In Golan v. FreeEats.com d/b/a ccAdvertising et al., the Eighth Circuit recently affirmed a trial court’s decision to reduce a TCPA judgment by approximately 98% on the grounds that an aggregate award of approximately $1.6 billion was unreasonable and disproportionate to the offense, and therefore unconstitutional. In so holding, the Eighth Circuit deviated from long-standing case law rejecting constitutional challenges to the amount of statutory damages allowed under the TCPA. If the Eighth Circuit’s analysis is adopted more widely, it could bring a needed measure of rationality to awards under the TCPA.Read More
Last week, in PDR Network, LLC v. Carlton & Harris Chiropractic, Inc., Case No. 17-1705 (2019), the Supreme Court declined to decide the level of deference that courts must afford the Federal Communications Commission (the “FCC”), finding that the answer may depend on resolution of two preliminary issues that had not been decided by the lower courts. The matter has been remanded to the Court of Appeals for the Fourth Circuit. In declining to reach the issues presented, the Supreme Court leaves open the crucial question of whether courts are bound by the FCC’s interpretation of the Telephone Consumer Protection Act (“TCPA”).Read More
Sen. John Thune (R-SD), member of the Senate Commerce Committee and chairman of the Subcommittee on Communications, Technology, Innovation, and the Internet, and Sen. Ed Markey (D-MA), also a member of the Commerce Committee and author of the Telephone Consumer Protection Act (“TCPA”), recently reintroduced the Telephone Robocall Abuse Criminal Enforcement and Deterrence (“TRACED”) Act, S. 151. The TRACED Act is identical to the version as originally introduced in November 2018 (and previously discussed here). The bill seeks to prevent illegal robocall scams and other intentional violations of the TCPA.
Recently, the attorneys general from all fifty states and four territories wrote a letter expressing support for the TRACED Act to Senators Roger Wicker (R-MS) and Maria Cantwell (D-WA), the Chairman and Ranking Member, respectively, of the Senate Commerce Committee. In the letter, the attorneys general stated that “[w]e believe that this legislation effectively addresses many of the concerns raised by federal regulators, voice service providers, private businesses, consumer advocacy groups, and other interested parties to combat illegal robocalls and spoofing, and we are heartened that it enables the telecom industry, federal regulators, and our offices to take meaningful steps to abate the rapid proliferation of these illegal and unwanted robocalls.”
The TRACED Act would broaden the authority of the Federal Communications Commission (“FCC”) and the Federal Trade Commission (“FTC”) to take aggressive enforcement action against voice service providers on call authentication and other technology solutions. And among other things, the Act would direct the FCC to adopt certain rules that would require voice service providers to implement appropriate and effective call authentication technologies and also establish an interagency working group, consisting of various federal agencies, state attorneys general, and other non-federal entities, to identify and report to Congress on improving deterrence and criminal prosecution of robocall scams at the federal and state levels. The widespread support from the state attorneys general for the Act, along with prior support from the FCC and FTC Commissioners, industry associations, and leading consumer groups, may incentivize Congress to move forward on the Act.
Check this space for further updates on any notable developments regarding the TRACED Act.
The Federal Communications Commission (the “FCC”) has adopted new rules (set forth in its Second Report and Order) to establish a single, nationwide database with information provided by phone companies that will allow callers to determine whether a number has been permanently disconnected and is therefore eligible for reassignment. The FCC also voted to provide a safe harbor from liability for any calls to reassigned numbers caused by database error. The database will be administered by a private company to be determined through a competitive bidding process. The FCC also voted to provide a safe harbor from liability for any calls to reassigned numbers caused by database error. The database will be administered by a private company to be determined through a competitive bidding process.
The reassigned-number database will provide callers with more certainty in ensuring that their records correctly reflect the current subscriber to a particular number. Similar to the databases used to determine if phone numbers have been assigned to cellular subscribers, the new database should greatly ease compliance with the Telephone Consumer Protection Act.
A district court in Illinois recently dismissed a lawsuit against Yahoo!, Inc. (“Yahoo”) alleging violations of the Telephone Consumer Protection Act (“TCPA”), reversing its previous decision denying summary judgment. In Johnson v. Yahoo! Inc., Case No. 14-cv-2028 (N.D. Ill. Nov. 29, 2018), the court granted Yahoo’s motion for reconsideration based on recent interpretations of the definition of an automatic telephone dialing system (“ATDS”) under the TCPA, particularly the decision in ACA Int’l v. FCC, 885 F.3d 687, 695 (D.C. Cir. 2018) (previously discussed here). In its ruling, the district court rejected prior Federal Communication Commission (“FCC”) pronouncements and adopted a narrow interpretation of ATDS, holding that only a system that actually dials randomly or sequentially generated numbers can be an ATDS.
Rachel Johnson sued Yahoo in 2014, alleging that Yahoo’s “PC2SMS” texting service was an ATDS and it had used that service to text her in violation of the TCPA. Yahoo’s PC2SMS service caused a text message to be sent to Johnson by pulling her number from a database of stored numbers, an address book, and then automatically sending that number a text message. In an earlier order, the court denied Yahoo’s motion for summary judgment because of disputes over whether PC2SMS was an ATDS under the FCC‘s interpretation of the TCPA. See Johnson v. Yahoo!, Inc., No. 14 CV 2028, 2014 WL 7005102, at *6 (N.D. Ill. Dec. 11, 2014). Yahoo asked for reconsideration and for entry of summary judgment based on the holding in ACA Int’l.
In ACA Int’l, the court set aside the FCC’s explanation of what devices qualify as an ATDS. See ACA Int’l, 885 F.3d at 695. The United States Court of Appeals for the District of Columbia Circuit found that including a device that “can call from a database of telephone numbers generated elsewhere” within the scope of the definition of an ATDS would be incompatible with a definition of ATDS requiring the device to generate random or sequential numbers to be dialed. Id. at 701–03. The FCC’s lack of clarity about the qualifying functions of an ATDS, in addition to its unreasonably expansive understanding of “capacity,” led the court to “set aside the Commission’s treatment of those matters.” Id. at 703.
The district court in Johnson v. Yahoo! explained that it had previously denied summary judgment to Yahoo because it was bound by the FCC’s definition of an ATDS. However, because ACA Int’l changed the premise upon which the earlier ruling was based, the court concluded that reconsideration was appropriate.
Under the TCPA, the term ATDS is defined as equipment which has the capacity “to store or produce telephone numbers, using a random or sequential number generator” and “to dial such numbers”. 47 U.S.C. § 227(a)(1). Yahoo’s PC2SMS system did not have the capacity to generate random or sequential numbers to be dialed — it dialed numbers from a stored list. In its order granting reconsideration, the court explained that a device that stores or produces numbers without the use of a random or sequential number generator is not an ATDS. Accordingly, Yahoo was entitled to judgment as a matter of law.
This decision is noteworthy in that it specifically holds that as a result of ACA Int’l, courts are not bound by prior FCC orders from 2003, 2008, and 2012 interpreting what sort of devices qualify as ATDS; a conclusion that has been reached by other courts in recent decisions, including Marks v. Crunch San Diego, LLC, 904 F.3d 1041 (9th Cir. 2018) (previously discussed here).
Furthermore, the Johnson v. Yahoo! court noted, even if the FCC orders concerning the scope of the term ATDS were not vacated by ACA Int’l, district courts nevertheless may not be bound by FCC’s orders, depending on the outcome in PDR Network, LLC v. Carlton & Harris Chiropractic, Inc., No. 17-1705, 2018 WL 3127423, at *1 (U.S. Nov. 13, 2018) (previously discussed here), in which the U.S. Supreme Court granted certiorari on whether the Hobbs Act requires the district court to accept the FCC’s legal interpretation of the TCPA. The Supreme Court decision, which is anticipated next year, is expected to resolve this question and clarify the weight of the FCC’s orders for future TCPA cases.
Sen. John Thune (R-SD), chairman of the Senate Commerce Committee, and Sen. Ed Markey (D-MA), a member of the Committee and author of the Telephone Consumer Protection Act (TCPA), recently introduced S. 3655, the Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (the TRACED Act), to prevent illegal robocall scams. In brief, the bill would extend the statute of limitations for the Federal Communications Commission (FCC) to pursue robocall scammers and others who intentionally violate the law, impose additional penalties on such violators, require call authentication and blocking technologies, and establish an interagency working group to explore further ways to prosecute robocallers who intentionally violate the law.
The genesis of the bill rests with the Commerce Committee’s April 2018 hearing (previously discussed here) on abusive robocalls and caller ID spoofing, and how to combat them. During the hearing, Committee members and witnesses highlighted the fact that robocalls and ID spoofing have “exploded in recent years” and that “about a quarter of these calls are scam calls.” Senators agreed that consumer education, aggressive FCC and Federal Trade Commission enforcement actions, and the use of new ID verification and robocall-blocking technologies are important tools in combating these calls, and identified gaps and shortcomings in these tools. For example, as Chairman Thune said in introducing the TRACED Act, the current “enforcement regime is totally inadequate for scam artists, and we need to do more to separate enforcement of carelessness and other mistakes from more sinister actors.”
To address these gaps and shortcomings, the TRACED Act would:
- broaden FCC authority to impose civil penalties of up to $10,000 per call on those who intentionally violate the law and to impose criminal fines on such persons;
- extend the statute of limitations from one year to three years for the FCC to pursue civil actions against those who intentionally violate the law;
- eliminate the requirement that the FCC issue a citation against such violators before pursuing civil actions, although it would require the FCC to provide notice before initiating such actions;
- establish an interagency working group led by the Department of Justice in consultation with the FCC, and consisting of various federal agencies, state attorneys general, and other non-federal entities, to identify and report to Congress on improving deterrence and criminal prosecution of robocall scams at the federal and state levels;
- direct the FCC to adopt a rule that requires voice service providers (defined to include voice-over-Internet (VOIP) providers) to implement appropriate and effective call authentication technologies that enable such providers to verify that incoming calls are legitimate before they reach consumers’ phones;
- delay implementation of the FCC authentication technology rule if the agency determines after public notice and comment that each voice service provider has established voluntary rules for an appropriate and effective authentication framework and is implementing the framework; FCC Chairman Ajit Pai recently sent letters to companies urging the adoption of such voluntary rules;
- direct the FCC to adopt rules that provide for (1) a safe harbor for voice service providers from liability for unintended or inadvertent blocking or misidentification of calls, and (2) a process permitting a calling party adversely affected by the authentication framework to verify the authenticity of the party’s calls; and
- direct the FCC to adopt a rule to help protect subscribers from receiving unwanted calls or text messages from a caller using an unauthenticated number.
With the current Congress scheduled to wrap up business next month, little if any action is expected on the bill this year. At the same time, the bill is noteworthy, and should not be ignored, for a number of reasons:
First, it is bipartisan bill, and could garner support not only in the Senate, but also in the soon-to-be Democratic-controlled House. In addition, both the telecom industry and consumer groups issued positive statements on the bill after its introduction.
Second, we expect Sens. Thune and Markey to re-introduce the bill next Congress and we understand that House Energy & Commerce Committee members have expressed interest in the legislation as well. Sens. Thune and Markey are well-positioned to help pass the bill. Sen. Thune was just elected the Senate Majority Whip for the next Congress, and although he has to give up his chairmanship of the full Commerce Committee because of Senate Republican term-limit rules, he could decide to chair the Committee’s Communications Subcommittee. Sen. Roger Wicker (R-MS), the current Communications Subcommittee Chairman, who also cosponsored the bill, is likely to be the next chairman of the full committee. Further, Sen. Markey could play an influential role not only in the Senate, but also with his former House colleagues on the Energy & Commerce Committee.
Finally, scam robocalls and illegal ID spoofing are clearly a serious problem, and the FCC and Congress support multiple solutions to help combat them. In the case of the TRACED Act, Sen. Markey said it “will provide every person with a phone much-needed relief” and will do so using “a simple formula: call authentication, blocking, and enforcement.” As Sen. Thune noted, it also is intended to go after really bad actors and not legitimate businesses. For this reason, it could help legitimate businesses and help clear the way for future legislation providing badly-needed TCPA reforms. Yet, as we noted last spring after the Senate hearing leading to the introduction of the bill, there is risk that legitimate businesses could be adversely affected by the bill and that attempts could be made, especially in the Democratic-controlled House, to amend it to expand rather than reform the TCPA. So, again, businesses should keep a close eye on the legislation.
On November 13, 2018 the U.S. Supreme Court granted certiorari in a Telephone Consumer Protection Act (“TCPA”) case in which the Fourth Circuit vacated the district court’s holding that an unsolicited fax sent by a health information provider offering a free e-book must have a commercial goal to be considered an advertisement under the TCPA. This case presents important questions as to the scope of judicial deference to the Federal Communication Commission’s (“FCC”) rules under the Hobbs Act, which limits the ability of TCPA litigants to challenge FCC rules in private civil litigation.
In February of this year, the Fourth Circuit held that faxes that offer goods and services, even if the goods and services are free, are “advertisements” under the TCPA, and reversed the district court’s dismissal of the suit. See Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, 883 F.3d 459, 469 (4th Cir. 2018). In so ruling, the Fourth Circuit took issue with the district court treatment of a 2006 Rule promulgated by the Federal Communications Commission the FCC interpreting certain provisions of the TCPA. Pursuant to its statutory authority to “prescribe regulations to implement the requirements” of the TCPA, see 47 U.S.C. § 227(b)(2), the FCC promulgated a rule providing that “facsimile messages that promote goods or services even at no cost . . . are unsolicited advertisements under the TCPA’s definition.” See Rules and Regulations Implementing the Tel. Consumer Prot. Act of 1991; Junk Fax Prevention Act of 2005, 71 Fed. Reg. 25,967, 25,973 (May 3, 2006) (the “2006 Order”). In the district court, plaintiff Carlton & Harris argued that the fax it received was an unsolicited advertisement as defined in the 2006 Order because it promoted a good at no cost. Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, No. 3:15-14887, 2016 WL 5799301, at *4 (S.D. W. Va. Sept. 30, 2016). The district court declined to defer to the 2006 Order, holding that the Hobbs Act did not compel the court to defer to “the FCC’s interpretation of an unambiguous statute.” Id. The district court further held that even under the 2006 FCC Rule, PDR Network’s fax was still not an advertisement because the rule requires an advertisement to have a “commercial aim,” and no such aim existed. Id. Accordingly, it granted PDR Network’s motion to dismiss.
The Fourth Circuit disagreed, holding that the jurisdictional command of the Hobbs Act requires a district court to apply FCC interpretations of the TCPA. See Carlton & Harris Chiropractic, 883 F.3d at 469. The district court therefore erred by engaging in Chevron analysis and “declin[ing] to defer” to the FCC rule and issuing a ruling “at odds with the plaining meaning” of the 2006 Order’s text. Id. at 462. Thereafter, PDR Network appealed to the Supreme Court asserting that the Fourth Circuit opinion created a circuit split with the Second, Sixth, Ninth, and Eleventh Circuits, all of which require a “commercial” nexus for faxes promoting free goods or services to be considered “advertisements” under the TCPA.
PDR Network’s petition for a writ of certiorari asks the Supreme Court to resolve the Circuit split regarding whether the Hobbs Act prevents courts from engaging in a typical Chevron analysis of FCC Orders interpreting the TCPA and requires automatic deference to the agency’s order where there has been no challenge to the validity of the order. It also asks the Court to resolve whether the FCC’s 2006 Order creates a per se rule that faxes that “promote goods and services even at no costs” are “advertisements” under the TCPA or whether courts can require a commercial nexus to a firms’ business in order for such a fax to fall within the definition of “advertisement.” In granting certiorari, the Supreme Court said it is limiting the certiorari to the question of whether the Hobbs Act required the lower court to accept the FCC’s legal interpretation of the TCPA.
The Consumer and Governmental Affairs Bureau of the Federal Communications Commission (the “FCC”) recently issued a public notice seeking comment on issues related to interpretation and implementation of the Telephone Consumer Protection Act (the “TCPA”). The notice followed the recent decision of the United States Court of Appeals for the District of Columbia in ACA International v. FCC, in which the Circuit Court affirmed and vacated in part a rule previously issued by the FCC. Our prior coverage of ACA International can be found here.
First, the FCC seeks comment on the TCPA definition of “automatic telephone dialing system.” The TCPA defines an automatic telephone dialing system 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.” The FCC had previously interpreted the term “capacity” to include a device “even if, for example, it requires the addition of software to actually perform the functions described in the definition.” The ACA International Court set that definition aside—finding that the agency’s “capacious understanding of a device’s ‘capacity’ lies considerably beyond the agency’s zone of delegated authority” and that it would have “the apparent effect of embracing any and all smartphones.” The FCC seeks comment on how to interpret “capacity” in light of the guidance provided in ACA International, specifically seeking comment on how to more narrowly interpret the word “capacity” to better comport with congressional findings and the intended reach of the statute.
The FCC further seeks comment on the functions a device must be able to perform to qualify as an automatic telephone dialing system. The FCC seeks comment on whether equipment can be considered an automatic telephone dialing system if the equipment cannot itself dial random or sequential numbers. And the FCC seeks comment on whether the prohibition on making certain calls using an automatic telephone dialing system should apply to equipment that has the ability to use such technology but does not actually use it in making the call.
Second, the FCC seeks comment on how to treat calls to reassigned wireless numbers under the TCPA where the statute carves out calls “made with the prior express consent of the called party” from its prohibitions. The FCC seeks comment specifically on the definition of “called party:” does it refer to the person the caller expected to reach (or reasonably expected to reach) or the person that the caller actually reached, i.e., the wireless number’s present-day subscriber? Further, does it include the “customary user” (e.g., the close relative on a subscriber’s family calling plan)?
Third, the FCC seeks comment on how a called party may revoke prior express consent to receive robocalls. The ACA International Court found that (1) “a party may revoke her consent through any reasonable means clearly expressing a desire to receive no further messages from the caller,” and (2) such a standard means “callers . . . have no need to train every retail employee on the finer points of revocation” and have “every incentive to avoid TCPA liability by making available clearly-defined and easy-to-use opt-out methods.” The FCC now seeks input on what, if any, opt-out methods exist that would be sufficiently clearly defined and easy to use such that “any effort to sidestep the available methods in favor of idiosyncratic or imaginative revocation requests might well be seen as unreasonable” for unwanted calls (i.e., saying “stop calling” in response to a live caller, offering opt-out through a website, or responding with “stop” to unwanted texts; and whether callers must offer all or some combination of such methods to qualify).
Fourth, the FCC seeks renewed comment on two pending petitions for reconsideration of the FCC’s Broadnet Declaratory Ruling, in which the FCC determined that the TCPA does not apply to calls made by or on behalf of the federal government in the conduct of official government business, except when a call made by a contractor does not comply with the government’s instructions. The petitions seek reconsideration of the FCC’s interpretation of “persons” under the TCPA, and clarification of whether federal government contractors, regardless of their status as common-law agents, are “persons” under the TCPA. The FCC now seeks comment on whether contractors acting on behalf of federal, state, and local governments are “persons” for purposes of the TCPA.
Fifth, the FCC seeks renewed comment on the pending petition for reconsideration of its 2016 Federal Debt Collection Rules, which seeks reconsideration of several aspects of the rules, including the applicability of the TCPA limits on calls to reassigned wireless numbers. Referring to the holding in ACA International, the FCC seeks renewed comment on “this and other issues” raised by the petition.
Comments are due by June 13, 2018 and reply comments are due by June 28, 2018.
This public notice, along with recent congressional hearings considering legislation applicable to telephone calls (previously discussed here), demonstrates that in the wake of ACA International, the laws and regulations applicable to outbound calling will continue to evolve.
The Senate Commerce Committee and House Energy and Commerce Committee held back-to-back hearings late last month on abusive robocalls and caller ID spoofing and how to combat them. Committee members and witnesses both highlighted the fact that robocalls and ID spoofing have “exploded in recent years” and several noted that “over 3 billion calls were placed [in March] alone” and “about a quarter of these calls are scam calls.” Further, because the technology used to place robocalls and to spoof are evolving technically, the number of calls continues to grow. There was broad agreement on both committees that consumer education, aggressive Federal Communications Commission (“FCC”) and Federal Trade Commission (“FTC”) enforcement actions, and the use of new ID verification and robocall-blocking technologies are important tools in combating these calls. However, Republicans and Democrats and business and consumer witnesses are generally split on the question of whether legitimate businesses are part of the problem and whether the Telephone Consumer Protection Act (“TCPA”) needs to be reformed or conversely expanded through new legislation and regulations. This focus on abusive/illegal robocalls and split on the TCPA presents both risks and potential opportunities for businesses and, consequently, requires close watch.