Last month, the U.S. Court of Appeals for the D.C. Circuit heard oral argument in , the appeal of the Federal Communication Commission’s (“FCC’s”) July 2015 declaratory order interpreting the Telephone Consumer Protection Act (“TCPA”). Although scheduled to last 40 minutes, oral argument before the three-judge panel lasted almost three hours. The nature of the judges’ questioning suggests that the D.C. Circuit may soon clarify the TCPA’s restrictions on automated telephone dialing, a result many affected businesses throughout the country would welcome.

The TCPA

Passed by Congress in 1991 to protect consumers from unwanted telemarketing communications, the TCPA regulates the use of automated telephone dialing systems (“ATDS”) and prerecorded messages. Among other things, the TCPA in its current form prohibits the use of an ATDS to call or send a text message to a cell phone without the recipient’s prior express consent. Consumers can sue violators in court and seek statutory damages ranging from $500 to $1,500 per violation.

The TCPA was drafted nearly 25 years ago, at a time when cell phone technology and usage were drastically different than they are today. However, there have been few changes to the statutory language designed to keep up with the changing landscape. As a result, there has been much confusion regarding the TCPA’s applicability. In light of that confusion, as well as the FCC’s and some courts’ expansive interpretations of the law, together with the potential for uncapped statutory damages, TCPA class actions have been on the rise in recent years.

The FCC is empowered to interpret and implement the TCPA through rules, regulations and, when appropriate, declaratory orders. The FCC’s July 2015 order set out to provide clarity and guidance regarding certain of the TCPA’s requirements, but several of its findings have only led to further ambiguity. The D.C. Circuit appellate court may soon provide much needed clarity on several of the TCPA’s most important provisions.

Key issues at stake in the FCC order on appeal include: (1) what constitutes an automated telephone dialing system under the TCPA; (2) when liability is imposed for calls to reassigned wireless numbers; and (3) how consumers may revoke prior express consent.

The definition of an ATDS

The TCPA defines an ATDS as equipment that has the “capacity” to produce or store, and to dial, telephone numbers randomly or sequentially without human intervention. The 2015 order expanded that definition by interpreting the word “capacity” to include not just the present, but also the potential abilities of the equipment to perform those functions. While stating the definition of ATDS “does not extend to every piece of malleable and modifiable dialing equipment that conceivably could be considered to have some capacity, however small, to store and dial telephone numbers,” the FCC’s acknowledged that equipment could constitute ATDS even if it required additional software or changes to its current configuration in order to perform the automated functions. Rather than provide specific guidance on the theoretical potential functionalities meriting ATDS treatment, the FCC’s order left the question open for courts to consider on a case-by-case basis.

In the appeal of the 2015 order, petitioners challenged the FCC’s broad interpretation of “capacity” beyond the equipment’s present abilities as contrary to the plain language of the TCPA. The petitioners argued that this interpretation would render any ordinary smartphone (or possibly any telephone having a chip) an ATDS because it could be modified to autodial simply by downloading an app or other software. At the oral argument, the judges recognized the petitioners’ concerns and agreed that the FCC’s definition could produce nonsensical results. For example, Judge Pillard pointed out that, under the FCC’s interpretation, if someone were to use a smartphone to call an old friend without prior consent, he or she would be in violation of the TCPA. Similarly, Judge Edwards took the position that Congress intended for the TCPA to prevent excessive telemarketing calls dialed automatically from an ATDS, not to regulate the capacity of the equipment itself. In hearing arguments on this issue, the judges acknowledged the difficulty of applying a nearly 25-year-old statute to modern-day communication methods.

“One call” safe harbor for reassigned phone numbers

Another issue before the D.C. Circuit is the TCPA’s controversial “one call” safe harbor rule. The TCPA generally forbids making ATDS calls to consumers without the “consent of the called party.” When a wireless number has been reassigned, a caller who dials a number provided by a consenting consumer may reach person who did not consent. The FCC’s 2015 order ruled that in such instances the term “called party” includes even an unintended “subscriber or customary user,” (i.e., the person that is actually called). As a result, calls made to the new owner of a reassigned wireless number violate the TCPA unless and until the newly called party provides express consent.

Recognizing that many companies acting in good faith to contact consenting consumers are exposed to liability when numbers have been reassigned without the companies’ knowledge, the FCC granted a one call safe harbor from TCPA liability. In support of its decision, the FCC reasoned that making a single call – even if unanswered – is deemed to provide “constructive knowledge” of a reassigned phone number. Industry participants characterized the rule as impractical and unworkable, especially considering the FCC’s own estimate that as many as 100,000 cell phone numbers are reassigned to new users every day.

On appeal, the court appeared sympathetic to the argument that a single call safe harbor is impractical if there are no reliable ways to ascertain whether a wireless number has been reassigned. Judge Srinivasan’s questions focused on this issue, asking how a caller or sender of a text message could know that the wrong party was reached if the called party does not answer and the text message recipient does not send a return text. The FCC suggested that companies take various measures to track reassigned numbers, such as maintaining a database or asking consumers to notify companies when they change from a number for which they gave prior consent. Judge Edwards appeared to disagree with the FCC’s position, indicating that the one call safe harbor should be revised to balance the TCPA’s goal of protecting consumers with legitimate business concerns.

Revocation of prior consent

The FCC’s 2015 order prohibits companies from limiting the manner in which a consumer may revoke prior express consent and requires only that the revocation be “reasonable.” The FCC rejected industry comments proposing a rule that would permit callers to designate exclusive means of revocation on the basis that it would materially impair and diminish the consumers right to revoke. According to the FCC, such a rule would have placed a significant burden on the consumer who wants to stop autodialed calls, which is inconsistent with the goals of the TCPA.

The order’s interpretation is problematic because it prevents companies from developing appropriate, individualized procedures to ensure revocation requests are timely and reliably honored. A caller cannot, for example, require that its customers provide a specified type of notice – whether oral or written – to a department designated to receive such requests. This places practical constraints on a company’s ability to track and respond to such requests, which callers conversely argue frustrates the intent of the TCPA to avoid non-consensual ATDS calls.

On appeal, petitioners argued that such standard is arbitrary and capricious because it allows consumers to revoke consent without effectively informing the companies, and it unduly burdens companies with the responsibility of keeping track of the various possible ways consumers might revoke consent. The judges questioned the FCC in depth about this issue on oral argument. Judge Srinivasan inquired whether the rule might have a chilling effect on businesses’ making protected communications to consumers who want to receive them. Similarly, Judge Edwards disagreed with the FCC’s argument that allowing companies to present their customers with specific requirements for revocation of consent as a condition to contract would not unduly burden the call recipients. As Judge Edwards recognized, if a customer did not wish to agree to a particular method of revocation of consent, he or she would have the option simply not to sign the contract.

Conclusions

The D.C. Circuit is expected to issue a decision in the appeal of the 2015 order in the upcoming months. Businesses affected by the TCPA stand to gain significant clarity regarding the scope of the statute.