Joint Petitioners File Initial Brief in Consolidated Appeal of FCC’s TCPA Order

On November 25th, joint petitioners ACA International, Sirius XM, PACE,, ExactTarget, Consumer Bankers Association, U.S. Chamber of Commerce, Vibes Media, and Portfolio Recovery Associates (“Petitioners”), filed their opening brief in the consolidated appeal of the FCC’s July 10, 2015 Declaratory Ruling and Order (the “Order”) in the United States Court of Appeals for the District of Columbia Circuit.  See ACA Int’l, et al. v. FCC, No. 15-1211 (D.C. Cir. Nov. 25, 2015).  Rite Aid filed a separate opening brief that we will address in a subsequent post

After providing a detailed overview of the TCPA and the FCC’s prior rulings, the Petitioners argue that FCC’s recent Order “rewrote the TCPA,” “jeopardizes desirable communications that Congress never intended to ban,” and “encourage[s] massive TCPA class actions seeking crippling statutory damages.”  Brief at 2, 3.  They challenge three aspects of the Order in particular:  (1) its interpretation of the statutory definition of an ATDS; (2) its rulings regarding reassigned numbers; and (3) its pronouncements regarding the revocation of consent.

The Statutory Definition of an ATDS

The Petitioners argue that the majority’s statements regarding the statutory definition of an ATDS “misinterpret the TCPA, violate the Constitution, provide no guidance to regulated parties, and contradict themselves.”  Id. at 21.  They contend that the majority’s interpretation is flawed because “[e]very relevant principle of statutory interpretation confirms that ‘capacity’ refers to what equipment can do as is, not what it might be able to do if changed.”  Id. at 22.  Quoting Commissioner O’Rielly’s dissent, they argue that the majority’s focus on potential rather than present capacity results in a definition that “‘is so expansive that the [majority] ha[d] to use a rotary phone as an example of a technology that would not be covered.’”  Id. at 24 (emphasis in original); see id. at 2 (“Contrary to the First Amendment and common sense, the Order threatens to turn even an ordinary smartphone into an ATDS.”).  They also argue that a “potential functionalities” test infringes upon callers’ First Amendment rights by “[t]hreatening crushing liability for millions of everyday calls simply because they came from devices that could be modified so that they might be able to generate random or sequential numbers….”  Id. at 28.

The Petitioners also argue that the majority’s interpretation is unlawful because it contradicts the plain language of Section 227(a)(1), which only covers equipment that can:  (1) generate random or sequential numbers, (2) store or produce those numbers, (3) dial those numbers, and (4) do all these actions automatically, that is, without human intervention.  Id. at 31-32.  They contend that the majority misconstrues the statute by focusing on some of those prerequisites and ignoring others.  Id. at 32-33.  For instance, the Order states that the “equipment need only be able ‘to store or produce telephone numbers,’ not just random or sequential ones.”  Id. at 32 (quoting Order ¶ 12).  Elsewhere, the Order states that the equipment must either have the “‘capacity to store or produce numbers and dial those numbers at random, in sequential order, or from a database of numbers.’”  Id. at 33 (quoting Order ¶ 16).  And in the next paragraph the Order “states that ‘the basic function’ of an ATDS is ‘to dial numbers without human intervention,’ without clarifying whether those numbers must be random or sequential.”  Id. at 33 (quoting Order ¶ 17).

Reassigned Numbers

After stressing that the TCPA “protects otherwise-prohibited calls if they are … made ‘with the prior express consent of the called party,’” the Petitioners argue that the majority “misinterpreted this critical defense and violated the First Amendment by interpreting ‘called party’ to mean the called phone number’s ‘current subscriber or customary user,’ rather than the call’s expected recipient.”  Id. at 39.  Under the majority’s interpretation, a caller could face liability if it “tries to reach a consenting customer but inadvertently reaches someone else to whom the customer’s number has been reassigned.”  Id.  The Petitioners explain that the majority’s approach is unrealistic because “[t]here is no reliable way to ascertain whether a given cell phone number has been reassigned,” because “no available database tracks all reassignments,” and because the liability for untracked reassignments could “prove catastrophic.”  Id. at 42-43.  The result is an interpretation that is not only unworkable but also unlawful, as “the threat of unpredictable and unavoidable TCPA liability will deter calls even to people who expressly consented to be contacted.”  Id. at 39; see id. at 2 (“It makes an empty promise of Congress’s assurance that callers may lawfully contact willing recipients, and it chills constitutionally protected expression.”).

The Petitioners further argue that the majority’s one-call safe harbor fails to “mitigate the impossible demands imposed by its interpretation” because it would “arbitrarily impose liability for later calls regardless whether the first call provides any reason to believe that the number has been reassigned or that the caller has reached the wrong person.”  Id. at 51 (emphasis in original).  They argue that the “constructive knowledge” imposed by that safe harbor provision “leaves callers in an impossible situation” because a single call will not always result in actual knowledge that a number has been reassigned, and there is no way for callers to identify a number’s “customary user.”  Id. at 52; see id. at 53 (“Imputing constructive knowledge – even though the Commission acknowledged that no amount of ‘reasonable care or diligence’ can ensure that the caller is aware of a reassignment – makes the Order all the more arbitrary.”).  As a result, the majority’s safe harbor provision “simply takes $500 off the potentially enormous bill that will result from the arbitrary and capricious liability the Order otherwise imposes.”  Id.

Revocation of Consent

The Petitioners mount two challenges to the majority’s approach to the revocation of consent.  First, they argue that the majority failed to “establish any standardized and workable method of revoking consent, instead allowing individuals to use whichever methods they prefer, so long as the Commission or a jury later concludes it was ‘reasonable’ under ‘the totality of the facts and circumstances.”  Id. at 54-55.  They contend that this “every-individual-is-a-law-unto-himself” approach is arbitrary and capricious.  Id. at 55; see id. at 3 (“This degree of customization of revocation methods makes it all but impossible for callers to track and process revocations, leaving everyone (including consumers) worse off.”).  They state that a regulation is arbitrary and capricious if “‘compliance’ with it ‘would be unworkable,’” and suggest that the FCC “could have prescribed uniform revocation procedures, or allowed parties to agree to reasonable standard processes of revocation.”  Id. at 55-56.  They note that the FCC has adopted such an approach in the past, for example with regard to the dissemination of “certain types of financial or healthcare information,” and they question why the majority did not do likewise with regard to revocation procedures.  Id. at 58-59 (noting that the exclusive means to revoke consent to automated text messages about certain types of financial or healthcare information is by “replying STOP”).  Under the majority’s approach, callers would be faced with the impossible task of “forecasting every possible scenario under which a means revoking consent could be deemed ‘reasonable’’ under the ‘totality of the circumstances,’ putting procedures in place to handle each scenario, and training personnel on all of these procedures.”  Id. at 57.

Second, the Petitioners argue that the Order “contradicts the common-law backdrop against which the TCPA was enacted” because at common law parties have the freedom to contractually waive their rights or agree on acceptable methods for providing notice.  Id. at 61.  They argue that “‘the TCPA’s silence regarding the means of providing or revoking consent” means that Congress incorporated the common law freedom of contract into the TCPA.  Id. at 61-62.  They also note that the Order is internally inconsistent because elsewhere it acknowledges the “common-law right to bargain about TCPA-related details.”  Id. at 62 (noting that the majority suggested that callers may contractually require consumers to not only update their contact information but also indemnify callers who reach the holders of recycled numbers).  Indeed, although the Order purports to “rely on the common law in concluding that consent is revocable in the first place,” it ignores the common law entirely when it comes to whether consumers may regulate or “waive that right by contract.”  Id. at 62-63.

Next Steps in the Consolidated Appeal

The Petitioners ask the D.C. Circuit Court of Appeals to grant their petitions and vacate the challenged provisions of the Order.  The FCC’s brief is due on or before January 15, 2016, the Petitioner’s reply brief is due on or before February 16, 2016, and final briefs are due on or before February 24, 2016.  The court has yet to set a date for oral argument.

John S. Yi

About the Author: John S. Yi

John Yi represents clients in civil and criminal litigations in federal court, as well as investigations and enforcement actions by the Federal Trade Commission (FTC), the U.S. Department of Justice (DOJ), the Securities and Exchange Commission (SEC), and other federal and state regulatory bodies. For clients in health care and other sectors, he handles a full array of antitrust issues. John has helped secure merger clearances from federal regulators and defended clients’ interests in suits alleging a variety of anticompetitive conduct. He has assisted companies with internal investigations and compliance strategies. John also has experience handling all aspects of civil litigation, including discovery, settlement, dispositive motions, trial advocacy and appellate work. John also defends a number of class action cases with a wide variety of claims, including issues arising under federal and state antitrust laws, the Telephone Consumer Protection Act (TCPA) and the Fair Credit Reporting Act (FCRA).

Michael P. Daly

About the Author: Michael P. Daly

Mike Daly has spent two decades defending, counseling and championing clients that interact with consumers. His practice focuses on defending class actions, handling critical motions and appeals, and maximizing the defensibility of marketing and enforceability of contracts. Clients large and small have trusted him to protect their businesses, budgets and brands in complex cases across the country.

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