DC Circuit Largely Rejects FCC's Declaratory Ruling Expanding Potential TCPA Liability for Autodialed Calls and Texts

On Friday, March 16^th, nearly 18 months after hearing oral argument in October 2016, the DC Circuit released its long-awaited opinion resolving a number of challenges to the FCC's 2015 Declaratory Ruling and Order (30 FCC Rcd 7961, FCC 15-72, found here) interpreting the Telephone Consumer Protection Act of 1991 ("TCPA") ("Order").

Specifically, the Court set aside the FCC's definition of an "automated telephone dialing system" or autodialer, and its "unreasonably expansive" interpretation of the statutory term "capacity", as it could subject any calls from a conventional smartphone (which nearly 80% of American adults own) to the consent requirements contained within the TCPA.  In its Order, the FCC clarified that the term "autodialer" included any current dialing equipment, as well as any equipment that has the future capacity to autodial numbers.  The court was concerned about contradictory regulation by the Commission that would regulate autodialer devices whose basic function is to dial numbers "without human intervention" while still stating that an autodialer could include devices that require a person to dial numbers.  It also expressed concern about whether another basic function of an autodialer to "dial thousands of numbers in a short period of time" is an essential condition to regulate autodialers, and the absence of a definition of a "short period of time."  The court concluded that this leaves "affected parties in a significant fog of uncertainty" about whether a device is an autodialer for purposes of regulating unconsented calls, and therefore the Order did not constitute reasoned decision-making.  Interestingly, FCC Chairman Ajit Pai, who as a Commissioner had dissented from the Order, released a public statement saying: "[t]oday's unanimous D.C. Circuit decision addresses yet another example of the prior FCC's disregard for the law and regulatory overreach.  As the court explains, the agency's 2015 ruling placed every American consumer with a smartphone at substantial risk of violating federal law.  That's why I dissented from the FCC's misguided decision and am pleased that the D.C. Circuit too has rejected it."  A copy of Chairman Pai's statement can be found here.

On a second key issue, the court addressed the Commission's interpretation that autodialer calls or text messages to millions of wireless numbers that are reassigned each year are subject to TCPA liability, other than for a "one free call" post-reassignment safe harbor. The court held that the FCC's interpretation of the TCPA to allow merely "one free call" under a safe harbor when a telephone number is reassigned was arbitrary and capricious.  The court reasoned that the Commission has "consistently adopted a 'reasonable reliance' approach when interpreting the TCPA's approval of calls based on prior consent," yet the FCC failed to explain how a one-call safe harbor meets this reasonable-reliance standard.  For example, the Commission contemplated that a new subscriber could "purposefully and unreasonably" decline to inform a good faith caller about a number's reassignment simply "to accrue statutory penalties."  In fact, in one case the FCC itself reported a case in which a subscriber waited to receive "900 text alerts" intended for the previous subscriber before initiating a lawsuit.  As the court pointed out, the first text message or call, or the many others that follow, may not indicate to the caller that the number has been reassigned.  The court's opinion also observes that the FCC has taken important strides to "designing a regime to avoid the problems of the 2015 ruling's one-call safe harbor", recently seeking comment on potential solutions that would require service providers to report reassignments in an effort to create a "comprehensive repository" of information about reassigned wireless numbers to avoid and reduce inadvertent, unconsented robocalls to those numbers.

However, on the remaining two issues, the court did uphold the FCC's ruling that a called party can revoke consent to be called through "any reasonable means", including verbal instructions, which clearly express a desire to receive no more calls or texts.  The court also upheld the FCC's exemption of time-sensitive healthcare-related calls from TCPA consent requirements.  The court dismissed the concerns raised by the petitioners that the FCC's order failed to provide standard requirements thus creating uncertainty.  The court, however, emphasized that the result is that calling parties "have every incentive to avoid TCPA liability by making available clearly-defined and easy-to-use opt-out methods."

Both Commissioner Michael O'Rielly and Commissioner Brendan Carr also released statements reacting to the Court's ruling.  In his statement, Commissioner O'Rielly was "heartened by the court's unanimous decision," but disagreed with the Court's view of the revocation issue and sees an opportunity to square it with the position that the Second Circuit has taken on the issue.  Commissioner O'Rielly's statement can be found here. Commissioner Carr welcomed the decision in his statement, and reminded stakeholders that the Commission has "elevated robocalls to our top enforcement priority, and we have already taken a number of important steps to combat those unlawful calls."  Commissioner Carr's statement can be found here.

Finally, Commissioner Jessica Rosenworcel also released a statement stating, in part, "Robocalls are already out of control. One thing is clear in the wake of today's court decision: robocalls will continue to increase unless the FCC does something about it."  Her entire statement can be found here.

The case is now remanded back to the FCC for further consideration and revision.

Given the current Commission's treatment of robocall regulation as its highest enforcement priority, we expect the Commission will also initiate a new rulemaking to address issues left open by the DC Circuit's opinion, including clarifying the definition of an autodialer under the TCPA to resolve ambiguities about that issue, and to possibly further clarify how prior express consent is revoked.  Setting aside the "one free call" safe harbor should also provide additional impetus for the Commission to move forward to establish an alternative safe harbor for autodialed calls to reassigned wireless numbers whether through a comprehensive reassigned number database (to which there is not uniform industry agreement) or through some other means.

Our Communications Practice professionals are available to assist and advise clients in addressing their TCPA compliance issues.  To learn more about the issues raised by this client alert, please contact either Doug Bonner at dbonner@potomaclaw.com or 202.352.7500, Katherine Barker Marshall at kmarshall@potomaclaw.com or 202.792.6422, or William Baker at wbaker@potomaclaw.com or at 571.317.1922.

Note: This Bulletin is not intended as legal advice.  Readers should seek professional legal counseling before acting on the information it contains.