Courts deem CallFire a common carrier, setting a major precedent at intersection of telecom and tech law

By Michael Carney , written on February 27, 2015

From The News Desk

CallFire scored a legal victory today that could have significant downstream implications for the broader technology and telecom industries.

In the case Rinky Dink, Inc. vs. Electronic Merchant Systems, heard in the US District Court for the Western District of Washington, two plaintiffs claimed that CallFire had violated the Telephone Consumer Protection Act (TCPA), the Announcing Device (WADAD) statute, and Washington State law by facilitating unwanted prerecorded sales calls by a vendor selling credit card processing services.

CallFire attorneys from Arent Fox successfully persuaded the court that the cloud-based telephony company merits common carrier status, the same designation afforded to companies like AT&T and Verizon, which would render it immune from TCPA liability. The defense further argued that CallFire’s customers are the ones who initiate the calls and thus who determine the content, timing, and recipient of the calls transmitted via its platform. CallFire's system goes so far as to prevent its users from unintentionally contacting consumers at inopportune times (like the middle of the night) or from contacting those listed on the do not call list. (These systems can be overridden, an ability that is intended for use in cases of emergency.)

“This decision should go a long way in eliminating harassing class action litigation, while enabling innovative technology companies like CallFire to focus on growing their businesses and creating jobs,” said Arent Fox partner and lead counsel on the CallFire case, Michael B. Hazzard.

The reason this case could be a victory for more than just CallFire, is that other large technology companies, including Twitter, have recently come under TCPA scrutiny. The 140 character public social network was hit with a $5 million putative class action in California last June, based on accusations that the company sent unsolicited text messages. At issue was the fact that the plaintiffs had recently come into possession of recycled phone numbers the previous owners of which had opted into receiving such marketing.

Like in the CallFire case, Twitter is merely a conduit between its clients and the recipients of their messages. Twitter previously contributed to the successful defense of the Los Angeles Lakers against similar accusations. In a motion to dismiss the case, Twitters’s counsel writes:

This case is another in a growing line of abusive, putative class action lawsuits brought under the Telephone Consumer Protection Act. The statute, intended to curtail certain kinds of invasive telemarketing practices, has been co-opted by the plaintiffs’ bar to seek windfalls for practices and from companies that Congress never intended to regulate.
Path, which was a party to the same Lakers case, joined Twitter in filing a joint amicus brief in California’s Ninth Circuit calling these TPCA actions “an extortionist club.”

The Los Angeles Clippers and Buffalo Bills professional sports franchises have previously reached $5 million and $3 million settlements, respectively, in similar TCPA cases.

“These laws were written in the early 1990s, pre-commercial internet,” CallFire Chairman and CEO Ron Burr says. “They never could have contemplated where this would end up.”

It’s unclear whether today’s decision will ultimately protect non-telecom companies like Twitter and Path from future TCPA actions, Burr adds, but the fact that this category of lawsuit will no longer be viewed as low-hanging fruit among litigators should certainly help. But for fellow FCC CLEC-licensed companies like Twilio and Skype, this week’s decision, which classifies these companies as common carriers indistinguishable legally from traditional telecom network operators, is a watershed moment for the industry.

Like any legal decision, this one is subject to further appeal, should the plaintiffs choose to go that route. But Burr is cautiously optimistic that that not only won’t there be an appeal in this case, but future frivolous cases that may have been brought in this space may be avoided.

“The courts have been resisting making a ruling on this, but they finally acknowledging that technology has evolved beyond just the guys who have copper wire in the ground,” Burr says. “The definition of being a telephone carrier has evolved and we are in the next era of our industry.”