Key takeaways
- Federal district courts are no longer required to defer to the FCC's interpretation of statutes in civil enforcement proceedings.
- Regulated entities can now challenge prior federal agency interpretations in federal district court, potentially leading to more uncertainty and circuit splits.
- The ruling may lead to increased litigation and divergent interpretations across jurisdictions, affecting not just TCPA cases but also other federal agencies subject to the Hobbs Act.
The Supreme Court of the United States recently issued its decision in McLaughlin Chiropractic Assoc., Inc. v. McKesson Corp.—part of a series of decisions reining in judicial deference to federal administrative agencies. The Court held that federal district courts are no longer required to give deference to the Federal Communications Commission's (FCC)—or most other agencies'—interpretation of a statute in civil enforcement proceedings under the Administrative Orders Review Act (the Hobbs Act). McLaughlin builds on last year's decision in Loper Bright Enterprises v. Raimondo, which overturned the longstanding Chevron doctrine, further eroding the tradition of judicial deference to federal agencies' statutory interpretations and signaling a broader judicial shift: federal courts, not agencies, will determine the best interpretation of federal statutes.
The decision is certain to disrupt the regulatory and litigation landscape for entities subject to FCC jurisdiction. Parties can no longer rely on FCC interpretations of the Telephone Consumer Protection Act (TCPA) or the Communications Act of 1934, as amended, as definitive guidance, raising the specter of increased litigation, new and innovative theories of liability, and the potential for divergent interpretations across jurisdictions. Importantly, McLaughlin appears to reach beyond the FCC, affecting the review of final orders from a range of federal agencies governed by the Hobbs Act.
Background
McLaughlin originated from a class action filed by chiropractic practices against a healthcare company, alleging that the healthcare company violated the TCPA by transmitting unsolicited fax advertisements, including some sent over the internet. This litigation was pending in 2019 when the FCC issued a declaratory ruling (Fax Declaratory Ruling). This Fax Declaratory Ruling interpreted the TCPA to mean that online fax services—platforms that deliver faxes via email or through internet-based portals—do not fall within the TCPA's definition of a "telephone facsimile machine," reasoning that such services do not implicate the harms the TCPA was designed to address. In deference to the Fax Declaratory Ruling, the district court decertified the class established by the chiropractic practices. The case eventually reached the Supreme Court, which addressed whether district courts must defer to agency interpretations in enforcement proceedings.
The Hobbs Act allows parties to seek pre-enforcement review of a federal agency's final order by filing an appeal in the U.S. Court of Appeals for the Federal Circuit within 60 days and grants the appellate courts exclusive jurisdiction to determine the validity of such orders. In contrast, a party that is the subject of a final agency order relating to an enforcement action may challenge that action in federal district court. Prior to McLaughlin, this framework left little room for independent judicial analysis at the federal district court level, since an appellate court's decision to uphold a federal agency's final order was not challengeable in subsequent litigation brought by targets of enforcement actions in federal district courts. McLaughlin upends this tradition by allowing federal district courts to interpret statutes independently, without deference to prior agency orders.
In McLaughlin, the Court held that the Hobbs Act does not require federal district courts to defer to federal agency statutory interpretations. The Court explained that statutes authorizing pre-enforcement review fall into three categories: (1) those that expressly preclude judicial review in later enforcement proceedings, (2) those that expressly authorize or contemplate such review, and (3) those that are silent on the issue. Finding that the Hobbs Act falls into the third category, the Court emphasized that, under the Administrative Procedure Act and established principles of statutory interpretation, federal district courts retain the authority to independently interpret the statute at issue through ordinary principles of statutory interpretation, while still giving appropriate—but not binding—respect to the agency's interpretation. Importantly, the Court did not resolve whether the FCC's interpretation of the TCPA was correct in this context and instead remanded the case for the federal district court to make that determination.
What This Means for Federal Agencies
The Court's decision is expected to have far-reaching consequences beyond TCPA enforcement challenges, including:
- At the FCC, increased opportunity for district court litigation. In the context of TCPA cases, McLaughlin opens the door for defendants to challenge the validity and scope of FCC interpretations of the TCPA in district court. Further, in light of the Court's decision in SEC v. Jarkesy and the U.S. Court of Appeals for the Fifth Circuit's subsequent decision in AT&T v. FCC, the McLaughlin decision may also cause the FCC to prioritize alternatives to final orders, such as consent decrees, to avoid federal district courts altogether.
- More broadly, increased uncertainty. McLaughlin is not limited to the FCC's interpretation of the TCPA—it speaks to the deference owed by a U.S. district court to the statutory interpretations of any federal agency subject to the Hobbs Act, including agencies such as the FCC, the U.S. Department of Housing and Urban Development, and the U.S. Department of Transportation. The lack of deference to federal agency decisions may result in conflicting decisions among federal district courts and a higher likelihood of circuit splits, potentially creating more uncertainty for parties subject to federal agency jurisdiction.
Takeaways
McLaughlin represents another step in the Supreme Court's weakening of the administrative state. Regulated entities may have opportunities to take advantage of the greater autonomy of federal courts to overturn prior federal agency interpretations.
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