Fourth Circuit Severs 2015 Government-Backed Debt Exemption From TCPA Based on First Amendment Challenge
The TCPA was the patient on the operating table in the Fourth Circuit’s opinion regarding the constitutionality of the TCPA issued today in American Association of Political Consultants, Inc., et al v. FCC, No. 18-1588 (4th Cir. Apr. 24, 2019). The court did two things in its opinion. First, it examined the patient to determine if it had a tumor (i.e. whether the government-backed debt exemption under the TCPA rendered the statute an unconstitutional content-based restriction on free speech). Once it did that, it had to determine if the tumor was operable (i.e. whether the offending exemption could be severed from the rest of the statute). The court ultimately held that the government-backed debt exemption under the TCPA rendered the Act’s prohibition on ATDS calls to cell phones an unconstitutional restriction on free speech, but the appropriate remedy was to sever the flawed exemption versus striking down the ATDS prohibition in its entirety.
The exemption at issue in AAPC was added to the TCPA by Congress in 2015, and exempts calls to collect on government-backed debt from the TCPA’s prohibition on ATDS calls to cell phones. The challenge in AAPC was brought on the basis this exemption rendered the TCPA an impermissible, content-based restriction on free speech that unconstitutionally favored “a select group of otherwise prohibited automated calls to cell phones.”
In deciding this challenge, the court broke down the constitutional question into three primary issues:
- First, whether “the debt-collection exemption is a content-based speech restriction subject to strict scrutiny review,” or a content-neutral restriction subject to intermediate scrutiny.
- Second, “whether the debt collection exemption to the automated call ban survives the applicable level of scrutiny.”
- Third, “whether to strike the automated call ban in its entirety, or whether to simply sever the flawed exemption therefrom.”
Issue 1: The Government-Backed Debt Exemption is a Content-Based Speech Restriction
With respect to the first issue, the court concluded that the debt-collection exemption was a content-based speech restriction subject to strict scrutiny. It reasoned that application of the exemption “depends entirely on the communicative content of the call,” and therefore constitutes a content-based speech restriction. The court also rejected the government’s argument that the exemption was premised on the relationship between the government and the person called, rather than the content of the message conveyed in the call. The court explained that the exemption made no reference to the relationship between the caller and the person called, but rather applied “because the call is about [a specific type of] debt, not because of any relationship between the federal government and the debtor.”
Issue 2: The Exemption Fails Strict Scrutiny
The court then proceeded to examine the government-backed debt exemption under the applicable strict scrutiny standard. It found that the exemption failed to meet the standard because it was an “underinclusive” restriction on free speech. In other words, the exemption “covers too little speech,” and therefore left “appreciable damage to the government’s interest unprohibited.” The court’s conclusion was based upon its finding that the exemption “subverted” the privacy protections underlying the TCPA, and also “deviate[d]” from the purpose of the ban rendering it an outlier compared the TCPA’s two other exemptions for calls made with the consent of the called party, and those made for emergency purposes.
Specifically, the court found that the exemption did not advance the TCPA’s “purpose of privacy protection,” because it “actually authorizes a broad swath of intrusive calls,” relating to “millions” of debts backed by the government. Along the same lines, the court also reasoned that the exemption was incompatible with the TCPA’s other exemptions for ATDS calls made with consent, and for emergency purposes. It explained that “consent generally diminishes any expectation of privacy,” and emergency purpose calls “serve the vital purpose of protecting the safety and welfare of Americans.” The government was unable to persuade the court that the government-backed debt exemption served “any similarly important purpose.”
Issue 3: Severance is the Preferred Remedy
Having checked the first two boxes of the analysis, the court was left with one final decision: strike down the TCPA’s prohibition on ATDS calls in its entirety, or sever the flawed exemption from the statute? In this final part of its opinion, the court chose a scalpel over a steamroller, and found the question a seemingly easy one to answer. Initially, the Supreme Court has articulated that severance is the “preferred remedy” to these sorts of constitutional problems. Additionally, Congress itself had similarly expressed a preference for severance within the broader context of its telecommunication laws. Given these apparent across-the-board preferences for severance, the court concluded that severing the government-backed debt exemption from the TCPA was the more appropriate remedy over striking down the TCPA’s ATDS prohibition in its entirety.
Takeaways From the Fourth Circuit’s Opinion
So what sorts of impacts can we expect from the opinion? For starters, it seems that one of the biggest impacts of the case will be in the student loan space. Companies that collect on government-backed student loan debt (which is by far the largest category of government-backed debt) have been able to use this exemption as a strong defense in defeating TCPA cases. See e.g. Green v. Navient Solutions, LLC, Case No. 1:17-CV-1453-VEH, 2018 U.S. Dist. LEXIS 201906 (N.D. Ala. Nov. 29, 2018); Gaza v. Navient Solutions LLC, Case No. 8:18-cv-1049, 2019 U.S. Dist. LEXIS 39773 (M.D. Fl. Jan. 23, 2019). Under AAPC, that defense is no longer available, at least within the Fourth Circuit. The net effect of this is likely going to be an uptick in TCPA litigation involving student loans within the Fourth Circuit’s footprint.
Next, AAPC may very well be a bellwether on what we might expect out of the similar constitutional challenges to the TCPA pending before the Ninth Circuit. Although the Ninth Circuit is generally protective of the First Amendment, it also showed a propensity to do-no-harm to the TCPA in last year’s Marks v. Crunch appeal in which it applied an expansive interpretation of ATDS to preserve the status quo on the applicability of the TCPA to modern dialing technology. Thus, we might very well see the Ninth Circuit take a page out of AAPA in its own approach to the issue.
Lastly the opinion shows that, for now, there is no silver bullet for the TCPA. Robust TCPA compliance infrastructure is still a must for any company leveraging automated technology to communicate with consumers. That’s because, as AAPA shows, demonstrating compliance with the TCPA is probably going to be a far more potent defense than a wholesale challenge to the constitutionality of the Act.