Why Pre-Lit Settlement Works: Most TCPA claims settle before litigation. The math is simple: $500-$1,500 per violation means even small campaigns create six-figure exposure. Settling early avoids litigation costs, discovery risk, and potential class certification.
The Term Sheet Approach
Start with a non-binding term sheet before drafting a formal settlement agreement. This approach:
Establishes framework without committing to specific language
Identifies deal-breakers early before investing in drafting
Creates negotiation leverage - you can walk away easier
Documents good faith if litigation becomes necessary
Speeds resolution - agreement on terms, then lawyers paper it
Key Negotiation Levers
1. Payment Amount
Anchor low: Start at 10-20% of statutory exposure
Per-contact vs. lump sum: Lump sum avoids disputes over count
Payment timing: Immediate payment vs. installments (discount for lump sum)
Tax treatment: Damages vs. attorneys' fees allocation matters for 1099 reporting
2. Release Breadth
Narrow release: Only claimant's specific claims
Broad release: All TCPA-related claims for defined period
Class waiver: Claimant agrees not to participate in class action
Trade-off: Broader release = higher payment
3. Non-Monetary Terms
Confidentiality: Silence has value - premium for NDA
Non-disparagement: Mutual or one-way
Future contact prohibition: Add to internal DNC
Compliance undertaking: Agree to fix process (costs you nothing if you're fixing anyway)
When NOT to Settle
Red Flags - Consider Rejecting Settlement If:
Strong consent defense: You have timestamped, clear consent records
Professional plaintiff pattern: Claimant has filed 10+ TCPA suits
Revocation timing issues: Claimant revoked consent ambiguously or not at all
Reassigned number defense: Called old customer, number was reassigned
ATDS definition: Post-Facebook v. Duguid, many dialers don't qualify
Settlement would invite more claims: Word gets out, other recipients demand same
Settlement Decision Matrix
Factor
Settle
Fight
Consent documentation
Weak/missing
Strong timestamped records
Contact volume
High (100+ calls/texts)
Low (1-5 contacts)
Post-opt-out contacts
Yes (willful risk)
None after STOP
Claimant profile
First-time complainant
Serial TCPA plaintiff
Dialer technology
Random/sequential dialer
Manual dialing or click-to-call
Demand amount
Reasonable (litigation cost+)
Excessive relative to exposure
Pre-Lit Settlement Timeline
Typical Pre-Lit Resolution Timeline:
Day 1-3: Receive demand, triage, preserve evidence
Day 4-7: Internal investigation, exposure calculation
Day 7-14: Initial response, open dialogue
Day 14-21: Term sheet exchange, negotiation
Day 21-30: Settlement agreement drafting
Day 30-45: Execution, payment, release effective
Release Scope
Critical Concept: The release is the most important part of any TCPA settlement. A poorly drafted release can leave you exposed to additional claims from the same claimant or waive your ability to pursue indemnity from vendors.
Known vs. Unknown Claims
Known Claims Release
Covers only the specific claims identified in the demand letter or complaint:
California law presumes you cannot release claims you don't know about. To release unknown claims, you must expressly waive Civil Code Section 1542:
Section 1542 Waiver Language:
Releasor expressly waives and relinquishes all rights and benefits under Section 1542 of the California Civil Code, which provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY."
Releasor acknowledges that Releasor may hereafter discover claims or facts in addition to or different from those which Releasor now knows or believes to exist with respect to the subject matter of this release and which, if known or suspected at the time of executing this release, may have materially affected this settlement. Nevertheless, Releasor hereby waives any right, claim, or cause of action that might arise as a result of such different or additional claims or facts.
State Law Variations: Many states have similar statutes. If claimant is not in California, research their state's equivalent and include appropriate waiver language. Common examples:
New York: General Obligations Law 15-303
Texas: No statutory equivalent, but common law applies
Florida: No specific statute, but explicit waiver recommended
Class Action Waiver Considerations
Why It Matters
Individual TCPA settlements create precedent. If you settle with one recipient, others may demand the same. Class waivers prevent the settling party from:
Serving as a class representative
Opting into a class action
Providing testimony or evidence for a class
Class Waiver Enforceability
Context
Enforceability
Notes
Pre-suit settlement
Generally enforceable
No judicial oversight needed
Post-filing, pre-certification
Enforceable with care
Must be knowing and voluntary
Post-certification
Requires court approval
Cannot pick off class representatives
Class Action Waiver Language:
Releasor agrees that Releasor will not:
(a) Initiate, join, participate in, or assist in any way with any class action, collective action, or representative action against any Released Party arising from or related to the Released Claims;
(b) Serve as a class representative, named plaintiff, or lead plaintiff in any such action;
(c) Opt into any class that may be certified against any Released Party relating to telemarketing, automated calls, automated text messages, or TCPA claims;
(d) Provide testimony, evidence, declarations, or other assistance to any person or entity pursuing such claims against Released Parties, except as compelled by valid subpoena.
This waiver is a material term of this Agreement without which the Releasee would not have agreed to provide the consideration set forth herein.
State Law Analog Claims
TCPA settlements should also release state-law equivalents. Key state statutes to include:
California
Cal. Bus. & Prof. Code 17538.41: Text message advertising restrictions
State Law Analog Release Language:
The Released Claims include, without limitation, all claims arising under or related to:
(a) The Telephone Consumer Protection Act, 47 U.S.C. 227, and its implementing regulations;
(b) Any state law analog to the TCPA, including but not limited to:
- California Business and Professions Code Section 17538.41
- California Public Utilities Code Sections 2871-2874
- Florida Telephone Solicitation Act, Fla. Stat. 501.059
- Washington Commercial Telephone Solicitation Act, RCW 19.158
- New York General Business Law Section 399-z
- Illinois Telephone Solicitations Act, 815 ILCS 305
- Any similar statute of any state or territory;
(c) Any federal, state, or local statute, regulation, or ordinance governing telemarketing, automated calling, automated texting, or do-not-call compliance;
(d) Any common law claim arising from the same operative facts, including but not limited to invasion of privacy, intrusion upon seclusion, nuisance, trespass to chattels, conversion, negligence, or intentional infliction of emotional distress.
Key Settlement Terms
The Essential Terms: Beyond payment and release, these terms protect you from ongoing risk and preserve business relationships.
No-Admission Clause
Why It Matters
Prevents use of settlement as evidence of wrongdoing
Protects against collateral estoppel in other claims
Required for most insurance coverage
Preserves defenses if similar claims arise
No-Admission Clause:
This Agreement is entered into solely to resolve disputed claims and avoid the expense, burden, and uncertainty of litigation. Nothing in this Agreement, and neither the fact of this Agreement nor any term hereof, shall be construed as:
(a) An admission of liability, wrongdoing, or violation of any law, regulation, or duty by any Released Party;
(b) An admission that any Released Party's conduct was unlawful, improper, or actionable;
(c) Evidence of the validity or invalidity of any claim released herein;
(d) A waiver of any defense that would otherwise be available to any Released Party.
The Released Parties expressly deny all allegations of wrongdoing. This Agreement may not be introduced as evidence in any proceeding except to enforce its terms.
Confidentiality Clause with Carve-Outs:
1. CONFIDENTIALITY. The Parties agree that the terms of this Agreement, including the settlement amount, are confidential and shall not be disclosed to any third party except:
(a) To the Parties' attorneys, accountants, tax advisors, or other professional advisors, provided such advisors agree to maintain confidentiality;
(b) To immediate family members of the Releasor, provided they agree to maintain confidentiality;
(c) As required by valid subpoena, court order, or legal process, provided the disclosing Party gives prompt written notice to the other Party to allow opportunity to seek protective order;
(d) As required by any governmental or regulatory body with jurisdiction over a Party;
(e) As required by applicable law, rule, or regulation.
2. PERMITTED STATEMENTS. Notwithstanding the foregoing, if asked about this matter, the Parties may state only that "the matter has been resolved to the mutual satisfaction of the parties."
3. BREACH REMEDY. The Parties acknowledge that breach of this confidentiality provision would cause irreparable harm not adequately compensable by monetary damages. Accordingly, in addition to any other remedies, the non-breaching Party shall be entitled to injunctive relief.
Non-Disparagement
Mutual vs. One-Way
Mutual: Neither party disparages the other
One-way: Claimant only (defendant businesses rarely disparage individuals)
Consideration: Mutual is more defensible; one-way looks punitive
Mutual Non-Disparagement Clause:
The Parties agree not to make, publish, or communicate to any person or entity any defamatory, disparaging, or derogatory statements, whether written or oral, about the other Party, or in the case of a business entity, its officers, directors, employees, agents, products, or services.
This provision does not restrict:
(a) Truthful statements made in response to legal process;
(b) Truthful statements made to governmental or regulatory bodies;
(c) Good faith communications with legal or financial advisors;
(d) Statements protected by applicable law.
For purposes of this Agreement, "disparaging statements" includes, without limitation, negative comments about business practices, customer service, marketing methods, or the conduct giving rise to the Released Claims, posted on social media, review sites, or any public forum.
No Future Contact Provision
No Future Contact / Internal DNC Clause:
Releasee agrees to add Releasor to its internal do-not-contact list and suppress Releasor's phone number(s) listed below from all future telemarketing, marketing, and promotional communications:
Phone number(s): [LIST ALL KNOWN NUMBERS]
This suppression shall:
(a) Be implemented within five (5) business days of execution of this Agreement;
(b) Remain in effect permanently unless Releasor provides subsequent express written consent;
(c) Apply across all platforms, systems, campaigns, and vendors used by Releasee;
(d) Include both voice calls and text messages.
Releasee shall provide written confirmation of suppression implementation within ten (10) business days.
Compliance Undertaking
Negotiation Tip: If you're already planning to fix your compliance, offering a compliance undertaking costs you nothing but may reduce the payment demand. It shows good faith and addresses claimant's stated concern about stopping the behavior.
Compliance Undertaking Clause:
Without admitting any violation of law, Releasee agrees to undertake the following compliance measures within sixty (60) days of execution:
(a) Review and update consent capture procedures to ensure compliance with TCPA requirements;
(b) Implement or enhance opt-out processing to honor STOP requests within [24/48] hours;
(c) Conduct training for personnel responsible for telemarketing campaigns;
(d) Review vendor agreements to ensure appropriate TCPA compliance representations and warranties.
These undertakings are made as a business decision to enhance compliance practices and shall not be construed as an admission that prior practices violated any law. Releasee's failure to complete any undertaking shall not constitute a breach of this Agreement or revive any Released Claim.
Settlement Term Sheet Template
How to Use: This non-binding term sheet establishes the framework for settlement before lawyers draft the formal agreement. Fill in the bracketed variables, negotiate to agreement, then have counsel prepare the final documents.
TCPA SETTLEMENT TERM SHEET[NON-BINDING]
Date: [DATE]
PARTIES:
Claimant: [CLAIMANT NAME]
Respondent: [COMPANY NAME]
MATTER: Demand letter dated [DATE] regarding alleged TCPA violations arising from [voice calls / text messages] to phone number [XXX-XXX-XXXX] during the period [START DATE] to [END DATE].
This term sheet outlines the principal terms for settlement. It is non-binding and subject to execution of a formal Settlement Agreement.
---
1. PAYMENT
Amount: $[AMOUNT]
Payee: [CLAIMANT NAME or ATTORNEY TRUST ACCOUNT]
Timing: Within [10/15/30] days of execution of Settlement Agreement
Form: [Check / Wire transfer / ACH]
2. TAX TREATMENT
Allocation: $[X] as damages (1099-MISC to claimant)
$[Y] as attorney fees (1099-NEC to attorney, if applicable)
Tax responsibility: Each party responsible for own tax obligations
3. RELEASE SCOPE
[ ] Known claims only (specific calls/texts identified in demand)
[ ] All TCPA claims arising from contacts during [DATE RANGE]
[ ] All TCPA and state-law analog claims
[ ] Unknown claims waiver (1542 waiver)
4. CLASS ACTION WAIVER
[ ] Yes - Claimant waives right to participate in class action
[ ] No class waiver
5. CONFIDENTIALITY
[ ] Confidential - Terms not disclosed except per standard carve-outs
[ ] Non-confidential
6. NON-DISPARAGEMENT
[ ] Mutual non-disparagement
[ ] Claimant only
[ ] None
7. FUTURE CONTACT
[ ] Add claimant to internal DNC / suppression list
[ ] No future contact provision
8. COMPLIANCE UNDERTAKING
[ ] Respondent agrees to review/update TCPA compliance procedures
[ ] No compliance undertaking
9. NO ADMISSION
[ ] Standard no-admission clause (required)
10. ADDITIONAL TERMS
[DESCRIBE ANY OTHER NEGOTIATED TERMS]
---
SIGNATURES (Non-Binding Indication of Intent)
Claimant: _________________________ Date: _______
Respondent: _______________________ Date: _______
---
NEXT STEPS:
Upon agreement to these terms, counsel will prepare a formal Settlement Agreement and Release incorporating these terms. Target execution date: [DATE].
Term Sheet Negotiation Tips
For Respondents (Businesses)
Start with known claims release - expand only if claimant pushes back
Insist on confidentiality - prevents copycat demands
Offer compliance undertaking - costs nothing, shows good faith
Get class waiver - critical if any class risk exists
Allocate to attorney fees - may be more tax-efficient for claimant
Red Lines (Don't Concede)
No-admission clause: Non-negotiable for insurance and future claims
Confidentiality: Essential to prevent "me too" demands
Full release: Must cover all claims arising from same facts
Settlement Agreement Clause Library
Usage Notes: These clauses are building blocks for a formal settlement agreement. Each includes "when to use" guidance. Consult with counsel before finalizing any settlement agreement.
Recitals / Background
RECITALS
A. Claimant contends that Respondent violated the Telephone Consumer Protection Act, 47 U.S.C. 227, by [making automated telephone calls / sending automated text messages] to Claimant's cellular telephone without prior express consent.
B. Respondent denies all allegations of wrongdoing and contends that all communications were made with proper consent and in compliance with applicable law.
C. The Parties desire to resolve their dispute without the expense, burden, and uncertainty of litigation.
D. This Agreement is a compromise of disputed claims and is not an admission of liability by any Party.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
When to use: Every settlement agreement. Establishes context without admissions.
Payment Terms
PAYMENT
1. Settlement Amount. In consideration for the releases and covenants set forth herein, Respondent shall pay to Claimant the total sum of [AMOUNT] Dollars ($[X]) (the "Settlement Amount").
2. Payment Terms. The Settlement Amount shall be paid as follows:
(a) Within [NUMBER] days after full execution of this Agreement;
(b) By [check made payable to / wire transfer to the account of] [PAYEE NAME];
(c) Delivered to [ADDRESS / WIRE INSTRUCTIONS].
3. Tax Treatment. The Parties agree that $[X] of the Settlement Amount shall be treated as damages and reported on IRS Form 1099-MISC, and $[Y] shall be treated as attorney fees and reported on IRS Form 1099-NEC to [ATTORNEY/FIRM NAME]. Each Party shall be solely responsible for payment of any taxes owed on amounts received and shall indemnify the other Party for any tax liability arising from the recipient's failure to report or pay taxes.
4. Default. If Respondent fails to make payment when due, Claimant may, upon ten (10) days' written notice, declare this Agreement in default. Upon default, Claimant may pursue all available remedies, and Respondent shall pay Claimant's reasonable costs of collection, including attorney fees.
When to use: Every settlement agreement. Adjust payment timing, method, and tax allocation based on negotiation.
Comprehensive Release
RELEASE
1. Released Claims. Claimant, on behalf of Claimant and Claimant's heirs, executors, administrators, successors, and assigns (collectively, "Releasor"), hereby fully and forever releases, acquits, and discharges Respondent and its past, present, and future parents, subsidiaries, affiliates, officers, directors, employees, agents, attorneys, insurers, successors, and assigns (collectively, "Released Parties") from any and all claims, demands, damages, debts, liabilities, actions, and causes of action of every kind and nature, known or unknown, suspected or unsuspected, that Releasor now has or may hereafter have against the Released Parties arising from or relating to:
(a) Any telephone call, voicemail, or text message to Releasor or to any telephone number associated with Releasor;
(b) Any alleged violation of the Telephone Consumer Protection Act, 47 U.S.C. 227, or any regulation promulgated thereunder;
(c) Any alleged violation of any state or local law analogous to the TCPA, including but not limited to [LIST APPLICABLE STATE LAWS];
(d) Any claim related to telemarketing, automated calling, automated texting, or do-not-call compliance;
(e) The conduct, events, transactions, or occurrences described in Claimant's demand letter dated [DATE] (collectively, the "Released Claims").
2. Section 1542 Waiver. [INCLUDE FULL 1542 WAIVER LANGUAGE FROM TAB 2]
3. Covenant Not to Sue. Releasor covenants not to sue or bring any action, claim, or proceeding against any Released Party based on or arising from any Released Claim.
When to use: Preferred for most settlements. Provides maximum protection. Narrow the scope if claimant won't agree to broad release (but adjust payment accordingly).
Representations and Warranties
REPRESENTATIONS AND WARRANTIES
1. Authority. Each Party represents and warrants that it has full power and authority to enter into this Agreement and to perform its obligations hereunder.
2. No Assignment. Claimant represents and warrants that Claimant has not assigned, transferred, or conveyed any of the Released Claims to any third party, and that no other person or entity has any interest in the Released Claims.
3. No Other Actions. Claimant represents and warrants that Claimant has not filed any complaint, charge, or action with any court, agency, or other body relating to the Released Claims, other than [DESCRIBE IF ANY].
4. Voluntary Execution. Each Party represents and warrants that it has read this Agreement, understands its terms, and executes it voluntarily and without coercion. Each Party has had the opportunity to consult with legal counsel of its choosing.
5. No Reliance. Each Party represents that it is not relying on any statement, representation, or promise by the other Party or its representatives other than those expressly set forth in this Agreement.
When to use: Every settlement agreement. Confirms claimant hasn't already assigned claims or filed suit.
Miscellaneous / Boilerplate
MISCELLANEOUS PROVISIONS
1. Entire Agreement. This Agreement constitutes the entire agreement between the Parties concerning the subject matter hereof and supersedes all prior negotiations, representations, and agreements.
2. Modification. This Agreement may not be modified except by a written instrument signed by both Parties.
3. Severability. If any provision of this Agreement is held invalid or unenforceable, the remaining provisions shall remain in full force and effect.
4. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of [STATE], without regard to conflicts of law principles.
5. Jurisdiction. Any dispute arising from this Agreement shall be resolved exclusively in the state or federal courts located in [COUNTY], [STATE].
6. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one instrument. Electronic signatures shall be deemed original signatures.
7. Headings. Section headings are for convenience only and shall not affect the interpretation of this Agreement.
8. Construction. This Agreement shall not be construed against any Party as the drafter. Each Party has had the opportunity to review and negotiate the terms.
9. Notices. Any notice required hereunder shall be in writing and delivered by hand, overnight courier, or certified mail to the addresses set forth below, or to such other address as a Party may designate in writing.
When to use: Every settlement agreement. Standard protective provisions.
Signature Block
SIGNATURES
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date last written below.
CLAIMANT:
_________________________________
[CLAIMANT NAME]
Date: _______________
RESPONDENT:
[COMPANY NAME]
By: _________________________________
Name: [AUTHORIZED SIGNATORY NAME]
Title: [TITLE]
Date: _______________
When to use: Every settlement agreement. Ensure proper authority for corporate signatories.
Need Help with TCPA Settlement?
Get professional guidance on settlement structure, release drafting, and negotiation strategy.