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Reasonable Expectation of Privacy: Are You Free To Eavesdrop on Pocket Dials?

Most people have experienced a “pocket dial” – be it as the sender or receiver – and some have found themselves in embarrassing situations as a consequence. But should people reasonably expect that conversations overhead during a “pocket dial” call are private and protected? Should the recipient feel obligated to end the call? The Sixth Circuit says no.

Yesterday, the Sixth Circuit decided whether a reasonable expectation of privacy exists with respect to “pocket dialed” communications. Carol Spaw, assistant to the CEO of Cincinnati/Northern Kentucky International Airport, received a call from James Huff, chairman of the airport board. It didn’t take long for Spaw to figure out that she had received a pocket dial, and that the conversation in the background was not intended for her ears. Spaw stayed on the line for an hour and a half – taking notes and recording the audio as Huff discussed private business matters with another board member, and later with his wife. Spaw sent the recording to a third party company to enhance the quality, and shared the recording with other board members. Huff and his wife sued Spaw for intentionally intercepting their private conversation in violation of Title III of the Omnibus Crime Control and Safe Street Act of 1968. The district court granted summary judgement in favor of Spaw, finding no “reasonable expectation” that the conversation would not be heard. On appeal, the Sixth Circuit affirmed in part, reversed in part, and remanded.

Title III only protects communication when the expectation of privacy is subjectively and objectively reasonable. The Sixth Circuit agreed with the district court that James Huff did not have a reasonable expectation that his conversation was private. Although Mr. Huff did not deliberatelydial the call, he knew that “pocket dials” were possible, and did not take any precautions to prevent them. The court analogized Huff’s situation to a homeowner who neglects to cover his windows with drapes; under the plain view doctrine, the homeowner has no expectation of privacy in his home when the windows are uncovered. Huff could have easily utilized protective settings on his phone to prevent pocket dials.

The Sixth Circuit reversed with respect to Bertha Huff’s claim. Bertha Huff was communicating with her husband in the privacy of a hotel room. She had a reasonable expectation of privacy in that context, and she was not responsible for her husband’s pocket dial. The Sixth Circuit feared that affirming the district court’s decision with respect to Bertha’s claim would undermine what we currently consider a reasonable expectation of privacy in face-to-face conversations. The court remanded the case back to the district court to decide whether Spaw’s actions made her liable for “intentionally” intercepting oral communications.

The Sixth Circuit’s decision leaves us with this: if you receive a pocket-dialed call, feel free to listen, record, and share (but be wary of the privacy interest of the other participants in the conversation); if you are a pocket dialer, lock your phone.

ARTICLE BY Pierre H. Bergeron of Squire Patton Boggs (US) LLP

Lauren Maynard contributed to this article.

What You Need to Know About the FCC’s July 10th Declaratory Ruling on the Telephone Consumer Protection Act (TCPA)

A sharply divided FCC late Friday issued its anticipated TCPA Declaratory Ruling and Order (the “Declaratory Ruling”). This document sets forth a range of new statutory and policy pronouncements that have broad implications for businesses of all types that call or text consumers for informational or telemarketing purposes. While some of its statements raise interesting and in some cases imponderable questions and practical challenges, this summary analysis captures the FCC’s actions in key areas where many petitioners sought clarification or relief. Certainly there will be more to say about these key areas and other matters as analysis of the Declaratory Ruling and consideration of options begins in earnest. There will undoubtedly be appeals and petitions for reconsideration filed in the coming weeks. Notably, except for some limited relief to some callers to come into compliance on the form or content of prior written consents, the FCC’s Order states that the new interpretations of the TCPA are effective upon the release date of the Declaratory Ruling. Requests may be lodged, however, to stay its enforcement pending review.

Scope and Definition of an Autodialer

An important threshold question that various petitioners had asked the FCC to clarify was what equipment falls within the definition of an “automatic telephone dialing system” or “ATDS.” The TCPA defines an ATDS as:

equipment which has the capacity—

(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and

(B) to dial such numbers. 47 U.S.C. § 227(a)(1) (emphasis added).

Two recurring points of disagreement have been: (1) whether “capacity” refers to present or potential capacity, i.e., whether it refers to what equipment can do today, or what some modified version of that equipment could conceivably do tomorrow; and (2) whether “using a random or sequential number generator” should be read to limit the definition in any meaningful way.

Stating that a broad definition would be consistent with Congressional intent and would help “ensure that the restriction on autodialed calls not be circumvented,” the FCC concluded that “the TCPA’s use of ‘capacity’ does not exempt equipment that lacks the ‘present ability’ to dial randomly or sequentially.” Rather, “the capacity of an autodialer is not limited to its current configuration but also includes its potential functionalities.”

The Declaratory Ruling stated that “little or no modern dialing equipment would fit the statutory definition of an autodialer” if it adopted a less expansive reading of the word “capacity.” But as for whether any “modern dialing equipment” does not have the requisite “capacity,” the agency declined to say:

[W]e do not at this time address the exact contours of the “autodialer” definition or seek to determine comprehensively each type of equipment that falls within that definition that would be administrable industry-wide…. How the human intervention element applies to a particular piece of equipment is specific to each individual piece of equipment, based on how the equipment functions and depends on human intervention, and is therefore a case-by-case determination.

Indeed, although the Declaratory Ruling insisted that this interpretation has “outer limits” and does not “extend to every piece of malleable and modifiable dialing equipment,” the only example that that Declaratory Ruling offered was anything but “modern”:

[F]or example, it might be theoretically possible to modify a rotary-dial phone to such an extreme that it would satisfy the definition of “autodialer,” but such a possibility is too attenuated for us to find that a rotary-dial phone has the requisite “capacity” and therefore is an autodialer.

Finally, the FCC majority brushed off petitioners’ concerns that such a broad definition would apply to smartphones—not because it would be impossible to read that way, but because “there is no evidence in the record that individual consumers have been sued….”

Commissioner Pai’s dissent expressed concern that the FCC’s interpretation of the ATDS definition “transforms the TCPA from a statutory rifle-shot targeting specific companies that market their services through automated random or sequential dialing into an unpredictable shotgun blast covering virtually all communications devices.” He also noted that even if smartphone owners have yet to be sued, such suits “are sure to follow…. Having opened the door wide, the agency cannot then stipulate restraint among those who would have a financial incentive to walk through it.”

Commissioner O’Rielly took issue with the FCC’s “refusal to acknowledge” the other half of the statutory definition, specifically that equipment “store or produce telephone numbers to be called, using a random or sequential number generator.” 47 U.S.C. § 227(a)(1). “Calling off a list or from a database of customers … does not fit the definition,” he explained. And as for the reading of the word “capacity,” the Commissioner stated that the FCC majority’s “real concern seems to be that … companies would game the system” by “claim[ing] that they aren’t using the equipment as an autodialer” but “secretly flipping a switch to convert it into one for purposes of making the calls.” He explained that even if there had been examples of this in the regulatory record, “this could be handled as an evidentiary matter. If a company can provide evidence that the equipment was not functioning as an autodialer at the time a call was made, then that should end the matter.”

Given the breadth of the FCC’s purported interpretation of ATDS, which clashes with the views of a number of courts in recent litigation and is replete with ambiguity, this portion of the Declaratory Ruling will most certainly be challenged.

Consent and Revocation of Consent

The Declaratory Ruling addressed the question of whether a person who has previously given consent to be called may revoke that consent and indicated that consumers have the ability to revoke consent in any “reasonable manner.” As dissenting Commissioner Pai noted, this can lead to absurd results if consumers are entirely free to individually and idiosyncratically select their mode and manner of revocation, particularly for any such oral, in-store communication. The Commissioner’s dissent asked ruefully whether the new regime would cause businesses to “have to record and review every single conversation between customers and employees….Would a harried cashier at McDonald’s have to be trained in the nuances of customer consent for TCPA purposes?……the prospects make one grimace.”

FCC Petitioner Santander had sought clarification of the ability of a consumer to revoke consent and alternatively, to allow the calling party to designate the methods to be used by a consumer to revoke previously provided consent. In considering the TCPA’s overall purpose as a consumer protection statute, the FCC determined that the silence in the statute on the issue of revocation is most reasonably interpreted in favor of allowing consumers to revoke their consent to receive covered calls or texts. The Declaratory Ruling found comfort both in other FCC decisions and in the common law right to revoke consent, which is not overridden by the TCPA. The Declaratory Ruling stated that this interpretation imposes no new restriction on speech and established no new law.

The FCC noted that its prior precedent on the question of revocation was in favor of allowing consumer revocation “in any manner that clearly expresses a desire not to receive further messages, and that callers may not infringe on that ability by designating an exclusive means to revoke.” Stating that consumers can revoke consent by “using any reasonable method,” the FCC determined that a caller seeking to provide exclusive means to register revocation requests would “place a significant burden on the called party.” The Declaratory Ruling contains no serious discussion of the burdens placed on businesses by one-off individual revocations. The FCC majority also rejected the argument that oral revocation would unnecessarily create many avoidable factual disputes, instead stating that “the well-established evidentiary value of business records means that callers have reasonable ways to carry their burden of proving consent.”

Reassigned Number “Safe Harbor”

There is perhaps no issue that garners more frustration among parties engaged in calling activities than potential TCPA liability for calls to reassigned numbers. No matter how vigilant a caller is with respect to compliance, under the FCC’s preexisting and now expanded statements, it is impossible to eliminate the risk of exposure short of not calling anyone. As explained in Commissioner O’Rielly’s Separate Statement: “numerous companies, acting in good faith to contact consumers that have consented to receive calls or texts, are exposed to liability when it turns out that numbers have been reassigned without their knowledge.” This portion of the Declaratory Ruling will also most certainly be subject to challenges.

While relying on a number of flawed assumptions, the FCC: (1) rejected the sensible “intended recipient” interpretation of “called party”; (2) disregarded the fact that comprehensive solutions to addressing reassigned numbers do not exist; (3) adopted an unworkable and ambiguous “one-call exemption” for determining if a wireless number has been reassigned (a rule that constitutes “fake relief instead of a solution,” as explained by Commissioner O’Rielly); and (4) encouraged companies to include certain language in their agreements with consumers so that they can take legal action against consumers if they do not notify the companies when they relinquish their wireless phone numbers.

First, the FCC purported to clarify that the TCPA requires the consent of the “current subscriber” or “the non-subscriber customary user of the phone.” It found that consent provided by the customary user of a cell phone may bind the subscriber. The FCC declined to interpret “called party” as the “intended recipient,” as urged by a number of petitioners and commenters and held by some courts.

Second, the FCC quickly acknowledged and then set aside the significant fact that there exists no comprehensive public directory of reassigned number data provided by the carriers. Instead, it seemed flummoxed by the purported scope of information accessible to companies to address the reassigned number issue. The FCC suggested that companies could improvise ways to screen for reassigned numbers (e.g., by manually dialing numbers and listening to voicemail messages to confirm identities or by emailing consumers first to confirm their current wireless phone numbers) and explained that “caller best practices can facilitate detection of reassignment before calls.” Ignoring the reality of TCPA liability, the FCC explained that “[c]allers have a number of options available to them that, over time, may permit them to learn of reassigned numbers.” (emphasis added).

Third, the FCC purported to create an untenable “one-call exemption.” The Declaratory Ruling explained “that callers who make calls without knowledge of reassignment and with a reasonable basis to believe they have valid consent to make the call should be able to initiate one call after reassignment as an additional opportunity to gain actual or constructive knowledge of the reassignment and cease future calls to the new subscriber. If this one additional call does not yield actual knowledge of reassignment, we deem the caller to have constructive knowledge of such.”

One potentially helpful clarification made was the determination that porting a number from wireline to a wireless service is not to be treated as an action that revokes prior express consent, and thus the FCC stated that that prior consent may continue to be relied upon so long it is the same type of call for which consent was initially given. The FCC agreed with commenters who had observed that if a consumer no longer wishes to get calls, then it is her right and responsibility to revoke that consent. Unless and until that happens, however, the FCC stated that a caller may rely on previously provided consent to continue to make that same type of call. Valid consent to be called as to a specified type of call continues, “absent indication from the consumer that he wishes to revoke consent.” As wireline callers need not provide express consent to be autodialed, any party calling consumers would have to still be aware of the nature of the called number to determine whether appropriate consent to be called was present.

Finally, the FCC – which claims to be driven by consumer interests throughout its Declaratory Ruling – makes the suggestion that companies should require customers, through agreement, to notify them when they relinquish their wireless phone numbers and then initiate legal action against the prior holders of reassigned numbers if they fail to do so. “Nothing in the TCPA or our rules prevents parties from creating, through a contract or other private agreement, an obligation for the person giving consent to notify the caller when the number has been relinquished. The failure of the original consenting party to satisfy a contractual obligation to notify a caller about such a change [of a cell phone number] does not preserve the previously existing consent to call that number, but instead creates a situation in which the caller may wish to seek legal remedies for violation of that agreement.”

Treatment of Text Messaging and Internet-to-Phone Messaging

The Declaratory Ruling also addressed a number of issues that specifically affect text messaging under the TCPA. First, the FCC addressed the status of SMS text messages in response to a petition that asked the FCC to make a distinction between text messages and voice calls. The FCC reiterated that SMS text messages are subject to the same consumer protections under the TCPA as voice calls and rejected the argument that they are more akin to instant messages or emails.

Second, the FCC addressed the treatment of Internet-to-phone text messages under the TCPA. These messages differ from phone-to-phone SMS messages in that they originate as e-mails and are sent to an e-mail address composed of the recipient’s wireless number and the carrier’s domain name. The FCC explained that Internet-to-phone text messaging is the functional equivalent of phone-to-phone SMS text messaging and is therefore covered by the TCPA. The FCC also found that the equipment used to send Internet-to-phone text messages is an automatic telephone dialing system for purposes of the TCPA. In so doing, the FCC expressly rejected the notion that only the CAN-SPAM Act applies to these messages to the exclusion of the TCPA.

Finally, the FCC did provide some clarity as to one issue that had created significant confusion since the adoption of the current TCPA rules in 2012: whether a one-time text message sent in response to a consumer’s specific request for information constitutes a telemarketing message under the TCPA. The specific scenario that was presented to the FCC is one confronted by many businesses: they display or publish a call-to-action, they receive a specific request from a consumer in response to that call-to-action, and they wish to send a text message to the consumer with the information requested without violating the TCPA and the FCC’s rules.

The FCC brought clarity to this question by finding that a one-time text message does not violate the TCPA or the FCC’s rules as long as it is sent immediately to a consumer in response to a specific request and contains only the information requested by the consumer without any other marketing or advertising information. The FCC explained that such messages were not telemarketing, but “instead fulfillment of the consumer’s request to receive the text.” Businesses may voluntarily provide the TCPA disclosures in their calls-to-action, as the FCC noted in the Declaratory Ruling, but a single text message to consumers who responded to the call-to-action or otherwise requested that specific information be sent to them would not be considered a telemarketing message and, as such, would not require the advance procurement of express written consent.

Limited Exemptions for Bank Fraud and Exigent Healthcare Calls and Texts

The TCPA empowers the agency to “exempt . . . calls to a telephone number assigned to a cellular telephone service that are not charged to the called party, subject to such conditions as the Commission may prescribe as necessary in the interest of the privacy rights [the TCPA] is intended to protect.” 47 U.S.C. § 227(b)(2)(C). In March 2014, the FCC invoked this authority to grant an exemption from the TCPA’s prior express consent requirement for certain package-delivery related communications to cellular phones, requiring that for such communications to be exempt, they must (among other things) be free to the end user.

The Declaratory Ruling invoked that same provision and followed that same framework in granting exemptions for “messages about time-sensitive financial and healthcare issues” so long as the messages (whether voice calls or texts) are, among other things discussed below, free to the end user. Oddly, the Declaratory Ruling referred to these two types of messages as “pro-consumer messages,” showcasing an apparent view that automated/autodialed calls are “anti-consumer” by default.

The FCC first addressed a petition from the American Bankers Association (ABA), seeking an exemption for four types of financial-related calls: messages about (1) potential fraud or identity theft, (2) data security breaches, (3) steps to take to prevent identity theft following a data breach, and (4) money transfers. After analyzing the record before it regarding the exigency and consumer interest in receiving these types of communications, and finding that “the requirement to obtain prior express consent could make it impossible for effective communications of this sort to take place,” the FCC imposed the following very specific requirements in addition to the requirement that the messages be free to the end user: (1) the messages must be sent only to the number provided by the consumer to the financial institution; (2) the messages must state the name and contact information for the financial institution (for calls, at the outset); (3) the messages must be strictly limited in purpose to the four exempted types of messages and not contain any “telemarketing, cross-marketing, solicitation, debt collection, or advertising content;” (4) the messages must be concise (for calls generally one minute or less, “unless more time is needed to obtain customer responses or answer customer questions,” and for texts, 160 characters or less); (5) the messages must be limited to three per event over a three-day period for an affected account; (6) the messages must include “an easy means to opt out” (an interactive voice and/or key-press activated option for answered calls, a toll-free number for voicemail, and instructions to use “STOP” for texts); and (7) the opt-out requests must be honored “immediately.”

The FCC then addressed a petition from the American Association of Healthcare Administrative Management (AAHAM) seeking similar relief for healthcare messages. Relying on its prior rulings regarding the scope of consent and the ability to provide consent via an intermediary, the FCC stated that (1) the “provision of a phone number to a healthcare provider constitutes prior express consent for healthcare calls subject to HIPAA by a HIPAA-covered entity and business associates acting on its behalf, as defined by HIPAA, if the covered entities and business associates are making calls within the scope of the consent given, and absent instructions to the contrary”; and, (2) such consent may be obtained through a third-party when the patient is medically incapacitated, but that “ just as a third party’s ability to consent to medical treatment on behalf of another ends at the time the patient is capable of consenting on his own behalf, the prior express consent provided by the third party is no longer valid once the period of incapacity ends.”

The FCC also granted a free-to-end-user exemption for certain calls “for which there is exigency and that have a healthcare treatment purpose”: (1) appointment and exam confirmations and reminders; (2) wellness checkups; (3) hospital pre-registration instructions; (4) pre-operative instructions; (5) lab results;(6) post-discharge follow-up intended to prevent readmission; (7) prescription notifications; and (8) home healthcare instructions. The FCC specifically excluded from the exemption messages regarding “account communications and payment notifications, or Social Security disability eligibility.”

The Declaratory Ruling imposed mostly the same additional restrictions on free-to-end-user health-care related calls as it did with free-to-end-user financial calls: (1) the messages must be sent only to the number provided by the patient; (2) the messages must state the name and contact information for the healthcare provider (for calls, at the outset); (3) the messages must be strictly limited in purpose to the eight exempted types of messages, be HIPAA-compliant, and may not include “telemarketing, solicitation, or advertising content, or . . . billing, debt-collection, or other financial content”; (4) the messages must be concise (for calls generally one minute or less, and for texts, 160 characters or less); (5) the messages must be limited to one per day and three per week from a specific healthcare provider; (6) the messages must include “an easy means to opt out” (an interactive voice and/or key-press activated option for answered calls, a toll-free number for voicemail, and instructions to use “STOP” for texts); and (7) the opt-out requests must be honored “immediately.”

Service Provider Offering of Call Blocking Technology

A number of state Attorneys General had sought clarification on the legal or regulatory prohibitions on carriers and VoIP providers to implement call blocking technologies. While declining to specifically analyze in detail the capabilities and functions of particular call blocking technologies, the FCC nevertheless granted the request for clarification and stated that there is no legal barrier to service providers offering consumers the ability to block calls – using an “informed opt-in process” at the individual consumer’s direction. Blocking categories of calls or individual calls was seen as providing consumers with enhanced tools to stop unwanted robocalls.

Service provider groups, which expressed concern that any blocking technology could be either over or under-inclusive from an individual consumer’s perspective, were provided the assurance that while both the FCC and the FTC recognize that no technology is “perfect,” accurate disclosures to consumers at the time they opt-in for these services should suffice to allay these concerns. The Declaratory Ruling also noted that consumers are free to drop these services if they wish, and encouraged providers to offer technologies that have features that allow solicited mass calling, such as a municipal or school alerts, to not be blocked, as well as to develop protocols to ensure public safety calls or other emergency calls are not blocked.

ARTICLE BY Laura H. Phillips & Eduardo R. Guzman of Drinker Biddle & Reath LLP

Twitter Terrorism: Criminals Choose the Hack Attack

In what appears to be yet another brazen demonstration of capability following an earlier hijack of government social media sites, a group calling itself the Syrian Electronic Army (SEA) recently hacked into the U.S. Army’s main news and public information website, positing its own message for website visitors: “Your commanders admit they are training the people they have sent you to die fighting.” In response, the Army was forced to shut down the site to implement additional security measures to protect its systems.

Earlier this year, two of the U.S. military’s Central Command social media websites on YouTube and Twitter were similarly attacked and compromised. There, organization profile images were replaced by those of ISIS supporters on the official Twitter page, and two ISIS propaganda videos were uploaded to the Central Command YouTube account. Over the past several years, SEA has initiated similar attacks on the Twitter accounts of the BBC, The New York Times, 60 Minutes and the Associated Press.

Business Concerns

While the U.S. government reported that none of the internal systems were compromised and that there was no loss of classified information, the attacks have certified the anxiety of many business leaders over the potential vulnerability of their own companies, and highlight the concerns regarding the lack of knowledge or ability to prevent such attacks. Recent surveys have confirmed that risks associated with social media, whether through external portal access or internal sabotage, are among the top concerns facing businesses in 2015.

Without question, social media has become a crucial advertising vehicle for thousands of businesses around the world. The number of Facebook, Twitter, LinkedIn and other social media users continues to grow at an exponential rate, allowing businesses access to many new customers and clients every day. The ability to maintain control over these new electronic profiles, however, has become increasingly difficult as the perpetrators become more skilled and the targets more prized. In one particularly publicized account in 2013, social media hackers changed the Twitter account name of a premiere fast-food company to that of its chief competitor and posted multiple offensive tweets. Thereafter, damage control was all that could be done.

Businesses in 2015 have become enthralled by virtually unlimited access to customers and business partners via online platforms. Unfortunately, many have focused on the potential profits arising from such undertakings without sufficient consideration for the problems that too frequently arise from the use of such platforms. Social media has become the soft underbelly of many growing businesses eager for success but unaware of its vulnerabilities. In addition to direct attacks, courthouses nationwide have been flooded by lawsuits tied to the use and regulation of social media sites. The governance of employee use of social media, ownership of content and retention of information gathered through social media are generating more litigation every day. While increased exposure may be the incentive, preventative medicine will likely prove integral to long-term success.

Such “preventative medicine” includes not only the appropriate policies and procedures on access to and use of social media, but also an understanding of the vulnerabilities created by using these online platforms. Most importantly, organizations must train their employees on these issues. Defending itself from perils arising out of social media starts at the first line of defense – the user.

ARTICLE BY Scott Sweeney & Ian A. Stewart of Wilson Elser Moskowitz Edelman & Dicker LLP

FCC’s Enforcement Bureau Commends PayPal for Modifying its User Agreement

We previously advised that the FCC’s Enforcement Bureau, in an unusual move, on June 11 published a letter it sent to PayPal warning that PayPal’s proposed changes to its User Agreement that contained robocall contact provisions might violate the TCPA.

These proposed revisions conveyed user consent for PayPal to contact its users via “autodialed or prerecorded calls and text messages … at any telephone number provided … or otherwise obtained” to notify consumers about their accounts, to troubleshoot problems, resolve disputes, collect debts, and poll for opinions, among other things. The Bureau’s letter highlighted concerns with the broad consent specified for the receipt of autodialed or prerecorded telemarketing messages and the apparent lack of notice as to a consumer’s right to refuse to provide consent to receive these types of calls.

On June 29, prior to the revisions coming into effect, PayPal posted a notice on its blog stating: “In sending our customers a notice about upcoming changes to our User Agreement we used language that did not clearly communicate how we intend to contact them.” PayPal clarified that it would modify its User Agreement to specify the circumstances under which it would make robocalls to its users, including for important non-marketing reasons relating to misuse of an account, as well as to specify that continued use of PayPal products and services would not require users to consent to receive robocalls.

The FCC’s Enforcement Bureau immediately put out a statement commending PayPal for its decision to modify its proposed contact language, noting that these changes to the User Agreement represented “significant and welcome improvements.” The Bureau’s very public actions on this matter signal to businesses everywhere of the need to review existing “consent to contact” policies. Certainly the FCC’s yet to be released Declaratory Ruling on TCPA matters that was voted on during a contentious FCC Open Meeting on June 18 may also invite that opportunity.

ARTICLE BY Laura H. Phillips of Drinker Biddle & Reath LLP

Meeting of the Minds at the Inbox: Some Pitfalls of Contracting via Email

This issue comes up regularly when informality creeps into negotiations conducted electronically, bringing up the age-old problem that has likely been argued before judges for centuries: one party thinks “we have a deal,” the other thinks “we’re still negotiating.” While email can be useful in many contract negotiations, care should be taken to avoid having to run to court to ask a judge to interpret an agreement or enforce a so-called “done deal.”

With limited exceptions, under the federal electronic signature law, 15 U.S.C. § 7001, and, as adopted by the vast majority of states, the Uniform Electronic Transactions Act (UETA), most signatures, contracts and other record relating to any transaction may not be denied legal effect solely because they arein electronic form. Still, a signed email message does not necessarily evidence intent to electronically sign the document attached to the email. Whether a party has electronically signed an attached document depends on the circumstances, including whether the attached document was intended to be a draft or final version.

There have been a number of recent cases on this issue, but the bottom-line, practical takeaways are as follows:

Consider an express statement in the agreement that performance is not a means of acceptance and that the agreement must be signed by both parties to be effective.
If you do not believe the agreement is final and accepted, do not begin to perform under the agreement unless there is an express written (email is ok) agreement by the parties that performance has begun but the contract is still being negotiated.
When exchanging emails relating to an agreement, be prudent when using certain loaded terms such as “offer,” “accept,” “amendment,” “promise,” or “signed” or phrases of assent (e.g., “I’m ok with that”, “Agreed”) without limitations or a clear explanation of intent.
Terms of proposed agreements communicated via email should explicitly state that they are subject to any relevant conditions, as well as to the further review and comment of the sender’s clients and/or colleagues. To avoid ambiguity, to the extent finalizing an agreement is subject to a contingency (e.g., upper management or outside approval, or a separate side document signed by both parties), be clear about that in any email exchange that contains near-final versions of the agreement.
Parties wishing to close the deal with an attachment should mutually confirm their intent and verify assent when the terms of a final agreement come together.
While it is good practice to include standard email disclaimers that say that the terms of an email are not an offer capable of acceptance and do not evidence an intention to enter into any contract, do not rely on this disclaimer to prevent an email exchange – which otherwise has all the indicia of a final agreement – from being considered binding.
Exercise extreme caution when using text messaging for contract negotiations – the increased informality, as well as the inability to attach a final document to a text, is likely to lead to disputes down the road.

While courts have clearly become more comfortable with today’s more informal, electronic methods of contracting, judges still examine the parties’ communications closely to see if an enforceable agreement has been reached.

Now, for those who are really interested in this subject and want more, here comes the case discussion….

Last month, a Washington D.C. district court jury found in favor of MSNBC host Ed Schultz in a lawsuit filed by a former business partner who had claimed that the parties had formed a partnership to develop a television show and share in the profits based, in part, upon a series of emails that purported to form a binding agreement. See Queen v. Schultz, 2014 WL 1328338 (D.C. Cir. Apr. 4, 2014), on remand, No. 11-00871 (D. D.C. Jury Verdict May 18, 2015). And, earlier last month, a New York appellate court ruled that emails between a decedent and a co-owner of real property did not evince an intent of the co-owner to transfer the parcel to the decedent’s sole ownership because, even though the parties discussed the future intention to do so, the material term of consideration for such a transfer was fatally absent. See Matter of Wyman, 2015 NY Slip Op 03908 (N.Y. App. Div., 3^rd Dept. May 7, 2015). Another recent example includes Tindall Corp. v. Mondelēz Int’l, Inc., No. 14-05196 (N.D. Ill. Mar. 3, 2015), where a court, on a motion to dismiss, had to decide whether a series of ambiguous emails that contained detailed proposals and were a follow-up to multiple communications and meetings over the course of a year created a binding contract or rather, whether this was an example of fizzled negotiations, indefinite promises and unreasonable reliance. The court rejected the defendant’s argument that the parties anticipated execution of a memorialized contract in the future and that it “strains belief that these two companies would contract in such a cavalier manner,” particularly since the speed of the project may have required that formalities be overlooked.

Enforceability of Electronic Signatures

A Minnesota appellate court decision from last year highlights that, unless circumstances indicate otherwise, parties cannot assume that an agreement attached to an email memorializing discussions is final, absent a signature by both parties. See SN4, LLC v. Anchor Bank, fsb, 848 N.W.2d 559 (Minn. App. 2014) (unpublished). The court found although the bank representatives intended to electronically sign their e-mail messages, the evidence was insufficient to establish that they intended to electronically sign the attached agreement or that the attached document was intended to be a final version (“Can you confirm that the agreements with [the bank] are satisfactory[?] If so, can you have your client sign and I will have my client sign.”).

A California decision brings up similar contracting issues. In JBB Investment Partners, Ltd. v. Fair, 182 Cal. Rptr. 974 (Cal. App. 2014), the appellate court reversed a trial court’s finding that a party that entered his name at the end of an email agreeing to settlement terms electronic “signed” off on the deal under California law. The facts in JBB Investmentoffered a close case – with the defendant sending multiple emails and text messages with replies such as “We clearly have an agreement” and that he “agree[d] with [plaintiff’s counsel’s] terms” – yet, the court found it wasn’t clear as to whether that agreement was merely a rough proposal or an enforceable final settlement. It was clear that the emailed offer was conditioned on a formal writing (“[t]he Settlement paperwork would be drafted . . .”).

Performance as Acceptance

Another pitfall of contracting via email occurs when parties begin performance prior to executing the governing agreement – under the assumption that a formal deal “will get done.” If the draft agreement contains terms that are unfavorable to a party and that party performs, but the agreement is never executed, that party may have to live with those unfavorable terms. In DC Media Capital, LLC v. Imagine Fulfillment Services, LLC, 2013 WL 46652 (Cal. App. Aug. 30, 2013) (unpublished), a California appellate court held that a contract electronically sent by a customer to a vendor and not signed by either party was nevertheless enforceable where there was performance by the offeree. The court held that the defendant’s performance was acceptance of the contract, particularly because the agreement did not specifically preclude acceptance by performance and expressly require a signature to be effective.

ARTICLE BY Jeffrey D Neuburger of Proskauer Rose LLP

Court Dismisses Text-Message TCPA Suit Against AOL, Finding Instant Messaging Service Does Not Constitute an ATDS

On June 1, the Northern District of California dismissed a putative TCPA class action against AOL, finding that the plaintiff had failed to allege that AOL utilized an automated telephone dialing system (ATDS), as required to state a cause of action under the TCPA. In dismissing the plaintiff’s complaint in Derby v. AOL, the court rejected the plaintiff’s arguments that AOL Instant Messenger (AIM), which allows individuals to send instant messages as text messages to cell phones, constitutes an ATDS. Instead, the court agreed with AOL’s argument that AIM relied on “human intervention” to send the messages at issue, which foreclosed the possibility of potential TCPA liability. (Covington represented AOL in this case.) The decision should be beneficial to a variety of services that enable their users to send text messages to cell phones.

The TCPA’s prohibitions include a ban on using an ATDS to call cellular telephones for informational purposes without the prior express consent of the recipient. The FCC and courts have extended the reach of the statute to include text messages. However, the FCC has stated that only equipment that has the capacity to operate “without human intervention” may qualify as an ATDS. The plaintiff in Derby alleged that he received three text messages from an AIM user that were intended for another individual, which the court recognized were “presumably . . . the result of the sender inputting an incorrect phone number.” After the receiving the third message, the plaintiff alleged that he sent a text message to AIM to block future texts from the AIM user, and that he received back a text confirmation of his request.

In analyzing TCPA liability for the first three text messages, the court noted that the plaintiff’s complaint “affirmatively alleges that AIM relies on human intervention to transmit text messages to recipients’ cell phones.” The court followed precedent from other Ninth Circuit district courts rejecting ATDS arguments where the equipment at issue relied on humans to press buttons on phones or manually enter telephone numbers into the system. Since the complaint demonstrated that “extensive human intervention is required to send text messages through defendant’s AIM service,” the court held that the complaint failed to state a claim under the TCPA with respect to the three text messages sent by an AIM user.

The court also analyzed potential TCPA liability for the separate confirmation text message that Derby alleged he had received from AIM. Again citing relevant authority, the court held that “a single message sent in response to plaintiff’s text . . . is not the kind of intrusive, nuisance call that the TCPA prohibits.” The court concluded that Derby, having sent the “block” request from his cell phone, had “knowingly released” his number to AIM and consented to receive a confirmation text from AIM at that number. The court’s opinion advocated for a “common sense” approach to TCPA liability, finding that the statute should not be utilized to “punish the consumer-friendly practice of confirming requests to block future unwanted texts.” Accordingly, the court also dismissed the TCPA claim based on the confirmation text message for failure to state a claim.

ARTICLE BY Caleb Skeath of Covington & Burling LLP

Unprecedented Move: Vox Populi Extends Sunrise Deadline for “.sucks” Domain Registration

In a move that is being interpreted as possible overreaching, Vox Populi, operator of the .sucks domain name, extended the period for registering .sucks during the “sunrise period” without notice. The new deadline to register the .sucks domain name is June 19. Not only is it $2,000 or more to register each .sucks domain name, there is also an annual renewal fee of $2,000.

There is online speculation that Vox’s extension is motivated by a relatively large surge in last minute registrations before the original deadline of May 29. This might indicate that Vox is extending the sunrise period for the purpose of taking additional profits from the registration of this already high priced gTLD.

What is a trademark owner to do?

Some businesses are defensively registering .sucks then “parking” the domain name to prevent others from using it.
Other trademark owners plan to proactively “own” .sucks as a way to receive and curate criticism. This is seen as a way to allow consumers to vet issues and allow companies to manage legitimate issues.
Some trademark owners have decided to not register the domain name.

The decision that is right for individual businesses should take into account a variety of factors uniquely associated with the business and its anticipated future use of the Internet for communicating criticism about goods and/or services.

Vox is promoting the registration of this domain name as being consumer friendly providing a “voice” for the people. Vox retained Ralph Nader and Dr. Martin Luther King (via vintage film clip) as two of their celebrity spokes people to promote .sucks as a “protest word.”

There has been significant controversy regarding the launch of the new domain name .sucks. Foremost is Vox’s pricing strategy. Vox Populi (Voice of the People) is offering the domain name to trademark owners for $2,000 for each registration during the “sunrise period.” The sunrise period is an initial brief period of time, usually about two months, during which a trademark owner has priority to register their trademark with the new gTLD. As an example: “chicagocubs.sucks” could be registered by the Chicago Cubs as the trademark owner during the sunrise period for $2,000. Most new domain names (.coffee, .wedding, .football, .media, etc.) can be registered during their sunrise period for $100 – $200. However, if the Cubs decide to not register .sucks, a party qualifying for a “Consumer Advocate Subsidized” registration (as determined by Vox) can register “chicagocubs.sucks” after the sunrise period for only $9.95.

Many trademark owners are questioning whether Vox’s pricing strategy is an impermissible windfall or free speech. Some parties have already brought this matter to the U.S. Federal Trade Commission (FTC) and the Competition Bureau Canada for consideration. Although no final decision has been reached by either agency, FTC Chairwoman Edith Ramirez provided a preliminary response pointedly reminding Internet Corporation for Assigned Names and Numbers (ICANN), acting on behalf of the concerned parties, that the FTC weighed in on these and similar issues years ago prior to the launch of the new gTLD program. While Chairwoman Ramirez cannot comment on the existence of pending investigations she left the door open for monitoring the actions of registries and taking action in appropriate cases “if we have reason to believe an entity has engaged in deceptive or unfair practices in violation of [the] consumer protection authority.” Chairwoman Ramirez urged ICANN to address these issues internally since the dramatic growth of gTLDs brought on by ICANN’s program cannot be “feasibly addressed on a case-by-case basis” by the FTC.

Over the first 30 years of the publically accessible Internet approximately 220 gTLDs, including country codes were made available. Between 2011 and 2014 ICANN initiated a program to create new gTLDs. The stated goal of these new gTLDs was to be inclusive of new interest groups, non-Latin script languages and to anticipate the expansion of the Internet. This initiative was wildly successful with 1,930 applications being received by ICANN. After significant review of the applications approximately 1,370 new gTLDs were scheduled for launch. As of May 1, 2015, the launch of these new gTLDs is approximately one quarter completed with approximately 1,000 new gTLDs still to launch.

ARTICLE BY Intellectual Property Department of Barnes & Thornburg LLP

Think Your Cellphone Usage is Private? Think Again

In a closely-watched case out of Miami, the Eleventh Circuit Court of Appeals redefined the zone of privacy for cell phone users. As the Tech World was focused on Miami for the second annual eMerge conference, the court issued an opinion permitting prosecutors to obtain records from mobile carriers—without a search warrant—allowing the tracking of an individual’s movements through his or her cell phone’s interaction with cell towers.

In U.S. v. Davis, the Eleventh Circuit, sitting en banc, considered the appeal of Quartavious Davis who was convicted by a Miami jury of participating in seven armed robberies. At trial, the prosecution presented accomplice and eye witness testimony that Davis was involved in seven separate armed robberies in a two-month period. The prosecutors also introduced historical cell tower records obtained from Davis’ mobile carrier for the time period spanning the robberies. The records contained a history of numbers dialed by Davis and the cell tower that connected each call. The prosecutors called a police officer that was able to pinpoint on a map the exact location of each robbery and—using the data obtained from Davis’ mobile carrier—the location of the cell tower that connected Davis’ calls around the time of each robbery. While Davis’ location was not precise, the evidence gave the government a basis to argue that the calls to and from Davis’ cell phone were connected through cell tower locations near the robbery locations. Several witnesses testified that Davis used his cell phone around the time of the robberies. These facts allowed the prosecutors to assert that Davis was necessarily near the locations of the robberies at the times they occurred.

The government acquired Davis’ mobile carrier’s records pursuant to the Stored Communications Act (the “SCA”), under which a governmental entity may require a telephone service provider to disclose “a record … pertaining to a subscriber to or a customer of such service (not including the contents of communications) … if a court of competent jurisdiction” finds “specific and articulable fact showing that there are reasonable grounds to believe” that the records sought are “relevant and material to an ongoing investigation.” Importantly, the government is not required to show probable cause—as it would to obtain a search warrant—before a court will issue an order mandating the release of the records.

Following the guilty jury verdict, Davis appealed on the grounds that that the government violated his Fourth Amendment rights by obtaining his mobile carrier’s records without a search warrant and a showing of probable cause.

The Eleventh Circuit rejected Davis’ arguments on two independent grounds. First, the court held that the government’s acquisition of Davis’ mobile carrier’s records did not constitute a search for purposes of the Fourth Amendment. The court reasoned that Davis did not have ownership or possession of the records, and, moreover, Davis did not have a reasonable expectation of privacy in records of the transmissions between his cell phone and his mobile carrier’s cell phone towers—particularly given that it was information captured in the mobile carrier’s records. Second, the court found that even if the government’s acquisition of the mobile carrier’s records did constitute a search under the Fourth Amendment, the government’s acquisition of the information was nonetheless reasonable because the government relied upon and adhered to the strictures of the SCA.

The full implications of the Davis case still remain to be seen, but the case raises important questions about privacy interests in respect of information transmitted over the airwaves and through the internet. For example—and as several judges concurring with the court’s opinion pointed out—what differentiates a third-party internet site’s tracking of a user’s movements on its site through the use of cookies from a mobile carrier’s tracking of a user’s location? One thing that we can say for certain is that as Miami continues to develop as an incubator for technology, start-ups and innovation, the Davis case certainly will not be the last word from our courts on the intersection of privacy and technology.

ARTICLE BY Naomi R. Alzate & Scott N. Wagner of Bilzin Sumberg Baena Price & Axelrod LLP

FCC Chairman Proposes New TCPA Rules

The FCC is ready to rule on long-standing petitions seeking clarifications of the Telephone Consumer Protection Act and related FCC regulations. On May 27, 2015, FCC Chairman Tom Wheeler circulated a proposed regulatory ruling to fellow commissioners, which would address issues raised in more than 20 pending petitions. The fact sheet summarizing the chairman’s proposal foreshadows bad news for legitimate businesses using automatic telephone dialing technology.

The fact sheet lumps scammer calls like those from perky “Rachel” of the mysterious and ambiguous “Cardholder Services” with those from legitimate businesses. The fact sheet cites the 214,000 consumer complaints about robocalls. No breakdown is given as to how many of these complaints involved con artists and how many related to businesses calling, for example, to collect debt. The tone of the fact sheet provides no comfort. Its preamble states the plan is to “close loopholes and strengthen consumer protections.”

The FCC will vote on the new proposal during its Open Commission Meeting scheduled for June 18, 2015. In the meantime, companies using automatic telephone dialing technology should plan to take action to comply with whatever comes from the FCC. There will be no notice and comment period and whatever passes at the Open Commission Meeting will become effective immediately upon release.

New Provisions

If Chairman Wheeler’s proposals are adopted without changes, the new rules will provide:

Wireless and wired telephone consumers will have the right to revoke their consent to receive calls and text messages sent from autodialers in any reasonable way at any time. Many courts have concluded that consumers have a right to revoke consent. Some have said that revocation must be in writing. Some have said consent, once given, cannot be taken back. If this proposal passes, all courts likely will hold that consent may be revoked in any reasonable way at any time. This rule will have consequences beyond TCPA exposure. For example, it is likely to increase the cost of credit because creditors and debt collectors will have to employ more people to manually dial debtors who have failed to meet their obligations and utter the words, “Stop calling me!”
To prevent “inheriting” consent for unwanted calls from a previous subscriber, callers will be required to stop calling reassigned wireless and wired telephone numbers after a single request. It is not clear from the fact sheet what the individual on the other end of the line must say to notify the caller that they are not the person they seek to reach.
The TCPA currently prohibits the use of automatic telephone dialing systems to call wireless phones and to leave prerecorded telemarketing messages on landlines without consent. The current definition of an “automatic telephone dialing system” under the TCPA is “equipment which has the capacity to (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” A 2003 FCC ruling focused on the use of the word “capacity” in the definition and broadly extended the definition to cover autodialers used to dial specific numbers. This ruling has resulted in inconsistent court decisions over whether a dialer must have a present capacity to so dial or whether a future capacity is sufficient for to trigger TCPA coverage. The new proposal appears to attempt to resolve the ambiguity by amending the definition of an “automatic telephone dialing system” to mean “any technology with the capacity to dial random or sequential numbers.” That is not much help. The industry needs an answer on the present versus future capacity issue. As it stands now, a court could conclude that a smartphone is an automatic telephone dialing system. The tone of the fact sheet suggests that this problem is not going to be solved in a way that is favorable to industry.

Existing Provisions Under TCPA

Chairman Wheeler’s proposal also provides for some very limited and specific exceptions for “urgent circumstances,” which may include free calls or text messages to wireless devices that alert consumers of potential fraud or that remind them of urgent medication refills. Consumers will still have an opportunity to opt-out of these types of calls and texts.

The new proposal will also leave many of the existing provisions of the TCPA intact:
The FTC will continue to administer the National Do-Not-Call Registry to prevent unwanted telemarketing calls
Wireless and home phone subscribers can continue to prevent telemarketing robocalls made without prior written consent
Autodialed and prerecorded telemarketing and information calls and text messages to mobile phones will still require prior consent
Political calls will still be subject to restrictions on prerecorded, artificial voice, and autodialed calls to wireless phones, but will continue to not be subject to the National Do-Not-Call Registry because they do not contain telephone solicitations as defined by FCC regulations
Consumers will still have a private right of action for violations of the TCPA along with statutory penalties

Implications

If adopted, the new regulations may significantly restrict the use of autodialing technologies by business. However, the devil will be in the details. Organizations should review the owners’ manual that came with their dialer. What can it actually do? In other words, what is its present and future capacity? Have those answers ready so you can act when the FCC rules. Companies should also have proper processes and systems in place to meet the consumer opt-out requirements of any new regulations. Policies should address steps to take when a called party claims that the number called no longer belongs to your intended recipient.

One thing is certain about these new rules, they will not stop scammers who use spoofed caller IDs and originate calls from outside of the United States and, therefore, outside of the jurisdiction of the FCC and/or FTC. They will just make to harder and more expensive for legitimate businesses to reach their customers.

ARTICLE BY Chanley T. Howell, Michael C. Lueder & Steven Millendorf of Foley & Lardner LLP

Three Steps to Leverage LinkedIn for Your Law Firm

I have yet to find an attorney who could not benefit from having their profile on LinkedIn. It’s the number one online network for white-collar professionals.

Whether you want to connect with non-competing attorneys, non-legal professionals, or potential clients, the demographics on LinkedIn speak for themselves:

The average age range of a LinkedIn user is 30 to 49
44% of LinkedIn users report an annual income of more than $100,000
50% of members have a college degree
28% have a graduate degree

LinkedIn members are highly educated and affluent. Is this a demographic you would like to reach? For most attorneys, the answer is obvious.

The first step to using LinkedIn is to create a comprehensive profile. Use your entire bio in your profile and be sure to include your keywords in it. In other words, use the exact keywords that you believe prospects or potential referral sources would use to find an attorney with your skill sets.

For example, if you are a business attorney in Omaha it might sound like this:

“John Doe is a Omaha business attorney who works with small business owners and CEOs of mid-sized companies to create comprehensive operating agreements, buy-sell agreements and employment agreements. His Omaha business clients appreciate the fact that John is an attorney who has a strong business background, having owned and operated two different companies, including a high tech company with 25 employees.”

Next, go to the See Who You Already Know on LinkedIn page and import your email contact list. This makes it super simple to connect with people you already know who are also on LinkedIn. In addition, based on your contacts, LinkedIn will suggest relevant contacts for you to connect with on the site.

Then search LinkedIn Groups and join those where your clients and prospects are. Create content — blog posts, free reports, articles, etc. — that will attract their attention. You can also start your own group and invite contacts to join.

The key to utilizing LinkedIn effectively is to be involved and be consistent. You need to commit to investing at least 30-45 minutes every week to log in, post an update or a link to your blog, reach out to your contacts, answer any questions that are sent to you, and make yourself visible. Simply setting up a profile on LinkedIn will not lead to more referrals any more than a having a business card will automatically get you new business.

ARTICLE BY Stephen Fairley of The Rainmaker Institute

Category: Communication Media & Internet

Reasonable Expectation of Privacy: Are You Free To Eavesdrop on Pocket Dials?

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