Advertising Law Blog

An important legal ruling is expected soon that will have far-reaching impact on the telemarketing and  debt-collection industries. In October, oral argument was held before the United States Court of Appeals for District of Columbia Circuit in a case entitled ACA International v. FCC. The lawsuit aggressively challenges the way the Federal Communications Commission (FCC) interprets the federal law which governs the use of autodialing devices. That law is the Telephone Consumer Protection Act (TCPA), which is codified at 47 U.S.C. § 227.

The Court of Appeals panel consisted of Judges Sri Srinivasan, Cornelia T.L. Pillard and Harry T. Edwards (Note: Srinivasan received serious consideration from President Barack Obama earlier this year for a Supreme Court nomination). According to lead appellant ACA International, which is a trade group of debt collectors, the oral arguments lasted nearly three hours.

Although ACA International is the lead challenger, other groups such as Rite Aid pharmacies and Sirius XM satellite radio have intervened and joined the opposition to the FCC’s interpretations of the TCPA. In particular, the legal challenge focuses on three controversial FCC rulings: (1) the FCC’s definition of “automatic telephone dialing system” which includes devices that have the mere “capacity” to store and dial numbers on a random and sequential basis even if the devices do not actually make such calls; (2) the FCC’s interpretation of “called party” which imposes liability on callers when consent to call was validly obtained but the phone number was reassigned without the caller’s knowledge; and (3) the FCC’s determination to let people revoke prior express consent to receive calls by “any reasonable means.”

As to the first issue, the challengers have asked the Court to rule that the FCC’s ruling that dialing equipment “capacity” is what triggers TCPA regulation, regardless of whether numbers are randomly or sequentially generated, should not be afforded controlling legal precedent. The TCPA, which became the law in 1991, severely restricts calls made by automatic telephone dialing systems, but the FCC has continually expanded the definition of an autodialer as technology has changed. The challengers argued that the FCC’s definition is unfair because nowadays, even a smart phone has the capacity to be upgraded into an autodialer. 

While the FCC denies it wants to include smart phones under the definition of an autodialer, it has failed to offer a definition that excludes such devices. The overbroad standard subjects every uninvited call or text to a wireless number from almost any modern phone to the TCPA’s $500 penalty provision. According to one of the appellate briefs filed, when the TCPA used the term capacity, it “refers to what something can do, not what it could do if altered. No one would advertise a laptop as having the capacity to store 500 GB because its 150 GB hard drive could be supplemented with a 350 GB external one.”

As for the second area of argument, the FCC’s interpretation of “called party” was challenged as illogical and unworkable because it imposes liability when a cell phone number has been reassigned without the caller’s knowledge. According to the challengers, this interpretation undermines a basic tenet of the TCPA—that a caller who obtains consent to contact a particular telephone number cannot be held liable for calls to that number—and exposes callers to potentially crippling class-action liability for innocent mistakes. In terms of a solution, the challengers contend that interpreting called party to mean “expected recipient” would solve the reassigned number problem. Currently, the FCC allows only a one-call safe harbor for calls to reassigned numbers. This means that a caller has constructive knowledge—and thus $500-per-call exposure—of a number reassignment after just one call even if that one call provided no indication that the number had been reassigned.

Finally, the challengers seek to overturn the FCC rule that allows revocation of prior consent by any reasonable means. Businesses, they argue, should be able to implement uniform procedures to revoke consent—such as pressing one, texting “stop”, etc. The current rule creates chaos preventing even well-meaning businesses from complying—for example, a customer walking up to a company cashier and asking to stop receiving company calls could be considered a reasonable way to revoke consent. The lack  of a standardized method for revoking consent leads to additional costs and burdens for businesses and creates a system that is impossible to implement.  These are the three central issues that the three D.C. Circuit judges must decide.

Takeaway: A ruling from the D.C. Circuit Court of Appeals could come at any time, most likely in early 2017. It can have profound effects on the way the TCPA is enforced, so users of autodialing devices—including mass texting software—should make every effort to stay current with legal developments in the TCPA context.