D.C. Circuit poised to issue precedential ruling in 2017 that may significantly impact TCPA’s reach

January 22, 2017

Class Action Alert

Author(s): Dan Deane

2017 opens with a TCPA case before the D.C. Circuit and a new administration that has promised to be business-friendly—Should companies anticipate changes to TCPA's reach? This alert discusses what businesses need to know.

The new year may bring big changes for cases brought under the Telephone Consumer Protection Act (TCPA). Among other things, a new, presumably more business-friendly administration, is settling in the White House,[1] legislators in Congress remain dissatisfied with the broad scope of the TCPA and may seek to rein it in, and the United States Court of Appeals for the D.C. Circuit is poised to issue an important ruling in a case that could significantly cut back on a recent consumer protective ruling by the Federal Communications Commission (FCC or commission). In particular, based on questions at oral argument, the D.C. Circuit could rule, in sharp contrast to FCC precedent, that the TCPA does not apply to any manually-dialed calls and text messages even when they are placed using equipment capable of autodialing.

The case, ACA International v. FCC, 15-1211, is a consolidated appeal of the FCC’s 2015 Omnibus Declaratory Ruling and Order (Order) which interpreted several key aspects of the TCPA. The TCPA is a federal statute, enacted in 1991, that protects consumer privacy from businesses using mass telemarketing methods, such as autodialers (technology that can store and dial lists of phone numbers randomly, or sequentially) and artificial or prerecorded voices. The statute and rules, promulgated by the FCC, generally forbid the intrusive use of these automated technologies, absent an applicable exception, or the express consent of the receiving party. But, as the D.C. Circuit recognized during arguments, the previously TCPA-regulated technologies have been replaced by new technologies and methods. The FCC has attempted, through its rulings interpreting the TCPA, to modernize the TCPA and prevent it from becoming obsolete. The question remains, however, whether the FCC has stretched its reach beyond the authority granted to it by statute.

The FCC’s Order bolstered consumer privacy protections in several important ways, including: (1) construing the definition of the term “automatic telephone dialing system” (ATDS or autodialer) to include any equipment that has the potential future capacity to autodial numbers, regardless of whether the equipment has the present capacity; (2) recognizing that the TCPA allows consumers to revoke consent to receiving automatic dials “[a]t any time and through any reasonable means”; (3) ruling that callers are liable for robocalls, even where consent had been given to call a particular number, where the number has been reassigned to a new subscriber who has not consented; and (4) allowing Health Insurance Portability and Accountability Act  (HIPAA)-protected calls to cell phones to be made without consent only when the call has exigency and a healthcare treatment purpose.

The Order has been met with heavy resistance from consumer-facing businesses and industry associations. Subsequent to its issuance, several organizations challenged the Order in court. Subject to certain restrictions, the Administrative Procedures Act (APA) allows for a party to seek judicial review of an agency order and in certain instances allows for them to take their challenge directly to the United States Court of Appeals. See 5 U.S.C. § 706 (2017); 47 U.S.C. § 402 (2017). Many such challenges were consolidated into the currently pending ACA Iternational case, which raises, among other things, the four issues described above.

The D.C. Circuit is apparently taking the challenges seriously as evidenced by the fact that the Court allowed oral arguments to exceed two and a half hours, well beyond the forty minutes originally allotted for the arguments. The judges focused much of their attention, drilling down, on the definition of an ATDS. Counsel for the petitioner stressed that the TCPA was not designed to “[b]an valuable targeted informative communications made with equipment not capable of generating random or sequential numbers” and argued that the Order impermissibly expanded the autodialer definition. The statute currently defines an ATDS as any “[e]quipment which has the capacity . . . to store or produce telephone numbers to be called, using a random or sequential number generator, and to dial such numbers.” 47 U.S. Code § 227(a)(1) (emphasis added). The Order, however, expanded the scope of the term through its interpretation of the word “capacity.” Under The FCC’s interpretation, Congress used “capacity” because it intended the definition to broadly encompass both the present and potential future capability of the dialing equipment. See FCC 15-72, at 7971–76.

Petitioners argued that such an expansive definition conceivably includes all smart phones capable of storing telephone numbers and of downloading an app or other software that can dial those numbers randomly or sequentially. Despite the FCC’s assurances to the contrary, the Order clearly states that “[d]ialing equipment generally has the capacity to store or produce, and dial random or sequential numbers (and thus meets the TCPA’s definition of “autodialer”) even if it is not presently used for that purpose, including when the caller is calling a set list of consumers.” FCC 15-72 at 7971–72.

Judge Srinivasan asked “[i]f there were a smart phone that could download an app that would give the smart phone the capacity to be an ATDS, would you consider the phone to satisfy the statute in terms of capacity?” Petitioners’ counsel responded “yes”, the FCC would consider such a phone to be an ATDS “[b]ecause that device would have the current capability to be an ATDS.” Judge Srinivasan probed further as to a distinction, under the statute, between a smart phone that has an autodialer app downloaded and installed, and a smart phone capable of doing the same, but has not presently done so. Petitioners responded that the FCC’s Order does not currently distinguish between the two—both are autodialers according to the FCC.

Judge Edwards displayed even greater skepticism of the FCC’s position. He wanted to know “[w]hat happens if a person or an institution makes a non-robocall using a device that only has the potential, but not the current capacity to robocall.” Petitioners answered that, under the Order, such a device is considered an autodialer. Moreover, if such a device were used to send calls or text messages manually (i.e., not using the autodialing feature of the equipment), those calls or texts would violate the TCPA if they were sent without consent because the equipment has the “capacity” to be used as an autodialer. Judge Edwards did not approve of this answer, bluntly stating, “[t]hat’s not what the statute says.” Judge Edwards chastised the petitioners for conceding their strongest argument—that the TCPA does not apply to manual calls of any kind no matter what kind of device is used or what capacity it has for autodialing. Rather than focusing on the autodialer definition, Judge Edwards focused on the statute’s prohibitory language, which only forbids to “using” an automatic telephone dialing “system.” According to Judge Edwards, merely using equipment that is capable of autodialing cannot constitute a TCPA violation if the autodialing functionality is not employed. Repeatedly, throughout the course of the arguments, Judge Edwards reiterated that the TCPA’s prohibition is not concerned with the equipment, but only the “use” of equipment to make automated calls.

During the FCC’s argument, the FCC’s lawyer contradicted Judge Edward’s interpretation of the statute, noting “[t]he general understanding of everyone as the premise for this Order” that the TCPA “[a]pplies when you are using a device which is an autodialer, whether or not at that time the device is configured as an autodialer, or whether it is being used that way.” This drew the ire of Judge Pillard, who asked: “[W]hy would that be your position? . . . What interest does Congress have and does the Commission have in subjecting me to strict liability for using my smartphone on Sunday to call my parents when I’m plugging it into an ATDS the rest of the week . . . for autodialing?” The FCC conceded that if applied broadly, that would be the case, but the Order is primarily concerned with catching calls made purposefully from an autodailer using the capacity to autodial. In essence, the FCC appeared to argue that the statute would not be applied so broadly in practice, but conceded that it could be.

The Court also reviewed the issue of whether consumer consent attaches to the phone number or to the person that gave the consent. The question presented is whether consent is lost when the number to which the consent had originally attached is later reassigned to a new subscriber (unbeknownst to the caller) who has not given consent. The petitioners argued that in order for consent to be reliable, the statutory terms “prior express consent” and “called party” necessarily must be read together. The petitioners asked the Court to interpret the term “called party” to mean “expected recipient” of the call, in order to safeguard callers against liability for innocently, but mistakenly, calling a wrong number, such as where a phone number has been reassigned without any notice to the caller.

The FCC downplayed the risk of such calls by pointing to the FCC’s “safe harbor” rule. Under that rule, a caller gets one free bite—one call can be made in error to a number that has been reassigned to a new person. After that, the calling party is presumed to have constructive notice and any call without proper consent from the new subscriber is a violation of the TCPA. The petitioners argued that rule is inadequate; for in many instances, consumers will not answer the first call, are not present, or purposely do not answer when they do not recognize a number. In such cases the calling party never obtains actual knowledge that the phone number has been reassigned. The FCC rule places all of the risk on the caller. The commission was adamant that in order to facilitate the purposes of the statute, any risk, in such cases, should be born by the caller and not the consumer for whom the statute was designed to protect.

Another major aspect of the Order is that it makes consent (one of the primary defenses available under the statute) far easier to revoke. This is meaningful because the TCPA is currently silent as to whether revocation is possible. Despite that silence, the Order explicitly allows for a consumer to revoke their consent by “any reasonable means.” Simultaneously, the Order prohibits callers from conditioning or restricting the manner by which a consumer might revoke their consent. Petitioners argue that the FCC failed to establish any standardized and workable method of revoking consent and thereby placed an undue burden on callers. Interestingly, the Order lays out several different examples for how a consumer might revoke their consent. But the Court was critical in its questioning of the FCC. Judge Edwards and Judge Srinivasan commented on the impracticality of the rule for businesses. The Court expressed concerns that the Order may have a chilling effect on businesses seeking to communicate with consumers they would otherwise have the right to communicate with.

The Court also took up the issue of whether certain communications exempt under HIPAA should be considered exempt under the TCPA. Counsel for Rite Aid, one of the petitioners, addressed the Court, arguing, that as a result of the Order certain valuable communications were being stifled and not received by consumers. The bench was skeptical of this point, questioning the petitioners as to the nature of the communications at issue. Some of the communications that the petitioners argued should not be covered by the TCPA included HIPAA compliant communications pertaining to alternate forms of treatment. The bench seemed to suggest that such communications amounted to marketing communications and, therefore correctly, fell within the scope of communications that the TCPA was designed to protect consumers from.

The D.C. Circuit is likely to render its judgment in this case sometime in 2017. While it is often difficult to predict how a court will rule, in this instance, the Court sent strong signals on some of the critical issues it is considering, especially with regard to the scope of the definition of autodialer. Judge Edwards, in particular, appears to disfavor an interpretation of the TCPA that would render liability for manual dialings from any devices, regardless of their capacity to be used as an autodialer. If Judge Edward’s interpretation of the statute prevails on the three-judge panel, the D.C. Circuit’s ruling could upend years of FCC precedent. Long before its 2015 Order, the FCC has proceeded with the assumption that TCPA liability can lie for any call made using an autodialer, regardless of whether the autodialing capabilities were actually employed. As noted above, the Court also vigorously questioned the FCC with regard to its rulings relating to consent—whether the reassignment of a number terminates consent and whether and how consent can be revoked by a consumer. Overall, the Court’s tone did not indicate a high degree of deference to the FCC and its interpretation of the TCPA. Thus, it remains possible that the Court could issue a ruling that significantly curtails key aspects of the FCC’s Order.

We will continue to follow this case closely and will report when the D.C. Circuit issues its decision.

  1. Indeed, as we reported here, Donald Trump’s campaign committee was sued for TCPA violations. It stands to reason that the new president is no fan of the TCPA.
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