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D.C. Circuit Strikes Down and Upholds Key TCPA Interpretations by the FCC; Uncertainty Remains

Publications - Client Alert | March 21, 2018

On March 16 the U.S. Court of Appeals for the D.C. Circuit vacated and upheld important aspects of a 2015 order from the Federal Communications Commission (“FCC”) greatly expanding the scope of the Telephone Consumer Protection Act (“TCPA”) rules.

In ACA International v. FCC, No. 15-1211 (D.C. Cir. March 16, 2018), the court vacated as arbitrary and capricious the FCC’s “one-call safe harbor” for calls made to wireless numbers reassigned to non-consenting persons without the caller’s knowledge. Additionally, the ACA court struck down the FCC’s definition of autodialer as any device with the “potential” for making autodialed calls. The court reviewed and upheld the FCC’s approach to consent revocation, under which a party may revoke her consent through any reasonable means, as well as the scope of the FCC’s exemption for time-sensitive health care calls.

The plaintiffs welcomed the D.C. Circuit’s decision as a check to the FCC’s assertion of expanded enforcement authority. But because the ACA decision only vacates certain FCC interpretations and does not establish new standards for what happens when cell phone numbers are reassigned or for what qualifies as an autodialer, uncertainty remains. This uncertainty will likely continue to spur litigation and require businesses using automated calls and texts to remain vigilant in their compliance efforts. 

TCPA and the FCC’s 2015 Order

The TCPA prohibits calls to wireless numbers that are placed by an “automatic telephone dialing system” (“ATDS” or “autodialer”) without the “prior express consent of the called party.” The statute amorphously defines an autodialer 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 TCPA grants individuals a private right of action against violators, including monetary relief of up to $500 per violation (trebled to $1,500 for willful or knowing violations). Violators also face state and federal government enforcement actions with the potential for additional monetary penalties.

Since its passage, the FCC has issued and amended regulations and other regulatory guidance on the TCPA numerous times. Most relevant to the ACA decision, in 2015, in response to requests for clarification by various industries, the FCC issued a Declaratory Ruling and Order (the “2015 Order”) to “reiterate and simplify” aspects of the TCPA.  The 2015 Order, among other things:

  • Expanded the definition of an autodialer by interpreting the “capacity” of calling equipment to include its “potential functionalities” or “future possibility,” not just its “present ability”
  • Established a “one-call safe harbor” in cases where a caller initiates a phone call (or sends a text message) based on a mistaken belief that the owner of the receiving number has given consent, when in fact the number has been reassigned to someone else from whom consent has not been obtained
  • Clarified that recipients may revoke consent through any reasonable means
  • Exempted from consent requirements certain calls to wireless numbers for which there is exigency and that have a healthcare treatment purpose
ACA Vacates the FCC’s Narrow Conditions for Calling Reassigned Numbers

The TCPA prohibits placing unwanted automated and prerecorded calls to wireless numbers other than calls made for emergency purposes or made with the prior express consent of the “called party.” In the 2015 Order, the FCC interpreted “called party” to refer to the person actually reached, which – after reassignment – would be the wireless number’s present-day subscriber. Based on this premise, the FCC’s 2015 Order established the one-call safe harbor, under which a caller can make one – and only one – call to a wireless number following reassignment to a non-consenting person before the caller is subject to liability under the TCPA. The FCC reasoned that this practice reflected the FCC’s refusal to interpret the TCPA as imposing a traditional strict liability (i.e., a “zero call”) standard on callers, favoring instead a “reasonable reliance” standard under which it is reasonable for a caller with no knowledge of a reassignment to continue to rely on the prior subscriber’s consent to make the first call following reassignment. Additionally, the FCC found that the one-call safe harbor represented an appropriate balance between a caller’s opportunity to learn of the reassignment and the privacy interests of the new subscriber, even though the FCC acknowledged it was not presuming that a single call to a reassigned number would always be sufficient for a caller to gain actual knowledge of a reassignment.

The ACA court vacated the one-call safe harbor as arbitrary, reasoning that the FCC gave no explanation of why reasonable reliance considerations would support limiting the safe harbor to just one call or message. In cases where the first post-reassignment call gives no reason to suspect a reassignment, the ACA court noted, a caller’s reasonable reliance on the previous subscriber’s consent would be just as reasonable for a second call. Additionally, the court found that the FCC’s failure to give a reasoned (and reasonable) explanation of why the one-call safe harbor stops at the seemingly arbitrary point of a single call or message required the court to set aside not only the FCC’s allowance of the safe harbor, but also its determination that the “called party” refers to the new subscriber. The court explained that only excising the one-call safe harbor would leave callers strictly liable for all calls made to reassigned numbers –- a result the court could not be certain the FCC would have adopted in the first instance.

ACA Vacates the FCC’s Expansive “Autodialer” Definition

In ACA, the D.C. Circuit found the only reasonable way to interpret the 2015 Order’s interpretation of what constitutes an “autodialer” is to conclude it is the FCC’s view that all smartphones qualify as autodialers because they have the inherent “capacity” or potential to gain ATDS functionality by downloading an app. Under such a scheme, the court noted, a person that obtains an acquaintance’s cell phone number from a mutual friend and then calls or sends a text message to that acquaintance from his smartphone to extend an invitation to an upcoming social gathering would ostensibly violate federal TCPA law and be subject to a minimum $500 penalty.     

Ultimately, the ACA court found that the FCC’s interpretation of the term “capacity” in the statutory definition of an ATDS was utterly unreasonable in the breadth of its regulatory inclusion. The court elaborated, noting that “nothing in the TCPA countenances concluding that Congress could have contemplated the applicability of the statute’s restrictions to the most commonplace phone device used every day by the overwhelming majority of Americans.” The court also observed that the unreasonableness of the FCC’s impermissibly expansive interpretation of the term “capacity” was compounded by the 2015 Order’s lack of clarity about which functions qualify a device as an autodialer.

ACA Upholds the FCC’s Liberal Consent Revocation Standard

The ACA court also upheld parts of the 2015 Order.  In finding the FCC’s liberal consent revocation standard neither arbitrary nor capricious, the court reasoned that the FCC’s guidance provided enough structure to quell concerns that the revocation rule was overly broad because the FCC specifically stated that callers are not required to adopt consent revocation systems that are overly burdensome to implement. Instead, the court offered, callers are incentivized to avoid TCPA liability “by making available clearly-defined and easy-to-use opt-out methods” that do not prevent consumers from effectively communicating revocation.  If recipients are afforded options, “any effort to sidestep the available methods in favor of idiosyncratic or imaginative revocation requests might well be seen as unreasonable.” Interestingly, the court noted it was not addressing whether a caller could impose consent-revocation requirements on a recipient by contract.

ACA Upholds the FCC’s Exemption for Time Sensitive Health Care Calls

Finally, the court upheld the exemption from the TCPA’s consent requirements for calls for which there is an exigency and that have a healthcare treatment purpose. The court found the exemption was consistent with HIPAA and that the FCC was permitted to create exemptions to the TCPA and adequately explained its reasoning for the exemption.

The Takeaway: While Some Untenable Interpretations Are Gone, Uncertainty Remains

While the ACA decision offers relief from certain untenable interpretations in the 2015 Order, it is unclear whether the FCC will respond with new guidance. The lack of clear rules or guidance on these issues likely means battles over the meaning and scope of the TCPA will continue in courtrooms across the country.

Compliance with the TCPA remains a complex topic, which cannot be comprehensively addressed in this summary format. If you would like additional information regarding TCPA compliance, please contact your Kutak Rock attorney or one of the authors.