In July 2015, the Federal Communications Commission (FCC) issued a much-anticipated Declaratory Ruling and Order aimed at clarifying certain aspects of the Telephone Consumer Protection Act (TCPA). As previously reported, more than a dozen parties filed appeals to the Order, claiming that it did nothing to clarify the TCPA and only served to further complicate compliance with the legal landscape. The appeals were consolidated under the name ACA International v. FCC, No. 15-1211, in the U.S. Court of Appeals for the D.C. Circuit. Oral argument is scheduled for October 19, 2016.

The appeals focus on four core areas of dispute:

(1) the FCC’s lack of meaningful guidance on dealing with the growing problem of reassigned cell phone numbers;
(2) the FCC’s overbroad and inconsistent definition of autodialer;
(3) the agency’s vague and overly broad standards for consent, including revocation; and
(4) issues unique to financial institutions and healthcare providers.

Key Issues in the Appeal

Reassigned Cell Phone Numbers. The FCC’s July 2015 Order reported that as many as 100,000 cell numbers are reassigned every day. Despite the difficulty of tracking reassigned wireless numbers, the FCC Order places the onus on businesses to avoid calling reassigned wireless numbers lest they face liability under the TCPA, even if such calls were made in good faith without knowing the cell number had been reassigned. The FCC’s answer to the problem was to create a one-call exemption. The petitioners have decried the one-call exemption, allowing companies to call a reassigned number once without liability, whether or not the recipient of the call answers the phone, as arbitrary and capricious since it ascribes constructive knowledge to the caller when it places the second call regardless of whether the first call “yield[s] actual knowledge of reassignment.” Petitioners have also taken issue with the Order defining “called party” as the current subscriber rather than the intended or expected recipient, which they say violates the First Amendment by deterring lawful communications.

Autodialers. The petitioners have objected to the FCC’s expansion of the definition of autodialer to include: (1) equipment that has the capacity to store or produce, and dial random or sequential numbers—without any showing that the particular functionality had been used for the call; and (2) equipment that lacks the present capacity but theoretically could be modified to become an autodialer under the TCPA’s definition. The petitioners claim the expanded definition is impermissibly vague and imposes liability that goes beyond Congress’s original intent in passing the TCPA.

Consent. Some of the petitioners contend that the standard set by the FCC’s Order allowing consent to be revoked at any time and by any means is arbitrary and capricious because it allows revocations to be delivered in ways that do not reasonably inform companies of the called party’s preferences. Other petitioners have asserted that this standard is also inconsistent with prior FCC statements and puts an undue and excessive burden on callers to review responses to determine which ones are revocations.

Special Rules for Certain Financial and Healthcare-Related Calls. Members of both the financial services industry and healthcare industry have challenged industry-specific provisions in the Order. For the financial services industry, the National Association of Federal Credit Unions (NAFCU) has objected to the Order’s interpretation of the “free-to-end-user” call exemption, which exempts from the TCPA calls regarding fraudulent account activity, risks to consumer personal data including steps the consumer can take to protect that data, and money transfer notifications. NAFCU claims that financial institutions have no way of knowing what kind of wireless plan a given customer has and consequently, whether that customer will be charged for the communication. On healthcare issues, Rite Aid challenges: (1) the distinction between Health Insurance Portability and Accountability Act (HIPAA) calls made to land lines (no TCPA liability) and wireless numbers (TCPA liability); and (2) the exclusion of some calls permitted under HIPAA from the Order’s exemption from the TCPA calls “for which there is exigency and that have a healthcare treatment purpose.”

Developments Since the 2015 Order

Since the 2015 Order was issued, courts have grappled with its application in pending cases. For example, the TCPA restricts the use of autodialers, defined 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.” Prior to July 2015, a number of courts had recognized that a piece of equipment’s capacity alone, without some showing that the functionality in question had been used, would not be sufficient to establish liability under the TCPA. Some courts have continued to apply this common sense approach. See McKenna v. WhisperText et al., 2015 WL 428728 (N.D. Cal. Sept. 9, 2015) (applying classic interpretation of “autodialer” to dismiss a TCPA claim, finding that the system used to send an unsolicited text required human intervention and thus did not qualify as an autodialer). Other courts, however, have struggled to apply the arguably broader standard from the 2015 FCC Order. See, e.g., Dominguez v. Yahoo, Inc., 2015 WL 6405811, at *2 (3d Cir. Oct. 23, 2015) (remanding for further proceedings in light of 2015 Order).

Courts in some jurisdictions have opted to stay cases in anticipation of a final appeal ruling. See, e.g., Coatney v. Synchrony Bank, 2016 WL 4506315 (M.D. Fla. Aug. 2, 2016); Rose v. Wells Fargo Advisors, LLC, 2016 WL 3369283 (N.D. Ga. June 14, 2016); and Errington v. Time Warner Cable Inc., 2016 WL 2930696 (C.D. Cal. May 18, 2016). Cases that have been stayed often involve the very issues that are the subject of the appeal—reassigned cell phone numbers, autodialers, consent, and certain finance and healthcare exemptions.

There are also indications from dissenting commissioners that portions of the FCC Order, specifically the expansive definition of autodialer, could be overturned given that the focus on “capacity” arguably contradicts the plain language of the statute. For example, Commissioner Michael O’Rielly observed that, with regard to focus on capacity, the concern seems to be that companies would claim that a particular piece of equipment is not being used as an autodialer and then secretly activate the autodialer functionality. Commissioner O’Rielly explained that “[i]f a company can provide evidence that the equipment was not functioning as an autodialer at the time a call was made, then that should end the matter.” Commissioner Ajit Pai stated in his dissent from the Order that the FCC’s interpretation of the autodialer definition “transforms the TCPA from a statutory rifle-shot targeting specific companies that market their services through automated random or sequential dialing into an unpredictable shotgun blast covering virtually all communications devices.” A number of courts have also recognized the possibility that the 2015 Order may be struck down. See Fontes v. Time Warner Cable Inc., 2015 WL 9272790, at *4 (C.D. Cal. Dec. 17, 2015) (“[I]n light of the close divide amongst the FCC commissioners and the fact that at least one commissioner believes the FCC’s ruling is ‘flatly inconsistent with the TCPA,’ there is a legitimate possibility that the Court of Appeals may overturn that ruling.”).

Oral argument is scheduled for October 19, 2016, and the ruling will have a significant impact on the TCPA rules going forward. Businesses, legal practitioners, and others interested in the TCPA hope the ruling will clarify the confusion that has followed the FCC’s order. It remains to be seen whether that means a return to previous interpretations of the statute or an increased compliance burden for parties affected by the TCPA.