United States: Appeals Court Strikes Down Key Portions Of FCC's Onerous TCPA Rulemaking

Summary

Last week, the US Court of Appeals for the DC Circuit issued a long-awaited decision on an omnibus challenge to the FCC's interpretation of the TCPA. While the decision provides some relief for businesses, it does not eliminate the prospect of TCPA liability and leaves important TCPA interpretive questions unresolved. Businesses should continue to be vigilant regarding consent and opt-out procedures when sending automated text messages and automated or pre-recorded calls to consumers.

In Depth

On March 16, 2018, the United States Court of Appeals for the DC Circuit issued a long-awaited decision on an omnibus challenge to the Federal Communications Commission's (FCC's) interpretation of the Telephone Consumer Protection Act (TCPA). The court struck down two key portions of the FCC's 2015 Declaratory Ruling and Order as arbitrary and capricious, while rejecting challenges to other portions of the 2015 Order.

Overall, the decision is good news for those frustrated by the FCC's expansive (and at times confusing) application of the TCPA. It struck down the FCC's definition of "automatic telephone dialing system" (ATDS, or autodialer) and the FCC's ruling on reassigned telephone numbers from the 2015 Order. However, the court left in place the FCC's rulings on revocation of consent and the exigent health care exemption for certain calls.

This decision will provide some relief from the most aggressive arguments that TCPA plaintiffs have wielded to spur large settlements and should encourage the FCC to tread more carefully before departing from bounds of the plain language of the statute. But—as usual in TCPA jurisprudence—important questions remain open, and clients that use automated texting or calling to communicate with their customers or patients should not let their guard down.

Issue 1: The Definition of "Automatic Telephone Dialing System"

With limited exceptions, the TCPA requires prior express consent before making a call to a wireless number using an ATDS or a pre-recorded/artificial voice. The question of what constitutes an ATDS is critical when analyzing potential TCPA liability.  

The TCPA defines an ATDS 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." In the 2015 Order, the FCC declared that a phone may qualify as an ATDS merely because it could be updated or configured so as to store or produce numbers and then dial them. This is a stunningly broad interpretation that could render almost any modern telephone system an ATDS.

In analyzing the FCC's position, the court emphasized that the FCC's interpretation would mean that any modern smartphone would be an ATDS, because the user could download software to the phone that would allow it to have the capabilities of an ATDS. In practice, this would mean that if an iPhone user sent text messages (or placed calls) to five contacts without their prior express consent, the user would be liable for between $2,500 and $7,500 in statutory penalties. This, the court ruled, simply cannot be the law.

In an effort to clarify the definition of an ATDS, the court focused on two questions: (1) when does a device have the "capacity" to perform the functions discussed above; and (2) what precisely are those functions? On both counts, the court found that the FCC's views failed to satisfy the criteria for "reasoned decision-making." Indeed, any rule that renders every modern smartphone an ATDS is simply unsupported by reason.

The court also took aim at the FCC's varied explanations of what it means for a device or phone to have the capacity "to store or produce telephone numbers to be called, using a random or sequential number generator" and "to dial such numbers." As the court explained, the FCC's interpretation of this test over the years has amounted to little more than policy statements about certain dialing functions and practices that likely meet the test, without explaining which are necessary conditions, which are sufficient conditions, or how these conditions tie back to the language of the statute. The court held that this does not amount to reasoned decision-making.

The bottom line: While the court reversed a number of the FCC's expansive pronouncements about what technology triggers TCPA liability, it did not (and perhaps could not) provide concrete answers about what does constitute an ATDS. Now, the response from the FCC and from lower courts applying this ruling will be critical. Nonetheless, the ruling sends a clear message that the FCC is not empowered to expand the statutory definitions of the TCPA without regard for the consequences of its interpretations and without a reasoned basis in the law.

Issue 2: Reassigned Numbers

Each year, millions of wireless numbers are reassigned from one user to another—the subscriber might stop paying the bill, might change phone numbers intentionally, might leave the country, or otherwise abandon his or her assigned phone number. This creates a conundrum under the TCPA: what happens when a caller has prior express consent to call one user, but (unbeknownst to the caller) the number has been reassigned to someone else (who has not given consent)?

There are two interrelated legal questions here: does the requirement for prior express consent from the "called party" refer to the person the caller intended to call, or the person whom the called actually called (due to the reassigned number)? And does the law hold callers strictly liable when they call the new owner of phone line, without any reason or way to know that the number was reassigned?

The FCC's answer to the first question is that "called party" really means "called party"—the person called, not who the caller intended to call. Consistent with an earlier decision from the Seventh Circuit, the court took no issue with this reasoning.

But this strict interpretation puts callers in a tough spot. As both the court and the FCC recognize, there is often no way for a caller to know that a number has been reassigned. The FCC's earlier solution was a "one strike" rule: the FCC ruled that callers are not liable for their first call to the new subscriber (unless they have reason to know the number changed hands). But under the FCC's interpretation, the caller is liable for each subsequent call, even if the caller has no way to know that there is now a different subscriber assigned to the number.

The court held that the FCC's one strike rule fails as a matter of law and common sense: "the Commission needed to give [a] reasoned (and reasonable) explanation of why its safe harbor stopped at the seemingly arbitrary point of a single call or message. The Commission did not do so." Applying a severability analysis, the court set aside the FCC's treatment of reassigned numbers entirely. It could not simply remove the one strike safe harbor, leaving in place the FCC's interpretation of "called party." This would result in a strict liability standard for callers. The court noted that the FCC is already designing a solution to address the reassigned number problem, seeking comments on proposed methods for "requir[ing] service providers to report information about number reassignments for the purposes of reducing unwanted robocalls." One such approach currently under review is proposed rulemaking to develop a database of reassigned numbers, along with a safe harbor for callers that choose to use the database.

The bottom line: This will continue to be an area of substantial litigation. On one hand, the court suggested that "called party" likely means the new subscriber; this position (and the Seventh Circuit's similar ruling) will likely be persuasive to other courts. But the court largely left open the question of whether and when a caller is liable for calls to a new subscriber made in reasonable reliance on consent from the previous user.

Issue 3: Revoking Consent

The third issue the court reviewed was how a user may revoke his or her prior express consent to receiving calls or texts. The FCC has received petitions asking for clarification as to whether a caller can unilaterally prescribe the exclusive means by which a called party can revoke consent to receive calls or messages. To date, the FCC has rejected these requests—and held that a called party "may revoke consent at any time and through any reasonable means . . . that clearly expresses a desire not to receive further messages." In determining whether a called party used reasonable means to revoke consent, the FCC prescribes that one must consider the totality of the circumstances, including: (1) whether the caller could have implemented mechanisms to effectuate a requested revocation without incurring undue burdens; and (2) whether the called party had a reasonable expectation that he or she could effectively communicate the request in that circumstance.

Here, the court upheld the FCC's reasoning and rulemaking. The court found that under the FCC's interpretation, callers have every incentive to implement clearly defined and user-friendly methods for a called party to revoke consent, and any effort by called parties to circumvent such methods "in favor of idiosyncratic or imaginative revocation request might well be seen as unreasonable." The court also left open the question whether callers and called parties can agree contractually to the means by which the latter can revoke consent.

The bottom line: Callers must continue to collect, respect, and act on reasonable requests to revoke consent. The caller cannot unilaterally prescribe how a user can opt-out. But the court's ruling will likely be a useful defense in abusive cases where plaintiffs try to engineer TCPA violations by revoking consent in obscure or idiosyncratic ways.

Issue 4: Calls by HIPAA Covered Entities

In 2012, the FCC issued a broad exception for calls to landline phones by covered entities under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Next, in its 2015 Order, the FCC created a markedly narrower exception for calls placed by health care providers to mobile phones. In its decision, the court analyzed arguments challenging the FCC's position on the grounds that it was arbitrary and capricious (1) to have a narrower carve-out for mobile phones, and (2) not to exempt all health care related calls under the TCPA's emergency purposes exception.

In a much shorter discussion, the court rejected both arguments, holding that HIPAA does not preempt or displace the TCPA, and the FCC had sound reasons for creating a different policy for calls to landlines and mobile phones. As to the second question, the court simply noted that calls by HIPAA covered entities that meet the "emergency purposes" exception likely fit within the FCC's 2015 safe harbor. Interestingly, the court did not address the onerous technical requirements included in the 2015 safe harbor, which are not present in the statutory "emergency purposes" exception. Likewise, the court also did not address the more fundamental question of why it matters if a call meets the 2015 regulatory safe harbor if it is exempt under the statute's emergency purposes provision.

The bottom line: the interaction between the TCPA and HIPAA is an area of substantial ambiguity. Here, the court's decision leaves the state-of-play unchanged. This means that, in practice, callers in this space will continue to wrestle with overlapping and ambiguous provisions in the statute and the FCC's regulations. In particular, the scope and applicability of the "emergency purposes" exception will likely remain an area of focus in TCPA litigation.

The court's decision will provide important perspective (and useful arguments and defenses in a litigation context) for callers facing the prospect of TCPA liability. However, this ruling is unlikely to abate the flow of TCPA litigation and enforcement activity, and TCPA compliance should remain a priority for all organizations with large-scale calling or texting operations. We expect further guidance from the FCC on these issues, and we will continue to monitor these developments.

Appeals Court Strikes Down Key Portions Of FCC's Onerous TCPA Rulemaking

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
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