TCPA Roundup: A Week of Blockbuster News from the Supreme Court, the Ninth Circuit, the FCC, and a Few District Courts

by Dorsey & Whitney LLP

If you follow daily TCPA news like we do, your head is probably spinning from this week’s developments. We normally digest TCPA developments for our readers in a monthly e-newsletter.  November has delivered some blockbuster news, however, and we decided to highlight some of the notable developments in this mid-month TCPA Roundup.

SCOTUS To Decide Whether the Hobbs Act Required a District Court to Accept the FCC’s Legal Interpretation of the TCPA

The TCPA is returning to the Supreme Court for the fourth time. In the first instance, the Supreme Court decided whether state courts have exclusive jurisdiction over private actions to enforce the TCPA. In a unanimous decision written by Justice Ginsburg, the Supreme Court held that federal and state courts have concurrent jurisdiction over private suits arising under the TCPA. See Mims v. Arrow Fin. Servs., LLC, 565 U.S. 368, 372, 132 S. Ct. 740, 745 (2012). In the second, the Supreme Court famously decided in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663, 666 (2016) that an unaccepted settlement offer under Rule 68 has no force. In the third, the Supreme Court vacated a judgment and remanded a case for further consideration of new Supreme Court case law in a one paragraph opinion that hardly bears mentioning. See Holster v. Gatco, Inc., 559 U.S. 1060, 1060, 130 S. Ct. 1575, 1575 (2010).

Now a new panel of Justices have granted certiorari in a TCPA case for a limited issue: “[w]hether the Hobbs Act required the district court in this case to accept the FCC’s legal interpretation of the Telephone Consumer Protection Act.” Pdr Network v. Carlton & Harris Chiropractic, No. 17-1705, 2018 U.S. LEXIS 6754, at *1 (Nov. 13, 2018).

By way of background, federal district courts are courts of limited jurisdiction and possess only that power authorized by Constitution and by statute. U.S. Const. Art. III, § 1.  Thus, where Congress has taken jurisdiction from the district courts regarding a certain issue or statute, those courts lack the power and authority to reach it.

The Hobbs Act purports to remove from federal district courts the authority “to enjoin, set aside, suspend (in whole or in part), or to determine the validity of [] all final orders of the Federal Communications Commission[.]” 28 U.S.C.S. § 2342(1). According to the Hobbs Act, “the court of appeals” has “exclusive jurisdiction” over these issues.

The Hobbs Act is a step beyond the agency deference framework set forth by the Supreme Court in Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 842, 104 S. Ct. 2778, 2781 (1984). Generally speaking, district courts follow the Chevron framework to interpret statutes where an agency rule is involved. That framework requires a court to first ask whether the underlying statute is ambiguous. If the statute’s meaning is clear on its face, the inquiry ends and the unambiguous meaning controls. If the statute is silent or ambiguous with respect to the specific issue, the court must decide whether the agency’s answer is based on a permissible construction of the statute.

To date, every Circuit Court that has addressed whether the Hobbs Act requires a district court to accept the FCC’s legal interpretation of the TCPA has held that it must. See, e.g., Mais v. Gulf Coast Collection Bureau, Inc., 768 F.3d 1110, 1121 (11th Cir. 2014) (holding the district court did not have the power to review the validity of the FCC’s 2008 interpretation of prior express consent).

The district court in PDR Networks bucked the trend. It granted the defendant’s motion to dismiss on the issue of whether the fax attached to the complaint (offering a “free” physicians’ desk reference) was an “advertisement” as defined in the TCPA. In doing so, the district court found the TCPA’s statutory definition of “advertisement” was unambiguous.

Because Chevron does not require a federal court to adopt an interpretation of an unambiguous statute, the district court concluded that the Hobbs Act does not require that it adopt the FCC’s interpretation of “advertisement” in this instance. See Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, No. 3:15-14887, 2016 U.S. Dist. LEXIS 135310, at *9 (S.D. W. Va. Sep. 30, 2016) (although the district court also found its interpretation of “advertisement” was consistent with the FCC’s.) The district court therefore declined to accept the FCC’s definition of “advertisement,” which includes the promotion of goods or services “even at no cost.” Instead, it held the fax is not an advertisement because it does not offer anything for sale.

On appeal, the Fourth Circuit held that the Hobbs Act requires a district court to apply FCC interpretations of the TCPA. It held that the district court erred by engaging in Chevron analysis and declining to defer to the FCC’s broader interpretation of an “advertisement.” Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, 883 F.3d 459, 466 (4th Cir. 2018). The Court reasoned, “when Chevron meets Hobbs, consideration of the merits must yield to jurisdictional constraints.” Id. at 464.

As Circuit courts have consistently held that district courts must follow FCC guidance, the fact that the Supreme Court has agreed to decide whether the Hobbs Act requires a district court to accept the FCC’s interpretation of the TCPA is novel. Reading tea leaves, it may suggest a willingness to depart from prior decisions and reign in the Hobbs Act’s clutching restraint on lower courts. If that happens, it could unleash (even more) disparate rulings from district courts who decline to follow the FCC’s guidance on arguably unambiguous statutory language.

It also may be significant that Justice Kavanaugh will hear this case. Justice Kavanaugh was on the panel of the D.C. Circuit Court of Appeal Judges when portions of the FCC’s 2015 TCPA Order was invalidated in March. In prior cases, Justice Kavanaugh has been critical of FCC decision making as it pertains to the TCPA. See Bais Yaakov of Spring Valley v. FCC, 852 F.3d 1078 (D.C. Cir. 2017) (writing the majority opinion in case regarding the FCC’s 2006 Solicited Fax Rule and accusing the FCC of “trying to sidestep the [TCPA’s] language”).

It’s anyone’s guess how the Supreme Court will come down on this issue. And if history is a guide, anything can happen between now and when the Supreme Court rules in this case—if it decides to issue a decision at all. (See, e.g., Dorsey partner Scott Goldsmith’s Law360 article, Spokeo Without Scalia: The Fate of No Injury Class Actions, noting, for instance, that the Supreme Court could dismiss the writ of certiorari as “improvidently granted.”)

In the meantime, District courts are already taking notice of PDR Network and beginning to question how much deference should be afforded to the FCC. See Hatuey v. IC Sys., No. 1:16-cv-12542-DPW, 2018 U.S. Dist. LEXIS 193713, at *14 (D. Mass. Nov. 14, 2018) (“[T]he question of what weight should be given to an FCC rule interpreting the TCPA is subject to ongoing dispute.” (citing the grant of certiori in PDR Network).

Dorsey’s team will continue to monitor these developments.

Ninth Circuit Stays Marks through February 4, 2019 Pending an Anticipated Writ of Certiorari

On November 7, 2018, the Ninth Circuit stayed the issuance of its mandate in Marks v. Crunch San Diego, LLC, 904 F.3d 1041 (9th Cir. Sept. 20, 2018) through February 4, 2019, pending Crunch’s anticipated filing of a petition for writ of certiorari in the Supreme Court. See Marks v. Crunch San Diego, LLC, No. 14-56834, 2018 U.S. App. LEXIS 31745, at *1 (9th Cir. Nov. 7, 2018) (granting unopposed stay).

If the Supreme Court grants certiorari, the stay will continue. If it is denied, the Ninth Circuit’s mandate will immediately issue.

To recap, the Ninth Circuit held in Marks that to qualify as an automatic telephone dialing system (ATDS), equipment need only have “the capacity to dial stored numbers automatically.” It need not use a random or sequential number generator, as the statutory definition states. (You can find our full recap of Marks here.)

Needless to say, the ruling was controversial. See Law360 article, 9th Circ. Heats Up TCPA Debate With Broad Autodialer Take. And district courts outside of the Ninth Circuit are beginning to express their disagreement with Marks. See Roark v. Credit One Bank, N.A., No. 16-173 (PAM/ECW), 2018 U.S. Dist. LEXIS 193252, at *7-8 (D. Minn. Nov. 13, 2018) (declining to follow Marks and finding “the decisions of the D.C., Second, and Third Circuits more persuasive”).

The stay of Marks is undoubtedly a welcome reprieve for TCPA defendants in the Ninth Circuit, however temporary.

FCC Withdraws Rule Requiring Opt-Out Notices on Solicited Fax Advertisements In Response to D.C. Circuit Ruling

On November 14, 2018, the FCC put the final nail in the coffin of a 2006 FCC rule that purported to require opt-out notices on fax advertisements sent with the recipient’s prior express permission or consent.

In 2006, the FCC issued an order, codified in section 64.1200(a)(4)(iv) from Title 47 of the Code of Federal Regulations, that states:

“A facsimile advertisement that is sent to a recipient that has provided prior express invitation or permission to the sender must include an opt-out notice that complies with the requirements in [47 CFR 64.1200 (a)(4)(iii)].”

In March 2017, the D.C. Circuit Court of Appeals held that “the [TCPA] does not require . . . [an] opt-out notice on solicited fax advertisements. . . [n]or does the Act grant the FCC authority to require opt-out notices on solicited fax advertisements.” The court concluded that “the FCC’s 2006 Solicited Fax Rule is unlawful to the extent that it requires opt-out notices on solicited faxes.” Bais Yaakov of Spring Valley v. FCC, 852 F.3d 1078, 1083 (D.C. Cir. 2017).

In light of the D.C. Circuit’s decision in Bais Yaakov of Spring Valley, the FCC eliminated entirely 47 CFR 64.1200(a)(4)(iv).

District Court Holds Defendant Reasonably Relied on Consent From Prior Cell Phone Owner in Reassigned Number Case

Reassigned phone numbers are a thorny problem for callers. A caller may rely on the consent obtained by the prior cell phone owner only to unwittingly call the phone number using regulated technology after the number changes hands. Millions of phone numbers are recycled each year, so of course callers attempting to reach their customers could not possible know each time this has occurred.

The FCC is poised to address the treatment of recycled phone numbers in its new TCPA order, following the D.C. Circuit’s order in ACA International that “set aside the [FCC’s] treatment of reassigned numbers as a whole.”

But until the FCC provides guidance on recycled phone numbers, district courts are left to their own devices. In Roark v. Credit One Bank, N.A., No. 16-173 (PAM/ECW), 2018 U.S. Dist. LEXIS 193252 (D. Minn. Nov. 13, 2018), a Minnesota district court decided the right approach to recycled phone numbers is a “reasonable reliance” standard.

In Roark, Credit One had prior express consent from the prior owner of the phone number at issue to call him at the number provided, including consent to call him with prerecorded messages. The court found that Credit One had no reason to know that the phone number had been reassigned to the plaintiff because they received no notice from the plaintiff and the incoming caller identification for the number still populated with the prior owner’s information.

Noting that the FCC’s prior treatment of reassigned numbers was vacated by the D.C. Circuit, the court held that “under current authority, the Court must consider the reasonableness of the caller’s reliance on a prior number holder’s express consent.” Because “[i]t was reasonable for Credit One to rely on [the prior owner’s] prior express consent to call his number[,] the court held that summary judgment for the defense is proper.

To top it off, the court also flatly rejected Marks, adopted the Third Circuit’s reasoning in Dominguez, and granted summary judgment on the separate issue that the plaintiff has offered no evidence to rebut Credit One’s assertion that its dialing system “does not have the present capability to generate random or sequential numbers to dial.”

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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