him, which Lincoln argued it never received. Reyes alleged that Lincoln continued to call him after he allegedly revoked his consent to be called.
The district court granted summary judgment for Lincoln on the basis that (1) the evidence of consent revocation was insufficient, and (2) in any event, the TCPA does not permit revocation when consent is provided as consideration in a binding contract.
Second Circuit Decision
The Second Circuit affirmed the judgment of the district court. The court held that Reyes did introduce sufficient evidence from which a jury could conclude that he revoked his consent, but that the TCPA does not permit a consumer to revoke its consent to be called when the consent forms part of a bargained-for exchange.
On the first issue, the court held that the district court's finding that Reyes did not revoke his consent to be contacted by telephone was improper on summary judgment. The court noted that Reyes testified that he mailed a letter to Lincoln revoking his consent; submitted of an affidavit to that effect; and introduced of a copy of the letter as evidence. The court held that the district court's conclusion that Reyes did not revoke his consent rested on an impermissible assessment by the court of Reyes's credibility.
On the second issue, the court held that, under the TCPA, a party is not able to revoke consent when it was given as bargained-for consideration in a bilateral contract. The court noted that the TCPA is silent as to whether a party that has given its prior express consent to be contacted can subsequently revoke that consent. The court noted that two circuit courts—the Third and Eleventh—have ruled that a party can revoke consent under the terms of the act. See Gager v. Dell Financial Services, 727 F.3d 265 (3d Cir. 2013); Osorio v. State Farm Bank F.S.B., 746 F.3d 1242 (11th Cir. 2014). The court further noted that the FCC relied on these two cases in ruling that a consumer's prior express consent is revocable under the TCPA. In re Rule & Regulations Implementing the Telephone Consumer Protection Act, 30 F.C.C. Rcd. 7961 (July 10, 2015). The court distinguished these cases on the basis that the three rulings considered whether the TCPA allows a consumer who has freely and unilaterally given his or her informed consent to be contacted can later revoke that consent. In Gager and Osorio, the plaintiffs provided voluntary consent to be contacted by furnishing their telephone numbers in connection with loan and insurance applications, respectively. And, in this case, the court was addressing a different question: whether the TCPA permits a consumer to revoke his or her consent when that consent is given, not gratuitously, but as bargained-for consideration in a bilateral contract.
The court drew a distinction between tort and contract law relating to a person's ability to revoke their consent. In tort law, consent is generally defined as a gratuitous action and the courts in Gager and Osorio confirmed that consent of this kind, which is not given in exchange for any consideration, and which is not incorporated into a binding legal agreement, may be revoked by the consenting party at any time. Reyes's consent, however, was not provided gratuitously—it was included as an express provision of a contract to lease an automobile. The court held, that under such circumstances, "consent" is not revocable because one party may not alter a bilateral contract by revoking a term without the consent of a counterparty.
The court also rejected Reyes's argument that his consent to be contacted is revocable because that consent was not an "essential term" of his lease agreement with Lincoln. The court held that a contractual term does not need to be "essential" in order to be enforced as part of a binding agreement. The court noted that a party who has agreed to a particular term in a valid contract cannot later renege on that term or unilaterally declare it to no longer apply simply because the contract could have been formed without it.
Finally, the court acknowledged that, while businesses may undermine the effectiveness of the TCPA by inserting "consent" clauses into standard sales contracts thereby making revocation impossible in many instances, such a concern is grounded in public policy considerations rather than legal ones. As a result, if the abuse did come to pass, it would be "for Congress to resolve—not the courts."
Takeaways
Reyes represents a significant win for businesses and the defense bar in the Second Circuit. In addition to shedding some light on the murky issue of revocable consent, the ruling also hands the defense an opportunity to end TCPA cases earlier—through a motion to dismiss rather than a summary judgment motion—in the event the defendant is able to demonstrate that the plaintiff's consent was given as bargained-for consideration in the parties' contract. As the court acknowledged in its opinion, the issue presented in Reyes has not been addressed by any other circuit court. It is likely that there will be mixed holdings from the circuit courts on this issue, resulting in a circuit split. Regardless, businesses that have transactional communications with consumers that may arguably fall within the purview of the TCPA should consider revising their consumer agreements to include terms that give businesses permission to contact consumers via telephone call or text message similar to the terms contained in Lincoln's lease agreement.
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