United States: U.S. Supreme Court To Review Deference To The FCC In TCPA Cases

Does the Hobbs Act require district courts to accept the Federal Communications Commission's legal interpretation of the Telephone Consumer Protection Act? That is the question the United States Supreme Court will consider in PDR Network, LLC v. Carlton & Harris Chiropractic Inc., Docket No. 17-1705. On November 13, 2018, the Supreme Court granted certiorari in the case following the Fourth Circuit's decision to vacate a lower court decision regarding what constitutes an "advertisement" under the TCPA.

Background

In Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, et al., Case No. 3:15-cv-14887, 2016 WL 5799301 (S.D.W.V. Sept. 30, 2016), plaintiff alleged that PDR Network had sent a single fax to plaintiff's office in violation of the TCPA. The fax offered the recipient a free "Physician's Desk Reference eBook." PDR filed a motion to dismiss, arguing that the fax was not an advertisement because it did not offer anything for purchase or sale. The district court agreed. The court found that an "advertisement" under the TCPA required the fax to have a commercial aim. The fax at issue, however, exhibited no commercial aim.

In so ruling, the court declined to defer to an FCC order interpreting the TCPA's definition of "unsolicited advertisement," which had concluded that a message that promoted goods or services at no cost is an unsolicited advertisement. The court found that the Hobbs Act did not require deference to the FCC's interpretation of an unambiguous statute. Because the definition of "advertisement" was clear and easy to apply, the FCC was not due "substantial deference" under Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837, 843 (1984). Even if it did defer to the FCC's interpretation, the district court found, the fax was not an advertisement, because the fax did not "promote" anything.

The Fourth Circuit Vacates and Remands

Plaintiff appealed the district court's dismissal of its claim, arguing that the district court erred in declining to defer to the FCC's 2006 rule. Specifically, plaintiff argued that the Hobbs Act, 28 U.S.C. § 2342 et seq., required the district court to defer to the FCC's interpretation of the term "unsolicited advertisement." And to the extent that the district court had interpreted the FCC rule, plaintiff argued that the district court erred by reading the rule to require the fax have a commercial aim to be considered an advertisement. The Fourth Circuit agreed and vacated the district court's judgment. Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, 883 F.3d 459 (2018).

First, the Fourth Circuit determined that the Hobbs Act deprives district courts of jurisdiction to consider the validity of orders like the FCC's 2006 Rule. The Court noted that, in a typical case of statutory interpretation where an agency rule is involved, the Chevron framework requires a court to first ask whether the underlying statute is ambiguous (step one). Where a statute's meaning is clear on its face, the inquiry ends and the unambiguous meaning controls. But the Hobbs Act, the Fourth Circuit found, precluded the district court from even reaching step one. The Hobbs Act, which provides a mechanism for judicial review of certain administrative rules by federal appellate courts, stripped jurisdiction from the district court regarding the issue. As such, the district court had acted beyond the scope of its authority by refusing to defer to the FCC rule and instead applying the Chevron analysis.

Second, the Court found that the district court's reading of the 2006 FCC Rule as requiring a fax to have a "commercial aim" to constitute an advertisement was at odds with the plain meaning of the Rule's text. Instead, under a natural reading of the text of the FCC Rule, the Rule was clear: faxes that offer free goods and services are advertisements under the TCPA. As such, the Fourth Circuit vacated the district court's judgment and remanded the case.

Judge Thacker dissented, arguing that, contrary to the majority's opinion, the district court had not determined the validity of the 2006 FCC Rule simply by engaging in step one of the Chevron analysis. Invalidation of the FCC Rule only could have occurred at step one if the court found the agency's construction was in conflict with the unambiguous statutory language. Here, there was no such finding. Because the district court concluded that the TCPA was unambiguous, it therefore did not need to defer to the 2006 FCC Rule. And in reaching its conclusion, it did not "determine the validity" of the rule, but instead assumed the Rule was valid and used the Rule to bolster its interpretation of the TCPA. As such, the district court had not exceeded the Hobbs Act's jurisdictional bounds. Judge Thacker also interpreted the statutory language of the TCPA and found that the TCPA was ambiguous because it suggested two competing interpretations of "advertisement": one that required a commercial aim and one that did not. Moving to step two of the Chevron analysis, Judge Thacker concluded that the 2006 FCC Rule required a commercial aim and was entitled substantial deference because it was a "permissible" construction of the TCPA.

PDR Petitions for a Writ of Certiorari

Following the Fourth Circuit's decision, PDR Network filed a petition for a writ of certiorari asking the Supreme Court to resolve the Circuit split regarding whether the Hobbs Act strips courts of jurisdiction to engage in a Chevron analysis and requires automatic deference to an agency's order even if there has been no challenge to the validity of such order. The petition also asked the Supreme Court to consider whether the FCC's 2006 Order created a per se rule that faxes that "promote goods and services at no costs" qualify as an "advertisement" under the TCPA or whether courts must require a commercial nexus to a firm's business for a fax to qualify as an "advertisement."

The Supreme Court granted certiorari, but limited certiorari to the first question of whether the Hobbs Act required the district court in this case to accept the FCC's legal interpretation of the TCPA. The Supreme Court's decision will either open or close doors to arguments regarding interpretation of the TCPA.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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