Oral arguments were recently held before the U.S. Court of Appeals District of Columbia Circuit in a consolidated case, spearheaded by ACA International, challenging the Federal Communications Commission's (FCC) recent order and declaratory ruling (Order) implementing the Telephone Consumer Protection Act (TCPA). While the ultimate outcome of the case remains uncertain, the court raised and repeatedly pressed the FCC about a number of significant concerns with the Order.

The challengers argued that the FCC's Order was arbitrary and capricious on three grounds. First, they argued that the FCC's definition of an "automatic dialer system" was arbitrary and capricious because it went far beyond the statutory definition. The TCPA defines an autodialer as a device or system having the capacity to "store or produce telephone numbers to be called, using a random or sequential number generator" and "to dial such numbers." The FCC, however, went beyond the statutory text and defined capacity as the "potential ability" to function as an autodialer, regardless of whether the device relied on random or sequential calling lists. The focus on "potential ability," the challengers argued, made calling a number from any smartphone a potential TCPA violation because of the ready availability of apps that would allow a smartphone to function as an autodialer. Moreover, even manually initiated calls made with systems currently used by many financial institutions would arguably be prohibited under this definition because of their potential ability to be used as an autodialer.

In response, the FCC argued that the Order did not materially change the definition of an autodialer from its prior unchallenged orders implementing the TCPA. Moreover, the statute's definition of an autodialer, as drafted, was vague and the challengers’ interpretation that would limit autodialers only to those devices that relied on random or sequential calling lists was awkward at best, and not mandated by the statutory language. The FCC also argued that it has repeatedly offered assurance that the Order is not intended to capture all smartphones, and if there are concerns, the proper approach is to simply request a declaratory ruling from the FCC to clarify whether a specific device or system, such as a smartphone, is an autodialer. The FCC emphasized that no one had asked the FCC for that kind of clarification yet (although in response, Judge Harry T. Edwards quipped, "I'm asking you.").

The court's questions for the parties on this issue signaled a significant concern that, regardless of the FCC’s assurances to the contrary, the language of the Order unambiguously encompassed all smartphones. Additionally, the court repeatedly returned to an argument not raised by either party—that the statutory language of the TCPA unambiguously prohibits the use of an autodialer, and under that seemingly clear language, showing that a device had the capacity to be used as an autodialer was not sufficient to demonstrate a violation. The challengers did not dispute the court's reading of the statute, but instead merely argued that the court need not reach that far and could vacate the Order based on a finding that devices that lack present capacity are not autodialers. Similarly, the FCC appeared to concede that the Order went beyond the TCPA's definition of a violation, but that this was not an arbitrary nor capricious overreach because the focus on capacity has been customary for years and is necessary, at least in part, to ensure that private litigants can satisfy pleading standards or burdens of proof in asserting TCPA claims.

Second, the challengers argued that the Order's one-call safe harbor for reassigned numbers was arbitrary and capricious. The Order allows callers to make one call to a number before the caller will be deemed to have constructive knowledge that the number was reassigned and that the called party, i.e., the new owner of the number, does not consent, and thus any subsequent calls to the reassigned number would result in TCPA liability. The challengers described this one-call limitation as "irrational" because callers frequently are unable to determine whether a number has been reassigned after making a single call, particularly if the call or text goes unanswered. Moreover, while the Order provides a list of suggested methods that callers can use to proactively determine whether a number has been reassigned, these steps are not foolproof and the challengers noted that some of the amici who have implemented these methods are still being sued for TCPA violations arising from reassigned numbers.

The FCC conceded that the one-call safe harbor in the Order was imperfect, but argued that the approach was an appropriate balance of the risks. The FCC emphasized that because the TCPA is a consumer protection statute, shifting more of the risk to callers in favor of protecting consumers from unwanted calls is not arbitrary and capricious. While the court pressed both parties on their positions, the panel repeatedly voiced discomfort with the notion that a caller who followed all of the rules and exhausted its efforts to comply with the statute could still be sued for violations as a result of a reassigned number.

The final challenge to the Order relates to the FCC's inconsistent treatment of procedural requirements for revocations. The Order requires that callers permit consumers to revoke consent by any means, a broad requirement found nowhere in the TCPA. The challengers argued that allowing consumers to revoke by any means will make compliance nearly impossible due to the challenges in training staff to recognize revocations without a standard procedure. Moreover, the FCC failed to provide a basis for its decision to allow the health care and financial industries to implement specific revocation procedures while denying that same option to other industries, and in the absence of any justification, the challengers argued that this distinction was arbitrary and capricious. In response, the FCC argued that the challenges to implementation were greatly exaggerated, and that to allow the imposition of specific revocation procedures creates a significant risk of abuse by allowing callers to create unreasonable hurdles to revocation.

ACA International's petition was supported by several amici, including the Credit Union National Association, which was represented by Ballard Spahr.

Ballard Spahr's TCPA Task Force assists clients in navigating the complex and challenging issues that arise under the TCPA. The Task Force, which comprises regulatory attorneys and litigators, provides counsel on TCPA compliance and avoiding TCPA liability, including reviewing policies and practices and helping to design mobile text message and prerecorded and autodialed call campaigns. It also assists clients in commenting on regulatory proposals and handling scrutiny from regulators, including preparing for examinations, responding to investigations, and defending against enforcement actions. Task Force members also defend clients against TCPA class or individual actions.

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