On Friday, March 16, 2018, the United States Court of Appeals for the District of Columbia issued its long-awaited opinion in ACA Int’l v. FCC, Case No. 15-1211. The decision is a victory for the defense bar and industry generally, though further and more comprehensive judicial, agency and Congressional relief is warranted to rein in the wildly out of control federal Telephone Consumer Protection Act (“TCPA”) litigation that continues to plague court dockets and yield grossly disproportionate and absurd verdicts and settlements.
The D.C. Circuit set aside the FCC’s effort to clarify the types of calling equipment that fall within the TCPA’s restrictions. Specifically, the Court rejected the FCC’s explanation of which devices constitute as an automatic telephone dialing system or ATDS (a defined term under the TCPA). In so doing, the Court concluded that the FCC’s unreasonable expansive interpretation of the TCPA would appear to subject ordinary calls from any conventional smartphone to the TCPA’s coverage. The Court also vacated the FCC’s approach to calls made to a phone number previously assigned to a person who had given consent but since reassigned to another (non-consenting) person. The Court rejected the FCC’s one-call safe harbor as arbitrary and capricious. Still a thorny issue, the Court upheld the FCC’s approach to revocation of consent, under which a party may revoke consent through any reasonable means clearly expressing a desire to receive no further messages from the caller. Lastly, and more industry specific to healthcare marketing calls (and beyond the scope of this article), the Court sustained the scope of the FCC’s exemption for time-sensitive healthcare calls.
The following provides a summary of the 2015 FCC Order and the D.C. Circuit Court’s 51-page decision.
2015 FCC Order: The FCC sought to clarify which devices for making calls qualify as an ATDS – equipment that: (1) “has the capacity” to “store or produce telephone numbers to be called, using a random or sequential number generator;” and (2) “to dial such numbers.” 47 U.S.C. § 227(a)(1). As to whether equipment has the “capacity” to perform the enumerated functions, the FCC declined to define a device’s “capacity” in a manner confined to its “present capacity.” Instead, the FCC construed a device’s “capacity” to encompass its “potential functionalities” with modifications such as software changes.
The FCC also considered the precise functions that a device must have the capacity to perform for it to be considered an ATDS. The FCC reaffirmed prior orders deciding that “predictive dialers” (equipment that can dial automatically from a given list of telephone numbers using algorithms to predict when a sales agent will be available) qualify as autodialers. The FCC noted that a basic function of an autodialer is to dial numbers without human intervention, but nevertheless declined to clarify that a dialer is not an autodialer unless it has the capacity to dial numbers without human intervention.
D.C. Cir. Opinion: The Court first considered the FCC’s effort to clarify which types of calling equipment qualify as an ATDS so as to fall subject to the general prohibition against making calls using such device without consent. Looking to the TCPA’s definition of ATDS, the Court found that the definition raised two questions: (1) when does a device have the “capacity” to perform the two enumerated functions of an autodialer; and (2) what precisely are those functions? The Court concluded that the FCC’s approach to these two questions could not be sustained, at least given the FCC’s unchallenged assumption that a call made with a device having the capacity to function as an ATDS can violate the statute even if autodialer features are not used to make the call. In other words, smartphones are not autodialers.
On the first question, the Court found that whether equipment has the “capacity” to perform the functions of an ATDS ultimately turns less on labels such as “present” and “potential” and more on considerations such as how much is required to enable the device to function as an autodialer (e.g., flipping a switch versus top-to-bottom equipment reconstruction). The Court found, acknowledging Chairman Pai’s dissent and keen observation in the 2015 FCC Order, that the FCC adopted an expansive interpretation of “capacity” having the apparent effect of embracing any and all smartphones. Specifically, the Court observed that if a device’s “capacity” includes the functions that could be added through app downloads and software additions, and if smartphone apps can introduce ATDS functionality into the device, it follows that all smartphones, under the FCC’s approach, satisfy the TCPA definition of an autodialer. The Court also found that if every smartphone qualifies as an ATDS, the TCPA’s restrictions on autodialer calls assume an eye-popping sweep given the statutory $500 per call/text (trebled if knowing or willful). Consequently, the Court found it untenable and utterly unreasonable to construe the term “capacity” in the TCPA definition of ATDS in a manner that brings within that definition’s fold the most ubiquitous type of phone equipment known; used countless times each day for routine communications by the vast majority of people in the country.
On the second question, the Court rejected the FCC’s threshold argument that it lacked jurisdiction to entertain a challenge concerning the functions a device must be able to perform, finding that the FCC’s prior rulings in 2003 and 2008 left significant uncertainty about the precise functions an autodialer must have the capacity to perform. As to the what exactly the phrase “using a random or sequential number generator” means, the Court found that the FCC offered no meaningful guidance to affected parties. The Court found that the 2015 FCC Order, in describing the functions a device must perform to qualify as an autodialer, was not reasoned decisionmaking. The Court further found that 2015 FCC Order’s lack of clarity about which functions qualify a device as an autodialer compounded the unreasonableness of the FCC’s expansive understanding as to when a device has the “capacity” to perform the necessary functions.
2015 FCC Order: The FCC addressed whether, and when, a caller violates the TCPA by calling a wireless number that has been reassigned from a consenting party to another person without the caller’s knowledge. The TPCA specifically permits autodialer calls “made with the prior express consent of the called party.” 47 U.S.C. § 227(b)(1)(A). If the called party under those circumstances refers to the intended recipient of a call or message, a caller would have no liability when using an autodialer to call a number believed to belong to a consenting party, even if the number in fact has been reassigned to another person who did not consent.
The FCC, however, determined that the term “called party” refers not to the “intended recipient of a call,” but instead to “the current subscriber” or the current, non-consenting holder of a reassigned number rather than a consenting party who previously held the number. The FCC did not hold a caller strictly liable when unaware that the consenting party’s number has been reassigned to another person. Instead, the FCC provided a one-call safe harbor (e.g., one liability-free, post-reassignment call).
D.C. Cir. Opinion: The Court acknowledged the practical effect concerning the reassignment of millions of wireless telephone numbers annually. That is, where a number has been reassigned, the caller might initiate a phone call or send a text message based on the mistaken belief that the owner of the receiving number has given consent, when in fact the number has been reassigned to another person that did not provide consent. The Court properly rejected the FCC’s position that a call or text to such person would result in TCPA liability (apart from the one-call, post-reassigment safe harbor). In so doing, the Court set aside the FCC’s interpretation on the ground that the one-call safe harbor is arbitrary and capricious.
On the called party issue, the Court found, relying on the Seventh Circuit decision in Soppet v. Enhanced Recovery Co., 679 F.3d 637 (7th Cir. 2012) (concluding that the called party in § 227(b)(1) means the person subscribing to the called number at the time the call is made (not the previous subscriber who had given consent)), that the FCC was not compelled to interpret “called party” in § 227(b)(1)(A) to mean the “intended recipient” rather than the current subscriber. In other words, it was permissible for the FCC to interpret “called party” in that provision to refer to the current subscriber.
2015 FCC Order: The FCC clarified the means in which a consenting party can revoke consent to receive autodialer calls. The FCC determined that callers may not unilaterally designate the acceptable means of revocation. It also declined to prescribe its own set of mandatory revocation procedures. Instead, the FCC concluded that “a called party may revoke consent at any time and through any reasonable means” – whether oral or written – “that clearly expresses a desire not to receive further messages.”
D.C. Cir. Opinion: The Court rejected petitioners’ primary argument that the FCC’s approach is arbitrary and capricious in eschewing the establishment of standardized revocation procedures in favor of an unduly uncertain, any reasonable-means standard. The Court, relying 4 on the FCC’s reasoning, found the arguments overstated. The Court also rejected petitioners’ argument that the 2015 FCC Order might preclude callers and consumers from contractually agreeing to revocation mechanisms. The Court found that the 2015 FCC Order precludes unilateral imposition of revocation rules by callers, but does not address revocation rules mutually agreed to by contracting parties. In other words, the parties maintain the ability to agree upon revocation procedures.
The D.C. Circuit’s decision is a victory for the defense and industry because it clarifies the types of calling equipment that fall within the TCPA’s restrictions, rejects the FCC’s expansive view as to what devices constitute an ATDS, removes smartphones as autodialers, and rejects the FCC’s one-call safe harbor for reassigned numbers. While the Court upheld the FCC’s approach to consent revocation, it made clear that contracting parties are free to negotiate such revocation procedures. All of this should decrease TCPA litigation sprawl and burden on the industry and courts, though further administrative and legislative action is necessary for TCPA reform.