Court Vacates Key Parts of FCC’s 2015 TCPA Order

In 2015, the Federal Communications Commission issued a Declaratory Ruling and Order expanding the definition of an automatic telephone dialing system (“ATDS”). The Order also clarified revocation of consent and provided very limited exceptions for reassigned numbers, healthcare, and financial calls and text messages.

The Order affirmed that the TCPA makes it unlawful for any person to initiate any call or text (other than a call or text made for emergency purposes or made with the prior express consent of the called party) using any ATDS or an artificial or prerecorded voice. An ATDS is defined in the statute 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.”

In the Order, the FCC considered whether, to constitute an ATDS, equipment must have the present capacity at the time of use to generate random or sequential telephone numbers (i.e., telemarketing equipment), or merely be capable of being modified to have those functionalities in the future.

The FCC construed the definition of ATDS to include any equipment that potentially can be modified to generate random or sequential telephone numbers in the future. Thus, “capacity” was defined to include present or future capacity, including with unspecified hardware and software modifications. The only limitation on this expansive “capacity” definition is that “there must be more than a theoretical potential that the equipment could be modified” into an autodialer.   The FCC’s Order only provided one example, a rotary telephone.

The Order also considered the available means by which consumers may revoke their prior consent and concluded that consumers may revoke consent through any reasonable means … in any manner that clearly expresses a desire not to receive further messages.” The Order also state that “callers may not infringe on that ability by designating an exclusive means to revoke.”

The Order also made it clear that “the TCPA requires the consent not of the intended recipient of a call, but of the current subscriber [or customary user of the phone.]” Quite problematic if a telephone number legitimately provided by a prior user is reassigned. While the FCC provided a one-call exception for reassigned numbers when callers “make calls without knowledge of reassignment and with a reasonable basis to believe that they have valid consent to make the call,” after that first call, telemarketers are liable for any calls thereafter even if that “one additional call does not yield actual knowledge of reassignment.”

On March 16, 2018, the D.C. Circuit Court of Appeals in ACA International, et al. v. Federal Communications Commission and United States of America, et al., No. 15-1211 (2018) issued a long-awaited decision that is of critical importance to telemarketers and TCPA litigation.

ACA filed suit in the District of Columbia Circuit Court of Appeals, arguing that the Order is at odds with the law’s original intent, and unnecessarily expanded the definitions of “capacity,” “ATDS” and “prior express consent.” It also argued that the Order violated due process and freedom of speech protections and challenged the one-call exception for reassigned numbers, hoping to have enacted a “safe harbor” for wrong numbers and an amended definition of “called party” (intended party v. current subscriber).

In short, the D.C. Circuit struck down key portions of the FCC’s previous expansive Order, including its definition of an ATDS and the controversial one-call safe harbor for reassigned numbers. Notably however, the Court upheld the reasonable revocation of consent threshold and exemptions for healthcare-related messages.

In vacating the FCC’s definition of ATDS, the Court found that the FCC’s definition of an ATDS is “utterly unreasonable.” The Court expressed concern that the definition would encompass smartphones that need additional equipment, either through add-ons or downloads, to function as an autodialer. “If a device’s ‘capacity’ includes functions that could be added through app downloads and software additions, and if smartphone apps can introduce ATDS functionality into the device,” the Court reasoned, “it follows that all smartphones, under the Commission’s approach, meet the statutory definition of an autodialer.”

“The TCPA cannot reasonably be read to render every smartphone an ATDS subject to the Act’s restrictions, such that every smartphone user violates federal law whenever she makes a call or sends a text message without advance consent.”

The Court also considered the ambiguity with the definition of an ATDS in terms of whether a device qualifies as an ATDS only if it can generate random or sequential numbers to be dialed, or whether it qualifies as an ATDS even if it lacks that capacity. It considered that the Order did not explain the degree of human intervention necessary for a device to meet the requirements for an ATDS.

Importantly, the ruling also struck down TCPA rulings on the issue of predictive dialers. The Court found that the 2015 Order is unclear as to whether a device qualifies as an ATDS only if it can generate random or sequential numbers for dialing.

Practically speaking, the Court has facilitated new interpretations as to the definition of the ATDS by the legal system.

The Court also vacated the FCC’s approach to calls made to a phone number previously assigned to a person who had given consent but since reassigned to another (non-consenting) person. The Court found that “called party” can mean “intended recipient” as well as the current subscriber, citing “reasonable reliance.” It found that the one-call safe harbor is arbitrary, stated “why does a caller’s reasonable reliance on a previous subscriber’s consent necessarily cease to be reasonable once there has been a single, post-reassignment call?”

The D.C. Circuit did, however, affirm the FCC’s interpretation of a consumers’ ability to revoke consent. “We uphold the Commission’s approach to revocation of consent, under which a party may revoke her consent through any reasonable means clearly expressing a desire to receive no further messages from the caller.” The Court stated, however, that if a calling party provides a revocation mechanism, a called party’s failure to use the mechanism could mean that the revocation was not in a reasonable manner and hence ineffective. Thus, the ruling left open the door to a telemarketer’s ability to obtain contractual consent to an established revocation method.

The Court also upheld the FCC’s stated scope for healthcare-related messages.

“It is undisputed that essentially any smartphone, with the addition of software, can gain the statutorily enumerated features of an autodialer and thus function as an ATDS,” Judge Srinivasan said. He also stated that “[i]f every smartphone qualifies as an ATDS, the statute’s restrictions on autodialer calls assume an eye-popping sweep. Recall that the statute generally bars the use of an ATDS to make any call (or send any text message) without prior express consent, and tags each violation with a minimum $500 penalty in damages for each individual recipient of each prohibited call or message. The reach of the statute becomes especially pronounced upon recognizing that, under the Commission’s approach, an uninvited call or message from a smartphone violates the statute even if autodialer features were not used to make the call or send the message.”

FCC Chairman Ajit Pai said, “Today’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.”

Commissioner Michael O’Rielly stated, “I am heartened by the court’s unanimous decision, which seems to reaffirm the wording of the statute and rule of law. This will not lead to more illegal robocalls but instead remove unnecessary and inappropriate liability concerns for legitimate companies trying to reach their customers who want to be called. In effect, it rejects the former Commission’s misguided interpretation of the law, inappropriate expansion of scope, and irrational view of reassigned numbers. While I disagree with the court’s decision on the revocation issue, I believe there is an opportunity here for further review in order to square it with the Second Circuit’s more appropriate approach.”

Commissioner Jessica Rosenworcel expressed strong concern over the decision. “One thing is clear in the wake of today’s court decision: robocalls will continue to increase unless the FCC does something about it. That means that the same agency that had the audacity to take away your net neutrality rights is now on the hook for protecting you from the invasion of annoying robocalls.”

The opinion is a significant win for telemarketers. The FCC will likely reconsider the ATDS and reassigned number issues following the ruling.

You can read the opinion, here.

If you are interested in learning more about this topic and its implications, email the author at rnewman@hinchnewman.com. You can also follow him on LinkedIn.

Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.

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