Locke Lord QuickStudy: D.C. Circuit Strikes Down Key Components of FCC’s 2015 Interpretation of the TCPA

In a highly anticipated decision issued late last week, the D.C. Circuit rejected key components of the Federal Communications Commission’s (“FCC”) July 10, 2015 Declaratory Ruling on the Telephone Consumer Protection Act (the “2015 Order”). The decision, ACA Int’l v. FCC, Case No. 15-1211, 2018 WL 1352922 (D.C. Cir. Mar. 16, 2018), addressed several issues related to Telephone Consumer Protection Act (“TCPA”) litigation and created a whole new set of issues that will now need to be addressed by the FCC, district courts and circuit courts going forward. The court:

• Rejected the FCC’s overly broad definition of an automatic telephone dialing system (“ATDS”);
• Rejected the FCC’s one call safe harbor for reassigned numbers; and
• Upheld the FCC’s rule that consumers may revoke consent through any reasonable means.

The ruling from the D.C. Circuit will restart hundreds of cases around the country that have been stayed hoping for guidance from the D.C. Circuit. However, the D.C. Circuit provided little guidance for TCPA litigants. Instead, the court simply struck down certain provisions of the 2015 Order without detailing how the elimination of those provisions impacts the TCPA landscape.

FCC Sent Back to the Drawing Board for Definition of ATDS
The most anticipated part of the opinion is the D.C. Circuit’s decision to strike down the 2015 Order’s definition of an ATDS. The court found that the FCC’s overly broad definition “would appear to subject ordinary calls from any conventional smartphone to the Act’s coverage, an unreasonably expansive interpretation of the statute.” ACA Int’l, 2018 WL 1352922, at *1. The court did not, however, take the additional step of providing an alternative interpretation of the statutory definition for ATDS. Instead, the FCC was sent back to square one to draft a new definition of an ATDS. Pending new rules, litigants face the uncertainty over what equipment qualifies as an ATDS that existed before the 2015 Order.

While the court did not adopt its own definition of an ATDS, the court did send a strong signal to the FCC about what the judges on the panel think the FCC should do on their next attempt at defining an ATDS. The court noted the FCC’s desire to adapt the definition of an ATDS to keep up with technology. The court suggested that the solution to finding a balance between the need for a broad definition of an ATDS to prevent telemarketers from getting around the TCPA with the need for people to use their smartphones without facing TCPA liability might be to limit TCPA violations to calls that are made using the autodial feature. The TCPA makes it unlawful “to make any call…using any automatic telephone dialing system.” The court cited approvingly to Commissioner O’Reily’s dissent to the 2015 Order in which he proposed interpreting the TCPA as requiring that the autodialer function actually be used to make the call before a violation can be found. The court invited the FCC to “revisit the issue in a future rulemaking or declaratory order.”

Predictive Dialers Are Probably Still Autodialers, At Least For Now
In addition to striking down the FCC’s expansive interpretation of an ATDS, the court also set aside the FCC’s prior orders addressing the functions a device must perform to qualify as an ATDS. The D.C. Circuit raised the possibility that predictive dialers, long held to qualify under the ATDS umbrella, may not meet the statutory definition.

The TCPA defines an ATDS as equipment that 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.C. § 227(a)(1). The court found that the 2015 Order contained inconsistent interpretations of what functions a system must have to meet this definition. In certain places, the 2015 Order indicated that a device must be able to generate and dial random or sequential numbers to qualify as an ATDS. In other places, the 2015 Order suggested a competing view -- equipment can qualify as an ATDS even if it lacks the capacity to generate random or sequential numbers. The D.C. Circuit used predictive dialers as an example. In its 2003 Order, affirmed in the 2015 Order, the FCC ruled that a predictive dialer qualifies as an ATDS even if the system does not have the capacity to generate and dial random or sequential numbers. The D.C. Circuit held that the FCC “cannot [] espouse both competing interpretations in the same order.”

Although the D.C. Circuit set aside the rule that a predictive dialer qualifies as an ATDS even if the equipment cannot generate and dial random and sequential numbers, the court left open the possibility that the FCC could adopt such a rule. We expect that the FCC will address predictive dialers in its next ruling on the definition of an ATDS. In the meantime, courts may continue to follow existing precedent holding that predictive dialers meet the definition of an ATDS. Callers should proceed with caution.

New Standard for Reassigned or Wrong Numbers?
In addition to setting aside the FCC’s interpretation of an ATDS, the court also vacated the FCC’s approach to calls made to a cell phone number that is reassigned to another subscriber. The FCC’s 2015 Order addressed the question of whether a caller violates the TCPA by calling a wireless number that has been reassigned from a consenting party to another person without the caller’s knowledge. The FCC ruled that calls to reassigned numbers violate the TCPA. However, the FCC adopted a one-call exception: a caller is allowed to make one, and only one, post-reassignment call without incurring liability under the TCPA. The FCC adopted the one-call exception, rather than a strict liability standard, based on the FCC’s interpretation of a caller’s ability to rely on a consumer’s “prior express consent” to mean “reasonable reliance.” The D.C. Circuit found that the one-call exception was arbitrary because the FCC offered no explanation of why reasonable-reliance considerations supported limiting the safe harbor to one call. The court noted that the first call might not give the caller any indication that the number had been reassigned. The FCC is already working on rules that would enable callers to check for reassigned numbers against a database. The new rules may avoid the problems the court found with the one call safe harbor.

The reasoning applied by the D.C. Circuit in setting aside the one call safe harbor could prove helpful to callers in other circumstances. The “reasonable reliance” standard could be used to protect callers from liability for calling wrong numbers or callers who rely on consent obtained by lead vendors. It is not uncommon for a caller to dial a number believing the caller has consent. However, as a result of a consumer putting the wrong number on a form or a clerk entering the wrong number from a form into a customer database, the caller may dial the wrong person. The question would then be whether the caller reasonably relied on the consent obtained from consumer A when the caller mistakenly dialed consumer B’s phone number.

Revocation of Consent
The D.C. Circuit agreed with the FCC, and upheld the portion of the 2015 Order finding that consent may be revoked through any “reasonable means” that clearly expresses a desire to receive no further messages from the caller. But the court provided some guidance on the issue by clarifying that the 2015 Order allows businesses to establish “clearly defined and easy-to-use opt-out methods,” and stating that if a consumer is offered these methods, “any effort to sidestep the available methods in favor of idiosyncratic or imaginative revocation requests might well be seen as unreasonable.”

Of potential help to callers, the D.C. Circuit found that the 2015 Order did not address whether contracting parties could agree to a particular revocation procedure. Callers should consider whether they can incorporate specific revocation procedures into their contracts.

Impact of the Decision Going Forward
How the elimination of the ATDS definition and the one call safe harbor impacts precedent set by circuit courts that previously relied on the now vacated portions of the 2015 Order remains to be seen. While callers can celebrate a victory in setting aside parts of the 2015 Order, the decision did not resolve very many issues. The FCC will most likely begin the process of adopting new rules, which have the potential to depart significantly from the prior rules not only because of this decision, but also because the FCC leadership has changed since 2015. In the interim, if courts simply apply caselaw that existed prior to the 2015 Order to pending cases, defendants will continue to face uncertainty and potentially devastating damages from class actions.

Callers and trade associations should consider filing petitions with the FCC and respond to requests for comments to ensure that their concerns are in front of the FCC.