Untouchable No More: Reinforcements Arrive for TCPA Defendants Battling the FCC’s Aggressive Expansion of the Statute

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The Telephone Consumer Protection Act (TCPA) was signed into law almost 30 years ago when around 3% of the population owned cellular telephones and no one had heard of – let alone sent – a text message. Since that time, the legislature has substantively amended the TCPA only once to create a government debt exception. Despite the TCPA’s antiquated language and minimal amendments, it is the basis for thousands of lawsuits each year, with one study reporting that TCPA actions have increased by 740% in the last decade alone. The aggressive evolution of the TCPA to cover everything from automated text messaging systems to reassigned cellular telephone numbers to automatic opt-out provisions is largely attributable to the Federal Communications Commission (FCC), and, up until last week, TCPA defendants have been practically defenseless against the FCC’s far reach. But with the release of the Fourth Circuit Court of Appeals decision in Carlton & Harris Chiropractic Inc. v. PDR Network, LLC, it’s open season on the FCC’s TCPA regulations.

Although the legislature has largely ignored the TCPA since it was enacted, the FCC has been filling the legislative vacuum with guidance that has aggressively expanded the TCPA’s scope. For example, effective October 2013, the FCC confirmed (for the second time) that the TCPA covered text messages and advised that prior express written consent is required to place telemarketing calls and text messages to cellular telephones.  The following year, TCPA lawsuits were the second most common action in federal court, and the top four settlements combined totaled north of $175 million. In 2015, the FCC expanded the definition of autodialer to include any equipment with the potential capacity to dial numbers without human intervention and tasked callers with sole responsibility for identifying reassigned cellular telephone numbers. The following year, TCPA litigation increased by 46%. These examples are just the tip of the iceberg.

Until now, courts generally deferred to FCC guidance based upon the underlying presumption that the Hobbs Act required courts to follow the FCC’s rules. PDR suggests that may no longer be the case. In PDR, a chiropractic office brought a TCPA class action against a publisher, alleging that the publisher sent unsolicited fax advertisements for a free e-book. The publisher moved to dismiss the complaint on the ground that its faxes were not “advertisements” because they offered a free product. In reliance upon a 2006 FCC Order defining “unsolicited advertisement,” the chiropractic office argued that communications that offer a “free good or service” are advertisements under the TCPA. After the district court sided with the publisher and held that faxes were only advertisements if they were sent for a commercial purpose, the Fourth Circuit Court of Appeals reversed and held that the Hobbs Act required the district court to adopt the FCC’s interpretation of the TCPA. When the publisher appealed to the United States Supreme Court, the Supreme Court remanded the case and held that the district court must consider (1) whether the FCC’s rule is legislative or interpretive; and (2) whether the publisher had a prior and adequate opportunity to seek judicial review of the rule.

On remand, the Fourth Circuit held that the FCC’s rule was interpretive and, because interpretive rules do not require formal notice and comment, no party had an opportunity to challenge the rule. Because interpretive rules do not “make rules carrying the force of law,” courts should look to the Supreme Court’s Skidmore decision to determine the amount of deference, if any, an agency rule is entitled to. Skidmore’s analysis is substantive and requires a court to examine (1) the thoroughness of the agency’s consideration; (2) the validity of the agency’s reasoning; (3) whether the rule is consistent with other past and present agency rules; and (4) the general persuasiveness of the agency’s position. The Fourth Circuit then remanded the case for further consideration of these factors by the district court.

Dense analysis aside, the key takeaway is this: The FCC’s rules are no longer untouchable. Going forward, there is likely going to be significant litigation regarding (1) whether each FCC rule is legislative or interpretive, and (2) for interpretive rules, whether the FCC’s reasoning is persuasive, reasoned, and consistent with other guidance. While the PDR court did not have to determine whether the subject rule was interpretive or legislative because both parties agreed it was interpretive, the PDR decision will still be a welcome addition to TCPA defendants’ arsenals.

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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