April 11, 2017
Class Action Alert
Class Action Alert
A recent D.C. Circuit ruling in a TCPA “junk fax” case involving unsolicited faxes narrows the scope of the Act’s “opt out” requirements and sends a signal that future court decisions may further undermine the FCC’s more aggressive interpretations of the statute. This alert discusses what businesses need to know.
On Friday, March 31, the federal court of appeals for the D.C. Circuit shook up the world of Telephone Consumer Protection Act (TCPA) jurisprudence by holding that a Federal Communications Commission (FCC) rule announced in 2006 was incorrect, and exceeded the agency’s authority. While the decision has an immediate impact on the (albeit, rapidly narrowing) world of facsimile advertisements, many are eagerly wondering if it signals forthcoming decisions that will further narrow the threat of liability under the Act.
The case was titled Bais Yaakov of Spring Valley et al. v. Federal Communications Commission et al. The question before the D.C. Circuit concerned, at bottom, the FCC’s interpretation of the TCPA requirements for faxes sent by advertisers with the recipients’ previous consent. The TCPA allows for regulation of unsolicited faxes, permitting them only when 1) the sender and the recipient have an established business relationship, 2) the recipient’s fax number was obtained via its own public disclosure, and, of key importance here, 3) each fax contains an opt-out notice that complies with the statute’s requirements. The third requirement mandates that clear and conspicuous language offer the recipient a cost-free mechanism to request the cessation of any further messages. The penalty for non-compliance is strict: an individual or business can sue for at least $500 per violation of any of these provisions.
The FCC is authorized to issue regulations implementing the TCPA. In 2006, the FCC issued a rule applying the opt-out notice requirements not only to unsolicited faxes, but also to solicited faxes. This new “Solicited Fax Rule” has left many advertisers facing exorbitant penalties for sending a fax that, while the recipient had previously agreed to receive, did not strictly adhere to the opt-out notice requirements. Indeed, the petitioner in this case, a seller of generic drugs, was facing liability of $150 million for failing to include opt-out notices to its customers—customers who admitted they had expressly given the petitioner consent to send the faxes. The D.C. Circuit, pointing out the absurdity of such a situation with biting frankness, struck down the FCC’s rule.
First, the D.C. Circuit held that the Act’s “requirement that businesses include opt-out notices on unsolicited fax advertisements” does not grant the FCC authority to require the same notices on solicited faxes. The language of the Act focuses on, first, barring unsolicited advertisements from being sent over facsimile. Then, it presents the exceptions to that rule, one of which is a fax that (among other things) contains an opt-out notice. Nowhere, the court held, did the Act “require a similar opt-out notice on solicited fax advertisements.” Furthermore, it determined that no language in the Act itself grants the FCC authority to require opt-out notices on solicited fax advertisements.
Noting that it is not the Judiciary’s job to “redraw” the Act to place requirements on senders of solicited faxes, the court rejected the FCC’s position that it may create and enforce the Solicitation Rule “so long as Congress has not prohibited” it. The court found such a theory “backwards as a matter of basic separation of powers and administrative law.”
In addition, the court did not agree that the Solicited Fax Rule was allowable on the grounds that Congress has yet to define what actually constitutes “express permission” to send fax advertisements. It bluntly criticized the FCC’s reasoning that since “prior express permissions lasts only until it is revoked…all fax advertisements—even solicited fax advertisement—therefore must include a means to revoke that permission” as “difficult to follow.” Though the FCC can reasonably define the concept of “prior express invitation or permission” and may allow recipients to revoke such permission, the court opined, “what the FCC may not do under the statute is require opt-out notices on solicited faxes[.]” The case was remanded for further proceedings.
To fully grasp the unique nature of this decision, which may seem limited to a rather archaic form of communication, it is important to note how much FCC interpretation of the TCPA has guided its application over changing technology. FCC rulings in 2012 have been treated as amendments of the TCPA’s consent rules for fax, text and telemarketing advertisements, and the 2015 FCC Declaratory Ruling and Order created an extremely broad and sweeping definition of an “autodialer” for TCPA purposes.
To the extent the court limits or reverses the FCC ruling by negating not only the substance of the rule but also the FCC’s authority to make it, this decision could be the harbinger of more change to come. In fact, the D.C. Circuit is currently considering another case, ACA International, that could have a significant impact on the rules governing calls and texts to customers. Among other things, the petitioners in that case have challenged the FCC’s very broad definition of “autodialer.” If the D.C. Circuit discards deference to the FCC’s interpretations of the statute, it could bring about a sea change in this area of the law
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.
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