United States: D.C. Circuit Invalidates Portion Of FCC's 2015 Declaratory Ruling & Order Implementing The TCPA

On March 16, 2018, the D.C. Circuit issued its long-awaited ruling in ACA International, et al. v. FCC, et al., No. 15-1211, resolving a series of challenges to the July 10 2015 Declaratory Ruling & Order of the Federal Communications Commission (FCC) implementing the Telephone Consumer Protection Act (TCPA), In the Matter of Rules & Regulations Implementing the Telephone Consumer Protection Act of 1991, Declaratory Ruling & Order, 30 FCC Rcd. 7961 (2015) (Order).

Petitioners challenged various aspects of the Order under the Administrative Procedure Act as "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2). The court agreed that the Order's "effort to clarify the types of calling equipment that fall within the TCPA's restrictions" and "approach to calls made to a phone number previously assigned to a person who had given consent but since reassigned to another (nonconsenting) person" are arbitrary and capricious and accordingly vacated those portions of the Order. Op. 5. The court upheld, however, the Order's approach to revocation of consent and to the scope of the exemption for healthcare-related calls. See id.

While the court's decision may provide companies temporary relief from some of the most punitive aspects of the TCPA, lower courts will now have to fill the gap left by the D.C. Circuit's partial vacatur of the FCC's Order. Notwithstanding this victory, companies should be mindful of the ongoing litigation risks of communicating with prospective and current customers using telephones and other emerging technologies.

Statutory Framework

The TCPA was enacted in the 1990s to curtail undesired robocalls to consumers. To that end, Congress prohibited the use of certain automated dialing equipment to make calls to cellular telephones without the called party's consent. Specifically, except in limited circumstances, the TCPA restricts calls made using an "automatic telephone dialing system" (commonly referred to as an "ATDS" or "autodialer") to a "telephone number assigned to a ... cellular telephone service" without "the prior express consent of the called party." 47 U.S.C § 227(b)(1)(A). The TCPA defines "automatic telephone dialing system" as "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." . § 227(a)(1).

Violations of the TCPA are subject to statutory damages of $500 per call, and up to $1,500 in damages for each "willful[] or knowing[]" call in violation of the Act. 47 U.S.C. § 227(b)(3). The TCPA vests the FCC with authority to promulgate regulations to implement the Act's requirements. 47 U.S.C. § 227(b)(2).

2015 Declaratory Ruling

On July 10, 2015, the FCC issued the Order in response to 21 petitions for rulemaking or requests for clarification regarding the meaning and scope of several provisions of the TCPA. The Order expanded the scope of the TCPA in several important and concerning ways.

First, the FCC concluded that even equipment without the "'present ability' to dial randomly or sequentially" may qualify as an autodialer within the meaning of the TCPA. Order ¶ 15. The Order clarified that a device's "capacity" encompasses the device's "potential functionalities," including with modifications to hardware and software. ¶ 16. The Order also reaffirmed prior decisions of the FCC that "predictive dialers" qualify as autodialers, but declined to clarify whether a device must "dial numbers without human intervention" to constitute an autodialer. ¶¶ 10, 16, 17.

Second, the Order defined "called party" for purposes of the Act's prior express consent provision as the current "subscriber" or "customary user of the phone," rather than the intended recipient of the call. Order ¶ 73. Under the FCC's interpretation, a caller could face liability if it calls a number provided by a customer who had provided consent, but inadvertently reaches someone else to whom that number has been reassigned. To address this "severe" result, ¶ 90 n.312, the FCC permitted callers unaware of a telephone number's reassignment to make one—and only one—liability-free, post-reassignment call. All subsequent calls, however, are subject to TCPA liability, even if the caller is not actually made aware of the reassignment on the first call.

Third, the Order clarified the ways in which a consenting party can revoke previously given consent to receive autodialed calls. The Order states that customers may revoke consent "at any time and through any reasonable means" and prohibits callers from "limit[ing] the manner in which revocation may occur." Order ¶¶ 47, 63.

Fourth, the Order exempted from the consent requirement certain nonmarketing healthcare-related calls to wireless numbers, subject to numerous limitations. Order ¶ 146. The exemption did not cover calls "that include telemarketing, solicitation, or advertising content, or which include accounting, billing, debt-collection, or other financial content."

D.C. Circuit Decision

In ACA International, the court granted in part and denied in part the petitions for review.

With respect to the Order's explanation of the types of devices that qualify as an ATDS, the court concluded that the FCC's expansive interpretation of the statutory term "capacity" could not be sustained. In reaching that conclusion, the court was troubled that the FCC's interpretation had "the apparent effect of embracing any and all smartphones" given that "essentially any smartphone, with the addition of software, can gain the statutorily enumerated features of an autodialer and thus function as an ATDS." Op. 14. "If every smartphone qualifies as an ATDS," the court observed, "the statute's restrictions on autodialer calls assume an eye-popping sweep," rendering unlawful and subjecting to $500-per-call statutory damages "an[y] uninvited call or message from a smartphone ... even if autodialer features were not used to make the call or send the message." at 16. The court concluded that the TCPA "cannot reasonably be read" to permit such "anomalous outcomes." at 16-17. The court further explained that the Order "falls short of reasoned decisionmaking" in failing to offer clear guidance on "whether a device must itself have the ability to generate random or sequential telephone numbers to be dialed" to qualify as an ATDS or whether it is "enough if the device can call from a database of telephone numbers generated elsewhere." at 25. Indeed, the court found, the Order "seems to give both answers." at 27. Moreover, the court concluded, "[t]he order's lack of clarity about which functions qualify a device as an autodialer compounds the unreasonableness of the Commission's expansive understanding of when a device has the 'capacity' to perform the necessary functions." at 29. Accordingly, the court vacated the Order's interpretation of the term autodialer.

The court then turned to the Order's treatment of liability for calls to reassigned numbers. The court explained that when "a consenting party's cell number has been reassigned to another person[,] ... the caller might initiate a phone call (or send a text message) based on a mistaken belief that the owner of the receiving number has given consent, when in fact the number has been reassigned to someone else from whom consent has not been obtained." Op. 31. By adopting an interpretation of the term "called party" (from whom consent to be called must be obtained) to mean "current subscriber" rather than the intended recipient of the call, the court explained, the Order exposes the caller to TCPA liability for mistakenly calling a party who has not given consent. at 32. The court concluded that, as a textual matter, the FCC was not "compelled" to interpret the term "called party" to mean the "intended recipient" rather than the "current subscriber." at 35. However, the court went on to conclude that the Order's one-call safe harbor for calls to reassigned numbers is arbitrary and capricious. The court explained that the FCC had rejected strict liability for calls to reassigned numbers on the grounds that callers could reasonably rely on the consent given by the previous subscriber but "gave no explanation of why reasonable-reliance considerations would support limiting the safe harbor to just one call or message" when "[t]he first call or text message ... might give the caller no indication whatsoever of a possible reassignment." at 36. Accordingly, the court vacated the one-call safe harbor on the ground that it was not the product of reasoned decision-making. The court then concluded that, having invalidated the one-call safe harbor, it was required to set aside the FCC's "treatment of reassigned numbers more generally" because the court could not say with certainty that the FCC would have adopted the severed portion but for the one-call safe harbor. See id. at 39.

With respect to the revocation of consent issue, the court upheld the FCC's approach, "under which a party may revoke her consent through any reasonable means clearly expressing a desire to receive no further messages from the caller." Op. 5. The court explained that although the FCC did not endorse standardized revocation procedures, the Order "absolves callers of any responsibility to adopt systems that would entail 'undue burdens' or would be 'overly burdensome to implement.'" at 41. And in light of the "any reasonable means" standard endorsed by the FCC, "callers will have every incentive to avoid TCPA liability by making available clearly defined and easy-to-use opt-out methods." at 42. Further, the court emphasized, "[i]f recipients are afforded such options, any ... idiosyncratic or imaginative revocation requests might well be seen as unreasonable" and therefore not an acceptable means of revoking consent. . The court also rejected the notion that the Order "preclude[s] callers and consumers from contractually agreeing to revocation mechanisms," explaining that "[t]he ruling precludes unilateral imposition of revocation rules by callers; it does not address revocation rules mutually adopted by contracting parties." at 43 (emphasis added); see also id. ("Nothing in the Commission's order ... should be understood to speak to parties' ability to agree upon revocation procedures." (emphasis added)).

Lastly, the court rejected the challenge by petitioner Rite Aid to the scope of the Order's exemption from the prior-consent requirement for certain healthcare-related calls to wireless numbers. The court concluded that the FCC's restriction of the exemption "to calls for which there is exigency and that have a healthcare treatment purpose" was not arbitrary and capricious. Op. 44.

Conclusion

The court's ruling invalidates two of the most concerning aspects of the Order for covered parties—the definition of ATDS and liability for calls to reassigned numbers. Going forward, it remains to be seen how courts will treat these issues in the absence of the FCC's guidance. Absent future action by the FCC in a rulemaking or in response to a petition, courts will be left to determine on a case-by-case basis whether a particular piece of dialing equipment is an autodialer within the meaning of the statute and whether calls to reassigned numbers subject a caller to TCPA liability when the caller had the intended recipient's (but not the current subscriber's) prior express consent to be called. And although the court upheld the Order's treatment of revocation of consent, the court emphasized that reasonableness is the benchmark, suggesting that courts should be wary of unreasonable attempts to revoke consent in order to manufacture TCPA liability, and clarified that the Order in no way restricts parties' ability to mutually agree upon standardized revocation methods (even if it restricts callers' ability to impose those methods unilaterally).

Interestingly, the court questioned whether "in the case of a device having the 'capacity' both to perform the autodialer functions set out in the statutory definition and to perform as a traditional phone, ... the bar against 'making any call using' an ATDS appl[ies] only to calls made using the equipment's ATDS functionality," or whether "the bar appl[ies] to all calls made with a device having that 'capacity,' even ones made without any use of the equipment's autodialer capabilities?" Op. 30. The court ultimately declined to address that question given that the parties had not raised it, but suggested that the FCC "could choose to revisit the issue in a future rulemaking or declaratory order, and a party might then raise the issue on judicial review." Id. at 31.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Jonathan G. Cedarbaum
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions