Advertising Law Blog

In Bais Yaakov of Spring Valley v. Federal Communications Commission (decided on March 31, 2017 in the Court of Appeals for the District of Columbia Circuit), a little-known but onerous FCC requirement for the Telephone Consumer Protection Act (TCPA) was struck down by court ruling.

The TCPA bans unsolicited fax advertisements unless there is an existing business relationship with the recipient or the fax machine owner has voluntarily listed the fax number to receive public distributions. In 2006, the FCC issued a rule that requires all advertisement faxes to include an opt-out notice, whether the advertisement was unsolicited or solicited. This requirement proved to be a trap for the unwary few businesses that still use fax machines to advertise.

Class-action plaintiffs could often find a technical violation in the lack of an opt-out notice instead of litigating the issue of consent. The Yaakov case was a perfect example of class-action abuse. In 2008, generic drug seller Anda was sued in a class action for allegedly violating the FCC’s solicited fax rule. Many of the plaintiff pharmacies admitted they had permitted Anda to send fax advertisements to them, but they nevertheless sought over $150 million in damages because Anda’s fax advertisements did not include a compliant opt-out notice. 

Anda petitioned the FCC for relief from this rule, but the FCC refused, so this legal challenge ensued. The D.C. Circuit Court of Appeals agreed with the defendants that the FCC’s opt-out requirement exceeded the authority that Congress gave to the FCC under the TCPA. The Court held that the FCC’s 2006 Solicited Fax Rule is unlawful to the extent that it requires opt-out notices on solicited faxes. The FCC unsuccessfully argued that giving fax recipients a cost-free, simple way to withdraw prior permission is good policy because, even though permission to fax was given, some recipients may have trouble figuring out how to revoke their permission.

In a decision that can be viewed HERE, the Court disagreed, stating, “The fact that the agency believes its solicited fax rule is good policy does not change the statute’s text. The text of the Act does not grant the FCC authority to require opt-out notices on solicited faxes.”

TAKEAWAY: Some commenters have already overstated the importance of this ruling. Because it does not apply to unsolicited faxes, the precedent set in this case will be of limited use to future defendants. However, for the very few defendants who do benefit from this ruling, they are off the hook for multi-million dollar class-action claims.