Proving once again that technology moves much faster than the law, last Friday the United States Court of Appeals for the District of Columbia Circuit set aside two significant portions of the Federal Communications Commission’s (FCC) 2015 orders governing its interpretations of the Telephone Consumer Protection Act’s (TCPA) bar on the use of automatic dialing devices to make uninvited calls.

Passed in 1991, the TCPA attempted to reduce the increasing volume of unsolicited telemarketing “robocalls” that were flooding residential phone lines and the newly popular cell phones. The TCPA restricts calls to any residential telephone line and to any number assigned to a cellular service other than calls made for emergency purposes or made with the prior express consent of the called party using an automatic telephone dialing system (ATDS), unless such call is used to collect a debt owed to or guaranteed by the United States. The TCPA contains a private right of action allowing an aggrieved party to recover at least $500 for each call, fax or text message made or sent, and treble damages for each “willful and knowing” violation. A surge of suits and class actions have followed, particularly as consumers have migrated from landlines to smart phones as their primary communication tool. As of 2016, it was estimated that approximately 80 percent of American adults own a smart phone.

The FCC’s 2015 Order

Last week’s decision focused on calls made to cell phones. The FCC has the challenging task of adopting the rules necessary for implementing the TCPA. Periodically it has adopted rules attempting to clarify provisions of the Act. All the while, the speed and capabilities of the devices and their market penetration has markedly increased.

In 2015, the FCC issued a declaratory ruling and order in which it sought to clarify which devices for making calls qualify as an ATDS. The statute defines an ATDS as equipment that “has 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 declined to define a device’s capacity in a manner confined to its “present capacity” and instead construed a device’s “capacity” to encompass its “potential functionalities” with modifications or software changes. The FCC also addressed the question of what constituted an “autodialer”. It decided 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 because the basic function of an autodialer is to dial numbers without human intervention. In short, the FCC adopted a broad view of what constitutes “capacity” to perform a function of an ATDS.

The Court of Appeals Finds the FCC’s Interpretation of “Capacity” to Be Unreasonable

The Court of Appeals found that the FCC’s interpretation of the term “capacity” in the statutory definition of an ATDS to be “utterly unreasonable in the breadth of its regulatory [in]clusion”. The court pointed to the commission’s acknowledgment that the commission’s definition of “capacity” could sweep in smartphones because they would have the capacity to store telephone numbers and to dial them through the use of an app or other software. In the court’s words:

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 of Appeals also found that the FCC’s order lacked clarity about which functions qualify a device as an autodialer. This lack of clarity compounded the unreasonableness regarding the expansive interpretation of a device’s “capacity” to perform the necessary functions. The Court of Appeals set aside that portion of the FCC’s order. In the event that it undertakes rulemaking as a result of this decision, the court suggested that the commission address what it means “to make any call using any” ATDS. Specifically, the court asked, “does the bar apply only to calls made using the ATDS functionality or does it apply to all calls made with a device having that ‘capacity,’ even ones made without any use of the equipment’s autodialer capabilities?”

The Court Sinks the FCC’s One-Call Safe Harbor Rule

The Court of Appeals struck down a second part of the FCC’s 2015 Order. The TCPA specifically permits calls made with an autodialer “made with the prior express consent of the called party.” This had become a major problem because thousands of cellular phone accounts are closed annually and the numbers are reassigned to new customers. The FCC concluded that the term “called party” in the statute referred not to the intended recipient of a call but to the current subscriber. Thus, if a retailer had received express consent to call a customer’s cell phone number but the customer had closed the account and the number had been reassigned, it ran the risk of TCPA liability even though it did not know that the reassignment had taken place. The FCC’s order allowed one — and only one — liability free, post-reassignment call for callers who lacked knowledge of the reassignment and possessed a reasonable basis to believe they had a valid consent.

The Court of Appeals noted that the commission previously employed a reasonableness regarding whether a caller had obtained “prior express consent” to make a call. The court observed that the FCC conceded that the caller could not divine from the consumer’s silence the current status of the telephone number. It also criticized the absence of any time limit on the one-call safe harbor. Thus, the court concluded that “no cognizable conception of reasonable reliance” supports the commission’s blanket, one-call-only allowance.

The Court of Appeals noted that the FCC is in the midst of designing a regime to avoid the problems with its one-call safe harbor rule. The commission recently sought comment on possible methods for requiring cellular service providers to report information about number reassignments for the purpose of reducing unwanted robocalls. The court noted that most of the proposals envision creating a comprehensive repository of information about reassigned wireless numbers. Stay tuned.

Finally, the Court of Appeals affirmed two other provisions of the FCC’s 2015 Order. First, it affirmed the FCC’s “reasonable means” standard for revoking consent to receive further messages. The existing order allows a caller to revoke consent at any time and through any reasonable means — orally or in writing — that clearly expresses a desire not to receive further messages. The court appeared to give a nod of approval to simple and easy methods for revoking consent and to the possibility of having the process for consent handled contractually.

Second, the Court of Appeals rejected a contention by Rite Aid concerning the scope of the commission’s exemptions of certain healthcare-related calls from the TCPA’s prior consent requirement for calls to wireless numbers. The court upheld the scope of the narrower exemption for healthcare-related calls to wireless numbers than to residential landlines.