D.C. Circuit Strikes Down Some Rules Governing Telephone Consumer Protection Act, Upholds Others

On March 16, 2018, the U.S. Court of Appeals for the D.C. Circuit issued a long-awaited ruling on a challenge to the Federal Communications Commission’s 2015 order that expanded the scope of the Telephone Consumer Protection Act (“TCPA”). In ACA International v. FCC, No. 15-1211, the court invalidated a rule that had broadly defined automatic telephone dialing systems, or “auto-dialers”; it also struck down the FCC’s approach to situations where a caller obtains a party’s consent to be called but then, unbeknownst to the caller, the consenting party’s wireless number is reassigned. In the same ruling, the court upheld the FCC’s decision to allow parties who have consented to be called to revoke their consent in “any reasonable way,” as well as the FCC’s decision to limit the scope of an exemption to the TCPA’s consent requirement for certain healthcare-related calls.

The court began by striking down the FCC’s expansion of the types of calling equipment governed by the TCPA’s restrictions, echoing current FCC Chairman Ajit Pai’s dissent in the agency’s 2015 order that the FCC was sweeping all smartphones into the auto-dialer definition. Indeed, the court explained that the FCC’s approach “would appear to subject ordinary calls from any conventional smartphone to the [TCPA’s] coverage, an unreasonably expansive interpretation of the statute.”

Addressing the second issue raised in the appeal, the court vacated the agency’s approach to calls to a phone number that was originally assigned to a person who had consented to be called, but was later reassigned to a non-consenting recipient.  “The Commission concluded that calls in that situation violate the TCPA, apart from a one-call safe harbor, regardless of whether the caller has any awareness of the reassignment,” the court said. But this safe harbor, “at least as defended in the order, is arbitrary and capricious.” The court’s ruling on this point does not entirely resolve concerns that callers might be held liable despite having a reasonable basis for believing they had the prior express consent of the called party. Instead, the court directs attention to the FCC’s ongoing process to consider potential safe harbors for companies that place calls “after consulting the most recently updated information” on reassigned numbers.

The D.C. Circuit upheld the FCC’s approach to revocation of consent, which allows people to use “any reasonable means” to revoke consent. This ruling may present practical compliance challenges as companies work to ensure that revocation communications coming to the company through any reasonable means is processed and honored.

Finally, the court sustained the limited scope of the agency’s exemption for time-sensitive healthcare calls as being available for calls directly on behalf of certain players in the healthcare ecosystem and subject to an extensive list of prerequisites.

The initial response from FCC Commissioner Brendan Carr has been positive: he issued a press release stating that “the prior FCC exceeded the scope of the TCPA and reached a decision of ‘eye-popping sweep,’ as today’s D.C. Circuit decision states. Rather than focusing our efforts on combatting illegal robocalls, the 2015 FCC decision opted to subject consumers and legitimate businesses to liability. Thankfully, the D.C. Circuit, in a unanimous decision, has now corrected that error.” Commissioner Carr’s statement suggests that the FCC, moving forward, may decline to challenge the D.C. Circuit decision. But aside from the significant ruling striking the FCC’s interpretation of the definition of auto-dialers, the court’s rulings on reassigned numbers, revocation of consent, and the healthcare exception do little to ease the practical compliance difficulties companies face when using every-day, operationally essential technologies.

The Issues Raised in ACA International

              A. Definition of an auto-dialer

  • The TCPA defines an auto-dialer as “equipment which has the capacity – (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.”
  • The D.C. Circuit observed that this definition raises two questions: (i) when does a device have the “capacity” to perform the two enumerated functions, and (ii) what precisely are those functions?
    • Regarding (i), the D.C. Circuit reasoned that all smartphones likely qualify as auto-dialers under the FCC’s approach because they have the inherent “capacity” to gain auto-dialer functionality by downloading an app. That interpretation of the TCPA is an “unreasonably, and impermissibly, expansive one,” the court said.
    • Regarding (ii), the FCC order’s lack of clarity about which functions qualify a device as an auto-dialer compounded the unreasonableness of its approach to “capacity” because “affected parties are left in a significant fog of uncertainty about how to determine if a device is an [auto-dialer] so as to bring into play the restrictions on unconsented calls.”
    • The court did not set a new standard for what qualifies as an auto-dialer, instead choosing to simply invalidate the FCC’s existing definition. The matter is now likely to head back to the FCC for further review. Meanwhile, courts handling TCPA cases will continue to address the issue, but will do so without the constraints of the FCC’s prior interpretation.
    • The court also highlighted the issue of whether liability can be imposed if equipment has the capacity to be used as an auto-dialer but that capacity is not actually used to make a call. The court did not rule on this issue because it was not raised by the parties, but the court’s comments signaled to the FCC that if a TCPA violation requires the actual use of auto-dialer technology, the definition of what constitutes an auto-dialer may be less problematic.

              B. Caller liability under the TCPA for calls made to reassigned numbers

  • The TCPA generally makes it unlawful to call cell phones using an auto-dialer unless the call is “made for emergency purposes or made with the prior express consent of the called party.”
  • The FCC interpreted the “consent” exception as referring to consent from the wireless number’s present-day subscriber after reassignment, rather than the person the caller expected to reach. This meant that, under the FCC’s ruling, a caller could be held liable for calling a number that it believed in good faith, and with good reason, it had consent to call. Rather than imposing strict liability for such calls, the FCC sought to allow callers one, and only one, call to the reassigned number. Further calls would expose the caller to liability, even if the caller was given no reason to believe the number had been reassigned.
  • The D.C. Circuit found the FCC’s approach invalid. It reasoned that, while the FCC specifically declined to adopt a strict liability regime, it simultaneously failed to explain why its safe harbor provision should be limited to a single call or message.

              C. Revocation/Withdrawal of Consent

  • Consumers who consent to calls are entitled to revoke their consent, but the TCPA does not explain how consent can be revoked. The FCC had previously ruled that consent could be revoked through “any reasonable means.” The D.C. Circuit upheld this standard.
  • The court reasoned that the FCC’s ruling incentivizes callers to avoid TCPA liability by offering easy-to-use opt-out methods. If recipients are afforded easy opt-out methods, “any effort to sidestep the available methods in favor of idiosyncratic or imaginative revocation requests might well be seen as unreasonable.”
  • The D.C. Circuit further noted that nothing in the FCC’s order “should be understood to speak to parties’ ability to agree upon revocation procedures.” In other words, a contractual agreement to allow revocation of consent through one or more specified methods may well be enforced.

              D. Limited scope of exemption of certain healthcare-related calls from the TCPA’s prior-consent requirement

  • The D.C. Circuit rejected a challenge to the FCC’s limitation of the emergency healthcare-related communications. Petitioners had argued that the FCC’s limitations conflicted with HIPAA, another federal law that facilitates the use of protected health information in communications by not just healthcare providers but other entities, and for purposes beyond the limited ones outlined in the FCC’s challenged order. The FCC had declined to extend the exception to critical players in the healthcare ecosystem regulated by HIPAA, and did not recognize the critical importance of the broad range of healthcare treatment, payment, and operations communications supported and incentivized by HIPAA.
  • The court found no obstacle to complying with both statutes, noting that the “Commission did not restrict communications that HIPAA requires be permitted to flow freely. It simply declined to make certain exchanges even less burdensome than they would have been by default.”