United States: DC Circuit Issues Long-Awaited Opinion Addressing Challenges To FCC's 2015 TCPA Ruling

Nearly seventeen months after oral argument in October 2016, the United States Court of Appeals for the District of Columbia issued its unanimous opinion today on the consolidated appeals of the Federal Communications Commission's 2015 Omnibus Ruling (the "2015 Ruling") regarding the Telephone Consumer Protection Act. The DC Circuit addressed four aspects of the 2015 Ruling:

(1) what constitutes an "automatic telephone dialing system," or ATDS; (2) the "one free call" exemption with respect to reassigned numbers; (3) the refusal to restrict the means of consent revocation; and (4) the scope of the time-sensitive healthcare alerts exemption. The DC Circuit rejected the FCC's ruling with respect to the first two issues but affirmed the FCC on the remaining issues.

While there are many takeaways, the opinion sets the stage for the FCC to re-address what constitutes an ATDS as well as its approach to reassigned telephone numbers. Given the new leadership at the FCC and Chairman Pai's statements on these issues within his dissenting opinion to the 2015 Ruling, there is reason to believe that the FCC may substantially change its position on these two issues. In the interim, the opinion provides an opportunity for entities to argue that any dialing equipment that does not meet the statutory definition does not constitute an ATDS. More importantly, the opinion makes clear that the 2015 Ruling does not address parties' ability to address revocation of consent through contract provisions.

The Definition Of An ATDS

The 2015 Ruling expansively interpreted the TCPA's definition of an ATDS, which reads "equipment which has the capacity—(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers." 47 U.S.C. § 227(a)(1) (emphasis added). The FCC refused to limit "capacity" to a system's present capacity. Instead, the FCC concluded that equipment with a potential capacity, even if that capacity was not used to place the call(s) at issue, falls within the scope of the TCPA's ATDS definition.

The DC Circuit rejected this interpretation, primarily because it encompasses a smartphone. The Court noted that many smartphones are able to send text messages en masse and that a user could easily download an application that would enable the smartphone to "gain the statutorily enumerated features of an autodialer and thus function as an ATDS." But this expansive definition, the Court noted, is incongruous with the purpose of the TCPA, which Congress designed to curb unwanted telemarketing calls, not subject the average American to TCPA liability for sending invitations to a social gathering.

The DC Circuit went on to reject the FCC's interpretation of what functionality is required for equipment to be deemed an ATDS for two reasons. First, the FCC has stated both that an ATDS must be able to generate, and call, random or sequential numbers and that equipment that lacks such functionality (e.g., a predictive dialer) constitutes an ATDS. Second, and although the FCC has repeatedly stated that the hallmark of an ATDS is the ability to place calls without human intervention, in the 2015 Order the FCC held that equipment may qualify as an ATDS even if human intervention is required. Because of these inconsistencies, the DC Circuit rejected the FCC's interpretation of what functionalities are required for equipment to be considered an ATDS.

Calls To Reassigned Numbers

Next, the DC Circuit invalidated the FCC's ruling with respect to reassigned numbers. In the 2015 Order, the FCC rejected the argument that consent to be called may be obtained from the "intended recipient." Instead, the FCC noted that the TCPA requires consent to be obtained from the current subscriber to the number. As a result, in the context of a recycled telephone number (i.e., a telephone number used by consumer A who relinquishes the number and the service provider reassigns that number to consumer B), consent must be obtained from the person actually reached. Nevertheless, the FCC refused to adopt a strict liability approach and, as a result, implemented the much maligned "one free call" safe harbor.

The DC Circuit agreed with petitioners that the one-free-call safe harbor was arbitrary. In justifying the safe harbor, the FCC stated that a caller may reasonably rely upon the consent provided to it by the prior subscriber for the caller's first call to the reassigned number. But the Court held that the FCC's approach fails because it does not explain why such reliance ends at one call, regardless of the outcome. As a result, the DC Circuit set aside the ruling. Importantly, and because rejecting only the safe harbor would result in the strict liability that the FCC expressly stated that it refused to adopt, the DC Circuit rejected the FCC's entire opinion regarding reassigned numbers.

Revocation Of Consent

Finally, the DC Circuit affirmed the FCC's ruling that a consumer may revoke consent in any reasonable manner. In affirming the FCC's ruling, the DC Circuit made clear that reasonableness must be considered and that where "clearly- defined and easy-to-use opt-out methods" are made available, a consumer's efforts "to sidestep the available methods in favor of idiosyncratic or imaginative revocation requests might well be seen as unreasonable." The DC Circuit also stressed that the 2015 Order "does not address revocation rules mutually adopted by contracting parties. Nothing in the [FCC]'s order thus should be understood to speak to parties' ability to agree upon revocation procedures." This concession by the FCC is critical when addressing the applicability of Reyes v. Lincoln Auto. Fin. Servs., 861 F.3d 51 (2d Cir. 2017), as consumers often point to the 2015 Order as support that Reyes cannot restrict a consumer's ability to revoke consent.

What's Next?

Outside of the applicability of Reyes, how this ruling will impact TCPA litigation going forward will largely depend upon the FCC's response. Until the FCC addresses these issues, plaintiff's attorneys will continue to argue that the FCC's prior decisions, in 2003 and 2008, as well as numerous court decisions, make clear that predictive dialers qualify as an ATDS. In addition, the DC Circuit did not question or otherwise cast doubt on the Seventh Circuit's decision in Soppet v. Enhanced Recovery Co., 679 F.3d 637 (7th Cir. 2012), which held that a call placed to a reassigned number violates the TCPA unless consent was obtained from the actual, not intended, recipient of the call.

Chairman Pai has made his thoughts clear with respect to the definition of an ATDS and reassigned numbers. In his dissenting opinion to the 2015 Order, Chairman Pai stated that equipment that lacks the capacity to store or produce random or sequential numbers, and to dial such numbers, cannot constitute an ATDS. In addressing the FCC's argument that nearly no modern dialer possesses this attribute, he stated that "Congress expressly targeted equipment that enables telemarketers to dial random or sequential numbers in the TCPA. If callers have abandoned that equipment, then the TCPA has accomplished the precise goal Congress set out for it." With respect to reassigned numbers, Chairman Pai endorsed the intended-recipient approach. Under this approach, a calling party would violate the TCPA for calls to a reassigned number only after the calling party actually learns of the reassignment.

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