On Nov. 13, 2018, the U.S. Supreme Court granted certiorari in Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, after the Fourth Circuit vacated a lower court ruling regarding what constitutes an “unsolicited advertisement” under the Telephone Consumer Protection Act (TCPA). No. 17-1705, 2018 WL 3127423, at *1 (2018).
The Supreme Court is set to review whether the Hobbs Act requires district courts to accept the Federal Communication Commission’s (FCC) legal interpretations of the TCPA. This ruling may bring uniformity to the amount of judicial deference that federal courts afford to the FCC’s TCPA rules in civil litigation.
District Court Ruling
In PDR Network, a chiropractic office brought a putative class action against the publisher of a widely used compendium of prescription drug information, alleging the publisher violated the TCPA by sending a fax to the chiropractic office inviting its manager to reserve a free copy of the book. 883 F.3d 459, 469 (4th Cir. 2018). The publisher moved to dismiss, arguing the fax was not an unsolicited advertisement because the book was free and not for purchase. The chiropractor office disagreed and cited a 2006 FCC rule, which provides, in pertinent part, “facsimile messages that promote goods or services even at no cost . . . are unsolicited advertisements under the TCPA’s definition.”
Applying a Chevron analysis, the district court ruled that the Hobbs Act did not compel deference to the FCC’s rule where the statute was unambiguous. In addition to finding that the TCPA’s definition of unsolicited advertisement was clear and easy to apply, the district court held that the TCPA prohibits only advertisements with a “commercial aim.” For these reasons, the district court granted the chiropractic office’s motion to dismiss.
Fourth Circuit’s Decision
On appeal, the Fourth Circuit vacated the district court ruling and held that (1) the Hobbs Act deprived the district court of jurisdiction to consider the validity of and apply Chevron deference to the 2006 FCC rule and (2) faxes that offer goods and services – even if free – are “advertisements” under the TCPA.
The Hobbs Act “provides a mechanism for judicial review of certain administrative orders.” Importantly, the Hobbs Act contains a “jurisdiction-channeling” provision vesting the federal appellate courts with “exclusive jurisdiction” to “enjoin, set aside, suspend (in whole or in part), or to determine the validity of” the orders to which the act applies, including the FCC’s TCPA rules. As courts of limited jurisdiction, federal district courts do not have the authority to reach issues where, as here, Congress has specifically stripped them of jurisdiction.
Citing decisions from the Sixth, Eighth and Eleventh Circuits, the Fourth Circuit ruled that “[w]hen Chevron meets Hobbs, consideration of the merits must yield to jurisdictional constraints.” See, e.g., Mais v. Gulf Coast Collection Bureau, Inc., 768 F.3d 1110, 1121 (11th Cir. 2014) (holding that under the Hobbs Act, the district court lacked the power to review the validity of the FCC’s 2008 interpretation of “prior express consent”). In finding that the district court “erred when it eschewed the Hobbs Act’s command in favor of Chevron analysis to decide whether to adopt the 2006 FCC Rule,” the Fourth Circuit held that the jurisdictional command of the Hobbs Act requires district courts to apply FCC interpretations of the TCPA.
2006 FCC Rule
In rejecting the district court’s interpretation of the 2006 FCC rule, the Fourth Circuit held that the publisher’s fax offering a free good was an advertisement under the plain meaning of the rule. Notably, the Fourth Circuit determined that although the publisher does not charge for its book, “giving away products in the hope of future financial gain is a commonplace marketing tactic” and it is “certainly plausible that the amount of money [the publisher] receives turns on how many copies of the [book] it distributes.”
The Supreme Court did not grant certiorari on this issue. Specifically, the publisher asked the Supreme Court to consider the following: “must faxes that ‘promote goods and service even at no cost’ have a commercial nexus to a firm’s business to qualify as an ‘advertisement’ under the TCPA, or does a plain reading of the FCC’s 2006 order create a per se rule that such faxes are automatically ‘advertisements’?”
The Supreme Court’s ruling may harmonize the current landscape where only some district courts observe the FCC’s interpretations of the TCPA. Moreover, the ruling could have ramifications for the FCC’s much-anticipated ruling on what constitutes an automatic telephone dialing system (ATDS) under the TCPA. For more information on the upcoming ATDS rule, see our post from September 2018.
While it did not grant certiorari as to the Fourth Circuit’s interpretation of the 2006 FCC rule, if the Supreme Court were to affirm the Fourth Circuit’s decision, that would leave in place a “per se rule” that a fax promoting free goods or services is an unsolicited advertisement under the TCPA. A reversal, however, would likely curb the Hobbs Act’s jurisdictional-channeling provision and provide more autonomy to district courts looking to apply a Chevron analysis to ambiguous statutory language.
Given that the TCPA provides for a private right of action and statutory damages, until the Supreme Court rules, companies should take a conservative approach to the FCC’s interpretations of the TCPA. This includes, among other things, monitoring vendors and independently assessing whether their communications trigger TCPA concerns.