October 20, 2021

Volume XI, Number 293


October 19, 2021

Subscribe to Latest Legal News and Analysis

October 18, 2021

Subscribe to Latest Legal News and Analysis

SCOTUS Punts on Whether FCC's TCPA Interpretations Bind District Courts

In November 2018, the U.S. Supreme Court had granted certiorari in PDR Network, LLC v. Carlton & Harris Chiropractic, Inc., to decide whether the Hobbs Act required the district court to accept the Federal Communications Commission's (FCC) interpretation of the Telephone Communication Protection Act's (TCPA) prohibition on unsolicited fax advertisements.

Although it vacated the decision of the U.S. Court of Appeals for the Fourth Circuit that held the district court was bound by the FCC's interpretation, the Supreme Court did not answer the question presented and remanded the case for the Fourth Circuit to consider two "preliminary issues" upon whose resolution "the answer [to such question] may depend." The opinion of the Court was written by Justice Breyer, with all of the Justices concurring in the judgment. The question left unanswered by the Supreme Court could take on increased significance should the FCC, in its anticipated ruling, adopt a broad reading of what constitutes an automatic telephone dialing system (ATDS) under the TCPA.

The Hobbs Act provides a mechanism for judicial review of certain "final orders" of the FCC, including FCC final TCPA orders. An aggrieved party has 60 days to 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.

The petitioner in PDR Network 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 Order 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 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 vacated the Fourth Circuit judgment and remanded the case for analysis of two "preliminary issues" that, depending on their resolution, could make it unnecessary to reach the question the Court granted certiorari to resolve. The first issue is whether the FCC's 2006 Order is an "interpretive rule" rather than a "legislative rule." If an interpretive rule, the Order may not be binding on a district court under the Hobbs Act, and PDR could challenge the FCC's interpretation in the district court. The second issue is whether PDR had a prior and adequate opportunity in 2006 to seek review of the Order in a court of appeals pursuant to the Hobb's Act exclusive-jurisdiction provision. If it did not, then PDR could challenge the Order even if it is deemed a "legislative rule."

In a separate opinion concurring in the judgment joined by Justices Thomas, Alito, and Gorsuch, Justice Kavanaugh wrote that he would decide the question presented and "conclude that the Hobbs Act does not bar a defendant in an enforcement action from arguing that the agency's interpretation of a statute is wrong." Justice Kavanaugh asserted that while the Hobbs Act provides for "facial, pre-enforcement challenges," it does not preclude judicial review of an agency's statutory interpretation in an enforcement action, such as the lawsuit filed against PDR.

By leaving open the possibility that a defendant in other unsolicited advertisement cases could successfully challenge the FCC's 2006 Order, it is uncertain whether the Supreme Court's decision will deter the filing of new TCPA litigation regarding unsolicited advertisements. The FCC currently is revisiting the TCPA's ATDS definition in light of the D.C. Circuit's decision in ACA International v. FCC. Should the FCC follow the Ninth Circuit in adopting a broad reading of the ATDS definition, the Supreme Court's decision would create uncertainty about the extent to which a defendant in a TCPA lawsuit based on such broad reading would be precluded by the Hobbs Act from challenging the FCC's interpretation under Chevron.

Copyright © by Ballard Spahr LLPNational Law Review, Volume IX, Number 175

About this Author

Kaplinksy, partner, New York, finance

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.

Daniel McKenna, Ballard Spahr Law Firm, Philadelphia, Litigation Attorney

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...

Stefanie Jackman, Ballard Spahr law firm, Partner, financial services institutions lawyer

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...

Culhane, Ballard, Partner

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,...

Joel Tasca financial institutions lawyer,  consumer class action attorney Ballard Spahr

Joel E. Tasca has defended banks and other financial institutions in consumer class and individual actions for over twenty years. These cases have arisen out of residential mortgage loans, credit card accounts, and an array of other consumer financial services.  Many of these suits have been brought under federal consumer protection laws such as the Fair Credit Reporting Act, the Telephone Consumer Protection Act, the Truth in Lending Act, and the Real Estate Settlement Procedures Act, as well as under state unfair, deceptive, or abusive acts and practices statutes....