2nd Cir. Holds Consumer Cannot Unilaterally Revoke TCPA Consent Provided in Binding Contract

The U.S. Court of Appeals for the Second Circuit recently concluded that a consumer’s consent to receive manual or automated telephone calls is irrevocable under the Telephone Consumer Protection Act (TCPA) when the consent was included in a binding contract.

The Second Circuit described the issue as one not previously addressed by the Federal Communications Commission (FCC) or any court of appeal – i.e., “whether the TCPA also permits a consumer to unilaterally revoke his or her consent to be contacted by telephone when that consent is given, not gratuitously, but as bargained-for consideration in a bilateral contract.”

The Court held that consent given under those circumstances is irrevocable.  The Court reached its decision by analyzing the issue as one of contract law, and determined that one party to the contract cannot unilaterally revoke a term of the contract without the consent of the other party.

A copy of the opinion in Reyes v. Lincoln Automotive Financial Services is available at:  Link to Opinion.

The plaintiff leased an automobile from a car dealership.  The defendant finance company financed the lease, and in the lease application the plaintiff provided his cellular phone number and agreed to a number of provisions within the lease.  One such provision authorized the defendant finance company to call the plaintiff, and included the following language:

You [plaintiff] also expressly consent and agree to Lessor [dealership], Finance Company, Holder and their affiliates, agents and service providers may use written, electronic or verbal means to contact you. This consent includes, but is not limited to, contact by manual calling methods, prerecorded or artificial voice messages, text messages, emails and/or automatic telephone dialing systems. You agree that Lessor, Finance Company, Holder and their affiliates, agents and service providers may use any email address or any telephone number you provide, now or in the future, including a number for a cellular phone or other wireless device, regardless of whether you incur charges as a result.

After the plaintiff defaulted on the lease, the defendant finance company called the plaintiff numerous times in an attempt to cure the default.  The plaintiff alleged that he then wrote a letter to the defendant requesting that the defendant stop calling his cell phone.  The defendant contended it never received the letter, and it continued to call the plaintiff even after he allegedly revoked his consent to be called.

The plaintiff filed a complaint against the defendant, alleging the defendant violated the TCPA, 47 U.S.C. § 227, et seq., by calling him after he revoked his consent.  The defendant filed a motion for summary judgment, and the district court granted the motion, holding that (1) the plaintiff had failed to produce sufficient evidence from which a reasonable jury could conclude that he had ever revoked his consent to be contacted by the defendant, and (2) that, in any event, the TCPA does not permit a party to a legally binding contract to unilaterally revoke bargained-for consent to be contacted by telephone.  The plaintiff appealed both rulings.

On appeal, the plaintiff contended (1) that he introduced sufficient evidence to create a triable issue of fact as to whether he placed the defendant on notice of his revocation of consent, and (2) that the TCPA, when construed in light of its broad remedial purpose to protect consumers from unwanted phone calls, allows a party to revoke consent to be called, even if that consent was given as part of a contractual agreement.

The Second Circuit addressed both issues.

As to the issue of the sufficiency of the evidence of revocation, the Court concluded that the plaintiff had introduced sufficient evidence to create an issue of fact on whether he revoked his consent.  More specifically, the Second Circuit held that the plaintiff (i) testified in his deposition that he sent the letter to the defendant, (ii) provided an affidavit making the same assertion, and (iii) introduced a copy of the letter.

According to the Court, when this evidence is viewed in the light most favorable to the non-moving party, it was sufficient to create a genuine issue of fact.  Thus, the Court concluded that the district court erred in granting the defendant summary judgment on that issue.

However, with regard to the issue of whether the consent can be revoked when it is given as a term in a valid contract with the calling party, the Second Circuit concluded that the consent is irrevocable.

The Court first analyzed a few court of appeals rulings in which the courts concluded that consumers were permitted to revoke their consent under the TCPA.  The Court observed that those court of appeals opinions formed the basis of the FCC’s 2015 Ruling in which the FCC established that “prior express consent” is revocable under the TCPA.  See In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 30 F.C.C. Rcd. 7961, 7993-94 (2015).

The Second Circuit then distinguished those previous opinions and the FCC’s 2015 Ruling, finding that they considered the narrow issue of whether the TCPA allows a consumer who has freely and unilaterally given consent to be contacted to subsequently revoke that consent.  According to the Court, the circumstances in this case were different, and the issue was “whether the TCPA also permits a consumer to unilaterally revoke his or her consent to be contacted by telephone when that consent is given, not gratuitously, but as bargained-for consideration in a bilateral contract.”

The Court recognized that the term “consent” had an established meaning under common law, but that consent was not always revocable under the common law.  The Second Circuit then compared the use of consent in tort and contract law.  According to the Court, under tort law the accepted meaning of consent was a “gratuitous action” or a “voluntary yielding.”  The Court pointed out that the issues raised in the prior opinions and the 2015 FCC ruling addressed situations where the consumer voluntarily gave consent to be contacted.

Under contract law, consent is not always revocable.  The Second Circuit observed that the plaintiff’s consent to be contacted by telephone was not provided gratuitously, but rather it was included as an express provision of a contract to lease an automobile from defendant. Under such circumstances, “consent,” as that term is used in the TCPA, is not revocable. “The common law is clear that consent to another’s actions can ‘become irrevocable’ when it is provided in a legally binding agreement, Restatement (Second) Of Torts § 892A(5) (Am. Law Inst. 1979), in which case any ‘attempted termination is not effective,’” id. at cmt. i.

The Second Circuit continued, “it is black-letter law that one party may not alter a bilateral contract by revoking a term without the consent of a counterparty.” See Restatement (Second) Of Contracts § 287 cmt. a (Am. Law Inst. 1981).

The Court concluded that in the absence of express statutory language to the contrary, it could not conclude that Congress, in enacting the TCPA, intended to alter the common law of contracts to allow unilateral alteration of a term contained in a contract.

The Second Circuit rejected the plaintiff’s argument that the consent provision was not an “essential term” of his lease.  According to the Court, all essential and non-essential terms of the contract are enforceable as long as the required elements of contract formation are present and the contract is valid.

The Court also rejected the plaintiff’s argument that the TCPA is a remedial statute enacted to protect consumers and the issue of consent and revocation should be construed to further that purpose.  “It was well-established at the time that Congress drafted the TCPA that consent becomes irrevocable when it is integrated into a binding contract, and we find no indication in the statute’s text that Congress intended to deviate from this common-law principle in its use of the word consent.”

Finally, the Second Circuit acknowledged that some businesses may try to undermine the TCPA by including consent provisions like the one in the plaintiff’s lease into their standard contracts.  According to the Court, however, this issue is one grounded in public policy considerations, not legal issues, and, as a result, would need to be addressed by the legislature.

Accordingly, the Second Circuit affirmed the trial court’s granting of summary judgment in favor of the defendant finance company.

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Mickey Lee practices in Maurice Wutscher’s Commercial Litigation, Consumer Credit Litigation and Employment Litigation groups. He has substantial experience representing clients in class action litigation, Fair Credit Reporting Act litigation, labor and employment law, and various types of commercial litigation. He has co-chaired several bench and jury trials in state and federal court and has authored numerous appellate briefs and argued numerous cases before the Indiana Court of Appeals and the United States Court of Appeals for the Seventh Circuit. He is Vice President of the Indianapolis Chapter of the Federal Bar Association, and a Board member of the Johnson County Indiana University Alumni Association. Mickey and his wife, Melissa, are active members of the Riley Society with the Riley Children’s Foundation and the Mended Little Hearts of Indianapolis. Mickey received his Juris Doctor from the Indiana University Robert H. McKinney School of Law, and obtained his Bachelor of Science degree from Indiana University – Bloomington.