A federal court judge has stayed a class action pending a decision by the Federal Communications Commission on the issue of whether the agency overstepped its bounds by issuing regulations stating that the Telephone Consumer Protection Act requires solicited fax advertisements to include opt-out notices.
Physicians Healthsource sued Endo Pharmaceuticals in Pennsylvania federal court, alleging in its putative class action that it received two fax ads that lacked opt-out notices. Although the TCPA is limited to a requirement that unsolicited fax ads must contain opt-out notices, the plaintiff relied upon an FCC regulation requiring opt-out language for solicited faxes as well.
But in its motion to stay the proceedings, Endo disputed the validity of the regulation. The FCC overstepped its authority, the defendant told the court, and promulgated a rule that exceeded the bounds of the TCPA. A number of administrative petitions filed with the FCC make similar arguments, Endo added.
Considering the motion, U.S. District Court Judge Cynthia M. Rufe acknowledged a split among courts facing a similar problem. District courts in California, Connecticut, Florida, and New Hampshire have all decided to put cases making identical allegations on hold pending FCC action, she noted, while a judge in Michigan declined to do so.
Although the court said the FCC has no schedule to reach a final decision on the issue and any stay may be open-ended, she sided with the defendant and halted the proceedings.
“[T]he Court believes that the issues before the FCC are potentially dispositive of identical claims before this court,” the judge wrote. “For example, the FCC may determine that the statute does not create a private right of action when a solicited fax advertisement lacks an opt-out notice. Judicial efficiency will be better served by imposing a stay of litigation while the FCC considers these related issues, which have already been presented to it, which are within the FCC’s domain of specialized knowledge, and which may significantly limit the scope of this action.”
Judge Rufe also considered the “risk of inconsistent rulings” if she ruled on the issue prior to the FCC. “Balancing the equities, the Court finds potential prejudice to the Defendants if they must defend this action without guidance from the FCC on issues such as statutory authority and standing to pursue a private right of action.”
The court placed the case in administrative suspense pending adjudication of related actions by the FCC, requesting joint status reports from the parties every 90 days.
To read the order in Physicians Healthsource, Inc. v. Endo Pharmaceuticals, click here.
Why it matters: The stay of proceedings will buy the defendant some time as the FCC considers multiple petitions arguing that the agency overstepped its authority when it issued regulations stating that the TCPA requires solicited fax advertisements to include opt-out notices. While the agency has requested comment on the issue, the FCC has set no timeline for making a decision.