FCC Reconsiders Government Contractors’ Classification as TCPA Non-“Persons”

The FCC in 2016 determined that the federal government was not a “person” subject to the TCPA, and that by extension, federal contractors working within the scope of their delegated authority were also not bound by TCPA restrictions.  This Broadnet Declaratory Ruling was the subject of at least one prominent dissent.  At the time, then-Commissioner Ajit Pai observed:  “[I]t is odd to suggest that a contractor’s status as a ‘person’ could switch on or off depending on one’s behavior or relationship with the federal government.”  The National Consumer Law Center and Professional Services Council both filed petitions for reconsideration and this issue was again joined on December 14, 2020, when the FCC issued a Reconsideration Order stating that government contractors – but not federal or state governments themselves – “must obtain prior express consent to call consumers” when making calls on behalf of the government.

The Reconsideration Order marks the anticipated reversal of the FCC’s Broadnet Declaratory Ruling, which allowed federal government contractors to place calls without consumers’ prior express consent in connection with their work on behalf of the government by finding that federal government and agents acting on its behalf did not fall within the scope of “persons” regulated by the TCPA.  That interpretation hinged on the derivative sovereign immunity analysis in a Supreme Court case regarding automated text messages (Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016)) and, under the common-law agency theory, shielded federal contractors placing calls on behalf of the government from TCPA liability in certain circumstances where a valid principal-agent relationship existed.  Since then, dozens of stakeholders with varying and often competing interests lodged or supported challenges to the Broadnet Declaratory ruling as having made material errors in its reasoning.  The Broadnet Declaratory Ruling deliberately left open the status of state and local governments and their contractors, leaving significant questions about the scope of the TCPA’s applicability to government contractors.

To answer these questions, the Reconsideration Order first determined that the Supreme Court’s Campbell-Ewald case is not particularly relevant to solving the question of whether government contractors are considered “persons” under the TCPA because derivative sovereign immunity is a common-law defense that cannot serve as an appropriate basis to categorically exclude government contractors from the TCPA.  Notably, in connection with this determination, the FCC specifically clarified that the Reconsideration Order does “not alter or impair the ability of contractors to invoke derivative immunity from liability when making calls on behalf of the federal government” before federal courts.  It would be left to the federal courts in individual cases to decide “whether the contractor [actually] satisfies the applicable test” for immunity.

The FCC next determined that the Broadnet Declaratory Ruling “incorrectly applied” an agency precedent – the DISH Declaratory Ruling – because it “did not involve the federal government nor the definition of ‘person’ but instead pertained to a non-governmental ‘person’ subject to the TCPA and whether it is vicariously liable for the actions of its non-governmental agents.”  In fact, the FCC suggested that such an overly broad application of the DISH Declaratory Ruling to the federal government’s relationship with its contractors might altogether invalidate the congressional intent underlying the TCPA, because “[e]very federal contractor . . . falls within one of the[] categories” of “person” defined in the Communications Act, which “expressly includes an individual, partnership, association, joint-stock company, trust, or corporation.”

For these reasons, the FCC explained that federal contractors fall within the express definition of “person” in the Communications Act.  This reversal of the Broadnet Declaratory Ruling appears to take an odd position that the same calls – based solely on whether they are dialed by the federal governments themselves or are dialed by their contractors – would be treated differently for TCPA purposes.  The Reconsideration Order also spared no effort in examining how this reversal would affect the way federal government entities rely on their contractors to achieve important objectives.  

Instead, the Reconsideration Order generally rejected arguments raised by the commenters, including government entities such as the Commerce Department, that reversing the prior determination would impair the ability of federal contractors to place calls “to promote civic engagement and inform citizens.”  The FCC explained that Congress “already weighed the balance between the privacy rights … and the ease and cost of robocalls” and could have chosen to exempt federal government contractors but thus far has not done so.  Despite some objections, the FCC stated a belief that the Reconsideration Order would not frustrate federal contractors’ ability to make autodialed or prerecorded calls because they can rely on several alternative avenues to lawfully make their calls without prior express consent:  (1) the TCPA emergency purpose exemption already applies to the “most important type of calls that government can make to its citizens”; (2) federal contractors may seek to invoke derivative sovereign immunity in courts; and (3) contractors might avoid TCPA liability if they did not make or initiate calls covered under the TCPA.

As to this third avenue, the Reconsideration Order explains there are two ways that contractors may be considered the “maker of the call”:  (1) “by tak[ing] the steps necessary to physically place a telephone call”; and (2) “being ‘so involved in the placing of a specific telephone call as to be directly liable for making it.’” The FCC commits to considering the “totality of the facts and circumstances surrounding the placing of a particular call” on a case-by-case basis when determining potential TCPA liability.

Relying upon similar reasoning, the Reconsideration Order clarified that, while state governments making calls “in the conduct of official business” (which does not include calls related to campaigns for re-election) are not “persons” under the TCPA, state contractors are “persons” and therefore are subject to TCPA restrictions.  Interestingly, Democratic Commissioners Rosenworcel and Starks both dissented to this government versus contractor distinction, preferring that state governments also be classified as “persons” under the TCPA.  Commissioner Rosenworcel criticized the Reconsideration Order as essentially “determine[ing] that state authorities are beyond the reach of” the TCPA whereas Commissioner Starks pointed out that “nothing in the language of the TCPA or its legislative history” compels a conclusion that state authorities are not subject to TCPA restrictions.

Finally, the Reconsideration Order concluded that local governments are not “sovereign entities” under other bodies of laws and thus are not excluded from the TCPA definition of “person.”  Therefore, their contractors naturally fall within the TCPA’s meaning of “person” and must obtain prior express consent before making certain autodialed or prerecorded calls to consumers.  But these types of calls may be permitted, as reminded by the Reconsideration Order, under the emergency purpose exemption for certain categories of callers making certain calls “directly related to the imminent health or safety risks arising out of the COVID-19 pandemic.”

Government contractors at all levels should carefully review the Reconsideration Order to understand how it affects their relationships with their contracting governmental entities and current contract performance obligations.  Faegre Drinker’s TCPA and Government Contracts teams will continue to monitor changes to the scope of TCPA liability and any further developments as a result of potential new FCC nominations by the incoming Biden Administration.

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.

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