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SCOTUS Decision in Unsolicited Fax Case Could Have Broader TCPA Implications

The U.S. Supreme Court's grant this week of the petition for certiorari in a case involving the Telephone Communication Protection Act (TCPA) prohibition on unsolicited fax advertisements could have significant implications for the Federal Communication Commission's (FCC) anticipated ruling on what constitutes an automatic telephone dialing system (ATDS) under the TCPA.

The petitioner in PDR Network v. Carlton & Harris Chiropractic sent a fax in 2013 to a West Virginia chiropractor offering a free copy of the Physicians' Desk Reference. The chiropractor declined the offer and sued PDR in West Virginia federal court, alleging that PDR had violated the TCPA by sending it an unsolicited fax advertisement. PDR moved to dismiss, arguing that the fax was not an "unsolicited advertisement" because it offered the desk reference for free rather than for purchase. The chiropractor disagreed, arguing that the fax was an "unsolicited advertisement" because a 2006 FCC rule interpreted the term to include "facsimile messages that promote goods or services even at no cost."

Applying step one of a Chevron deference analysis, the district court found that the TCPA's definition of "unsolicited advertisement" was unambiguous, and therefore it was not required to defer to the FCC's interpretation. Concluding that the TCPA only prohibited faxes with a commercial aim, it granted PDR's motion to dismiss. The U.S. Court of Appeals for the Fourth Circuit reversed, ruling that the Hobbs Act precluded the district court from "even reaching the step-one question [of Chevron]" and required it to defer to the FCC rule.

The Supreme Court has granted certiorari to decide whether the Hobbs Act required the district court to accept the FCC's TCPA interpretation. The Hobbs Act provides a mechanism for judicial review of certain agency orders, including all FCC final orders under the TCPA. An aggrieved party can challenge such an order by filing a petition in the court of appeals for the judicial circuit where the petitioner resides or has its principal office or in the U.S. Court of Appeals for the District of Columbia Circuit. Under the Hobbs Act, such courts have "exclusive jurisdiction" to "enjoin, set aside, suspend (in whole or in part), or to determine the validity of" the orders to which the Act applies, including TCPA interpretations by the FCC.

In addition to the Hobbs Act question, PDR's certiorari petition presented the question of whether faxes must have a commercial nexus to a firm’s business to be prohibited by the TCPA. However, the Supreme Court only granted certiorari to decide the Hobbs Act question. Therefore, an affirmance would leave in place the Fourth Circuit's reading that the FCC's rule created a "per se rule" that a fax promoting free goods or services is an "advertisement." While such a result could contribute to the filing of additional TCPA litigation regarding unsolicited advertisements, it could also eliminate further TCPA litigation over the TCPA's ATDS definition should the FCC—which is revisiting the definition in light of the D.C. Circuit's ACA International decision—adopt a narrow reading.

If the Supreme Court were to reverse the Fourth Circuit, however, a future district court might consider itself free to apply a Chevron analysis to the FCC's narrow reading. In Marks v. Crunch San Diego, the U.S. Court of Appeals for the Ninth Circuit recently found that the ATDS definition is ambiguous and, based on an examination of the "context and structure of the [TCPA's] statutory scheme," concluded that Congress intended to regulate devices that make automatic calls, including automatic calls dialed from lists of recipients. A district court might follow Marks to conclude that although it must proceed to step two of a Chevron analysis because the ATDS definition is ambiguous, the FCC's narrow interpretation is not reasonable or permissible because it conflicts with the "context and structure of the [TCPA's] statutory scheme."

Copyright © by Ballard Spahr LLP

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Kaplinksy, partner, New York, finance
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Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

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Culhane, Ballard, Partner
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John L. Culhane, Jr., is known for his work advising on interstate direct and indirect consumer and residential mortgage loan and leasing programs, through both traditional brick-and-mortar facilities and e-commerce. Before joining Ballard Spahr, Mr. Culhane was associate counsel with Mellon Bank, N.A.; associate counsel with Bank of America NT&SA; and senior attorney (section chief) with the National Credit Union Administration, the federal agency regulating federal credit unions.

Mr. Culhane addresses issues involving licensing, advertising and marketing, application processing, privacy, disclosure, pricing, substantive terms, servicing, collection, portfolio sales, and securitization. His regulatory practice includes preparing clients for banking agency and CFPB compliance examinations and assisting in the defense of attorney general investigations and banking agency and CFPB enforcement actions. His clients have ranged from a multibillion-dollar bank holding company, to one of the nation's largest residential mortgage lenders, to a leading provider of financial institution forms and documentation. Mr. Culhane is a member of the firm's Fair Lending Task Force.

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Stefanie Jackman, Ballard Spahr law firm, Partner, financial services institutions lawyer
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Stefanie H. Jackman devotes her practice to assisting financial services institutions facing government investigations and enforcement actions, as well as defending them in individual and class action lawsuits. Ms. Jackman regularly handles matters arising under an array of federal and state consumer financial laws, including UDAP/UDAAP statutes, FDCPA, FCRA, TCPA, EFTA, SCRA, and TILA. Ms. Jackman represents clients across the financial services industry, including banks and nonbanks, mortgage banking lenders and servicers, debt collectors and buyers, third-party...

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Daniel McKenna, Ballard Spahr Law Firm, Philadelphia, Litigation Attorney
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Daniel JT McKenna devotes his practice to privacy and data security, consumer financial services, and mortgage banking litigation.

Mr. McKenna's privacy practice focuses on new product and process design, privacy impact assessments and audits, privacy management and policy, incident planning, incident response and notification, third-party and vendor management, privacy counseling, regulatory comments, and litigation. His clients include banks, loan service providers, health care providers, manufacturers, colleges and universities, and member...

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