On Friday, March 16, 2018, the United States Court of Appeals for the District of Columbia issued its long-awaited ruling in ACA International et al. v. FCC (see attached). The petition before the court challenged aspects of the Telephone Consumer Protection Act (TCPA) Omnibus Declaratory Ruling and Order issued by the Federal Communications Commission (FCC) in July of 2015.

The court reviewed the 2015 order against the deferential “arbitrary and capricious” standard. In so doing, the court affirmed certain aspects of the 2015 order, set aside other determinations, and provided some guidance as to the proper understanding of the surviving portions.

Bottom lines:

  • FCC test for autodialer set aside; DC Circuit suggests the real test should be how much effort it would take to convert any device into an autodialer
  • The one-call “safe harbor” for calling reassigned numbers is set aside as arbitrary
  • Court finds FCC was permitted to find that every TCPA-covered call to a reassigned number is a TCPA violation; or, impliedly, to find that a calling party can cite reasonable reliance on prior consent as a defense
  • However, given the court’s striking down of the one-call safe harbor provision, the order’s findings on reassigned numbers are set aside in whole
  • Court affirms the FCC’s revocation of consent provisions, requiring calling parties to offer “clearly-defined and easy-to-use opt-out methods” but honor any reasonable request to revoke
  • Court rules that calling party and called parties can agree to exclusive method of revocation, but does not specify the conditions needed for such agreement to be valid

FCC’s standard for autodialers set aside: As to autodialers, the court set aside the 2015 order in toto. In part, that decision reflects the court’s determination that the FCC’s definition of autodialer would lead to unreasonable results. In part, the court noted conflicts among FCC determinations on the subject, which left affected parties with no meaningful guidance.

Only calls placed using an autodialer fall within the scope of certain provisions of the TCPA. The TCPA defines an automatic telephone dialing system, or ATDS, as “equipment which has the capacity—(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” 47 U.S.C § 227(a)(1).

The 2015 order had determined that “capacity” in the definition of ATDS included “potential functionalities” and “future possibilities.” This expansive reading had left open the prospect that any dialing equipment more modern than a rotary phone would be an autodialer.

That order had even left open the prospect that personal use of smartphones may constitute calls via autodialer leading to potential TCPA liability. The DC Court noted this as a sign of the unreasonableness of the definition: “It cannot be the case that every uninvited communication from a smartphone infringes federal law, and that nearly every American is a TCPA-violator-in-waiting, if not a violator-in-fact.”

The court further noted that seemingly conflicting FCC guidance as to, for example, (1) the extent that human intervention would prevent a device from being an ATDS, and (2) whether the device had to itself store or generate numbers to be an ATDS, rendered this section of the 2015 order arbitrary and capricious.

In setting aside the autodialer rule, the DC Circuit did not put any clear test in its place.

FCC’s ruling on reassigned numbers set aside: To make TCPA-covered calls, the calling party needs the prior express consent of the “called party.” 47 U.S.C. § 227(b)(1)(A). However, people change their cell phone numbers all the time. The carrier reassigns those cell phone numbers to someone else. If a calling party was told by Person A to call them at a number (prior express consent) and that number is reassigned to Person B, is the calling party violating the TCPA? After all, the calling party does not have Person B’s prior express consent. But the calling party also may have had no notice of the change in subscribers.

Several years before the 2015 order, some federal courts had read it as a TCPA violation to call a reassigned number. See, e.g., Soppet v. Enhanced Recovery Co., 679 F.3d 637 (7th Cir. 2012) and Osorio v. State Farm Bank, F.S.B., 746 F.3d 1242, 1250-52 (11th Cir. 2014). Those courts noted that the term “called party” (whose consent was needed) was used consistently in the statute to mean only the current subscriber. Therefore, a call to a reassigned phone number would be a TCPA violation. The DC Court noted that this interpretation of the TCPA was plausible and permissible for the FCC to adopt.

However, this is not what the FCC adopted – at least not consistently. The FCC found that “called party” meant the current subscriber, but made that determination in tandem with a decision that the calling party would have a one-call safe harbor to call the reassigned number. The court found that this one-call safe harbor was arbitrary. The FCC granted this safe harbor for companies citing their reasonable reliance on prior consent. But “why does a caller’s reasonable reliance on a previous subscriber’s consent necessarily cease to be reasonable once there has been a single, post-reassignment call?”

The FCC could have adopted the Soppet and Osorio results, the DC Circuit ruled, but the court could not be certain the FCC would have adopted so severe a remedy without being able to offer the one-call safe harbor. Therefore, that entire section of the 2015 order is set aside.

Revocation of consent reaffirmed. The 2015 order had stated that a called party could revoke their prior express consent to be called at any time, by any reasonable means, orally or in writing. The court affirmed this section of the ruling, despite the concerns of petitioners. “The Commission’s ruling absolves callers of any responsibility to adopt systems that would entail ‘undue burdens’ or would be ‘overly burdensome to implement.’” Further, if a calling party provides clearly defined and easy-to-use opt-out methods, the court found that “any effort to sidestep the available methods in favor of idiosyncratic or imaginative revocation requests might well be seen as unreasonable.”

The 2015 order also stated that a calling party may not set forth an exclusive mechanism by which to opt out. In briefing on this matter, the FCC conceded that the ruling “did not address whether contracting parties can select a particular revocation procedure by mutual agreement.” The court found that “nothing in the Commission’s order thus should be understood to speak to parties’ ability to agree upon revocation procedures.” We note that neither the 2015 order nor the court in this decision set forth the required predicates to such an agreement in terms of information to be disclosed, choices offered, and proper form of acceptance.

Scope of FCC’s healthcare exemption affirmed. The 2015 order provided an exception for TCPA-covered “calls for which there is exigency and that have a healthcare treatment purpose.” However, it excluded from this calls “that include telemarketing, solicitation, or advertising content, or which include accounting, billing, debt-collection, or other financial content.” Petitioners challenged the exclusion of these types of calls from the exception.

Petitioners had argued that all of these calls were permitted by the Health Insurance Portability and Accountability Act (HIPAA), therefore all should benefit from the healthcare treatment exception. The court rejected this argument. The FCC did not have to provide any exemptions to the TCPA; in doing so for some HIPAA-permitted communications, it did not have to do so for all such communications.

The court also rejected an objection that the 2015 order (as to wireless cell phones) was more stringent regarding the same type of calls than prior orders (as to landlines) and an objection that all healthcare-related calls have an emergent purpose and hence should be exempt from the TCPA.

Where does the FCC go from here: It is uncertain at this point what steps, if any, the FCC will take to clarify some of the new ambiguity created by the court’s decision. Notably, the court did not remand the 2015 order to the commission for further consideration, so the decision of how and when, or even whether, to address the relevant issues in a further rulemaking or declaratory ruling seems to have been left to the discretion of the commission. In that regard, immediately after the DC Circuit issued its order, FCC chair Ajit Pai issued a statement expressing pleasure that the circuit court recognized the regulatory overreach of his predecessor, but said nothing about wanting to step up and clarify the TCPA’s statutory language in light of the court’s opinion. Instead, Chairman Pai (who had dissented from the FCC’s 2015 order) emphasized his commitment to increased enforcement against spoofers and scammers, and to his favored approach of putting in the hands of consumers the tools necessary to protect themselves from unwanted robocalls (implicitly seeming to prefer that course to examining under a microscope the words of a statute that is now more than 25 years old).

Of note, it appears that, at least so far, none of the petitioners in the ACA case has announced whether it intends to ask the FCC to clarify the agency’s position, for example on the definition of an autodialer, in light of the court’s order. For now, the petitioners are undoubtedly mulling over (and will be seeking advice, including informally from the FCC) whether they are best served by seeking clarification from the commission on specific issues or simply by living with the ambiguities that have resulted from the recent court order and just taking their chances in litigation.

In the courts: The DC Circuit Court’s ruling was limited to the reasonableness of the FCC’s 2015 order and is not dispositive of many pending issues raised in TCPA litigation. The court did not offer an alternative definition of an autodialer or a cognizable liability scheme for calling reassigned numbers and, as a result, there is little direction for litigants. This is particularly challenging for the hundreds of individual and putative class action cases stayed by district courts across the country pending the outcome of the ACA decision. And because the DC Circuit did not issue a remand, it is uncertain whether the FCC will attempt to rewrite the 2015 order to address the issues noted by the court. Given the length of time many cases have already been stayed, however, and the drawn-out regulatory rulemaking process, it seems likely that many courts will lift stays and that litigation will proceed based on circuit court precedent to adjudicate the remaining unsettled issues including (1) what constitutes an ATDS, (2) when the calling party’s reliance on a previous subscriber’s consent ceases to be reasonable, and (3) whether the consumer’s method of revoking consent is reasonable.

As a result of these open issues, we are unlikely to see a precipitous decline in new TCPA filings. Until a consensus forms in the courts on what to do post-ACA, businesses will continue to have risk. Unambiguous consent to place calls will remain the strongest defense to litigation. But depending on the facts of a particular case, businesses may also be able to leverage the court’s order to argue that its ruling is a reset back to the original statutory language of an autodialer, or that a business was reasonable in relying on the previous subscriber’s consent to call a reassigned phone number. And given the increasingly creative methods by which consumers – often assisted by plaintiffs’ counsel or credit repair companies – attempt to opt out, it is reasonable to expect that businesses will also succeed in arguing “idiosyncratic or imaginative” opt-out requests are not effective.

For compliance: Despite some statements about reasonableness that may be useful to litigants, nothing in the court’s decision should cause companies to overhaul their TCPA compliance programs.

The court set aside the FCC’s test for autodialers but provided no test to take its place. Even the court’s discussion of smartphones as not autodialers may have been specific to the examples provided, all in the context of smartphones made for personal and social calls. Only the passing statement that a finding of “capacity” should turn “more on considerations such as how much is required to enable the device to function as an autodialer” provides some useful frame of reference.

The court did not find that callers are authorized to call reassigned numbers in reasonable reliance on past consent (though it did not foreclose that reading of the TCPA should courts choose to adopt it). The decision did not relieve compliance departments of the burden of trying to prevent such calls.

The court affirmed the prior revocation of consent portions of the 2015 order. If a calling party intends to rely on a bilateral agreement with the called party as setting the exclusive means of opt-out, it should do so understanding that neither the FCC nor the DC Court has set forth any safe harbor for valid mutual consent.

And the court affirmed the scope of the healthcare messages exception.

While the court sought to reinforce the need to read the TCPA and the surviving sections of the 2015 order reasonably, calling parties should remain cautious in relaxing any compliance efforts.