Contracts 101: Second Circuit Holds That Black Letter Contract Law Precludes Revocation of Consent Claims under the TCPA
The explosion of litigation under the Telephone Consumer Protection Act (“TCPA”) has continued through the second quarter of 2017. Businesses have been anxiously awaiting a ruling from the D.C. Circuit in the appeal of the Federal Communications Commission’s (“FCC”) July 2015 Declaratory Ruling and Order as well as reforms from the FCC itself. As the wait continues, promising developments have been emerging from the courts. On June 22, 2017, the Second Circuit—in a common sense and practical opinion in Reyes v. Lincoln Auto. Fin. Servs., No. 16-2104 (2d Cir.)—acknowledged that contract is king and that a party cannot unilaterally modify its terms. In affirming summary judgment in favor of the defendant, the court cited the Restatement (Second) of Contracts and explained that “[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.” Its opinion in this TCPA action has significant implications for businesses that have standard contracts with their customers. And it is a welcome step in the right direction.
In this action, the plaintiff’s car lease application for a Lincoln MKZ sedan included a clause, as a condition of the agreement, in which he consented to receive automated calls from the defendant. The defendant subsequently called the plaintiff after he defaulted on his lease payments and continued to do so after the plaintiff allegedly revoked his consent to receive them. The plaintiff then filed a lawsuit seeking to recover statutory damages (which range from $500 to $1500 per call) from the defendant under the TCPA. The United States District Court for the Eastern District of New York granted summary judgment in favor of the defendant based primarily on the plaintiff’s failure to prove that he had, in fact, revoked his consent.
Although the Second Circuit affirmed the trial court’s entry of summary judgment, it disagreed with the trial court’s reasoning and instead grounded its opinion in the notion that the TCPA “does not permit a consumer to revoke his consent to be called when that consent forms part of a bargained-for exchange.” It acknowledged that the TCPA is silent as to whether a consumer can revoke her consent and concluded that, “absent express statutory language to the contrary, we cannot conclude that Congress intended to alter the common law of contracts. . . .” The court noted that this case presented a novel question that “has not been addressed by the FCC or . . . by any federal circuit court of appeal,” specifically “whether the TCPA . . . permits a consumer to unilaterally revoke his or her consent to be contracted by telephone when that consent is given, not gratuitously, but as bargained-for consideration in a bilateral contract.” The court found that it does not. Because the plaintiff had provided his consent to be called as an express provision of his lease agreement with the defendant, such consent was irrevocable. The court explained 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.”
The court recognized that, while consent clauses in consumer contracts might render “revocation impossible in many instances,” any related public policy considerations are “for the Congress to resolve—not the courts.” Thus, businesses would be well-advised to include such language in their consumer agreements.