The U.S. Supreme Court's grant this week of the petition for certiorari in a case involving the Telephone Communication Protection Act (TCPA) prohibition on unsolicited fax advertisements could have significant implications for the Federal Communication Commission's (FCC) anticipated ruling on what constitutes an automatic telephone dialing system (ATDS) under the TCPA.
The petitioner in PDR Network v. Carlton & Harris Chiropractic sent a fax in 2013 to a West Virginia chiropractor offering a free copy of the Physicians' Desk Reference. The chiropractor declined the offer and sued PDR in West Virginia federal court, alleging that PDR had violated the TCPA by sending it an unsolicited fax advertisement. PDR moved to dismiss, arguing that the fax was not an ″unsolicited advertisement″ because it offered the desk reference for free rather than for purchase. The chiropractor disagreed, arguing that the fax was an ″unsolicited advertisement″ because a 2006 FCC rule interpreted the term to include ″facsimile messages that promote goods or services even at no cost.″
Applying step one of a Chevron deference analysis, the district court found that the TCPA's definition of ″unsolicited advertisement″ was unambiguous, and therefore it was not required to defer to the FCC's interpretation. Concluding that the TCPA only prohibited faxes with a commercial aim, it granted PDR's motion to dismiss. The U.S. Court of Appeals for the Fourth Circuit reversed, ruling that the Hobbs Act precluded the district court from ″even reaching the step-one question [of Chevron]″ and required it to defer to the FCC rule.
The Supreme Court has granted certiorari to decide whether the Hobbs Act required the district court to accept the FCC's TCPA interpretation. The Hobbs Act provides a mechanism for judicial review of certain agency orders, including all FCC final orders under the TCPA. An aggrieved party can challenge such an order by filing a petition in the court of appeals for the judicial circuit where the petitioner resides or has its principal office or in the U.S. Court of Appeals for the District of Columbia Circuit. Under the Hobbs Act, such courts have ″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 TCPA interpretations by the FCC.
In addition to the Hobbs Act question, PDR's certiorari petition presented the question of whether faxes must have a commercial nexus to a firm’s business to be prohibited by the TCPA. However, the Supreme Court only granted certiorari to decide the Hobbs Act question. Therefore, an affirmance would leave in place the Fourth Circuit's reading that the FCC's rule created a ″per se rule″ that a fax promoting free goods or services is an ″advertisement.″ While such a result could contribute to the filing of additional TCPA litigation regarding unsolicited advertisements, it could also eliminate further TCPA litigation over the TCPA's ATDS definition should the FCC—which is revisiting the definition in light of the D.C. Circuit's ACA International decision—adopt a narrow reading.
If the Supreme Court were to reverse the Fourth Circuit, however, a future district court might consider itself free to apply a Chevron analysis to the FCC's narrow reading. In Marks v. Crunch San Diego, the U.S. Court of Appeals for the Ninth Circuit recently found that the ATDS definition is ambiguous and based on an examination of the ″context and structure of the [TCPA's] statutory scheme,″ concluded that Congress intended to regulate devices that make automatic calls, including automatic calls dialed from lists of recipients. A district court might follow Marks to conclude that although it must proceed to step two of a Chevron analysis because the ATDS definition is ambiguous, the FCC's narrow interpretation is not reasonable or permissible because it conflicts with the ″context and structure of the [TCPA's] statutory scheme.″
Ballard Spahr's TCPA Team assists clients in navigating the complex and challenging issues that arise under the TCPA. The Team, which comprises regulatory attorneys and litigators, defends clients against TCPA class and individual actions, and counsels on TCPA compliance and avoiding liability, including reviewing policies and practices and helping to design text message, 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.Ballard Spahr's Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance, including pioneering work in pre-dispute arbitration programs
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