As Courts Grapple With The Severability of The Federal Debt-Collection Exemption, SCOTUS Is Asked to Resolve The Issue

The 2016 amendments to the TCPA—which created an exemption for calls that are made “solely to collect a debt owed to or guaranteed by the United States”—have inadvertently reshaped the way that TCPA claims are litigated. While early decisions in Indiana, Alabama, and Florida rejected claims under the FCC’s proposed implementing rules because they never became effective, more recent decisions have focused on whether the exemption, and by extension the entire statute, violates the First Amendment.  The first of those was the Fourth Circuit’s decision in American Association of Political Consultants v. FCC, which was soon followed by the Ninth Circuit and the Southern District of Florida.

The most recent example comes from the District of Delaware, which likewise found that the federal debt-collection exemption is a content-based restriction that is not narrowly tailored to serve a compelling government interest. Specifically, it found that “the TCPA is fatally underinclusive” because automated or prerecorded calls can be intrusive “regardless of the content or the initiator of the message,” and because “[t]here is no serious doubt that the debt-collection exemption would allow a substantial number of those intrusive calls.”  Perrong v. Liberty Power Corp., LLC, No. 18-0712, at 11 (D. Del. Sept. 30, 2019) (citations omitted).

Interestingly, the plaintiff’s claim in Perrong did not arise from attempts to “collect a debt owed to or guaranteed by the United States.” Rather, the debt-collection exemption became relevant because the defendant argued that the entire TCPA must be stricken—and by extension that the claim under the statute must be dismissed—because it unduly regulates the content of protected speech.  In doing so, the defendant pointed to the federal debt-collection exemption to demonstrate that the TCPA turns “entirely upon the content of the message conveyed by the speaker of the telephone call.”

The United States intervened in order to defend the TCPA’s constitutionality, arguing that the defendant lacked standing to challenge the exemption, that the TCPA satisfies both strict and intermediate scrutiny, that the exemption is narrowly tailored to serve the compelling interest of collecting debts that are owed to or backed by the government, and that the exemption is “indisputably severable” from the rest of the statute.

The District of Delaware agreed with the latter proposition and followed the trend of not only invalidating the debt-collection exemption but also severing it from the statute.  The remainder of the TCPA should remain “fully operative as law,” it reasoned, because “there is no evidence that Congress would not have enacted the TCPA without the exception for government debt.”

But there is good reason to question the wisdom of simply severing the debt-collection exemption from the rest of the statute, which remains riddled with other content-based regulations that have a chilling effect on protected speech. For example, as we discussed previously, the TCPA and implementing rules combine to create a number of exemptions and restrictions that are based on the identity of the caller and/or the content of the call. As the Supreme Court concluded in Reed v. Town of Gilbert, 135 S. Ct. 2218 (2015), “the government’s benign motive, content-neutral justification, or lack of ‘animus toward the ideas contained’ in the regulated speech” do not in itself neutralize a law that is so inseparable with content-based criteria. Simply severing the debt-collection exemption from the TCPA would, as the defendant argued in Perrong, also end up “restricting more than less speech.” Indeed, just yesterday a petition for certiorari—which we will examine at length in a separate post—asked the Supreme Court to take up this very issue.

Qiusi Y. Newcom

About the Author: Qiusi Y. Newcom

Qiusi Newcom brings efficiency and reliability in navigating clients through regulatory issues in telecommunications, export controls, economic sanctions and global privacy laws. Her experience in these areas uniquely positions her to help companies bridge compliance gaps in light of emerging legal developments such as multi-agency actions to protect U.S. communications supply-chain security and foreign direct-investment considerations involving critical telecommunication infrastructures or sensitive personal data. Having lived in and obtained law degrees in both China and the U.S., Qiusi’s understanding of cultural factors and local customs adds immense value to her counsel for business activities across borders.

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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