Fourth Circuit Expands Liability by Striking Federal Debt Exemption—But Not Entire TCPA—on First Amendment Grounds

Just as political campaign season begins to heat up, the Fourth Circuit has delivered what must be an unsatisfying victory to a group of political consultants, pollsters, and organizations that had challenged the constitutionality of the TCPA on First Amendment grounds. Am. Ass’n of Political Consultants, Inc. v. FCC, No. 18-1588 (4th Cir. Apr. 24, 2019). Although the challenge had been brought by political groups, the Fourth Circuit’s decision has wide-ranging implications for organizations that collect federal debts. Indeed, the Fourth Circuit may have handed an unexpected gift to the plaintiffs’ bar.  

As we previously reported here, the plaintiffs argued that the TCPA is facially unconstitutional because, among other things, its federal debt-collection exemption is a content-based regulation of speech. The exemption in question was the result of a 2015 amendment to the TCPA, which created a carve-out to the TCPA’s restrictions for automated calls to cell phones if the calls were “solely to collect a debt owed to or guaranteed by the United States.” Bipartisan Budget Act of 2015, Pub. L. No. 114-74, § 301(a), 129 Stat. 584, 588 (2015) (amending 47 U.S.C. § 227(b)(1)(A)(iii)). As we noted here and here, the FCC promulgated regulations implementing that exemption in 2016, but because the Office of Management and Budget never approved the regulations, several courts have determined that they never became effective.

The Eastern District of North Carolina agreed with the plaintiffs that the exemption was a content-based regulation but rejected their argument that the exemption fails strict scrutiny review. As a result, it entered summary judgment in favor of the FCC and the Attorney General. See Am. Ass’n of Political Consultants, Inc. v. Sessions, 323 F. Supp. 3d 737 (E.D.N.C. 2018).

In vacating and remanding, the Fourth Circuit agreed with the plaintiffs that the federal debt-collection exemption is a content-based regulation that “depend[s] entirely on the communicative content of the [call],” and rejected the defendants’ argument that the exemption is principally based on the relations between the caller and the called party. But, unlike the district court, when the Fourth Circuit applied strict scrutiny review, it held that the exemption does not advance a compelling government interest in a narrowly tailored fashion. It found the exemption “fatally underinclusive” because it “subverts the privacy protections” underlying the TCPA’s ban on automated calls to cell phones and “deviates from the purpose of the automated call ban.”

Although the court held that the exemption is an “unconstitutional content-based restriction on speech,” it did not invalidate the entire statute as the plaintiffs had urged. Instead, it sided with the Government and severed the offending exemption, leaving the rest of the TCPA undisturbed.

Only one group will be pleased with this outcome: plaintiffs’ attorneys. The plaintiffs did not succeed in reining in the scope of the TCPA—they expanded it. And while the Government did succeed in preserving a statute—never mind that this particular statute has generated tens of thousands of lawsuits—it did so at the expense of an exemption that Congress had enacted for its own benefit. The government contractors (who may not have been aware of this possibility—there were no amici in the appeal) now have to grapple with the potential exposure created by the Fourth Circuit’s decision. Plaintiffs’ counsel, on the other hand, snatched victory from the jaws of defeat from the sidelines, and had a defense eliminated.

We expect this decision will not be the last word on the issue, and we’ll be keeping an eye on the Ninth Circuit to see how similar constitutional challenges posed in the Gallion appeal shake out. See Gallion v. Charter Communic’ns, Inc., No. 18-55667 (9th Cir.).


Marsha J. Indych

About the Author: Marsha J. Indych

Marsha Indych handles complex commercial litigation and arbitration matters in jurisdictions throughout the United States, focusing on consumer class actions and domestic and international business disputes. She represents clients from a broad array of industries, including the health care, financial services, media, technology and energy industries. Marsha defends leading businesses against consumer protection-based claims. She has successfully defended dozens of Telephone Consumer Protection Act (TCPA) actions, including class actions, individual actions, arbitrations and prelitigation disputes in jurisdictions across the country. Her practice includes helping clients navigate evolving — and sometimes conflicting — standards for TCPA compliance. She regularly contributes to the TCPA Blog, providing analysis about recent developments regarding the statute.

Justin O. Kay

About the Author: Justin O. Kay

Justin Kay advises and defends business clients regarding their interactions and communications with consumers. He appears regularly on behalf of clients before federal and state courts, federal agencies and independent self-regulatory bodies, such as the National Advertising Division of the Better Business Bureau. Justin’s practice focuses on defending clients in the growing number of complex class actions arising under federal and state consumer protection and privacy laws such as the federal Telephone Consumer Protection Act, the Illinois Biometric Information Privacy Act and the California Consumer Privacy Act. He is a deputy leader of the litigation practice group.

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