In its October 2014 Final Order (the “Anda Order”), the Federal Communications Commission found that it had the statutory authority to regulate solicited faxes by promulgating a rule that requires an opt-out notice on all such faxes, but also found that because of reasonable confusion surrounding the regulation, there was good cause to waive the rule for fax senders who had previously sent solicited faxes without the opt-out notice.

The Anda Order was appealed both by class action plaintiffs (“Plaintiff Petitioners”) who challenged the grant of the retroactive waivers) and by class action defendants/recipients of the waiver (“Defendant Petitioners”) who challenged the conclusion that the FCC had the authority to apply the opt-out rule to solicited faxes at all. The appeals were ultimately consolidated in the U.S. Court of Appeals for the D.C. Circuit as Bais Yaakov of Spring Valley, et al. v. FCC. Later this month, we expect to see the final briefings in this consolidated appeal.

The first briefs for both the Plaintiff Petitioners and Defendant Petitioners were filed on November 9, 2015. The Plaintiff Petitioners (who allegedly received fax ads lacking compliant opt-out notices) argued in their briefs that that the Anda Order unlawfully extinguished their pre-existing TCPA claims and violated the separation of powers doctrine. The Defendant Petitioners argued that the Commission cannot impose an opt-out notice requirement on fax advertisements sent with permission because the TCPA prohibits only unsolicited faxes. Defendant Petitioners also asserted that the regulation poses serious First Amendment concerns because it is a content-based regulation of speech that warrants strict scrutiny—a standard of review it cannot survive.

On December 24, 2015, the Commission responded to both sides in a single 73-page brief. In response to the Defendant Petitioners’ arguments, the Commission defended its authority to require an opt-out notice on solicited faxes by arguing that the Junk Fax Prevention Act (“JFPA”) created a statutory floor, not a ceiling, by requiring opt-out notices for unsolicited faxes sent pursuant to an “established business relationship.” Res. Br. 22 (citing Cheney R.R. Co. v. ICC, 902 F.2d 66, 69 (D.C. Cir. 1990) (“Congress’s mandate in one context with its silence in another suggests…simply a decision not to mandate any solution in the second context, i.e., to leave the question to agency discretion.”). Invoking its broad authority to “prescribe regulations to implement the requirements of [the JFPA (47 U.S.C. § 227(b)(2))]”, the Commission further argued that in order to achieve the statute’s goal of preventing all unsolicited faxes, the Commission found that it was necessary to require an opt-out notice even on faxes sent with permission so that consumers can stop the flow of solicited fax ads when they no longerwish to receive them. Therefore, the Commission, argued, the opt-out notice requirement for solicited fax advertisements was an appropriate exercise of its power to implement the statute’s general prohibition against the faxing of an “unsolicited advertisement.”

In response to the Defendant Petitioners’ arguments that the regulation poses serious First Amendment concerns, the Commission argued that (i) the opt-out notice requirement applies only to commercial speech, (ii) commercial speech is governed by an intermediate scrutiny standard, and (iii) under that standard, the regulation passes muster because it directly advances the government’s substantial interest in protecting consumers from the costs and annoyance of unwanted fax ads in a narrowly tailored way by “requiring only a brief statement” that gives recipients of fax ads a way to communicate the revocation of their consent.

In response to the Plaintiff Petitioner’s arguments, the Commission vigorously defended its authority to waive strict compliance with its own regulations. The Commission opened its defense by reminding the D.C. Circuit that “[t]he Commission’s rules allow it ‘at any time’ to waive requirements for good cause . . . where particular facts would make strict compliance inconsistent with the public interest.” Res. Br. 28 (quoting Keller Commc’ns, Inc. v. FCC, 130 F.3d 1073, 1076 (D.C. Cir. 1997) (citing 47 C.F.R. § 1.3) (internal citation omitted)). The Commission then reiterated the findings it made in the Anda Order: a footnote in the Junk Fax Order adopting the opt-out notice requirement erroneously stated that the opt-out notice requirement did not apply to faxes sent with permission; that internal inconsistency could have led a reasonable advertiser to be confused about the requirement or to have a misplaced confidence that the requirement did not apply; and, accordingly, a waiver would best serve the public interest because it would avoid the “unjust or inequitable” result of “potentially substantial damages, as well as possible liability for forfeitures under the Communications Act” for “inadvertent violations” due to “a confusing situation for businesses.” Order ¶¶ 27, 28. Citing MetroPCS California, LLC v. FCC, 644 F.3d 410, 412-13 (D.C. Cir. 2011), the Commission argued that its judgment on the public interest should be accorded “substantial judicial deference.” Res. Br. 33.

The Commission responded to Plaintiff-Petitioners’ arguments that the Anda Order is a violation of the separation of powers by first noting that Congress created a cause of action under the TCPA that is predicated on a violation of the Commission’s regulations, and “[i]f there is no violation of a rule prescribed under Section 227(b)(3), by the terms of the statute, there can be no liability.” Res. Br. 38. Invoking the Plaintiff Petitioners’ concession that the Commission “has authority under its rules…to waive requirementsnot mandated by statute” (Pl. Pet. Br. 12), the Commission argued that since the opt-out notice rule was not mandated by the statute, but rather a regulation promulgated by the Commission, the Commission had the authority to waive it.

Having filed opening briefs attacking the Anda Order, on January 25, 2016, both sets of Petitioners filed briefs defending the Commission (insofar as the Commission’s position was consistent with the Petitioners’ opening briefs). The Defendant Petitioners (including Anda Inc., one of the original recipients of the waiver), argued in their brief that governing D.C. Circuit precedent makes clear that the Commission has authority to waive requirements imposed by its own regulations (as opposed to requirements imposed by statute) where strict compliance with the regulation is against the public interest, and the Commission reasonably concluded that was the case with regard to the requirement for opt-out notices on solicited fax advertisements. The Plaintiff Petitioners, meanwhile, argued that the TCPA’s requirement that unsolicited fax ads include opt-out notices did not preclude the Commission from requiring that same opt-out notice on solicited faxes because the Commission reasonably interpreted the TCPA’s explicit mandate regarding the regulation of unsolicited fax advertisements to include future unsolicited fax advertisements, and that interpretation should be upheld under the principles of Chevron.

Reply briefs are due on February 24, 2016.