This past Friday, the US Court of Appeals for the District of Columbia Circuit released its long-awaited decision in ACA International et al. v. FCC, a case involving the Telephone Consumer Protection Act (TCPA) that has significant implications for any business contacting consumers by telephone or text. The decision arises out of challenges to an omnibus Declaratory Ruling and Order released by the FCC in July of 2015, which itself was responding to requests for exemption from, or clarification of, the FCC’s TCPA rules, especially the more stringent FCC rules that took effect on October 16, 2013. In the Declaratory Ruling and Order, the FCC adopted a very expansive interpretation of the TCPA, exacerbating, rather than alleviating, long-standing litigation risks that many companies face under the TCPA.

The TCPA places numerous restrictions on calls made to residential and wireless telephones. The law also provides for a private right of action allowing individuals to sue, along with significant statutory damages, making it a risk for businesses and the source of an enormous and growing quantity of nationwide class action suits. At issue in the Order were “calls” to wireless telephones, which the FCC interprets to include text messages.

The TCPA broadly prohibits any call to a wireless telephone using an automatic telephone dialing system (ATDS) without the called party’s prior express consent. If the call involves telemarketing, the consumer’s prior express consent must be in writing under the FCC’s 2013 rules. The law contains very limited exemptions for emergency calls and calls seeking to collect a debt owed to the United States, but grants the FCC authority to create additional exemptions where the called party is not charged for the call.

Numerous parties have petitioned the FCC over time to create various exemptions as well as to issue rulings as to whether certain equipment constitutes an ATDS and whether certain actions or circumstances evidence a consumer’s consent to receive a call or text.

In July 2015, the FCC issued the omnibus Declaratory Ruling and Order grouping together numerous petitions that raised similar issues. We wrote about the Order here as well as about the legal uncertainty which has continued throughout the pendency of the appeal of the Order here.

Four major elements of the Declaratory Ruling and Order were challenged on appeal by a broad and diverse array of businesses and affected parties. The four major conclusions reached by the court in response to those challenges are summarized briefly below.

What Constitutes an ATDS?

The first issue that the court addressed is what constitutes an ATDS. The TCPA identifies an ATDS as equipment with the “capacity” to “store or produce telephone numbers to be called using a random or sequential number generator” and to “dial such numbers.” The FCC had construed the “capacity” requirement very broadly to include the equipment’s potential capabilities if features could be added through software changes or updates.

Challengers argued that the FCC’s interpretation is too broad and means that all smartphones are autodialers. The court sided with those challengers, stating that the “TCPA cannot reasonably be read to render every smartphone an ATDS subject to the Act’s restrictions, such that every smartphone user violates federal law whenever she makes a call or sends a text message without advance consent.” The court also found the FCC’s statements as to which functions (i.e., store, generate, or dial telephone numbers) qualify a piece of equipment as an ATDS to be confusing and contradictory, compounding “the unreasonableness of the Commission’s expansive understanding of when a device has the ‘capacity’ to perform the necessary functions.”

Are Callers Liable for Calls to Reassigned Telephone Numbers?

The second issue the court addressed dealt with reassigned telephone numbers. Given the large number of telephone number reassignments occurring every year, callers who secure consent to call a telephone number nevertheless find themselves the subject of litigation when the number they are calling has been reassigned to a new subscriber who has not given his or her consent to the calls.

The FCC had ruled that callers needed to secure the consent of the “actual” called party, that is, the person who had inherited the reassigned telephone number, because the original consent given by the “intended” called party was not sufficient to permit calls to the new holder of the telephone number. The FCC said that callers could “reasonably rely” on the intended called party’s original consent to call the new holder of the telephone number one time. That is, callers act reasonably when calling a telephone number for which they have been given consent to call but which number has since been reassigned. However, the FCC said the caller must discern in that very first call that the telephone number has been reassigned, regardless of whether the call is answered or if the answering party alerts the caller to the reassignment. The caller must cease calling the number if it has been reassigned or secure new consent to call the reassigned number.

The court questioned the logic of the one-call “safe harbor” and struck down both the Commission’s safe harbor and its treatment of reassigned numbers overall.

When Can Called Parties Revoke Consent to Be Called and How?

The third issue the court dealt with is the issue of whether and how the called party may revoke its consent to receive autodialed calls and texts. We had previously written about the uncertainty surrounding requests to opt out of previously granted consent here.

The FCC had ruled that the consumer inherently had the right to withdraw prior consent. Further, the FCC held that the caller could not establish an exclusive means of revocation and that the called party was free to use any reasonable method that clearly communicates the desire to stop receiving calls. Challengers contended the rule created an incentive for the called party to “creatively opt out” and trap the caller in a TCPA violation, and that the Commission’s decision ignored situations where the caller and called party had agreed to a specific method of revoking consent when contracting with one another.

The court sided with the Commission, finding that the called party’s right to revoke consent is “undisputed” and that the challengers’ concerns regarding “creative opt-outs” are overblown. The court stated that a called party using an “unconventional” method might not have the required “reasonable expectation” that it has effectively communicated its opt-out request to the caller. However, the court did not address the issue of whether parties can establish through contract an exclusive means of opting out.

Is the Healthcare Exemption Permissible?

Finally, the court dealt with an exemption the FCC created for certain healthcare-related calls. In 2012, the FCC had established an exemption from the consent requirement for prerecorded telephone calls to a residential landline where the call was covered by HIPPA, the federal healthcare privacy law.

In the 2015 omnibus Declaratory Ruling and Order, the FCC also allowed an exemption from the consent requirement for calls to wireless numbers. However, it only did so with respect to certain healthcare-related cases. Specifically, the FCC’s healthcare call exemption for wireless telephone numbers does not cover calls dealing with billing or account issues, as some parties had requested.

Challengers objected to the narrower scope of the exemption, arguing that it conflicts with HIPPA, and that the Commission should have considered all healthcare-related calls to satisfy the exemption for “emergency” calls in the TCPA. The court rejected both these claims, stating that the FCC could reasonably find that calls to cell phones involve a greater invasion of consumer privacy than calls to landlines and that billing and account calls are not sufficiently urgent to warrant that level of invasion of privacy.

What’s Next?

The two Republican Commissioners who were on the Commission at the time the omnibus Declaratory Ruling and Order was adopted, now-Chairman Pai and Commissioner O’Rielly, had dissented from many of the aspects of the Declaratory Ruling and Order that ultimately were overturned by the court. Each has released a statement (you can read Pai’s here and O’Rielly’s here) supporting the court’s decision to rein in the definition of ATDS and the limited one-call safe harbor for reassigned numbers.

Given the changes at the FCC since the original Order was adopted, you can expect to see a different approach on these issues going forward. In fact, the FCC had already started a proceeding this past summer aimed at creating a universal resource to identify reassigned numbers and providing a safe harbor for callers relying on that resource when placing a call to a number that turns out to have been reassigned.

Robocalls and texts will continue to be one of the FCC’s top sources of consumer complaints, and therefore a hot button issue, for the foreseeable future. Businesses are just hoping for clear but reasonable rules of the road for contacting their customers without being pulled into class action litigation. How those interests will be balanced continues to be a developing story here at CommLawCenter.