Federal Appeals Court Affirms TCPA Consent Cannot Be Revoked if Granted by Contract

Last week the U.S. Court of Appeals for the 2nd Circuit ruled in Reyes v. Lincoln Automotive Financial Services that a consumer does not have the right to revoke consent to autodialed and/or prerecorded calls to his a mobile device where consent was part of a bargained-for agreement between the consumer and the caller. This decision has broad implications for the flood of cases that have been and will continue to be brought under the Telephone Consumer Protection Act (TCPA) for calls to mobile phones following a consumer’s attempted revocation of consent that was previously granted in connection with a transaction.

In 2012, plaintiff Alberto Reyes entered a car lease with defendant Lincoln Automotive Financial Services that included a provision granting defendant the right to communicate with Reyes in various forms, via “prerecorded or artificial voice messages, text messages, … and/or automatic telephone dialing systems.” Shortly thereafter, Reyes defaulted on the lease and Lincoln called him multiple times in an attempt to cure the breach. Reyes claimed to have mailed Lincoln a letter demanding that the calls to his cell phone stop. At trial, Reyes offered evidence of his transmitting the letter to Lincoln, which did not include the address to which it was mailed, had no postmark, and included an incorrect account number. The trial court in New York granted summary judgement to Lincoln, finding Reyes “(1) had failed to produce sufficient evidence from which a reasonable jury could conclude that he had ever revoked his consent to be contacted by Lincoln, and (2) … the TCPA does not permit a party to legally binding agreement to unilaterally revoke bargained –for consent to be contacted by telephone.”

Reyes appealed. The 2nd Circuit reversed the first finding, holding that Reyes has provided sufficient evidence to allow a jury to decide whether the revocation letter was ever mailed and reached Lincoln. But, the panel agreed on the second point, holding that a party to a negotiated contract may not unilaterally modify that agreement and thus any attempt to revoke consent that was granted in the agreement was ineffective. 

The appellate court acknowledged the FCC’s July 2015 ruling that granted consumers the right to revoke previously provided consent by “any reasonable means,” as well as decisions in the 3rd and 11th Circuits holding that consumers may revoke consent provided in various loan applications. But the panel distinguished those cases by observing that consent in those cases was provided “gratuitously,” whereas Reyes’ consent was a bargained for part of the automobile lease agreement.

In support of its decision, the court cited §892A(5) of the Restatement of Torts, reciting that “[t]he common law is clear that consent to another’s actions can ‘become irrevocable’ when it is provided in a legally binding agreement.” Further, “[i]t is black-letter law that one party may not alter a bilateral contract by revoking a term without the consent of a counterparty.” Noting the TCPA, as enacted, is silent on revocation, the court concluded that, “[a]bsent express statutory language to the contrary, we cannot conclude that Congress intended to alter the common law of contracts in this way.” The court also rejected Reyes’ argument that consent provision was not an essential term of the lease agreement, noting that “a contractual term does not need to be ‘essential’ in order to be enforced as part of a binding agreement” and “as long as the basic conditions of contract formation (e.g., consideration and mutual assent) are met,” a “contract should be construed so as to give full meaning and effect to all of its provisions.”

The court expressed sensitivity to “the argument that businesses may undermine the effectiveness of the TCPA by inserting ‘consent’ clauses of the type signed by Reyes into standard sales contracts, thereby making revocation impossible in many instances.” Ultimately, the court concluded this was a “hypothetical concern … grounded in public policy rather than legal ones … and therefore for Congress to resolve – not the courts.” 

This decision has the potential to be a game changer on the issue of revocation of certain consents under the TCPA. Defendants facing TCPA law suits (at least in the 2nd Circuit) based on a failure to honor consumer revocation requests may now have an opportunity to escape liability by including consent clauses in their customer agreements that are subject to negotiation by the parties. It is less clear whether this decision will provide a haven for web site operators seeking to enforce a terms of use against visitors to the site, as such terms are typically not expressly agreed to by consumers. Questions also remain as to whether an online transaction by a consumer that requires agreement to the seller’s terms would enjoy the same level of enforcement if the consumer has no ability to negotiate such terms. Further, the ruling may not have any effect on the revocability of prior express written consent that the FCC requires under the TCPA rules for prerecorded telemarketing and autodialed telemarketing to cell phones, as that consent is required (among other things) to be clearly and conspicuously disclosed, and to inform the consumer that consent is not a condition to the purchase of any good or service.

It will also be interesting to see how and whether other circuits address this issue and how the D.C. Circuit rules on the industry appeal of the FCC’s 2015 Omnibus ruling which reaffirmed consumers’ right to revoke TCPA consent, an issue that has been briefed and argued to that court. It also remains to be seen whether the FCC will issue any ruling(s) that would prevent “contractual” consent from being irrevocable. In any event, this decision provides companies that are potentially subject to TCPA law suits filed by serial plaintiffs and law firms with a potentially powerful shield to wield in anticipation and defense against such claims.