In September 2018, in Marks v. San Diego Crunch, a unanimous Ninth Circuit three-judge panel held that the TCPA’s definition of an automatic dialing system (ATDS) includes telephone equipment that can automatically dial phone numbers stored in a list, rather than just phone numbers that the equipment randomly or sequentially generates. This decision departed sharply from the post-ACA International decisions by the Second and Third Circuits, which had narrowed the definition of an ATDS. Although the defendant in the case filed a petition for certiorari with the U.S. Supreme Court in January 2019, the parties have since settled, thereby leaving Marks as precedential law in the Ninth Circuit.
In response to Marks, the FCC asked for comments on what constitutes an ATDS under the TCPA and is believed to be considering rulemaking on the ATDS definition. Even if the FCC adopts a rule rejecting Marks, courts in the Ninth Circuit and elsewhere will have to decide whether to defer to the FCC’s rule.
The issue of what deference courts must give FCC rulings on TCPA issues is currently before the U.S. Supreme Court in PDR Network v. Carlton & Harris Chiropractic. The case involves the definition of an “unsolicited advertisement” for purposes of the TCPA ban on unsolicited fax advertisements. Applying step one of a Chevron deference analysis, the district court found that the TCPA’s definition of “unsolicited advertisement” was unambiguous, and therefore it was not required to defer to the FCC’s interpretation and granted the defendant’s motion to dismiss. The U.S. Court of Appeals for the Fourth Circuit reversed, ruling that the Hobbs Act precluded the district court from “even reaching the step-one question [of Chevron]” and required it to defer to the FCC rule.
The Supreme Court granted certiorari to decide whether the Hobbs Act required the district court to accept the FCC’s TCPA interpretation. The Hobbs Act provides a mechanism for judicial review of certain agency orders, including all FCC final orders under the TCPA. An aggrieved party can challenge such an order by filing a petition in the court of appeals for the judicial circuit where the petitioner resides or has its principal office or in the U.S. Court of Appeals for the District of Columbia Circuit. Under the Hobbs Act, such courts have “exclusive jurisdiction” to “enjoin, set aside, suspend (in whole or in part), or to determine the validity of” the orders to which the Act applies, including the FCC’s TCPA interpretations. Oral argument is scheduled to be held in the Supreme Court on March 25.
Even if the Supreme Court were to reverse the Fourth Circuit in PDR Network and rule that a district court can apply a Chevron analysis to FCC rulings, a Chevron analysis should weigh in favor of deference to a new FCC ruling on the ATDS definition assuming, in step one of such analysis, the court agreed with the Ninth Circuit’s view in Marks that the statutory definition is ambiguous. Under Chevron step two, a court would be required to defer to the FCC’s ruling unless it found the ruling not to be permissible or reasonable.
In Marks, after concluding that the statutory definition of an ATDS was ambiguous, the Ninth Circuit based its broad interpretation of the ATDS definition on the “context and structure of the [TCPA’s] statutory scheme.” Thus, if the Supreme Court were to rule that FCC rulings are subject to a Chevron analysis, there would continue to be a risk that in conducting Chevron’s step two analysis, a court might be unwilling to defer to an FCC rule rejecting Marks’ interpretation because it finds that the rule is not reasonable based on the TCPA’s “context and structure.”