Deference or preference – looking ahead at the impact of the US Supreme Court’s indecision on questions of agency authority

Eversheds Sutherland (US) LLPThe Telephone Consumer Protection Act (TCPA) is one of the most frequently litigated statutes, spurring individual, and more often, national class action litigation. The pace at which new TCPA suits are filed is not slowing, with news of high-dollar settlements announced almost daily. But the nearly 30-year old TCPA is often criticized as outdated and ill-equipped to deal with the issues facing the modern telecommunications industry and the manner in which corporations, large and small, utilize technology. Congress is currently considering legislation with bills introduced in both the House of Representatives and Senate to combat autodialed communications to consumers, but those efforts are of no help to parties and courts involved in pending TCPA litigation.1

In the absence of statutory reform, courts facing questions regarding the TCPA or novel telecommunications issues often turn to the Federal Communications Commission (FCC) for guidance. Reliance on the FCC can present a unique set of questions, however, as the FCC, unlike Congress, is a federal agency that is tasked with enforcing the TCPA; it does not have legislative powers to amend the TCPA. Regardless of whether (or when) Congress amends the TCPA, the FCC will continue to play a prominent role in defining the TCPA, and thus impacting compliance and litigation strategies and outcomes. The US Supreme Court in PDR Network, LLC v. Carlton & Harris Chiropractic, Inc., 139 S. Ct. 2051 (2019), was presented with the opportunity to opine on whether courts must defer to the FCC in TCPA litigation. Although the Supreme Court punted on the issue, leaving it up to the Fourth Circuit to address on remand the FCC deference question, there are lessons to be learned from the Court’s opinion.

The triggering event in PDR Network was a single fax message sent from PDR Network, LLC (PDR) offering a free medical reference book to a chiropractor, who initiated litigation against PDR, alleging that the fax constituted an unsolicited advertisement in violation of the TCPA.

The District Court for the Southern District of West Virginia was tasked with determining whether the fax was an “unsolicited advertisement” defined by the TCPA, in part, as “any material advertising the commercial availability or quality of any property, goods, or services” sent without the recipient’s consent.2 In a 2006 Rule issued 15 years after the TCPA was enacted, the FCC included “facsimile messages that promote goods or services even at no cost” in its own definition.3

The district court declined to give deference to the 2006 FCC Rule, holding that the TCPA’s language regarding unsolicited advertisements was sufficiently clear without the FCC’s guidance. Applying what it considered to be the plain meaning of the statute, the district court found that the fax did not constitute an unsolicited advertisement under the TCPA because the medical reference book was free.

On appeal, a 2-1 Fourth Circuit panel disagreed and held that the Hobbs Act, a federal statute that grants the federal courts of appeal exclusive jurisdiction to set aside certain federal agencies’ orders, required the district court to apply the 2006 FCC Rule. Deferring to the FCC Rule, the Fourth Circuit held that the fax constituted an unsolicited advertisement despite offering a free good or service.

PDR filed a petition for certiorari before the US Supreme Court, which the Court granted in November 2018. For more information on the factual and legal background of PDR Network, please see our prior alert here.

In June 2019, the Supreme Court vacated and remanded the Fourth Circuit’s ruling, holding that the question of deference was not properly before it because the appellate court did not address two essential questions.

First, the Fourth Circuit did not consider whether the FCC Rule is a legislative or interpretive rule. If the FCC Rule is an interpretative rule, rather than a legislative rule having the “force and effect of law,” the Court suggested that it may not even be binding on district courts, which may not need to follow it.

Second, the Fourth Circuit did not consider whether PDR had a sufficient opportunity to seek judicial review of the FCC Rule. In the Court’s view, if PDR did not have an adequate opportunity to challenge the FCC Rule due to the Hobbs Act’s requirement that certain agency orders be challenged within 60 days after the order has been entered, PDR may have a private right to do so under the Administrative Procedure Act.

Both Justices Kavanaugh and Thomas concurred in the Court’s unanimous decision. Justice Kavanaugh, joined by Justices Alito, Thomas, and Gorsuch, joined in the decision but would have answered the ultimate deference question to find that the Hobbs Act does not require courts to give absolute deference to the FCC. Justice Thomas issued a separate concurrence but raised a concern that the Hobbs Act could conflict with courts’ fundamental role to “say what the law is” under Marbury v. Madison should courts be precluded from reviewing federal agency orders.

At first glance, the Supreme Court’s punt back to the Fourth Circuit may appear to be a run-of-the-mill remand. Despite the lack of a decision from the Supreme Court, however, PDR Network remains an important case and one to continue to watch due to the oversized role the FCC plays in TCPA litigation.

For example, individuals and businesses alike routinely petition the FCC on statutory clarification matters. The FCC does not seem to be slowing down on proposing new rules and regulations, with its Chairman, Ajit Pai, proposing new rules in July 2019 to ban autodialed calls originating outside the US.4 Throughout the rulemaking process, the FCC seeks comments from the public and industry, such as regarding highly-anticipated guidance on the automatic telephone dialing system (ATDS) definition as well as call blocking safe harbors. The comment period provides the public with the valuable opportunity to communicate with the FCC and present the FCC with its positions. As a result, should deference to the FCC be strengthened under the Fourth Circuit’s interpretation of the Hobbs Act, the FCC’s role as well as the comment period may become even more critical as industry groups attempt to get a hold of the FCC’s ear.

Conclusion

Although the Supreme Court’s decision in PDR Network did not result in a definitive ruling, the Supreme Court’s avoidance of the ultimate issue regarding the interplay between the Hobbs Act and FCC rulings could present TCPA litigants with continued opportunities to make arguments for and against FCC guidance in private cases. Further, with at least a plurality of justices already willing to curb deference under the Hobbs Act, it is likely this issue will come before the Supreme Court again. In the meantime, the Fourth Circuit will likely also consider the weight of FCC guidance more directly on remand in PDR Network and will thus have the opportunity to present some added clarity within this space. And even if Congress passes additional legislation aimed at updating the TCPA or addressing the modern issues that FCC guidance has grappled with, the FCC will remain a crucial actor in shaping the TCPA landscape.

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1 The Stopping Bad Robocalls Act (H.R. 3375) was introduced in the House of Representatives in June 2019 and passed in the House in July 2019. The Telephone Robocall Abuse Criminal Enforcement and Deterrence (TRACED) Act (S. 151) was introduced in the Senate in January 2019 and passed in the Senate in May 2019.

2 47 U.S.C. § 227(a)(5).

3 21 FCC Rcd. 3787, 3814 ¶ 52 (2006).

4 The FCC adopted proposed rules banning foreign robocalls on August 1, 2019.

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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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