SPECIAL FOCUS: FCC Under Pai: Implications for the TCPA

by Manatt, Phelps & Phillips, LLP

Manatt, Phelps & Phillips, LLP

On January 23, 2017, President Trump appointed Commissioner Ajit Pai to serve as the next chairman of the Federal Communications Commission (FCC). While not surprising, as he was widely viewed to be the presumptive pick, his appointment came sooner than anticipated. Since his appointment to a Republican seat at the FCC in 2012, Pai has been a vociferous critic of the Democratic-controlled FCC on many issues, most notably on TCPA rulings and orders. His appointment will no doubt result in significant changes to the FCC's position on the myriad of TCPA related-issues.

Pai is perhaps best known for his lengthy, witty, and sometimes scathing dissent in the FCC's July 2015 TCPA Omnibus Ruling and Order. Taking issue with the majority's interpretation of the term "automatic telephone dialing system," Pai opined that it "transforms the TCPA from a statutory rifle-shot targeting specific companies that market their services through automated random or sequential dialing into an unpredictable shotgun blast covering virtually all communications devices." He also claimed that the majority's approach to reassigned number liability will produce "perverse incentives" for "litigious individuals" and their "trial lawyers." And, highlighting various flaws in the majority's ruling on revocation of consent, he pithily observed: "Could a customer simply walk up to a McDonald's counter, provide his contact information and a summary 'I'm not lovin' it,' and put the onus on the company? The prospects make one grimace."

Pai's sharp and critical dissent in many ways served as a roadmap for the appeal of the 2015 Order currently pending in the Court of Appeal for the D.C. Circuit and was quoted often during the lengthy oral argument. The Circuit's decision is forthcoming and if the court does rule that the Commission exceeded its authority, it's possible that Pai will not appeal the ruling to the U.S. Supreme Court. Alternatively, if the court directs the FCC to fix the 2015 Order, Chairman Pai might use his position to re-work the Order to achieve what he believes the FCC should have done in the first place: "shutting down the abusive lawsuits by closing the legal loopholes that trial lawyers have exploited to target legitimate communications between businesses and consumers."

Beyond the 2015 Order, Pai has made clear that he believes the FCC's interpretations of the TCPA should be fairly circumscribed to follow the clear text and legislative history. He dissented, in part, from the FCC's July 2016 Broadnet/RTI Declaratory Ruling, which ruled that federal contractors are immune from the TCPA.

While he agreed with the Commission's ruling that the term "person" in the TCPA does not apply to the federal government, he disagreed that federal contractors are exempted under the statute. He noted that each federal contractor is an "individual, partnership, association, joint stock company, trust or corporation" under 47 U.S.C. § 153(39) so the definition facially appears applicable to contractors regardless of the entity for whom they are placing calls. While contractors may be entitled to derivative immunity based on their relationship with their federal entity customers, he concluded that such issues should be left to the courts to determine the "proper contours of the federal common law of immunity."

A month later, and for the same reason, he dissented from the FCC's Report and Order implementing Section 301 of the Bipartisan Budget Act of 2015, saying "the Commission's approach is unlawful and makes a dog's breakfast of the TCPA." Under the Budget Act, the FCC was authorized to adopt rules restricting or limiting the number and duration of calls made to wireless numbers to collect debts owed or guaranteed by the federal government. Since the FCC only has power to regulate "any person" and the federal government is not a "person," Pai argued that the FCC cannot regulate it under the TCPA. He also used his dissent as an opportunity to urge the FCC to reverse its ruling in Broadnet.

Without the benefit of Carnac the Magnificent or Nostradamus by our side, we are unable to definitively predict what specific impact Pai's appointment will have on TCPA-related issues. But, if his dissents are any indication, he will likely use his position to scale back the FCC's prior TCPA rulings that have brought confusion, uncertainty and fear to businesses. Specifically how he will accomplish this is unclear, but there are many possibilities.

The most likely will come from the outcome of the D.C. Circuit's decision. If the petitioner's appeal is upheld and the FCC is directed to reconsider its July 2015 Ruling, Pai might either drop entirely or direct Commission staff to take a more business-friendly approach to some of the prior determinations. For example, the definition of "autodialer" might exclude devices that have the "capacity" to autodial but do not use such functionality or calls requiring human intervention. Consistent with his dissent in the July 2015 Ruling, he may also soften or remove the strict liability approach to reassigned numbers, and afford more freedom for businesses to dictate a fair process for revocation of consent. On the other hand, revising the FCC's position on these issues in a way that compromises consumer privacy—one of the foundations of the TCPA—may be met with significant resistance from legislators and privacy advocates.

Mr. Pai's appointment may also open the floodgates for petitions seeking clarification of other controversial and muddy aspects of the FCC's TCPA rulings. For example, with regard to the prior express written consent disclosure requirements in the 2012 Ruling, what does the FCC consider to be "clear and conspicuous," and to what extent does the Commission expect businesses to comply with the specific wording of the disclosures? Moreover, Mr. Pai's appointment might result in more business-friendly decisions on various petitions currently before the FCC seeking guidance on various other aspects of the TCPA.

While the exact contours of Pai's influence on the FCC remains to be seen, his tweet on the day he was nominated is promising: "There is so much we can do together to bring the benefits of the digital age to all Americans and to promote innovation and investment." Hopefully, this includes freeing businesses from the vast uncertainty and litigation exposure caused by simply communicating with consumers.

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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