Insights

The U.S. Court of Appeals for the Ninth Circuit closed out 2012 by amending two opinions notable for their interpretations of the Telephone Consumer Protection Act. Unfortunately, in amending minor aspects of the original Chesbro v. Best Buy Stores, L.P. opinion, the court missed an opportunity to correct a significant misstep in its original opinion. As a result, notwithstanding the amended Chesbro opinion issued on December 27, 2012, we are left with the court’s dubious conclusion that a prerecorded message providing information about a retailer’s reward program is considered a sales call for purposes of TCPA compliance analysis. (In the other amended opinion, Meyer v. Portfolio Recovery Associates, LLC, the court did a better job of correcting an earlier misinterpretation of the TCPA’s consent standard.)

When Michael Chesbro made a purchase from Best Buy, the retailer enrolled him in its rewards program. (Chesbro disputed whether he knowingly enrolled.) Best Buy called Chesbro on several occasions to deliver prerecorded messages providing information about the program, including changes in program terms. In one type of call that the court addressed, Best Buy provided a reminder that earned rewards points were going to expire. In a second type of call, Best Buy provided information about various changes to the rewards program, including how to accumulate and redeem points.

After receiving several of these calls from Best Buy, Chesbro asked that the company not place any more marketing calls to him. He did so by using prompts in Best Buy’s automated touch-tone dialing system and by contacting a local Best Buy store directly to make a company-specific do-not-call request. He also filed a complaint with the Washington Attorney General’s Office regarding the calls. Best Buy later called Chesbro again with another message regarding the terms of the rewards program. In response, Chesbro sued Best Buy, alleging violations of the TCPA and the Washington Automatic Dialing and Announcing Device Act. The trial court granted Best Buy’s summary judgment motion, finding that the calls at issue were not sales contacts and were therefore outside the scope of the standards established by the TCPA and the Washington ADAD Act. Chesbro appealed, and the Ninth Circuit reversed, finding that the calls were placed for marketing purposes.

As noted above, Best Buy’s calls to Chesbro provided information about the expiration of benefits earned through the rewards program and changes to the program. Although the messages did not include an express marketing message, the court nevertheless deemed them advertising under the TCPA and commercial solicitations under the Washington ADAD Act. The court, claiming to apply common sense in its analysis, noted the following in support of its conclusion: (1) the calls urged consumers to redeem program benefits; (2) the calls directed consumers to a website for further engagement with the rewards program; and (3) the calls thanked consumers for shopping at Best Buy. The court also noted that redeeming benefits required making additional purchases. The court concluded: “Neither the statute nor the regulations require an explicit mention of a good, product, or service where the implication is clear from the context. . . . Because the calls encouraged recipients to engage in future purchasing activity, they also constituted telemarketing.”

Given the scripts of the messages at issue, the appellate court’s reasoning seems somewhat weak. Even assuming that a call to a customer does not need to include an explicit sales pitch to be deemed a sales call, businesses should be able to contact their customers to discuss their relationship without every such call being regulated as telemarketing. This broad “sales” standard, however, seems to be the Ninth Circuit’s position. If calls about changes to the terms of a rewards program are sales calls, it is hard to imagine what types of calls a business could place to its customers that would avoid regulation as telemarketing.

Based on this interpretation, the court concluded that Best Buy’s calls violated the TCPA prohibition on prerecorded sales calls absent the called consumer’s consent and the TCPA’s do-not-call provisions. It also concluded that Best Buy’s calls violated the Washington ADAD Act’s prohibition on using automatic dialing and announcing devices for purposes of commercial solicitation as well as Washington’s do-not-call standard. Callers might disagree with the court’s conclusions in Chesbro, but callers operating in the Ninth Circuit states should definitely note the court’s expansive interpretation of what constitutes marketing under the TCPA and Washington law.

The court’s amendments to its original opinion changed very little. Rather than revisit the substance of the earlier opinion, the court tweaked its wording in an apparently concerted effort to track statutory and regulatory definitions and standards more precisely.

Michael A. Goodman is a partner in the Washington, D.C., office of Hudson Cook, LLP. Mike can be reached at 202-327-9704 or by email at mgoodman@hudco.com.