The Court of Appeals for the D.C. Circuit has just struck down the FCC’s rule requiring companies to include opt-out notices in solicited faxes, even as to persons who have previously consented to receive them. In Bais Yaakov of Spring Valley v. FCC, a divided three-judge panel held that “the FCC’s 2006 Solicited Fax Rule [47 C.F.R. § 64.1200(a)(4)(iv)] is unlawful” because Congress had empowered the FCC to regulate the sending of unsolicited faxes, not solicited faxes. The ruling is remarkable for what it does––namely, protect companies from potentially massive liability for sending solicited faxes––and also because it provides another example of judicial willingness to reign in overly aggressive administrative regulations.

By way of background, the Telephone Consumer Protection Act and the Junk Fax Prevention Act together prohibit using “any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement.” An advertisement is “unsolicited” if it is sent “without [the recipient’s] express invitation or permission, in writing or otherwise.” But there is an exception: A business can send unsolicited faxes if (among other things) the unsolicited fax contains a conspicuous and plainly worded notice allowing the recipient to opt-out of future advertisements. Congress empowered the FCC to issue regulations implementing the Act.

In 2006, the FCC issued the Solicited Fax Rule which required even solicited faxes include the same opt-out notice required of unsolicited faxes. Various advertisers––many of whom were defendants in class actions regarding solicited faxes––challenged the rule.

By a 2-1 vote, the D.C. Circuit panel struck down the 2006 rule. It reasoned that Congress did not empower the FCC to regulate solicited faxes. The FCC had argued that it could properly regulate solicited faxes because a recipient could rationally chose to withdraw consent at any point and needed a mechanism to do so, but the D.C. Circuit disagreed. It found that “Congress drew a line in the text of the statute between unsolicited fax advertisements and solicited fax advertisements” and “[i]t is the Judiciary’s job to respect the line drawn by Congress, not to redraw it as we might think best.” As a result, the court concluded that the FCC’s power to regulate stopped with unsolicited faxes and did not allow the FCC to impose the same opt-out requirement on solicited faxes as Congress imposed on unsolicited faxes.

The case is obviously a good result for advertisers. Assuming this panel decision withstands further appellate review, it will mean that an advertiser otherwise complying with the applicable statutes and sending solicited faxes need not include an opt-out notice, and so long as they otherwise comply with the statute, such advertisers will not be subject to the potentially ruinous statutory damages that result from sending faxes that violate the FCC’s rules: $500 per bad fax, without any statutory cap on liability. The decision restores a rare measure of common sense to the Junk Fax Protection Act. It makes no sense for an act purportedly designed to avoid wasting the recipient’s ink, toner, paper and tying up his or her fax machine to force additional ink, toner, paper, and fax time to be wasted on redundant opt-out notices to recipients who have already agreed to receive such faxes. The court was plainly aware that it made no sense to put an advertiser “on the hook for $150 million for failing to include opt-out notices on faxes that the recipients had given [the advertiser] permission to send.”

Even outside of the fax advertisement context, this case highlights two conflicting views of administrative authority. The court’s ruling found that the statute did not authorize the FCC to make rules about solicited faxes, but the FCC and dissenting judge argued that the statute did not forbid the FCC from making such rules. The restrictive view prevailed over the permissive view in this case, and that restrictive view is ascendant. Judge Gorsuch, for example, is a noted proponent of limiting the power of administrative agencies to the scope of Congress’ authorization, as demonstrated most forcefully in his concurring opinion in Gutierrez-Brizuela v. Lynch, . Expect the scope (and potentially the success rate) of judicial challenges to administrative agency action to expand in the coming years.