We continue to await a ruling from the US Court of Appeals for the DC Circuit in the appeal of the Federal Communications Commission’s (FCC) July 2015 Omnibus Telephone Consumer Protection Act (TCPA) Declaratory Ruling and Order (TCPA Order), which is expected to affect the scope of the TCPA. In July 2015, as noted in a prior Eversheds Sutherland legal alert, more than a dozen parties filed appeals to the TCPA Order, claiming that it did nothing to clarify the TCPA and only served to further complicate compliance. The appeals were consolidated under the name ACA International v. FCC, No. 15-1211, and were argued in October 2016—14 months ago—but the court has not yet issued its ruling. The appeal addresses many disputed aspects of the TCPA rules including:

(1) The FCC’s overbroad and inconsistent definition of autodialer; (2) The FCC’s lack of meaningful guidance on dealing with the growing problem of reassigned cell phone numbers; (3) The agency’s vague and overly broad standards for consent, including revocation; and (4) Issues unique to financial institutions and healthcare providers.

If the challengers prevail, the issues are likely to be reconsidered by a significantly reconstituted FCC. The two FCC commissioners who dissented vigorously to the TCPA Order in 2015, Ajit Pai and Michael O’Rielly, are now in the majority, with Pai serving as Chair.

Key Issues in the Appeal

Autodialers. One of the principal issues on appeal is the FCC’s expansive definition of autodialer, which includes: (1) equipment that has the capacity to store or produce, and dial random or sequential numbers—without any showing that the particular functionality was used for the call at issue; and (2) equipment that lacks the present capacity but theoretically could be modified to become an autodialer under the TCPA’s definition. To bolster its position, the TCPA Order noted, rather unhelpfully, that while “it might be theoretically possible to modify a rotary-dial phone to such an extreme that it would satisfy the definition of ‘autodialer,’ … such a possibility is too attenuated for us to find that a rotary-dial phone has the requisite ‘capacity’ and therefore is an autodialer.” The appeal challenges the expanded definition as impermissibly vague and imposing liability beyond the original intent of Congress when it enacted the TCPA in 1991. At oral argument, some members of the court expressed concern that the definition was so broad it could potentially yield absurd results, especially since any smartphone equipped with the correctly configured mobile application could be transformed into an autodialer under the FCC’s interpretation.

Reassigned Cell Phone Numbers. The TCPA Order reported that as many as 100,000 cell numbers are reassigned every day. Despite the difficulty of tracking reassigned wireless numbers, the TCPA Order places the onus on businesses to avoid calling reassigned wireless numbers lest they face liability under the TCPA, even if such calls were made in good faith without knowing the cell number had been reassigned. The FCC’s answer to the problem was to create a one-call exemption, which allows a company to call a reassigned number only once without liability—whether or not the recipient of the call answers the phone. The appeal decries the one-call exemption as arbitrary and capricious because it ascribes constructive knowledge to the caller when a second call is made, regardless of whether the first call results in actual knowledge of the reassignment. The appeal also takes issue with the TCPA Order defining the “called party” as the current subscriber rather than the intended or expected recipient, which the challengers argue violates the First Amendment by deterring lawful communications. At oral argument, the court questioned whether making one unanswered call (or text) creates sufficient constructive knowledge of reassignment, and also asked what solutions would help businesses while also protecting consumers.

Consent and Revocation. The appeal contends that the standard set by the TCPA Order allowing consent to be revoked at any time and by any means is arbitrary and capricious because it allows revocation to be delivered in ways that do not reasonably inform companies of the called party’s preferences. The revocation standard is also inconsistent with prior FCC statements and puts an undue and excessive burden on callers to review responses to determine which ones are revocations. At oral argument, the court asked a number of questions about whether a company should be permitted to mandate a specific method of revocation by contract, a solution which the TCPA Order disallows.

Special Rules for Certain Financial and Healthcare-Related Calls. Members of the financial services and healthcare industries have challenged industry-specific provisions in the TCPA Order. For the financial services industry, the appeal objects to the TCPA Order’s interpretation of the “free-to-end-user” call exemption, which exempts from TCPA liability calls regarding fraudulent account activity, risks to consumer personal data (including steps the consumer can take to protect that data), and money transfer notifications. The appellants claim that financial institutions have no way of knowing what kind of wireless plan a given customer has and thus cannot know whether that customer will be charged for the communication. On healthcare issues, the appeal challenges: (1) the distinction between Health Insurance Portability and Accountability Act (HIPAA) calls made to landlines (no TCPA liability) and wireless numbers (TCPA liability); and (2) the exclusion of some calls permitted under HIPAA from the TPCA Order’s exemption from TCPA calls “for which there is exigency and that have a healthcare treatment purpose.” The court gave less attention to these issues at the oral argument, but they are important concerns for these particular industries.

Developments Since the 2015 TCPA Order

Since the FCC issued its July 2015 TCPA Order, courts have grappled with application of the Order in pending cases. For example, the TCPA restricts the use of autodialers, defined 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.” Prior to July 2015, a number of courts had recognized that a piece of equipment’s capacity alone, without some showing that the functionality in question had been used, would not be sufficient to establish liability under the TCPA. Some courts have continued to apply this common sense approach. See McKenna v. WhisperText et al., 2015 WL 428728 (N.D. Cal. Sept. 9, 2015) (applying the classic interpretation of “autodialer” to dismiss a TCPA claim, finding that the system used to send an unsolicited text required human intervention and thus did not qualify as an autodialer). Other courts, however, have struggled to apply the arguably broader standard from the TCPA Order. See, e.g., Dominguez v. Yahoo, Inc., 629 Fed. Appx. 369 (3d Cir. 2015) (remanding for further proceedings in light of the TCPA Order). And courts in some jurisdictions have opted to stay cases in anticipation of a final appeal ruling.

Another significant development is the shift of power at the FCC. With the shift to Republican control of the administration, former minority commissioner Pai is now Chairman of the FCC and leads a 3-2 Republican majority on the commission. In 2015, Pai, along with Commissioner O’Rielly, was strongly critical of the approach taken by the FCC in the TCPA Order, and he issued a harsh dissenting statement at the time the TCPA Order was issued. Should the DC Circuit rule in favor of the challengers (and perhaps even if not), the issues from the TCPA Order are likely to be reconsidered by a significantly different FCC. Any reconsideration of the issues could have a significant impact on the scope of the TCPA going forward.