D.C. Circuit Strikes Down FCC Opt-Out Notice Requirement for “Solicited” Fax Ads

by Kilpatrick Townsend & Stockton LLP

Takeaway: The D.C. Circuit recently dismantled a claim commonly asserted under the TCPA’s Junk Fax Prevention Act of 2005, by rejecting the FCC’s rule that fax advertisers violate the TCPA by not including compliant “opt-out” notices on solicited faxes. Senders of solicited fax ads, however, should be sure to carefully document (and be ready to prove) they actually received prior permission from the recipients and the permission has not been revoked.

In Bais Yaakov of Spring Valley v. FCC, No. 14-1234, 2017 WL 1192909 (D.C. Cir. Mar. 31, 2017), a split D.C. Circuit panel struck a blow to the FCC’s rule-making authority under the TCPA. In an occasionally droll opinion that opens with “[b]elieve it or not, the fax machine is not yet extinct,” the court ruled the FCC exceeded its authority when it imposed its 2006 mandate that solicited fax advertisements contain an opt-out notice – something the text of the TCPA only requires for unsolicited faxes.

The TCPA defines an unsolicited fax advertisement as one the sender has not received the recipient’s “prior express permission” to send. Such permission can be given “in writing or otherwise.” The TCPA doesn’t define a solicited fax – the word “solicited” appears nowhere in 47 U.S.C. § 227. But by negative implication, a solicited fax must be one for which, “at a minimum,” the sender has received prior permission to send.

The majority employed straightforward logic. First, the FCC may only take action that Congress has authorized. On that point, the court summarily rejected the FCC’s argument that it could require opt-out notices on solicited faxes because Congress has not prohibited the FCC from doing so. According to the majority, the FCC’s position “has it backwards as a matter of basic separation of powers and administrative law.” 2017 WL 1192909, at *3.

Second, Congress drew a line in the text of the TCPA between solicited and unsolicited faxes, only requiring opt-out notices on the latter. The court concluded: “Congress has not authorized the FCC to require opt-out notices on solicited fax advertisements. And that is all we need to know to resolve this case.” Id. Stated differently, the authorization to prescribe rules “implement[ing] [the TCPA’s] requirements” does not empower the FCC to enact a rule expanding those requirements beyond the text of the TCPA. In this case, that meant the FCC could not require senders of solicited faxes to comply with an obligation the TCPA imposes only on senders of unsolicited faxes.

The decision was a victory for Anda, a generic drug company that had been sued in a 2008 class action for sending solicited fax advertisements – sans an opt-out notice – to various pharmacies. Despite many of the plaintiff pharmacies admitting they gave Anda permission to send the faxes, they sought over $150 million from Anda for not complying with the FCC’s 2006 rule. The court seemed sympathetic to Anda’s plight, instructing the reader to “[l]et that soak in for a minute” when explaining that whether or not the FCC had authority to issue its rule would determine whether Anda was potentially on the hook for $150 million for not putting opt-out notices on solicited faxes. Id. at *2. Fortunately for Anda, the court ruled that the FCC had no such authority.

Judge Pillard’s dissent countered that the FCC did not overstep its authority. A recipient’s “prior express permission” to receive faxes cannot be perpetual – at a minimum, there must be some way to revoke it. And the FCC has already properly limited the concept of “prior permission” by saying it lasts only “‘until the consumer revokes [it] by sending an opt-out request to the sender.’” 2017 WL 1192909, at *5 (Pillard, J., dissenting) (quoting 21 F.C.C. Rcd. 3787, 3812 (2006)).

So, Judge Pillard asks, why can’t the FCC also require the obvious next step that senders of solicited faxes tell recipients how they may do so? Without that information, the ability to revoke consent is not meaningful. To illustrate, she notes that anyone who has shared their contact information and then received an onslaught of unwanted advertisements without opt-out notices has likely experienced the frustration of trying to figure out how to stop them. She believes requiring solicited faxes to clearly explain how the recipient can revoke their consent is consistent with the TCPA’s underlying purpose: protecting recipients from unwanted ads. Her dissent also notes that requiring opt-out notices on solicited faxes avoids the “factual morass” that can arise from allowing prior permission to be granted in writing “or otherwise.” Id. at *6. Providing a clear opt-out mechanism on purportedly solicited advertisements permits the consumer to quickly resolve any disagreement over whether some non-written act constituted permission for the sender to fax ads.

The majority acknowledged these arguments might reflect “good policy.” Id. at *4. But mere policy does not change the fact that the language of the TCPA does not permit the FCC to require opt-out notices on solicited advertisements. On this point, the majority stated “[i]t is the Judiciary’s job to respect the line drawn by Congress, not to redraw it as we might think best.” Id. at *3. Anda – and many other TCPA defendants facing similar class actions based on non-compliant (or non-existent) opt-out language in solicited faxes – breathed a sigh of relief at this exercise in judicial restraint.

Stay tuned for an update on another pending challenge to the FCC’s rule-making authority under the TCPA. In ACA Int’l v. FCC, No. 15-1211, a D.C. three-judge panel that includes Judge Pillard (the dissenting judge in Bais Yaakov) will be addressing the FCC’s authority to enter a 2015 order that broadened the definition of “autodialer” and set strict conditions on calling reassigned numbers. TCPA plaintiffs and defendants will be watching to see if the D.C. Circuit will again adhere strictly to the text of the TCPA or will find support for the FCC’s attempts to effect Congress’s perceived broader consumer protection purpose.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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