Cases of Note
FCC Proposes New Rule to Regulate AI-Generated Content in Calls and Texts
On August 7, 2024, the FCC adopted a Notice of Proposed Rulemaking (NPRM) that seeks to implement new rules regarding artificial intelligence (AI) in calls and texts. The proposed rule defines the term "AI generated call," requires callers using AI-generated content to make certain disclosures, and provides exemptions for individuals with speech or hearing disabilities.
The NPRM defines "AI generated call" as "a call that uses any technology or tool to artificially generate a voice or text using computational technology or other machine learning, including predictive algorithms, and large language models, to process natural language and produce voice or text content to communicate with a called party over an outbound telephone call." The FCC seeks comment on how to ensure that this definition keeps pace with rapidly evolving AI-technologies.
The NPRM also proposes disclosure requirements for callers using AI-generated content. The TCPA already requires that a caller obtain a consumer's prior express consent before making an artificial or prerecorded voice call or an autodialed call. Now, a caller sending AI-generated artificial or prerecorded voice messages or autodialed text messages would have to include a clear and conspicuous disclosure that the consumer's consent to receive such calls or texts may include consent to receive AI-generated content. Moreover, if a call requires prior express written consent and contains AI-generated content, the consumer's written consent must include a clear and conspicuous disclosure authorizing the caller to use AI-generated content. Likewise, calls that include an AI-generated voice must disclose that the call is using AI-generated technology at the beginning of the call.
The proposed rule would exempt individuals with a speech or hearing disability who use technology designed to facilitate their ability to communicate over the telephone from these requirements. The NPRM seeks comment on whether it could alternatively define "artificial and prerecorded voice" in a way that excludes technologies designed to assist individuals with disabilities in communicating by voice over the telephone.
The NPRM seeks comment on the development and deployment of technologies that detect, alert consumers of, and block fraudulent or AI-generated calls, as well as the legal, technical, and practical barriers to implementing such technologies.
The FCC adopted this NPRM during its open meeting on August 7, 2024, and seeks additional comment and information on these new technologies in its Notice of Inquiry. Comments and reply comments are due 30 and 45 days, respectively, after the proposed rule is published in the Federal Register.
California Court Dismisses TCPA Claim Due to Plaintiff's Lack of Standing and Failure to Sufficiently Allege Liability
The District Court for the Southern District of California dismissed a TCPA claim because Plaintiff failed to establish Defendant Nano Hearing Tech Opco's direct or vicarious liability and because Plaintiff lacked standing to bring the claim or seek injunctive relief.
Plaintiff alleged that she received two phone calls promoting Defendant's products in January 2023, to a number listed on the National Do Not Call Registry. Plaintiff also alleged that she received another phone call in February 2023 from someone named Daniel Houston, who said he worked for Life Care. Houston transferred Plaintiff to someone named Ken, who gave Plaintiff a callback number. Plaintiff alleged that this callback number directed her to Defendant.
Plaintiff filed suit on behalf of herself and a putative class of similarly situated individuals for declaratory and injunctive relief and damages. Defendant moved to dismiss Plaintiff's complaint and to strike the class allegations. The Court granted both motions.
The Court granted Defendant's motion to dismiss for Plaintiff's failure to state a claim because Plaintiff failed to establish Defendant's liability under either a direct or a vicarious liability theory.
Direct liability under the TCPA applies only to a defendant who makes or initiates a call by taking the steps necessary to physically place the call. Plaintiff alleged that the callers' phone numbers belonged to Defendant or its agent because the callers promoted Defendant's products and because one of the calls was transferred to a number that connected to Defendant. The Court found these allegations insufficient to establish that Defendant directly made the calls.
Vicarious liability under the TCPA applies to a defendant who has an agency relationship with a third-party caller. A plaintiff can establish vicarious liability under three theories of agency: (1) actual authority; (2) apparent authority; and (3) ratification. Plaintiff failed to establish actual or apparent authority because she did not allege that any of the callers identified themselves as Defendant's agents or had any interactions with Defendant. Plaintiff also failed to establish ratification because this theory requires an existing agency relationship, which Plaintiff failed to demonstrate.
The Court also granted Defendant's motion to dismiss because Plaintiff lacked standing. In order to have standing to bring a claim, a plaintiff must show that the defendant caused the plaintiff's injury and that a judgment in favor of the plaintiff would redress the plaintiff's injury. Plaintiff in this case failed to establish both causation and redressability because Plaintiff did not allege facts that showed that Defendant or its agent placed any of the calls to Plaintiff.
Plaintiff also lacked standing to seek injunctive relief because she failed to allege any likelihood of future injury, especially since she did not allege any additional calls after February 2023.
Finally, the Court granted Defendant's motion to strike class allegations because Plaintiff's class definition was overly broad and because Plaintiff did not sufficiently allege that she fell into her own class definition.
Brown v. Nano Hearing Tech Opco, LLC, 2024 WL 3367536, 2024 U.S. Dist. LEXIS 120371 (S.D. Cal. July 9, 2024).
New York Court Determines Cellular Phones Can Be "Residential" But Dismisses TCPA Claim for Failure to Plead Agency Relationship
The District Court for the Southern District of New York dismissed pro se plaintiff Joshua Cacho's TCPA claim for failure to state a claim alleging either direct or vicarious liability against defendant law firm McCarthy & Kelly LLP. In so holding, the Court determined that cellular phones may be considered residential and subject to liability under the TCPA's Do-Not-Call provisions.
Plaintiff allegedly received thirty-five calls from a purported telemarketing service hired by Defendant on his cell phone number in July 2023, despite it being registered on the National Do-Not-Call Registry. Plaintiff also alleged that he used his cell phone primarily for personal, household purposes and had not owned a landline phone for the past fifteen years.
Defendant moved to dismiss Plaintiff's claims on three alternative grounds: first, Plaintiff's cellphone use is not covered under section 227(c) of the TCPA because he is not a "residential telephone subscriber." Second, the calls were not solicitations because they were not made to encourage the purchase of services. Third, and finally, the complaint does not adequately allege vicarious liability or an agency relationship between Defendant and the telemarketer.
The Court disagreed with Defendant's first argument and indicated its alignment with the Federal Communications Commission's interpretation of the TCPA, that a cell phone user can be a residential subscriber, even after considering Loper Bright Enterprises v. Raimondo's abrogation of Chevron deference. The Court reasoned that both the text and purpose of the TCPA supported reading the word "residential" in the statute as a distinction between subscriber type and function, rather than between specific types of telephone technology.
Defendant's second argument that the calls were not solicitations also failed to persuade the Court. Defendant argued that because the purpose of the calls was to convince Plaintiff to allow McCarthy & Kelly to represent him on a contingency fee basis, there was no purchase of services involved. The Court rejected this contention and found that the calls were solicitations, because encouraging a Plaintiff to direct a portion of a future right to payment, (even a payment coming from a third-party) in exchange for legal representation was still an encouragement to purchase a service.
However, the Court ultimately dismissed Plaintiff's claims without prejudice for failure to allege direct or vicariously liability on the part of Defendant. The Court was unconvinced by Plaintiff's conclusory allegations that Defendant had control over the actions of the telemarketer making the calls and provided lead-qualifying instructions to it. Without more specific allegations of Defendant's words or conduct indicating the existence of an agency relationship, the Court held that Plaintiff had not pled enough facts to support that the telemarketer acted with actual or apparent authority from Defendant.
Cacho v. McCarthy & Kelly LLP, 2024 WL 3293628, 2024 U.S. Dist. LEXIS 117544 (S.D.N.Y. July 3, 2024).
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