In a decision that businesses hope will reign in liability for commercial calls to consumers, the U.S. Court of Appeals for the D.C. Circuit unanimously rejected key provisions of a 2015 FCC order that broadly interpreted the scope of the Telephone Consumer Protection Act of 1991 (TCPA).1 In its 51-page opinion issued on March 16, 2018, ACA International v. Federal Communications Commission2 set aside two important aspects of the 2015 Order: (i) the FCC’s sweeping pronouncement of what devices qualify as autodialers and (ii) the FCC’s treatment of consent, when, unbeknownst to the caller, the dialed number has been reassigned from a consenting person to a nonconsenting person. The D.C. Circuit, however, upheld the FCC’s ruling that gives consumers broad leeway to revoke consent to receive autodialed calls.3 Because ACA International leaves a regulatory vacuum as to key aspects of the TCPA, the FCC likely will take steps to promulgate revised interpretations in coming months.

Background

Many TCPA restrictions apply when businesses use an “automatic telephone dialing system” (ATDS or autodialer) to make telemarketing and similar calls without prior express written consent.4 Aggrieved parties can sue under the TCPA, and recover up to US$500 in damages for each violation (i.e., each call) or treble damages for willful or knowing violations.5

In response to confusion over what equipment constitutes an ATDS, the FCC, authorized by Congress to regulate the TCPA, interpreted in its 2015 Order the TCPA’s statutory definition of an ATDS: “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.”6 Specifically, the FCC declared that the term “capacity” included equipment which could be configured to dial randomly or sequentially, even if additional software would be required to perform those functions.

The 2015 Order also addressed the situation when a wireless carrier reassigns the telephone number of a party who previously consented to receiving autodialer calls to a new, non-consenting party. The FCC interpreted the statutory term “called party” to mean the number’s current subscriber rather than a call’s intended recipient. Recognizing that businesses may not necessarily know when a consenting recipient’s phone number is reassigned, however, the FCC created a one-call safe harbor, allowing businesses one “liability-free, post reassignment call” when a business has a reasonable basis to believe the recipient consented to the call.7

Believing that giving consumers broad revocation rights is the “most reasonable construction” of the TCPA, the FCC further determined that a called party “may revoke consent at any time and through any reasonable means” and prohibits callers from “limit[ing] the manner in which revocation may occur.”8

ACA International v. FCC

Given the surge in lawsuits since the FCC’s expansive reading of the TCPA’s reach, a number of businesses and trade groups petitioned the D.C. Circuit for review of the 2015 Order pursuant to the Administrative Procedure Act.9 The D.C. Circuit first took issue with the FCC’s unconstrained reading of the term “capacity” in the TCPA’s definition of an ATDS, noting that the FCC’s formulation of “capacity” would include new functionality that could be added to equipment by merely downloading and installing software—in effect rendering “essentially any smartphone” an autodialer. As the D.C. Circuit remarked, “[i]f every smartphone qualifies as an ATDS, the statute’s restrictions on autodialer calls assume an eye-popping sweep.”10 Indeed, the D.C. Circuit observed that if every smartphone has the requisite “capacity” to be an ATDS, any individual sending out group text messages, without first securing consent from the recipients, could find him or herself in violation of the TCPA, potentially subject to thousands of dollars in liability.11 ACA International held that the TCPA cannot reasonably be read to produce such an anomalous and impermissibly expansive result.

The D.C. Circuit also found the 2015 Order deficient in describing functions that a device must perform to qualify as an ATDS, because the FCC had inconsistently addressed the question of whether an autodialer must itself be able to generate random or sequential telephone numbers—or whether it suffices that the device can make calls from a database of elsewhere-generated numbers.12 The D.C. Circuit opined that while “[i]t might be permissible for the FCC to adopt either interpretation[,] the FCC cannot, consistent with reasoned decision-making, espouse both competing interpretations in the same order.”13 Accordingly, the D.C. Circuit set aside the 2015 Order’s interpretation of what constitutes an ATDS.

With respect to the problem of businesses calling consumers whose numbers have been reassigned, the D.C. Circuit reviewed the FCC’s interpretation of the term “called party” to mean “current subscriber” not the “intended recipient” of a call. The D.C. Circuit pointed to the Seventh Circuit’s opinion in Soppet v. Enhanced Recover Co., which found that references to a “called party” “unmistakeably denote[d] the current subscriber” and that the term “intended recipient” appeared nowhere in the statute.14 As a result, the D.C. Circuit noted, “the reassignment of a wireless number extinguishes any consent given by the number’s previous holder and exposes the caller to liability for reaching a party who has not given consent.”15 But the D.C. Circuit also held that the FCC’s one-call safe harbor for calls to reassigned numbers was arbitrary and capricious because the FCC provided “no explanation of why reasonable-reliance considerations would support limiting the safe harbor to just one call or message.”16 Importantly, the D.C. Circuit held that this failure required setting aside not only the one-call safe harbor, but the FCC’s treatment of reassigned numbers as a whole.

The D.C. Circuit affirmed the FCC’s rulings that consumers may revoke consent “‘at any time and through any reasonable means’—orally or in writing—‘that clearly expresses a desire not to receive further messages.’”17 Rejecting the notion that absent the establishment of “standardized revocation features” callers could only ward off TCPA liability by taking “exorbitant precautions,” the D.C. Circuit reasoned that, under the FCC’s ruling, “callers . . . have every incentive to avoid TCPA liability by making available clearly-defined and easy-to-use opt-out methods” and a consumer’s failure to use such methods “in favor of idiosyncratic . . . requests may well be seen as unreasonable.” ACA International further rejected the contention that the existence of certain opt-out mechanisms for time-sensitive banking- and healthcare-related calls compelled a different result, as the FCC has found those situations sufficiently important to warrant separate treatment. In a related discussion, the D.C. Circuit noted that while the 2015 Order does not allow callers to “unilaterally prescribe” revocation mechanisms, “[n]othing in [the 2015 Order] should be understood to speak to parties’ ability to agree upon revocation procedures.”18

Implications for TCPA Litigation

Companies facing TCPA claims should now evaluate whether the D.C. Circuit’s recent decision opens the door to new defenses. The last chapter in this saga has yet to be written, however, as the FCC retains the authority to craft new regulations to fill in the gaps left by ACA International. Indeed, the D.C. Circuit observed that the FCC could exercise its exemptive authority to fashion regulation that would prevent the result of every uninvited call from a smartphone violating the statute, and the FCC has already sought comment on potential methods for requiring wireless providers to report on number reassignments, for the express purpose of reducing unwanted robocalls.19 Thus, while some courts may give businesses a boost in dismissing certain TCPA actions, other courts may lean towards staying cases pending further guidance from the FCC. Given that the composition of the FCC has changed since 2015—and the FCC’s current Chairman in fact dissented from the 2015 Order—industry and trade associations may still be able to contribute to the dialogue concerning appropriate FCC regulation of the TCPA.