For years, there has been tension in the world of Telephone Consumer Protection Act litigation. The Federal Communications Commission has the authority to issue interpretations of the TCPA, and it has actively exercised that authority for some time. But what happens if a district court disagrees with the FCC’s interpretation of the TCPA on an issue before the court? Does it have to defer to the FCC or can it exercise its own independent judgment as to what the TCPA means? By recently granting a writ of certiorari in PDR Network LLC et al. v. Carlton & Harris Chiropractic Inc., a case involving junk faxes under the TCPA, the U.S. Supreme Court has signaled that it will step into the fray. And depending on the outcome, the decision could have a profound impact on TCPA litigation nationwide. In fact, the Supreme Court’s guidance might even impact the new rule-making that the industry expects from the FCC soon and the Ninth Circuit’s decision in Marks v. Crunch San Diego LLC, which has been a source of significant controversy in the months since it was issued. The Statutory and Common Law Backdrop of the PDR Network Case The PDR Network case involves the interplay of three separate sources of law: (1) the provisions of the TCPA; (2) the Hobbs Act; and (3) Chevron deference. In passing the TCPA, codified at 47 U.S.C. § 227, Congress established a statutory scheme that regulates the ability of a caller to place calls using an automatic telephone dialing system (ATDS) or artificial or prerecorded voice. It also covers other aspects of telecommunications practices, like rules pertaining to telemarketing, junk faxes and the national do-not-call list. Importantly, the TCPA gives the FCC authority to prescribe regulations implementing the statute. That is where the Hobbs Act comes in. According to the Hobbs Act, “[t]he court of appeals (other than the United States Court of Appeals for the Federal Circuit) has exclusive jurisdiction to enjoin, set aside, suspend (in whole or in part), or to determine the validity of ... all final orders of the Federal Communication Commission …” Generally, “[a]ny party aggrieved by the final order may, within 60 days after its entry, file a petition to review the order in the court of appeals wherein venue lies.” When combining the TCPA and the Hobbs Act, we have a statutory scheme where the FCC is given certain rule-making authority under the TCPA, with courts of appeals having jurisdiction to review FCC final orders. But that is not the whole story in light of a doctrine known as Chevron deference, which governs court deference to administrative agencies. Assessing the impact of Chevron deference in a case is a two-step process. In the Fourth Circuit, which is where PDR Network originated, the Chevron framework requires a court to first ask whether Congress has directly spoken on the precise question at issue. If it has, the court is to follow Congress, without regarding to an administrative agency’s position. If, on the other hand, Congress passed an ambiguous statute that an agency has interpreted, the court is to follow the administrative agency’s guidance if it “is based on a permissible construction of the statute.” And so, against this backdrop, the PDR Network case has begun to play out. What if the FCC interprets a statute that the district court finds unambiguous? Can the court plow its own path under step one of Chevron? Or must it follow the FCC pursuant to the Hobbs Act? The District Court Followed the Fourth Circuit’s Chevron Framework In 2016, the district court for the Southern District of West Virginia granted summary judgment for PDR Network in a TCPA case regarding unsolicited faxes. In deciding summary judgment, the principal issue was whether faxes advertising a free book constituted an “unsolicited advertisement,” which was necessary to trigger the TCPA. Carlton & Harris Chiropractic argued that the court was bound to follow a previous FCC interpretation, which created a presumption that “any fax that offers free services or goods is an advertisement.” The plaintiff claimed that the Hobbs Act required the court to credit the FCC’s interpretation, without straying from it. The district court took a different approach. Relying on Chevron deference, the district court held that it was “not obliged to defer to the FCC’s interpretation of an unambiguous statute.” In turn, it found that the TCPA was unambiguous with respect to the meaning of “unsolicited advertisement” and, ultimately, granted summary judgment for PDR Network. In its analysis, the court addressed the Hobbs Act as well. It recognized that, under the Hobbs Act, it did not have jurisdiction to decide the validity of FCC interpretations of the TCPA. It concluded, however, that it was not addressing the validity of the FCC’s interpretation. In fact, it presumed the FCC’s order was valid. It simply found that the FCC order was inconsequential to its analysis under Chevron because the TCPA provision at issue was unambiguous. The Fourth Circuit Reversed: Hobbs Act Trumped Chevron In February of 2016, the Fourth Circuit reversed the district court in a divided opinion (two to one). According to the majority opinion, the district court’s framework was incorrect in two material ways: First, the Fourth Circuit found that the Hobbs Act was applicable to the case. The district court had found the Hobbs Act inapplicable because it governs the validity of FCC orders, and the district court never “invalidated” any such orders. The court of appeals thought this was a distinction without a difference. According to the Fourth Circuit, the district court could not avoid the reach of the Hobbs Act by claiming it was simply ignoring the FCC’s order, rather than invalidating it. Second, because the Hobbs Act applied, the Fourth Circuit concluded that the Hobbs Act prevents the district court from ever conducting its Chevron analysis. In other words, Hobbs trumped Chevron. According to the court, the Hobbs Act strips the district court of jurisdiction to decide whether the FCC Order was entitled to deference. The district court did not have the authority to determine whether the TCPA was ambiguous or unambiguous and, as a result, whether it was required to defer to agency guidance. Instead, because there was an FCC interpretation on point, the district court was required to follow it under the Hobbs Act. The Supreme Court Is Going to Step Into the Fray, Which Could Matter in a Big Way On Nov. 13, 2018, the Supreme Court granted PDR Network’s petition for a writ of certiorari. In granting the writ, it limited the appeal to the question of: “Whether the Hobbs Act required the district court in this case to accept the FCC’s legal interpretation of the Telephone Consumer Protection Act.” In other words, the Supreme Court is likely to address the question of whether the district court can properly interpret a TCPA provision (and potentially other statutory provisions) that it finds unambiguous without deferring to the FCC’s interpretation of the same provision. At this point, you may be asking: Why does this case matter to me? My company gets sued under the TCPA occasionally, but we do not send junk faxes. It matters because scores of TCPA cases are decided every month by courts deferring to, or declining to defer to, FCC interpretations of the TCPA. Whether a court defers to the FCC can have a fundamental impact on the outcome of the case. The Supreme Court in PDR Network may now provide significant guidance on whether a court can interpret an unambiguous provision of the TCPA itself under Chevron or, instead, whether it must follow the FCC under the Hobbs Act. Here are a few practical examples of how this could play out: 1. The FCC’s Forthcoming Interpretations of What Constitutes an ATDS and Treatment of Reassigned Numbers Two of the biggest issues in TCPA litigation today are: (1) whether a caller’s telephone constitutes and ATDS; and (2) the extent of a caller’s liability for calling a telephone number that has been reassigned to a subsequent user. In many cases, if a consumer was called with a telephone that is not an ATDS, that consumer has no claim. Similarly, if a caller falls within a safe harbor when calling telephone numbers for which it has consent, but that has been subsequently reassigned, that could have a profound impact on many individual cases and class actions. In recent months, courts nationwide have reached varying conclusions on these issues. For example, the Ninth Circuit recently issued the Marks v. Crunch San Diego LLC decision, which broadly interpreted the meaning of ATDS. The Marks decision stands in contrast to the Third Circuit’s decision in Dominguez v. Yahoo Inc., which interpreted the phrase narrower. Meanwhile, the FCC has been collecting comments and preparing to issue an interpretative ruling on both the ATDS issue and the reassigned number issue. The FCC is expected to issue interpretive guidance soon. Businesses of all types have been looking to the FCC to provide needed clarity, consistency, and a narrow view of the applicability of the TCPA. If the FCC’s forthcoming ruling narrows the interpretation of ATDS, as expected, and expands the safe harbor for reassigned number calls, the Supreme Court’s eventual decision in PDR Network could have a profound impact on TCPA litigation. For example, if the Supreme Court finds that district courts are bound by the Hobbs Act to follow FCC guidance, then the FCC’s interpretations could effectively become the law of the land. If, on the other hand, the Supreme Court finds that Chevron trumps the Hobbs Act, you could get a series of courts declining to follow an FCC order on the theory that the TCPA provision at issue is unambiguous under Chevron step one. 2. What About Marks? In TCPA circles, the Marks v. Crunch San Diego decision has been the talk of the town in recent months. And there is good reason for it. Until Marks, the law nationally had been trending toward a narrower definition of ATDS and, as a result, more-limited reach of the TCPA. The Marks decision upset that trend. When the FCC issues its forthcoming guidance, many in the industry expect to it to conflict with Marks. This could set up a battle in the Ninth Circuit. Do district courts have to follow the FCC in TCPA cases or are they required to follow Marks. Surprisingly, the Supreme Court’s decision in PDR Network may have little impact on this question — but businesses should not fret. In Marks, the Ninth Circuit unequivocally held that the TCPA’s definition of an ATDS is “ambiguous on its face.” As a result, if the FCC issues a narrow interpretation of the meaning of ATDS, district courts in the Ninth Circuit may be bound to follow it (absent a direct appeal of the FCC order), regardless of the way the Supreme Court decides PDR Network. Specifically, if the Supreme Court finds that the Hobbs Act trumps Chevron, then the FCC order would control. If, on the other hand, Chevron trumps the Hobbs Act, then the FCC order would still control under step two of Chevron deference, given the Ninth Circuit’s conclusion that the statute is ambiguous. Ultimately, these are interesting times in TCPA litigation. With the FCC order likely to come out soon, and the PDR Network decision to follow, TCPA litigants are likely to get more clarity as to what the TCPA means over the next year.
This article was originally published on Law360.