The D.C. Circuit Significantly Limits the Reach of the TCPA Statute, but Issues Still Remain

On March 16, 2018, almost seventeen months after oral argument, the U.S. Court of Appeals for the District of Columbia finally issued its ruling on several consolidated administrative challenges to the Federal Communications Commission’s (FCC) July 2015 Omnibus Declaratory Ruling and Order (Order) interpreting various provisions of the Telephone Consumer Protection Act. ACA Int’l v. FCC, No. 15-1211 et al., 2018 WL 1352922 (D.C. Cir. Mar. 16, 2018). The decision focused on four aspects of the 2015 Order: (a) the definition of the term “automatic telephone dialing system” (ATDS), which turned on present or potential capacity with modifications such as software changes; (b) liability for calls to reassigned numbers and the FCC’s “one-call” post-reassignment safe harbor for such calls; (c) the FCC’s clarification that consumers may revoke consent via any reasonable method; and (d) the FCC’s exemption from consent requirements for calls to wireless numbers for which there is exigency and that have a healthcare treatment purpose.

1. Defining an ATDS

In an important victory for those challenging the FCC’s ruling as overbroad, the Court struck down the FCC’s expansive definition of the term ATDS. The statute defines ATDS 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.” 47 U.S.C. § 227(a)(2). The Commission ruled that the equipment’s “capacity” included its “potential functionalities” or “future possibility,” not just its “present ability,” significantly expanding the reach of the Act. 30 F.C.C. Rcd. 7951, 7975, ¶ 20. In rejecting the FCC’s interpretation, the Court noted that, under the FCC’s approach, all smartphones would meet the statutory definition of the ATDS because they all may have the capacity to store numbers to be called and to dial such numbers through the use of an app or other software, giving the statute an “eye-popping sweep.” Id. at *6-7. The Court also criticized the FCC’s Order for giving conflicting answers to the question of whether a device qualifies as an ATDS only if it can generate random or sequential numbers to be dialed or if it qualifies even if it lacks that capacity and simply dials from the supplied list. Id. at *12. Likewise, the Court was skeptical of the FCC’s decision not to exempt from the definition of ATDS any equipment that does not have the capacity to dial numbers without human intervention. Id. at *12. Finally, although the Court did not rule on the FCC’s broad interpretation of what it means to “make any call using any” ATDS, 47 U.S.C. 227(b)(1)(A)(iii), the Court flagged the issue for the future. In particular, the Court noted that, even under the FCC’s definition of capacity as including potential functionalities, the statute would not have prohibitively expansive reach if the bar against “making any call using” an ATDS applied only to calls made using the equipment’s ATDS functionality (rather than calls made with a device with potential capacity, but without the actual use of autodialer capabilities). Id. at *13.

While the call for a more reasonable interpretation of an ATDS is welcome, the FCC will now be faced with creating a new, more limited, definition of ATDS equipment. In the meantime, we expect courts will more narrowly interpret the ATDS definition and this may give new life to defenses based on certain calls to existing customers that are not from “randomly” generated lists.

2. Calls to Reassigned Numbers

The Court also rejected the FCC’s treatment of calls to reassigned numbers. Id. at *15-16. The Court began by upholding the Commission’s interpretation of the term “called party” whose consent is required, agreeing that it could be the person who is actually reached (i.e., the present-day subscriber after reassignment) as opposed to the “intended” party (the person the company was trying to reach). Id. at *15. Nevertheless, the Court set aside the Commission’s entire treatment of reassigned numbers because it found the one liability-free post-reassignment call safe harbor to be “arbitrary and capricious.” Id. at *13. For example, the Court noted that the Commission consistently used a “reasonable reliance” approach when interpreting calls made with “prior express consent,” including “as the justification for allowing a one-call safe harbor when a consenting party’s number is reassigned.” Id. The Court found no reasonable explanation, however, as to why a caller’s reliance on prior consent ceases to be reasonable after one post-reassignment call where that first call “might give the caller no indication whatsoever of a possible reassignment.” Id. In striking the FCC’s treatment of reassigned numbers, the Court referenced several proposals currently pending before the FCC for creating a comprehensive repository of information about reassigned wireless numbers and creating a safe harbor for callers who rely on this repository, and noted that those proposals “have greater potential to give full effect to the Commission’s principle of reasonable reliance.” Id. at *17.

3. Revocation of Consent

The Court upheld the FCC’s ruling that a called party can revoke consent to be called at any time through any reasonable means, orally or in writing, as long as the request “clearly expresses a desire not to receive further messages.” Id. The Court noted that the FCC’s ruling “did not address whether contracting parties can select a particular revocation procedure by mutual agreement.” Id. at *18. This is consistent with a recent Second Circuit decision precluding revocation of consent where consent was obtained as part of the contractual consideration.[1]

4. Special Exemption for Certain Health Care Calls to Cell Phones

Finally, the Court upheld the FCC’s exemption from prior express consent requirement for “certain non-telemarketing, healthcare calls” to cellular numbers that “provide vital, time-sensitive information” for patients. This exemption is different from the exemption from prior written consent requirement the FCC granted in 2012 for health care-related calls to residential lines which are already regulated by HIPAA.[2] Whereas the 2012 exemption applied to any “health care messages,” including messages pertaining to any of the topics that “health care” is defined to include under HIPAA, the FCC stated that the 2015 exemption would not cover calls that contain “telemarketing, solicitation, or advertising content, or which include accounting, billing, debt-collection, or other financial content.” Id. at *19. However, the Court upheld the narrower 2015 exemption for calls to cellular lines based on the statutory language and the FCC’s observation that calls to cellular numbers “tread [more] heavily upon . . . consumer privacy interests.” Id. at *21 (citing 2012 Order, 277 F.C.C. Rcd. at 1855, ¶ 63).

* * *

It remains to be seen what the FCC does in response to the Court’s ruling, but the ruling is a clear rejection of some of the most hotly contested aspects of the FCC’s 2015 Order. It is anticipated that the newly constituted FCC will provide needed clarity that will likely take a more industry friendly approach.

[1] Reyes v. Lincoln Auto. Fin. Servs., 861 F.3d 51 (2d Cir. 2017).

[2] In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 27 F.C.C. Rcd. 1830, 1837 ¶ 18 (2012) (codified at 47 C.F.R. § 64.1200(a)(3)(v)).

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