D.C. Circuit Sets Aside Certain TCPA Interpretive Rulings from FCC’s July 10, 2015 Declaratory Ruling & Order

The U.S. Court of Appeals for the D.C. Circuit recently set aside certain interpretations in the FCC’s  July 10, 2015, Declaratory Ruling & Order: (i) the types of equipment qualifying as an automatic telephone dialing system (ATDS); and (ii) calls made to a phone number reassigned from a consenting person to a person who has not given consent to receive.  In the same order, the Court upheld the FCC’s interpretations on: (i) the manner in which a party may revoke consent to receive calls; and (ii) the exemption for time-sensitive healthcare treatment calls from the TCPA’s prior-consent requirement.

The Court assessed the lawfulness of the FCC’s rulings by evaluating whether such rulings were arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with the law.  The Court first reviewed the FCC’s ruling that equipment qualifies as an ATDS if it has the future “capacity” to function as an autodialer, even if it does not presently have such capacity.   The Court found the FCC’s interpretation of the statutory term “capacity” to be unreasonably and impermissibly expansive, noting that such an interpretation would result in an “eye-popping sweep” of all smartphones because “essentially any smartphone, with the addition of software, can gain the statutorily enumerated features of an autodialer and thus function as an ATDS.”  In setting aside the ruling, the Court reasoned that the statute “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.”  Although the Court did not offer guidance on the types of equipment that might qualify as an ATDS, it suggested that the FCC revisit the issue in future rulemaking.

The Court next considered the FCC’s “one-call safe harbor” ruling for calls unknowingly made to a phone number reassigned from a consenting person to a person who has not given consent to receive calls.  The Court noted that although the FCC interpreted “called party” to mean current “subscriber” instead of intended recipient, resulting in strict liability even if callers are unaware of the reassignment, it allowed a “one-call safe harbor” to accommodate a caller’s “reasonable reliance” on previously-obtained consent.  The Court set aside this ruling as arbitrary and capricious, noting that the FCC “gave no explanation of why reasonable-reliance considerations would support limiting the safe harbor to just one call or message” when “[t]he first call or text message [] might give the caller no indication whatsoever of a possible reassignment.”  Finding that the “one-call safe harbor” approach could not be severed from the FCC’s interpretation of “called party,” the Court also set aside the FCC’s treatment of reassigned numbers as a whole.

The Court then reviewed the FCC’s ruling that a called party may revoke consent at any time and through any reasonable means that clearly expresses a desire not to receive further messages.  In upholding this ruling, the Court determined that the FCC’s process for permitting a called party to revoke consent was not arbitrary and capricious because: (i) it absolves callers of any responsibility to adopt systems that would entail “undue burdens”; (ii) “callers will have every incentive to avoid TCPA liability by making available clearly-defined and easy-to-use opt-out methods”; and (iii) a recipient’s “effort to sidestep the available methods in favor of idiosyncratic or imaginative revocation requests might well be seen as unreasonable.”

Finally, the Court addressed the FCC’s ruling applying a healthcare exemption from the TCPA’s prior-consent requirement to calls for which there is “exigency and that have a healthcare treatment purpose,” but not to calls including “telemarketing, solicitation, or advertising consent, or which include accounting, billing, debt-collection, or other financial content.”  The FCC explained that while treatment calls provide “vital, time-sensitive information patients welcome, expect, and often rely on to make informed decisions,” such exigency does not exist for other types of calls such as account communications and payment notifications.  In upholding this ruling, the Court determined that the FCC’s position was not arbitrary and capricious because the FCC was “empowered to draw the distinction it did, and it adequately explained its reason for doing so.”

A copy of the opinion can be viewed here.