TCPA Class Action Ruling: Nonprofits Acting With Dual Purposes

The TCPA “nonprofit exemption” may not apply to a nonprofit entity acting: (1) on behalf of a for-profit entity and/or (2) with dual commercial and non-commercial purposes.

In this putative class action, Plaintiff challenges Defendant’s alleged practice of making unsolicited telemarketing calls to individuals who registered their phone numbers on the national Do Not Call registry (“DNC”).  Defendant operates a nonprofit company and “purports to offer credit counseling services and debt management plans on a nonprofit basis.”  Plaintiff asserts that another entity: (1) provides back-office and administration services to Defendant, (2) exerts control over Defendant’s telemarketers, and (3) generates income from Defendant’s telemarketing activities.  Pinn v. Consumer Credit Counseling Foundation, Inc., No. 22-cv-04048, 2023 WL 21278 (N.D. Cal. Jan. 3, 2023).

Plaintiff asserted class action claims under the Telephone Consumer Protection Act, 47 U.S.C. § 227(c)(5) (“TCPA”).  Defendant filed a motion to dismiss because the calls were to promote Defendant’s tax-exempt nonprofit “debt counseling services.”  The District Court denied the motion and permitted the case to proceed by analyzing the dual commercial and non-commercial purpose of a nonprofit entity’s communications:

    • TCPA’s regulation: The TCPA authorizes “[a] person who has received more than one telephone call within any 12-month period by or on behalf of the same entity in violation of the regulations prescribed under this subsection” to bring an action for injunctive relief and/or actual or statutory damages of up to $500 per violation.  47 U.S.C. § 227(c)(5).  The corresponding regulations provide in relevant part that “[n]o person or entity shall initiate any telephone solicitation to … [a] residential telephone subscriber who has registered his or her telephone number on the national do-not-call registry of persons who do not wish to receive telephone solicitations that is maintained by the Federal Government.” 47 C.F.R. § 64.1200(c)(2).  This prohibition also applies to wireless telephone numbers.  47 C.F.R. § 64.1200(e).  A telephone solicitation “does not include a call or message … [b]y or on behalf of a tax-exempt nonprofit organization.”  47 C.F.R. § 64.1200(f)(15)(iii) (emphasis added).
    • 2003 FCC Order: The Federal Communications Commission (“FCC”), in a 2003 order, states concerns about calls made jointly by nonprofit and for-profit organizations,” including that the exemption “frequently has been used to veil what is in reality a commercial venture.”  In Re Rules & Reguls. Implementing the Tel. Consumer Prot. Act of 1991, 18 F.C.C. Rcd. 14014, 14087-88 (2003) (emphasis added).
    • 2005 FCC Order: The FCC, in a 2005 order, states that “[i]n circumstances where telephone calls are initiated by a for-profit entity to offer its own, or another for-profit entity’s products for sale–even if a tax-exempt nonprofit will receive a portion of the sale’s proceeds–such calls are telephone solicitations as defined by the TCPA.”  In the Matter of Rules & Reguls. Implementing the Tel. Consumer Prot. Act of 1991, 20 F.C.C. Rcd. 3788, 3800 (2005).
    • Massaro/PETA ruling: In Massaro v. Beyond Meat, Inc., 3:20-cv-510, 2021 WL 948805, at *6 (S.D. Cal. March 12, 2021), the court ruled that the nonprofit exemption did not apply, at the pleadings stage, to a nonprofit – People for the Ethical Treatment of Animals (“PETA”) – which could be held liable under the TCPA for sending marketing text messages promoting alternative animal food products because the text messages were made with dual commercial and non-commercial purposes.  PETA denied that it received compensation from Beyond Meat for the marketing messages, but the court was obligated to accept the allegations as true for purposes of the motion to dismiss.  See also, Aranda v. Caribbean Cruise Line, Inc., 179 F. Supp. 3d 817, 828 (N.D. Ill. 2016) (analyzing a different TCPA exemption for calls made for a non-commercial purpose).

In sum, courts will not automatically dismiss a TCPA action against a nonprofit entity and, instead, the court will analyze the commercial and noncommercial purposes of the communications.


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