Tiffany Cheung, Julie O'Neill, and Adam J. Fleisher
Class Actions + Mass Torts
Late last week, the D.C. Court of Appeals issued its much-anticipated ruling in ACA International et al. v. Federal Communications Commission, No. 15-1211 (Mar. 16, 2018).The ruling appears to pare back significantly the scope of activity that may be subject to the Telephone Consumer Protection Act, 47 U.S.C. 227, and its implementing regulations at 47 C.F.R. 64.1200 (collectively, the “TCPA”), as interpreted by the Federal Communications Commission (“FCC”).
The TCPA, in relevant part, addresses pre-recorded and other automated telephone calls made, and text messages sent, to wireless phone numbers. It bars the use of an “automated telephone dialing system” (or “ATDS”) to make such calls or deliver such messages without appropriate consent. And, it creates significant compliance imperatives (and draws attention from plaintiffs) because statutory damages begin at $500 per violating call or text, and there is no cap on such damages.
Unsurprisingly, what constitutes an ATDS and what constitutes “consent” are two of the most pressing issues for companies seeking to avoid liability under the TCPA. The Court’s ruling was precipitated by an omnibus ruling, in July 2015, by the FCC on multiple petitions for rulemakings and requests for clarification. In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 30 FCC Rcd. 7961 (2015) (the “Declaratory Ruling”). Over two Commissioners’ dissents, the Declaratory Ruling addressed, among other things: (1) the scope of the definition of an ATDS; (2) whether and to what extent a call to a wireless number that has been reassigned is a violation of the TCPA (i.e., where the party receiving the call was not the party who consented to be called at that number); (3) how a party that has provided consent can “revoke” that consent; and (4) exemptions from the ATDS-related provisions of the TCPA for calls made for exigent purposes and for a healthcare treatment purpose.
The Court’s ruling not only appears to pare back significantly the scope of what may constitute an ATDS, but also provides helpful clarity on other key aspects of the TCPA even where the Court, in part, denied the petitions for review. Accordingly, we address in turn each of the four issues before the Court.
What Is an ATDS?
What constitutes an ATDS was the major issue of contention with respect to the Declaratory Ruling and thus the ACA case. The TCPA defines an ATDS as “[E]quipment 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)(1). In the Declaratory Ruling, the FCC construed this definition to encompass the “potential functionalities” of a device, i.e., what the device may be capable of in the event that hypothetical modifications, such as software changes, were made to the device.
The Court found that the FCC significantly overreached in its interpretation of an ATDS and therefore what calls may be subject to the TCPA. While the Court’s analysis is quite lengthy, its fundamentals are as follows:
The Court set aside the FCC’s interpretation of “capacity” and also found that the FCC failed to engage in “reasoned decisionmaking” with respect to interpreting whether a device must itself have the ability to “generate random or sequential numbers to be dialed,” or if a device can still be an ATDS if the phone numbers are generated elsewhere and then dialed by the device. This distinction becomes germane because the Court rejected the FCC’s interpretation of “capacity” to mean, essentially, anything that can be done to a device to make it so.
Perhaps most significantly, the Court did not stop merely at finding that the FCC’s approach to defining an ATDS “cannot be sustained.” The Court also strongly suggested what it perceived to be an appropriate interpretation of the TCPA by focusing on the fact that the TCPA imposes restrictions on initiating calls “using an ATDS.” 47 C.F.R. 64.1200(a)(1) (emphasis added). The Court effectively endorsed the dissenting position taken by Commissioner O’Rielly in the Declaratory Ruling: the TCPA should apply only to calls actually made using an ATDS. This analysis, the Court strongly implied, would address the underlying problem inherent in the operational definition of an ATDS, i.e.,that virtually any device except for a rotary dial telephone has the “capacity” to be an ATDS. Focusing on the present configuration of the device, and how the configuration is used, solves certain problems with the boundless “capacity” standard for determining whether a call is made with an ATDS, and therefore is subject to the TCPA. It still remains, however, for the meaning of what actually constitutes an ATDS at the time a call is made to be clarified.
The second part of the Court’s ruling focused on one of the most vexing challenges for businesses under the TCPA: Assume that calls are made with an ATDS, and that the business has obtained consent from the party that it is trying to call. But, then, the wireless number associated with the individual who provided consent is “reassigned,” and the business winds up calling somebody who did not consent to be called. The Court noted that there is “no dispute” that the number of wireless numbers reassigned each year is in the “millions,” thereby acknowledging the scope of the problem under the TCPA. Nevertheless, the Court found the Declaratory Order’s solution, which was to provide a “one-call, post-reassignment safe harbor,” was arbitrary and capricious, and thus the Court set it aside.
The Court analyzed the FCC’s approach as follows: (1) the reassignment of a wireless number “extinguishes” consent because the “called party” is the person who is actually reached, and not the person the caller intended to reach; (2) there is no “affirmative obligation” on the new subscriber to inform the caller that the number has been reassigned and, accordingly, the new subscriber can “purposefully and unreasonably” not tell a good-faith caller about the reassignment in order to accrue statutory penalties; (3) the FCC could have imposed a zero-call approach with no safe-harbor, but such a “severe” result was not required by the TCPA; and (4) a one-call safe harbor provides “reasonable reliance” that the called party is the party that consented (i.e., that there has been no reassignment) and, after that, allowing TCPA liability to attach strikes the “appropriate balance” between the caller’s opportunity to realize the number has been reassigned and the privacy interests of the (new) called party.
While it found that the FCC’s determination that the “called party” is the current subscriber was permissible, the Court also found that the one-call safe harbor was arbitrary and therefore struck it down. The Court found that there was literally no basis for the safe harbor: “the Commission . . . gave no explanation of why reasonable-reliance considerations would support limiting the safe harbor to just one call or message.” The Court noted, for example, that the FCC had found that the “one call” itself may not give callers notice of reassignment. So why would the reasonable reliance not attach to a second call in such a situation? And why couldn’t a caller have a reasonable opportunity to learn of a reassigned number before making any call? And, why would the one-call exception apply “over an unlimited period of time?”
The failure to provide any reasoned (or reasonable) explanation as to why the safe harbor stopped at the point of a single call or message led the Court to set aside the one-call safe harbor and the Declaratory Order’s treatment of reassigned numbers generally. In other words, the Court declined to impose a rule that would have effectively made callers strictly liable for all calls made to a reassigned number, with no knowledge. Instead, the Court noted that the FCC is working on technical solutions to the reassigned number problem. These include the creation of a repository of reassigned numbers, and possibly a safe harbor (grounded in “reasonable reliance”) for calls inadvertently made to a reassigned number after consulting such a repository. The Court did seem to endorse this approach by noting that it, unlike the arbitrary one-call safe harbor, would have “greater potential to give full effect to the [FCC’s] principle of reasonable reliance.”
Who Revoked Consent?
On the question of how consent can be revoked, the Court left the Declaratory Ruling in place, but nevertheless provided an interpretive gloss that offers greater certainty.
In its Declaratory Ruling, the FCC determined that consent may be revoked “at any time and through any reasonable means,” including orally or in writing, that “clearly expresses a desire not to receive further messages.” With the TCPA itself silent with respect to the mechanisms by which consent may be revoked, the Court found that the FCC’s approach was not arbitrary and capricious. But, in so doing, the Court also helped to limit the scope of what may, in fact, be considered a reasonable method of seeking to revoke consent. For instance, the Court noted that the Declaratory Ruling provides that “whether a revocation request meets the ‘reasonable means’ standard” is a matter of “the totality of the facts and circumstances,” and one factor is “whether the caller could have implemented mechanisms to effectuate a requested revocation without incurring undue burdens.” The Court noted that it would be an undue burden, and callers would not be required, to “train every retail employee on the finer points of revocation.” And, the Court declared:
callers will have every incentive to avoid TCPA liability by making available clearly-defined and easy to-use opt-out methods. If recipients are afforded such options, any effort to sidestep the available methods in favor of idiosyncratic or imaginative revocation requests might well be seen as unreasonable.
In other words, if the caller enables consent to be revoked through reasonable means, an effort to revoke consent by other means could be found unreasonable.
Additionally, the Court endorsed the notion of contractually agreed upon mechanisms of consent, observing that, while the Declaratory Ruling “precludes unilateral imposition of revocation rules by callers,” there is nothing in the ruling that “should be understood to speak to parties’ ability to agree upon revocation procedures.” Thus businesses may consider including in agreements in which they obtain consent an express agreement that such consent may be revoked only by the specified means offered by the caller. Such provisions should be more likely to withstand scrutiny if, of course, the methods by which consent may be revoked are, indeed, reasonable.
What’s an Emergency?
The final challenge to the Declaratory Ruling pertained to the scope of the exemptions to the TCPA’s prior express consent requirement for healthcare-related calls to wireless numbers. The Declaratory Ruling included an exemption for such healthcare calls, but it was narrower than petitioners would have liked: it covers only calls for which there is “exigency and that have a healthcare treatment purpose,” which does not, according to the FCC, include calls that may include telemarketing, advertising, and so on, and calls that relate to accounting, billing, debt-collection, and other financial content.
The Court rejected the arguments of the petitioner here, and also rejected an arbitrary-and-capricious challenge based on the TCPA’s disparate treatment of the exemptions for healthcare-related calls to wireless and residential (i.e., landline) phones. As the Court explained, a pre-recorded healthcare-related call to a landline is not subject to the TCPA’s consent requirement. In the 2012 order in which it effectuated this exemption, the FCC also seemed to suggest that such calls to wireless numbers would come under the same exemption. In effect, the 2015 Declaratory Ruling narrowed the scope of the healthcare message exemption for calls to wireless numbers. As a result, some healthcare-related calls, such as calls that may include billing information, are wholly exempted from the TCPA if made to landlines, but the exemption for calls to wireless numbers extends only to calls for which there is a “healthcare treatment purpose.” The Court did not find this distinction arbitrary and capricious, noting, among other reasons, that the statute itself presupposed that “calls to residential and wireless numbers warrant differential treatment.”
Business that use automated equipment to make calls for any purpose, including marketing, can take some comfort in the Court’s rulings on the scope of an ATDS and the Court’s observations regarding the revocation of consent. That said, the Court’s opinion leaves room for argument over what falls within the narrowed scope of an ATDS, and how to deal with reassigned numbers. With the FCC’s Declaratory Ruling vacated in part, the agency will have another opportunity to address these issues, and it remains to be seen what the FCC (now with new members) will do next. In turn, the scope of activity subject to the TCPA will remain an open question, and future interpretations, including from the FCC, will be important guides for businesses.
While waiting for these processes to play out, in addition to carefully evaluating whether any particular device may be an ATDS, callers that have obtained appropriate consent should consider their processes for offering to called parties a reasonable means of revoking any previously provided consent.
Morrison & Foerster LLP submitted a brief for amici curiae Retail Litigation Center, Inc., National Retail Federation, and National Restaurant Association in support of the petitioners in this case.
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