Today, a panel of the D.C. Circuit—composed of Judges Srinivasan and Pillard and Senior Judge Edwards—heard argument in ACA International v. FCC, the consolidated appeals from the FCC’s 2015 Declaratory Ruling and Order, which greatly expanded the reach of the Telephone Consumer Protection Act (“TCPA”). (An audio recording of the argument is here, and Kevin attended the argument.) The case has been closely watched, and a number of TCPA class actions around the country have been stayed to await the D.C. Circuit’s decision. More detail is below the fold, but here are our quick impressions from the argument:

  • The panel asked tough questions of lawyers for both sides in an argument that went two full hours over the allotted 40 minutes.
  • The panel focused most of its attention on the FCC’s new—and far-reaching—definition of an automatic telephone dialing system (ATDS, or “autodialer”). All three judges expressed discomfort with the fact that the FCC’s new definition could be read to cover smartphones.
  • Judge Edwards repeatedly voiced criticisms of the FCC’s expansive readings of the TCPA across the board, and may be inclined to vacate large portions of the FCC’s Declaratory Ruling.
  • Judge Pillard seemed the most receptive to the FCC’s arguments.
  • Judges Srinivasan was the hardest to read, but it seems possible that he might join Judge Edwards in setting aside major portions of the FCC’s Declaratory Ruling.

Background

As readers of the blog may recall, the FCC’s July 10, 2015 Declaratory Order and Ruling addressed 21 petitions seeking guidance regarding various requirements under the TCPA and the FCC’s past regulations implementing that statute. The petitions largely focused on the rules prohibiting certain automated-dialing and texting practices, which have led to a torrent of class-action litigation seeking statutory damages that, when trebled, can reach $1,500 per call or text message.

The FCC’s 2015 Declaratory Ruling covered a number of subjects. (Please read our report (pdf) for a full recap.) But today’s argument in the D.C. Circuit focused largely on three issues:

  • The FCC’s expanded definition of what equipment constitutes an autodialer triggering the autodialer provisions of the TCPA;
  • The FCC’s attempt to impose of strict liability for all but the first call to a reassigned number, even if the caller would have no reason to know that the number had been reassigned; and
  • Whether the FCC can bar companies from limiting the manner by which consumers may revoke consent to receive autodialed calls or text messages.

Autodialer Definition

The primary focus of the argument was on the FCC’s expanded definition of an autodialer. The statutory definition is “equipment which has the capacity” to “store or produce telephone numbers to be called, using a random or sequential number generator,” and “to dial such numbers.” 47 U.S.C. § 227(a)(1). In its Declaratory Ruling, the FCC concluded that equipment is an autodialer if it has the potential “capacity” to dial random or sequential numbers (whether generated on its own or from a preexisting list), even if that “capacity” has been “de-activated” or could be added only through “software changes” or other updates. In fact, the only device that the FCC was willing to say could not be modified to constitute an autodialer was a rotary telephone.

During the argument, the judges focused largely on the fact that most modern smartphones—as well as all computers—would fall under this definition—meaning that a person who calls a relative without the requisite prior consent would have violated the TCPA. Judge Edwards at one point observed that such an expansion of TCPA liability would be “absurd” and “not what Congress intended.” He also suggested that the TCPA should be limited to prohibit only the “use” of an autodialer, and that a person using a smartphone to dial “his sister” would not be violating the TCPA.

Judges Pillard and Srinivasan were harder to read. The FCC lawyer arguing the case (Scott Noveck, who, as it happens, is a former Mayer Brown lawyer) defended the FCC’s interpretation by contending that TCPA plaintiffs would be presented with intractable proof problems if defendants could avoid liability by simply claiming that they had flipped a switch on an autodialer to disable its random-call functions just before making the call at issue. Judge Pillard at some points in the argument appeared to accept that explanation. And she seemed concerned that the petitioners’ view would render the TCPA would be a “dead letter,” limiting its application to the random-call generators that companies stopped using decades ago.

But when the argument turned to whether smartphones would constitute autodialers under the FCC’s definition, Judge Pillard did not accept the FCC’s hedging. The FCC lawyer suggested that the FCC had not addressed smartphones in its Declaratory Ruling, instead inviting a future petition to ask about that issue. But Judge Pillard pointed out that the broad sweep of the 2015 Declaratory Ruling inevitably covered smartphones. And she seemed concerned that the definition of an autodialer that the FCC had adopted has caused the statute to extend beyond what Congress intended.

Judge Srinivasan’s position on this issue is also difficult to predict. He stated that it seemed “impossible” to him that Congress would have intended to prohibit calls from smartphones. And at one point in the argument, he joked that receiving a call from one’s grandmother on a cellphone would violate the TCPA under the FCC’s view. But he pressed petitioners’ counsel to concede that downloading an app needed to convert a smartphone into a true autodialer—with the ability to dial random numbers—required only “trivial effort.”

The panel also heard a lot of argument about whether equipment that dials numbers from a preselected list—rather than generated at random or sequentially—constitutes an autodialer. But it was difficult to tell from the questions how the panel was leaning on this issue. At least two judges—Srinivasan and Pillard—seemed concerned that a company could avoid liability under the petitioners’ approach by calling from a list of “all numbers in New York City.” Nonetheless, the panel struggled with how the FCC’s ruling that dialing numbers from a list could be squared with the statutory language of the TCPA.

Reassigned Numbers

Another issue that arose during the argument—one that arises frequently in TCPA litigation—is whether the TCPA is violated when a business attempts to place a call to one customer (who consented to receive such calls) but, because the phone number has been reassigned, the call turns out to be received by another person who does not consent to be called. The FCC has concluded that such calls violate the TCPA. The FCC ruled that the caller must have the consent “not of the intended recipient of the call, but of the current subscriber (or nonsubscriber customary user of the phone).” The FCC then adopted a safe harbor for the first call to a reassigned number, after which the company would be “deemed” to have actual or “constructive knowledge” that the number was no longer valid.

Petitioners contended that the FCC’s ruling rested on a mistaken reading of the statute, arguing that if the intended recipient of the call has consented, the TCPA does not impose liability. And petitioners observed that as soon as the actual recipient of the calls objects, any further calls would trigger TCPA liability, as Congress intended.

It was difficult to tell whether the panel was accepting the petitioners’ interpretation as the only reasonable one, rendering the FCC’s contrary interpretation impermissible. Two of the judges (Srinivasan and Edwards) remarked at different times that the FCC’s safe harbor appeared to be insufficient, as companies will frequently not learn from the first call or text to a reassigned number of the change in subscriber. (For example, the call may go to an uninformative voicemail box, or a text message may receive no response.)

The panel also seemed to offer a mixed reception to the FCC’s explanation that the rule involved a tradeoff, and that the FCC could properly determine that consumers should not bear the risk of having to receive calls to reassigned numbers. Judge Srinivasan noted, however, that another purpose of the TCPA was to protect calls made in compliance with the rules from liability, and that the FCC’s rule would chill companies from making those calls for fear of inadvertently calling a reassigned number.

Revocation of Consent

The final issue on which the panel focused extensively was whether companies may restrict the means by which a consumer may revoke consent to be called. In the Declaratory Ruling, the FCC determined that consumers may revoke consent “in any reasonable manner,” and barred callers from “designating an exclusive means to revoke.” The FCC provided several examples of what it deemed to be “reasonable” methods of revoking consent: in “writing,” “by way of a consumer-initiated call” to the company, a request made during “a call initiated or made by the company,” an in-person request at a company store, such as “an in-store bill payment location.”

Judge Edwards observed that this rule was impractical for businesses. Judge Srinivasan similarly remarked that, for example, large companies can be reached at many phone numbers, and it would be difficult for them to monitor every number in order to try to record a revocation of consent.

Judge Pillard suggested, however, that the FCC was arguably forcing companies to come up with such an easy way to revoke consent that consumers would not try to do so by other means, which would eliminate the problem of having to “herd cats.” But as petitioners’ counsel pointed out in response, at least some consumers might still try to revoke consent in individualized ways, presenting companies with the difficult task of trying to record all consents. The end result, especially in combination with the FCC’s rule imposing strict liability on calls to reassigned numbers, would be to prevent companies from being able to rely on a consumer’s consent to be called.

A number of the judges asked whether consumers and companies can nonetheless enter into an agreement as to how consent may be revoked. The FCC lawyer agreed that they could, as long as the agreement was “voluntary” rather than on a “take-it-or-leave-it” basis.

The Bottom Line

It is always difficult to predict from argument how a judge—and especially a panel of judges—will rule. Certainly it is possible that some or all of the judges asked seemingly hostile questions not to signal disagreement with a position, but to probe the limits of that position.

That said, it seems possible that there were at least two votes on the panel to require the FCC to reconsider its approach to the definition of an autodialer, and perhaps also with respect to the safe harbor for calls to reassigned numbers. It is also possible that the panel might direct the FCC to provide greater clarity regarding how opt-out or revocation requests might work.