Accusing the Federal Communications Commission (FCC) of abdicating its responsibility to clarify areas of uncertainty under the Telephone Consumer Protection Act (TCPA) and muddying the already murky waters of the TCPA, more than a dozen parties have filed appeals challenging the FCC’s July 10, 2015 TCPA Declaratory Ruling and Order. The FCC’s Order purported to clarify the rules governing the TCPA but, instead, created more confusion than certainty by failing to articulate common sense rules that recognize the realities of modern day communication. See “Call (Un)Answered (the Second Ring): FCC Issues Sweeping Package of Declaratory Rulings on TCPA Petitions.”

The pending appeals, which have been consolidated before the U.S. Court of Appeals for the D.C. Circuit,1 have been filed by a wide range of business interests challenging various aspects of the FCC’s Order. The challenges2 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.

Reassigned Cell Phone Numbers

Despite acknowledging that approximately 100,000 cell phone numbers are reassigned to new users each day and that no systematic means exist for businesses to track or even know when a subscriber has relinquished his or her cell phone number and whether that number has been reassigned, the FCC cautioned businesses to institute new and better safeguards to avoid calling reassigned wireless numbers that may give rise to TCPA liability. The FCC failed, however, to provide meaningful guidance on how to achieve this result. At least nine of the petitioners in the consolidated appeal have included this issue in their petition for review.

The FCC’s Order creates a “one-call” exemption from the strict liability that attaches under the TCPA for calls made to a cellular telephone number the caller believes belongs to a consumer who previously provided some form of consent. As the petitioners have pointed out, this exemption is virtually meaningless for several reasons. First, the exemption does not take into account whether the one and only “free” call is actually answered. Second, it does not consider whether the caller obtains actual knowledge that the telephone number has been reassigned. Third, the exemption fails to take into account that before placing a call businesses have no practical way of verifying the accuracy of a customer’s consent, which would terminate upon the relinquishment and reassignment of the customer’s cell phone number. The FCC ascribes constructive knowledge to the caller when it places the second call regardless of whether the first call “yield[s] actual knowledge of reassignment.” As several petitioners pointed out, this construction is arbitrary and capricious.

Several petitioners also have pointed out that the Order improperly defines “called party” in the consent provisions as the “current subscriber (or non-subscriber customary user of the phone)” rather than the intended recipient or expected recipient. The petitioners asserted that this interpretation violates the First Amendment by deterring lawful communications through the TCPA’s strict liability scheme. Two petitioners asserted that this definition is contrary to other portions of the Order and effectively makes it impossible for callers to ensure that at the time of any call or text, the prior express consent obtained for that phone number remains valid.

Autodialers

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.” Also included are predictive dialers, defined as “equipment that dials numbers and, when certain computer software is attached, also assists telemarketers in predicting when a sales agent will be available to take calls.”

In several cases decided prior to the FCC’s Order, courts were trending towards a common sense standard recognizing that a piece of equipment’s capacity alone, without some showing that the functionality in question had been utilized, would not be sufficient to establish liability under the TCPA. Gragg v. Orange Cab Co., Inc., 995 F. Supp. 2d 1189, 1196 (W.D. Wash. 2014). See also Marks v. Crunch San Diego, LLC, 55 F. Supp. 3d 1288, 1291-1292 (S.D. Cal. Oct. 23, 2014);Glauser v. GroupMe, Inc., 2015 WL 475111 *3-4 (N.D. Cal. Feb. 4, 2015).

In its Order, however, the FCC disregarded this pragmatic approach. The FCC stated that the mere capacity or capability to store or produce, and dial random or sequential numbers—without any showing that the functionality had been utilized at the time the calls were made—determines whether the equipment constitutes an autodialer. Highlighting its lack of meaningful guidance on whether equipment is or is not an autodialer, the FCC provided the following example: “it might be theoretically possible to modify a rotary-dial phone to such an extreme that it would satisfy the definition of ‘autodialer,’ but such a possibility is too attenuated for us to find that a rotary-dial phone has the requisite ‘capacity’ and therefore is an autodialer.”

At least 10 of the petitioners pointed out that the FCC improperly expanded the definition even further by including equipment that lacks the present capacity but has “more than a theoretical potential” of being “modified to satisfy the [autodialer] definition” in the future. These petitioners contend that this definition is overly broad because it allows for potential liability far beyond Congress’ original intent to impose liability for calling unlisted specialized numbers through an autodialer’s ability to dial randomly and call sequential blocks of numbers.

On the more basic question of what functionality a piece of equipment must have to qualify as an autodialer, 10 of the petitioners pointed to the varying and inconsistent conclusions contained in the Order. One section of the Order confirms Congress’ statutory definition of autodialer while another section states that the equipment need only have the capacity “to store or produce telephone numbers.” Another section defines autodialer as equipment that can dial “without human intervention,” a standard that does not appear anywhere in the TCPA. According to the petitioners, these varying definitions violate the Administrative Procedure Act (APA) and the Due Process Clause because they are inconsistent and irreconcilable.

Consent

The issue of consent is one aspect of the TCPA that has given rise to significant class action litigation. Consent for certain types of calls may be established expressly, generally by the called party previously providing a phone number. Consent for other types of calls must be in writing. Although not addressed in the text of the statute, the FCC Order states unambiguously that consent may be revoked at any time by any means, and a caller may not limit or restrict the manner in which revocation may occur.

At least nine of the petitioners contend that this standard 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. For example, several of the petitioners noted that the Order would allow, for example, a customer’s oral notification to an employee at a caller’s in-store bill payment location to serve as valid revocation of consent. That employee may not have any reasonable means of communicating the revocation of consent to those in the company responsible for recording revocations. Two of the petitioners asserted that this standard is also inconsistent with prior FCC statements and puts an undue and excessive burden on callers, particularly those communicating by text message. For example, when a business sends an automated text message with a list of words that allow the consumer to stop future text messages by responding with a specific word or phrase, the FCC takes the position that a consumer could respond with a word which does not appear in the list and then file suit claiming a violation of the TCPA following receipt of any future text messages from the business. Due to limitations on the ability of technology to recognize every expression of desire to revoke consent, the business would have to manually review responses to determine which ones were revocations.

Special Rules for Certain Financial and Healthcare-Related Calls

Despite creating an exemption from the TCPA’s consumer consent requirements for certain calls and texts it deems to be pro-consumer regarding time-sensitive financial and health-related issues, the Order’s guidance creates practical problems in both arenas.

In the financial context, the National Association of Federal Credit Unions (NAFCU) takes issue with the Order’s treatment of the “free-to-end-user” call exemption. It exempts calls about fraudulent transactions/identity theft, possible data breaches of customer’s personal information that includes information about measures consumers may take to prevent identity theft following a data security breach, and money transfer notifications from the TCPA. But these communications must be completely free of charge to the recipient regardless of whether they come in the form of calls or text messages. NAFCU contends that this requirement makes it functionally impossible for financial institutions to take advantage of the exemption because customers’ cell phone plans are still largely individualized. Financial institutions have no ability to determine whether a given customer has an unlimited calling and/or texting plan versus a plan with a monthly allotment of minutes and messages.

In the healthcare arena, Rite Aid challenges the arbitrary distinction between calls delivering Health Insurance Portability and Accountability Act (HIPAA)-protected healthcare messages when placed to residential telephone lines—to which no TCPA liability would attach—and the same calls delivering the same messages when placed to wireless telephone numbers, where TCPA liability would attach. In addition, Rite Aid notes that the FCC’s defined category of calls “for which there is exigency and that have a healthcare treatment purpose” excludes some calls that are otherwise permitted under HIPAA. In its opening brief, Rite Aid contends that the FCC has violated both the First Amendment and the APA by taking these positions on HIPAA-protected healthcare calls.

Conclusion

This appeal will be closely watched by companies that communicate with their customers by phone and text message. The outcome of the appeal could reshape the law in several key areas and rein in the FCC’s expansive omnibus Order. Further developments in the case are expected in 2016. Meanwhile, the business community continues to deal with the ongoing wave of TCPA class actions filed in courts across the country.