On October 19, Judges Srinivasan and Pillard and Senior Judge Edwards of the D.C. Circuit heard argument in ACA International v. FCC, which addressed several consolidated petitions, including those by the U.S. Chamber of Commerce and Sirius XM, challenging the Federal Communications Commission's (FCC or the Commission) July 2015 Declaratory Ruling and Order (the July 2015 Order). Diana Eisner, a litigation associate in Manatt's Washington, D.C. office and a member of the firm's TCPA compliance and class action defense practice, attended the argument and authored this summary of the proceeding.

The petitioners argue that the FCC exceeded its authority and in essence rewrote the TCPA through its rules regarding prohibited calling and texting methods. The national drugstore chain Rite Aid also participated as an intervenor, arguing the July 2015 Order could be construed as imposing restrictions on healthcare calls, which conflicts with prior FCC guidance and/or the Health Insurance Portability and Accountability Act. The standing-room only argument, which lasted almost three hours (far beyond the 40 minutes allotted), signaled the importance of the issues before the court. The "hot" bench focused on what are widely considered to be the three key issues in the July 2015 Order:

  • The FCC's expansive interpretation of what is an "autodialer,"
  • The FCC's strict liability approach to reassigned numbers, and
  • The FCC's rules regarding revocation of consent.

Autodialers

The Commission's expanded definition of automatic telephone dialing system (ATDS) dominated the argument. All three judges were focused on the fact that under the July 2015 Order, a device, such as a cell phone, would be considered an ATDS if the user downloaded an autodialing app, even if the app is not being used to make calls. Judge Edwards quickly focused on the word "using" in the statutory prohibition of autodialed calls. He repeated this point throughout the argument, suggesting that the FCC's construction of the term "ATDS" to include devices with a potential capacity to autodial, but which capacity is not used to place the call or calls, is overbroad. While the FCC acknowledged that the statute prohibits "using" an ATDS to initiate calls, the Commission relied on the TCPA's purpose as a consumer protection statute. The FCC argued that the broad interpretation provides consumers with greater protection against and an easier way to challenge unwanted calls by relieving them of having to prove that the autodialer functionality was used to place the call. Judge Edwards noted this was really an "evidentiary issue" for plaintiffs to address in their individual cases. Also addressing the FTC's motivation, Judge Pillard questioned what interest Congress has in subjecting businesses to strict liability for making non-autodialed calls, but using a device that has the capacity to do so. The FCC acknowledged the concern is the use of autodialers to autodial.

The panel also appeared concerned with whether technology that dials numbers from a previously compiled list falls within the scope of an autodialer. In particular, the panel questioned whether dialing numbers from a list means the numbers aren't "randomly or sequentially generated" as required by the TCPA's definition of an ATDS. On that, the panel observed that while calling consumers from a predetermined list could potentially fall outside the purview of an ATDS, it also acknowledged that a preselected list could include all people within a geographic area, thus allowing a mass volume of calls.

Reassigned Numbers

The second big issue addressed by the panel was the FCC's ruling on reassigned numbers. Under the July 2015 Order, if a telephone number is reassigned to a new user, she becomes the current subscriber of the number and is thus the "called party" under a TCPA coverage analysis. Thus a call to a number that has been reassigned to a new subscriber, even if the prior owner of the same number consented to be called, would violate the TCPA after a single "safe harbor" call. Petitioners pressed that the "called party" should be the "intended party." The panel seemed concerned with the FCC's imposition of strict liability after the one "safe harbor" call, even if that first call does not reveal that the number had been reassigned. The judges expressed concern with the FCC's imputing constructive knowledge of a reassignment after just one call where no such notice or knowledge exists or is required, for example, when a call to a reassigned number goes to voicemail and the voicemail does not provide the name of the owner.

The FCC focused on the examples provided in the July 2015 Order as to how businesses may avoid liability for calling reassigned numbers, such as by confirming contact information by email or requiring a consumer to provide notice of a new number and suing if she does not. But the panel, in particular Judge Edwards, noted that those solutions, such as suing a consumer, aren't practical in the real world. Judge Srinivasan also raised the issue of good faith: If a business acted in good faith and intends to call someone who wants the call, isn't that what Congress really desired with the TCPA? The FCC countered that "somebody has to bear the risk" and it should be businesses and not consumers. But Judge Edwards was quick to reply that there are business interests at play here that should not be ignored.

Revocation of Consent

Moving to revocation, petitioners opened the argument by claiming that the Commission refused to standardize the revocation process by allowing revocation in any "reasonable" manner and not allowing businesses to dictate the manner of revocation. Petitioners faulted the Commission for leaving revocation open to unwieldy "individualization" and vulnerable to opportunistic plaintiffs. Petitioners offered the example of consumers typing "I do not want to receive these text messages anymore" as an opt-out request despite the text message instruction to simply text "Stop." In these instances, the automated text messaging platform doesn't recognize the consumer's text and continues to send marketing messages. The consumer then sues.

Judge Pillard submitted that the "reasonableness" standard was a way for the Commission to ensure consumers could revoke consent easily and not allow businesses to mandate an overly burdensome mechanism. On the other hand, Judges Edwards and Srinivasan both remarked that individualized methods of consent are impractical and difficult for companies to record. When asked by the panel whether consumers and businesses could enter into an agreement as to how consent may be revoked, the FCC responded that if a company wants an exclusive method of revocation, it has to be negotiated.

Healthcare-Related Restrictions

As to Rite Aid's arguments, the panel appeared to recognize the competing interests of warding off unwanted marketing calls, while at the same time facilitating healthcare-related communications consumers might desire, such as information about potential new products or treatments. The panel appeared interested in whether the FCC has the expertise necessary to make the determination of what types of healthcare-related calls should be exempted over others. Judge Pillard seemed the most interested in this specific area, but the panel's questions did not indicate a proclivity one way or the other.

Why it matters: While impossible to predict how any judge, much less a panel of three, will rule on the petitioners' pleas, this argument revealed genuine and practical concerns by the judges about the FCC's July 2015 Order. In accordance with a 1984 Supreme Court case (Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.), federal agencies are afforded broad deference when issuing rulings and determinations on statutes they administer. However, this panel seemed willing to take a hard look at and ask some pointed questions about the FCC's ruling, suggesting a possibility that the July 2015 Order be vacated, in whole or in part. If so, the FCC could be directed to provide clearer guidance to businesses on how they may permissibly communicate with their customers. However the panel rules, there will be significant implications for countless businesses.