From a Deference Dimension: Breaking Down the Supreme Court’s Grant of Certiorari to Consider Whether the Hobbs Act Requires District Courts to Follow the FCC’s TCPA Rulings

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As reported earlier today, the Supreme Court granted the Petition for Certiorari in PDR Network, LLC v. Carlton & Harris Chiropractic, Inc., No. 17-1705, 2018 WL 3127423 (U.S. Nov. 13, 2018) to consider the following legal question:

Whether the Hobbs Act required the district court in this case to accept the FCC’s legal interpretation of the Telephone Consumer Protection Act.

Based on how the Court framed the question, it looks like it’s headed to decide issues that will have a significant impact on the legal framework under which lower courts apply administrative decisions by the FCC.  But the case will undoubtedly have far broader implications since the Hobbs Act reaches more than just administrative rulings by the FCC.  Could it even pave the way for the Supreme Court to revisit Chevron Deference?  We explore this, and more, below.

The Background

The Petition arises from a TCPA junk fax class action in which Carlton & Harris Chiropractic, Inc. sued PDR Network, LLC for sending a single fax offering a free Physicians’ Desk Reference.  Carlton claimed the fax violated the TCPA because it was an “unsolicited advertisement” sent without its consent.  The District Court dismissed the case under Fed. R. Civ. P. 12(b)(6) finding that the fax was not an “unsolicited advertisement” under the TCPA because the fax did not have a “commercial aim”.  Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, No. CV 3:15-14887, 2016 WL 5799301, at *3 (S.D.W. Va. Sept. 30, 2016).

Plaintiff urged the court to follow a 2006 FCC ruling in which the Commission concluded that “facsimile messages that promote goods or services even at no cost, such as free magazine subscriptions, catalogs, or free consultations or seminars, are unsolicited advertisements under the TCPA’s definition.”  But the court found that it was not bound to follow the FCC’s 2006 ruling under the Hobbs Act because the Act only prohibited parties from challenging the validity of an FCC interpretation, and no such challenge was being made in the case.  It also found that it was not required to automatically defer to the FCC’s interpretation under the Supreme Court’s Chevron Deference doctrine because the statutory definition of “unsolicited advertisement” was “clear and easy to apply.”  Id. at *4.

These issues propelled the case up to the Fourth Circuit, which reversed the District Court.  In a divided opinion, the Fourth Circuit held that the District Court was required to follow the FCC’s 2006 ruling under the Hobbs Act because the Act “stripped” the court of jurisdiction to consider the validity of the ruling.  Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, 883 F.3d 459, 464 (4th Cir. 2018).  And in reaching this holding, the Fourth Circuit found that the District Court’s decision not to follow the FCC’s ruling meant it was considering the “validity” of the ruling, which it did not have the jurisdiction to do under the Hobbs Act.

PDR Network then petitioned the Supreme Court to review the following questions: (1) whether the Hobbs Act strips courts of jurisdiction to engage in a Chevron analysis and require automatic deference to an agency’s order even if there has been no challenge to the “validity” of such order; and (2) whether faxes that promote goods and services even at no cost must have a “commercial nexus” to the sender’s business to qualify as an “advertisement” under the FCC’s 2006 order?  The Court granted the Petition in part, and certified only the first question for review.  PDR Network, LLC v. Carlton & Harris Chiropractic, Inc., No. 17-1705, 2018 WL 3127423, at *1 (U.S. Nov. 13, 2018).

The Tension Between Chevron Deference and the Hobbs Act

As illustrated above, there’s tension here between these two legal doctrines concerning the binding effect of the decisions by administrative agencies, and which seems to be the driving force behind the Supreme Court’s decision to grant certiorari here.

So let’s start with Chevron.  The Chevron Deference doctrine was rolled out by the Supreme Court in 1984.  Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 858, 104 S. Ct. 2778, 2789, 81 L. Ed. 2d 694 (1984).  Under Chevron Deference, if a statute is silent or ambiguous with respect to a specific issue, then the lower court must defer to an agency’s ruling on that issue if it is based on a “permissible construction” of the statute.  Notably, Chevron itself has been regarded as “dramatically expand[ing] the circumstances in which courts must defer to agency interpretations of statutes.”  See e.g. Merrill & Hickman, Chevron’s Domain, 89 Geo. L.J. 833 (2001).  But even under its rubric, the doctrine still affords lower courts some measure of jurisdiction to decide whether it is appropriate to apply an administrative ruling.

The Hobbs Act (also known as the Administrative Procedure Act) predates Chevron Deference (it was passed in 1946), and provides a mechanism for judicial review of certain administrative orders.  In doing so, it limits the manner in which the validity of certain administrative orders may be challenged, including those by the FCC, Secretary of Agriculture, Secretary of Transportation, and more.  See 28 U.S.C. § 2342.  As applied by the Fourth Circuit in Carlton, the Hobbs Act requires lower courts to automatically apply such administrative rulings because the Act strips the lower courts of jurisdiction to consider the “validity” of those administrative rulings.

The tension between these two legal doctrines propelled the Carlton case from a seemingly ordinary junk fax TCPA class action to one that has the potential to alter the balance of powers between the executive and judicial branches of the government.  How much deference must administrative rulings get in the lower courts, and – more fundamentally – who gets to decide what the law means?

Time to Break out the Crystal Ball

What exactly is the Supreme Court looking to do here?  It’s tough to tell right now.  But there’s some interesting little tidbits here that may give us a glimpse of where this might go.

The Supreme Court has some fresh faces – Justices Gorsuch and Kavanaugh – who, as one commentator pointed out a few months back, have both “questioned the continued desirability of Chevron deference.”  Might then the Supreme Court be poised to consider some new rules surrounding deference to administrative decisions?  Possibly.

But then again it’s conceivable that the Court could decide the far narrower legal issue implicated here over what it means for a lower court to consider the “validity” of an administrative ruling.  Because at bottom the Fourth Circuit’s determination that the Hobbs Act required the Court was animated by its view that a decision not to follow an administrative ruling is the equivalent of a challenge to the validity of the ruling (i.e. what a lower court is “stripped” of jurisdiction to decide under the Hobbs Act).  See Carlton, 883 F.3d at 464.

If anything is clear is that this is all happening at a particularly interesting time given that we now have a seemingly more business-friendly FCC that is poised to rule on key issues like the ATDS definition and meaning of “called party.”  An opinion by the Supreme Court here has the potential of affecting whether and under what circumstances lower courts will be bound to follow this forthcoming ruling… Just as we are all looking forward to the FCC issuing some binding rulings that will harmonize the discord we’ve seen lately in the law.

And what might happen if the Supreme Court decides to give more leeway to the lower courts to determine whether to apply FCC rulings?  Well, one need to look no further than our ATDS Scorecard to catch a glimpse the possibilities there.  Also, remember that time a District Court in the Southern District of Florida, in applying Chevron Deference, chose not to follow the FCC’s rule that the provision of a phone number in a credit application provides prior express consent?  Mais v. Gulf Coast Collection Bureau, Inc., 944 F. Supp. 2d 1226, 1239 (S.D. Fla. 2013), rev’d in part, 768 F.3d 1110 (11th Cir. 2014).

But enough prognostication.  I’ll put away my crystal ball for now.  We’ll no doubt keep our finger on the pulse of these proceedings, and you can be sure to count on us for more timely reporting and analysis as things continue to break.

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