United States: D.C. Circuit Strikes Down FCC's Order Requiring Opt-Out Language On Solicited Fax Advertisements

On March 31, 2017, the D.C. Circuit issued its long-awaited decision in Bais Yaakov of Spring Valley, et al., v. Federal Communications Commission, et al., No. 14-1234, invalidating the FCC's rulings that required opt-out language on both solicited and unsolicited fax advertisements. The split decision, which was authored by Circuit Judge Kavanaugh, joined by Senior Circuit Judge Randolph and from which Circuit Judge Pillard dissented, will likely face challenges going forward.

With respect to fax transmissions, the TCPA prohibits the use of a fax machine to send an "unsolicited advertisement" unless the advertisement: (1) is sent to a recipient with whom the sender has an established business relationship; (2) the fax number was obtained either directly from the recipient or the recipient voluntarily agreed to make it available for public distribution; and (3) contains an opt-out notice as described in 47 U.S.C. § 227(b)(2)(D). See 47

U.S.C. § 227(b)(1)(C). In 2006, the FCC held that any fax advertisement "sent to a recipient that has provided prior express invitation of permission to the sender must include an opt-out notice." 21 FCCR 3787, 3812 (2006) (the "2006 Order").

After its 2006 Order, the FCC received various petitions challenging its finding. On October 30, 2014, the FCC rejected those petitions and confirmed its 2006 Order, holding again that any fax advertisement, regardless of whether it was solicited or unsolicited, must contain an opt-out notice. See 29 FCCR 13998, 14005 (2014) (the "2014 Order"). However, and citing footnote 154 of the 2006 Order, which stated that "the opt-out notice requirement only applies to communications that constitute unsolicited advertisements[,]" the FCC created a retroactive waiver of the requirement to include an opt-out notice on a solicited advertisement. See id., at 14008-12.

Importantly, then-Commissioner Pai dissented from the 2014 Order, stating that "[t]o the extent that our rules require solicited fax advertisements to contain a detailed opt-out notice, our regulations are unlawful. And to the extent that they purport to expose businesses to billions of dollars in liability for failing to provide detailed opt-out notices on messages that their customers have specifically asked to receive, they depart from common sense." Today, the D.C. Circuit adopted then-Commissioner Pai's argument and found that the FCC's ruling requiring an opt-out notice on solicited fax advertisements was unlawful.

In its decision, the D.C. Circuit strictly interprets the TCPA. First, it notes that the TCPA regulates only an "unsolicited advertisement," a term defined by the statute. Second, the Court holds that while the TCPA permits the FCC to issue regulations to implement its prohibitions, it does not permit the FCC to require opt-out notices on solicited fax advertisements. Third, it rejects the FCC's arguments that the statute does not expressly prohibit the FCC from enacting such a rule and that the rule furthers the purpose of the TCPA. The Court states that it is up to Congress to revise the express language of the statute, should it see fit to do so.

While this is a victory for senders of fax advertisements, it may also be a sign of things to come as the D.C. Circuit next addresses challenges to the July 2015 omnibus ruling (in ACA International v. Federal Communications Commission, No. 15 1211, which is briefed, argued and submitted). Of note, Circuit Judge Pillard is one of the three Judges who will decide ACA International, along with Judge Srinivasan and Judge Edwards. We remain hopeful that the appointment of Chairman Pai signals a shift in the FCC's attitude towards the impact of the TCPA on legitimate business communications. By quoting from then-Commissioner Pai's dissent in its opinion, the D.C. Circuit has certainly taken notice as well.

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