Parties Present Their Arguments Before The D.C. Circuit in The Consolidated Appeal

The U.S. Court of Appeals for the D.C. Circuit heard oral argument in the consolidated appeal of the FCC’s July 10, 2015 TCPA Declaratory Ruling and Order on Wednesday, October 19th. The panel was composed of Judges Sri Srinivasan, Cornelia T.L. Pillard and Harry T. Edwards. The argument was well attended and lasted nearly three hours – much longer than the forty minutes for which it had been scheduled. The panel’s questions primarily focused on the definition of an ATDS, the identity of the “called party” from whom consent must be obtained, the impracticality of the FCC’s one-call safe harbor, and the methods by which consumers may revoke consent. A small portion of the argument was devoted to healthcare-related messages.

Scope and Definition of an ATDS

In relevant part, the TCPA prohibits calls made “using any automatic telephone dialing system or an artificial or prerecorded voice” without the “prior express consent of the called party.” 47 U.S.C. § 227(b)(1)(A). The TCPA defines an ATDS as “equipment which has the capacity — (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers. 47 U.S.C. § 227(a)(1) (emphasis added). The majority of the argument focused on the interpretation of “capacity” and the functionalities of an ATDS. Before and after the Order, two recurring points of disagreement have been: (1) whether “capacity” refers to present or potential capacity, i.e., whether it refers to what equipment can do today, or what some modified version of that equipment could conceivably do tomorrow; and (2) whether “using a random or sequential number generator” should be read to limit the definition in any meaningful way. The Order concluded that “the capacity of an autodialer is not limited to its current configuration but also includes its potential functionalities.”

With respect to “capacity,” the panel questioned both sides as to where the line should be drawn to determine whether a piece of equipment has the capacity to function as an ATDS. The petitioners argued that if the line was not drawn at a piece of equipment’s present ability, virtually every smartphone or computerized device would satisfy the capacity portion of the definition, since these devices could simply download an application with autodialing capabilities. The FCC argued that focusing on how a piece of equipment was used as opposed to whether the equipment had the capacity to function as an autodialer would create evidentiary problems for consumers attempting to state a claim for a TCPA violation. When pressed on the question of whether smartphones fall under the FCC’s definition of an ATDS, the FCC tried to deflect the question by stating that the Order does not address smartphones and that the issue has yet to be squarely presented to the FCC. Judges Srinivasan and Pillard both disagreed with the FCC on this point with Judge Srinivasan stating that much of the language used in the Order “seems like it could apply four-square with smartphones.”

Judge Edwards questioned whether the FCC had authority to interpret the statute. The petitioners responded that the FCC’s interpretations must be consistent with the statutory language provided by Congress, which in this case requires that an ATDS produce numbers using a “random or sequential number generator.” To that end, the petitioners argued that a piece of equipment that receives a list or database of numbers and then determines a sequence for calling those numbers does not fall within the purview of an ATDS since it does not generate random or sequential numbers. The FCC challenged this argument stating that there was no sensible reason why Congress would have wanted the TCPA to encompass random sequential numbers, but not calls to any other group of numbers. However, Judge Srinivasan noting that the statute itself speaks in terms of random and sequential numbers, stated that “you have to treat with the words that are in the statute,” and seemed skeptical that a piece of equipment that obtains a list of only two numbers and makes calls from that list could qualify as an ATDS.

Interpretation of a “Called Party” and the Safe Harbor Provision

The TCPA protects otherwise-prohibited calls provided that they are made with the prior express consent of the “called party.” The Order interprets the term “called party” to be the “current subscriber” or “the non-subscriber customary user of the phone,” which might be fine if not for the fact that nearly 37 million phone numbers are reassigned each year. Therefore, a company could place a call intending to reach a consumer who has consented to receive such a call only to reach an entirely different recipient because the number at issue had been reassigned.  This issue is exacerbated by the fact that there is currently no reliable method or service to track all reassigned numbers. The Order acknowledges this fact and purports to offer a solution by way of a one-call safe harbor, explaining “that callers who make calls without knowledge of reassignment and with a reasonable basis to believe they have valid consent to make the call should be able to initiate one call after reassignment as an additional opportunity to gain actual or constructive knowledge of the reassignment and cease future calls to the new subscriber.  If this one additional call does not yield actual knowledge of reassignment, we deem the caller to have constructive knowledge of such.”

The petitioners argued that the Order has made it impossible for callers to comply with the TCPA through obtaining consent, because the Order’s interpretation of “called party” as the actual recipient of the call has made consent unreliable.  As a result, with the influx of reassigned numbers and the insufficiency of a single call to notify a caller that a number has been reassigned, callers have ceased the very type of calls that Congress meant to protect when enacting the TCPA. Judge Edwards asked whether the real issue is how much time a caller would need to determine whether a number had been reassigned, and the whole panel questioned how a single call could provide constructive knowledge of reassignment when a text goes unanswered or a call results in a voicemail. The FCC noted that the safe harbor provision is a “deeming rule” where callers are deemed to have constructive knowledge after one call. Judge Edwards noted that the FCC has already conceded that many calls may have to be made before a caller has actual knowledge of a reassignment, which makes the issue whether it was permissible for the FCC to place the burden of risk on callers.

Judge Srinivasan observed the tension between protecting good faith callers from unavoidable liability and protecting consumers with reassigned numbers from unwanted calls. The FCC argued that most consumers do not sue, several reliable commercial services are available to track reassignments, and the Order discusses seven best practices that callers can follow to determine most numbers that have been reassigned. Judge Edwards remarked that when dealing with large businesses, the best practices outlined in the Order are not straightforward with some even sounding “silly.” The FCC acknowledged that there are trade-offs involved, but when striking a balance and working with a consumer protection statute, the burden of risk should not fall on the innocent consumer.  Judge Srinivasan countered that there is a social cost in allocating risk on callers as some consumers wish to receive calls, and if the Order stops callers from making those calls, then an affirmative good that the TCPA is trying to achieve will not be realized. When asked what the FCC could do to address its concern of recipients with reassigned numbers receiving unwanted calls, the petitioners referred the panel back to its original argument that a called party should be interpreted as the intended recipient of the call or alternatively, the FCC’s treatment of reassigned numbers should be struck entirely and remanded.

Reasonable Methods of Revocation

As for revocation of consent, the petitioners had asked the FCC to clarify whether consumers could revoke consent and alternatively, whether a caller could designate the methods to be used by a consumer in revoking previously provided consent. The FCC determined that the silence in the statute on the issue is most reasonably interpreted in favor of allowing consumers to revoke their consent “in any manner that clearly expresses a desire not to receive further messages, and that callers may not infringe on that ability by designating an exclusive means to revoke.” Stating that consumers can revoke consent by “using any reasonable method,” the FCC determined that allowing callers to specify exclusive means for registering revocation requests would “place a significant burden on the called party.” Elsewhere in the Order, however, the FCC specified an exclusive method for consumers to revoke consent for text messages involving banking and healthcare.

The petitioners argued that mandating specific methods of revocation for banking and healthcare text messages, while offering no explanation as to why other calls were not subject to the same methods of revocation, was the very definition of arbitrary agency action. The petitioners argued that this places callers in an untenable position where they will either have to cease all communications or train every employee on recognizing and documenting revocations, which is still not a foolproof method. Judge Pillard questioned whether the petitioners were ignoring the word “reasonable” in the Order’s allowance for consumers to revoke consent “in any reasonable manner.” The petitioners countered that this is not a viable solution because, while some companies have already established easy and clear methods of revocation, some still attempt to revoke consent in individualized manners creating the potential for TCPA violations.

For its part, the FCC argued that it allowed specific revocation procedures for certain areas, i.e. banking and healthcare, because it determined that these communications were so important that they warranted the creation of a specified means of revocation. The FCC conceded that a consumer revoking consent by notifying the “pizza delivery guy” would not fall under the spectrum of reasonableness, but highlighted that the Order provides several examples of what it deemed to be reasonable methods. Both Judges Srinivasan and Edwards seemed skeptical of the practicality of allowing different methods of revocation for businesses.  When questioned whether parties could enter into agreements as to how consent may be revoked, the FCC stated that agreements that are freely negotiated, as opposed to a “take or leave it” basis, are not addressed by the Order. Judge Pillard commented that almost all consumer contracts would fall into the latter “take it or leave it” category, and was skeptical of the FCC’s illustration of mortgage loan agreements falling into the former freely negotiated category. The FCC countered that its overarching view is that a caller who has received a consumer’s repeated requests to revoke consent should not be able to ignore that request simply because the consumer is unaware of the specific method of revocation outlined by the caller.


While it can be difficult to infer from questioning how any appellate panel will ultimately rule, it was obvious that the panel was well prepared and well aware of the potential implications of their ruling for both consumers and callers. We will continue to monitor the pending appeal and report on any significant developments.


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).

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