Locke Lord QuickStudy: Reyes v. Lincoln Automotive Financial Services: Second Circuit Rules that TCPA Does Not Permit Revocation When Consent is Provided as Consideration in a Binding Contract


In Reyes v. Lincoln Automotive Financial Services, No. 16-2104-cv, 2017 WL 2675363 (2d Cir. June 22, 2017), the Second Circuit Court of Appeals held that the TCPA does not permit a consumer to revoke his or her consent to be called when that consent was provided as consideration in a binding contract. The decision is based upon the principle that one party may not unilaterally alter a contract by revoking a term without the consent of a counterparty. This ruling is significant because it has the potential to significantly reduce TCPA liability for companies that incorporate “consent” clauses into their agreements with consumers. 

Plaintiff alleged TCPA violations even though he consented to the communications in his automobile lease agreement.

The Reyes case arose from Alberto Reyes Jr.’s automobile lease from Lincoln Automotive Financial Services (“Lincoln”). As a condition of the lease agreement, Reyes consented to receive manual or automated telephone calls from Lincoln. Specifically, the applicable lease provision provided: 

    You [Reyes] also expressly consent and agree to Lessor [Ford], Finance Company, Holder and their affiliates, agents and service providers may use written, electronic or verbal means to contact you. This consent includes, but is not limited to, contact by manual calling methods, prerecorded or artificial voice messages, text messages, emails and/or automatic telephone dialing systems. You agree that Lessor, Finance Company, Holder and their affiliates, agents and service providers may use any email address or any telephone number you provide, now or in the future, including a number for a cellular phone or other wireless device, regardless of whether you incur charges as a result.

Lincoln called Reyes regularly after he defaulted on his lease obligations, and continued to do so after Reyes revoked his consent to be called. Reyes filed suit in the Eastern District of New York, alleging violations of the TCPA and seeking $720,000 in damages. 

The Second Circuit distinguished between consent given freely and unilaterally and consent given as bargained-for consideration in a contract. 

The District Court granted summary judgment to Lincoln, ruling in pertinent part that the TCPA does not permit a party to a legally binding contract to unilaterally revoke bargained-for consent to be called. Reyes appealed and argued that the TCPA, construed in light of its broad remedial purpose to protect consumers from unwanted phone calls, does permit a party to revoke consent to be called, even if that consent was given as part of a contractual agreement. 

The Second Circuit rejected Reyes’s argument and distinguished previous rulings from other circuits and the FCC that held merely that a party can revoke prior consent under the terms of the TCPA. The Second Circuit observed that those cases involved instances of a consent given freely and unilaterally and not as consideration for a binding contract. For example, in Gager v. Dell Financial Services, 727 F.3d 265, 267-68 (3d Cir. 2013) the plaintiff consented to be called in an application for a line of credit that she submitted to the defendant. In Osorio v. State Farm F.S.B, 476 F.3d 1242, 1253 (11th Cir. 2014) the plaintiff consented to receive phone calls from the defendant in an application for auto insurance. In 2015, the FCC relied on these two cases in ruling that “prior express consent” is revocable under the TCPA. See In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 30 F.C.C. Rcd. 7961, 7993-94 (2015). The Second Circuit observed that the critical distinction in Gager and Osorio was that the plaintiffs provided voluntary consent to be contacted in connection with loan and insurance applications, respectively, but the consent was not given in exchange for consideration or incorporated into a binding legal agreement, and therefore could be revoked by the consenting party at any time.

The Second Circuit found that the case before it presented a different scenario. Reyes’s consent to be contacted by telephone was not provided gratuitously.  Consent was included as an express provision of a contract to lease an automobile from Lincoln. Under such circumstances, “consent” as that term is used in the TCPA, is not revocable because the common law is clear that consent to another’s actions can become irrevocable when it is provided in a legally binding agreement, in which case any attempted termination is not effective. The Second Circuit observed that it is black-letter law that one party may not alter a bilateral contract by revoking a term without the consent of a counterparty and ruled that the District Court properly granted summary judgment to Lincoln.

The Second Circuit acknowledged that as a result of its ruling, businesses may undermine the effectiveness of the TCPA by inserting “consent” clauses of the type signed by Reyes into standard sales or other consumer contracts, thereby making revocation impossible in many instances. But the Second Circuit observed that this hypothetical concern, if valid, is grounded in public policy considerations rather than legal ones; if the abuse came to pass, it would be for the Congress to resolve—not the courts.

Impact: Businesses can limit TCPA exposure by memorializing a consumer’s consent within the contract. 

As the Second Circuit acknowledged, this specific issue does not appear to have been previously addressed by any other federal circuit court or the FCC. Accordingly, the decision in Reyes is only binding on federal district courts in Connecticut, New York, and Vermont. As to the other federal circuits, the decision may be persuasive authority but is not binding. It remains to be seen whether the other circuits will adopt the Second Circuit’s holding. As the Second Circuit noted, there is also the possibility that the Congress could act to prohibit such clauses in consumer contracts if it finds that the clauses are undermining the effectiveness of the TCPA.

In the meantime, however, businesses who make non-telemarketing calls to consumers as part of their business operations—especially those who have faced TCPA lawsuits in the past—should consider adding a provision similar to that contained within Lincoln’s lease agreement within their consumer contracts to limit their exposure to TCPA liability.