As previewed this summer, topics related to the Telephone Consumer Protection Act ("TCPA") appear to be ripe for reform at the Federal Communications Commission ("FCC") and beyond. Two recent decisions, one by the FCC and another by a U.S. District Court in the Southern District of California, provide important insight into the future of TCPA enforcement.
FCC Requires Solicited Faxes to Have Opt-Out Information
The FCC decision, released October 30, 2014, confirms that senders of fax ads must include information that will allow customers to opt out from further distributions, even if those consumers previously agreed to receive fax ads from the sender. In doing so, the FCC expressly rejected arguments that it lacked statutory authority to require the opt-out information and reaffirmed that section 227(b) of the TCPA is the basis for the opt-out requirement. This decision adds more ammunition to the frequently used private right of action for TCPA plaintiffs. Recognizing the regulatory uncertainty that existed on this issue, the FCC declined to immediately pursue enforcement action of the opt-out notice requirement, instead granting retroactive waivers and a six-month grace period for parties that have submitted petitions to the FCC to come into compliance with the new opt-out notice requirements. The FCC extended its offer of waiver to other, similarly situated parties but expressed its expectation that all parties must be in strict compliance with the rules at the end of the six months. The FCC's apparent leniency on past violations, however, may not give any comfort to defendants facing judicial lawsuits on the opt-out issue, the proceedings for which are now more likely to move forward.
Crunch Court Pushes Back on FCC's Broad Definition of Autodialers
Meanwhile, a district court in the Southern District of California has released a decision regarding the use of autodialers that may provide yet more impetus for the FCC to further clarify its TCPA rules. On October 23, 2014, the court in Marks v. Crunch granted summary judgment to a defendant that had employed a web-based system to send promotional text messages, finding that the FCC's broad definition of "Automatic Telephone Dialing System" ("ATDS") was not supported by the TCPA. The court adopted the widely discussed argument that an overly broad definition of the "capacity" to store, produce, or call randomly or sequentially generated numbers would effectively sweep most modern telephones and computers within the TCPA. The court also rejected the interpretation of "random or sequential number generator" as "any list of numbers dialed in a random or sequential order," finding that this interpretation would effectively nullify the entire clause. Instead, the court determined that the clause referred to the "genesis" of the numbers, rather than to the order in which the phone numbers may be called.
Finding that the defendant's system did not have the capacity to generate random or sequential digits—and was furthermore contractually prevented from acquiring that capacity—the court concluded that the system was not and could not become an ATDS.
In dicta, the court also called into question a 2012 Ninth Circuit case that deferred to the FCC's position that "predictive dialing" systems were ATDSs. The Crunch court noted that the FCC appeared to be impermissibly modifying or interpreting the definition of "ATDS," most notably by interpreting "random or sequential" as referring to the ordering of telephone numbers called, and not to the actual generation of telephone numbers to call. The Southern District of California decision, if followed by other courts, could significantly restrict the reach of the TCPA with respect to the types of ATDSs that are covered by the law.
TCPA Forecast: More, and Soon
The deluge of petitions and comments that have been filed with the FCC on these and other TCPA-related questions, along with growing conflicts between different courts, strongly suggests that the FCC's October 30 order may be the first in a series of declaratory releases by the FCC in a concerted effort by FCC staff to clear up the backlog of TCPA issues and provide some clarity to businesses and consumers. Many of the outstanding issues appear suitable to be resolved by the FCC through the issuance of discrete orders. Other TCPA issues may require the FCC to seek additional comment from interested parties. Thus, the FCC may engage in an ongoing process the rest of this year of adopting a combination of discrete declaratory orders for immediately resolvable issues and additional public notices to address more complex issues that require the development of a further factual record.