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 ChiropracticThe 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.”

 

 

The FCC’s creation of a database of disconnected phone numbers is expected to significantly reduce the potential TCPA exposure companies face for unknowingly calling a customer at a reassigned phone number.  In this week’s podcast, we review the relevant TCPA legal background, explain how the database will operate and the requirements for obtaining a safe harbor from TCPA liability, and discuss proactive steps companies can take in advance of the database launch.

Click here to listen to the podcast.

 

The FCC has taken a step toward getting control over the potential TCPA exposure a business faces when it calls one of its customers at a phone number that, unbeknownst to the business, has been reassigned from the customer to someone else.

On December 13, 2018, the FCC released an order directing the creation of a single comprehensive database of disconnected numbers.  Phone service providers will be required to periodically report (the 15th of each month) the last date of permanent disconnection of phone numbers to a database administrator.  A caller can then use the database to determine whether a telephone number has been permanently disconnected and thus is no longer assigned to the person the caller wants to reach.  More specifically, callers will have the ability to query the database using the phone number, and a date on which the caller is reasonably certain that the consumer the caller intends to reach could in fact be reached at that number.  In response to the query, the database will tell the caller if the number has been reassigned since the date the caller input – if the database tells the caller the number was reassigned, the caller will know not to call that number to reach its customer.

The FCC’s order establishes a safe harbor from TCPA liability for callers that properly use the database.  To avail itself of the safe harbor, the caller must demonstrate that it checked the most recent update of the database, and the database reported that the number had not been permanently disconnected since the date the caller last contacted that consumer or the date on which the caller could be confident that the consumer could still be reached at that number.  The caller bears the burden of proof and persuasion that it checked the database before making a call.  The safe harbor would then shield the caller from liability should the database return an inaccurate result.

Although the concept of the database is a positive development for businesses trying to minimize TCPA liability, businesses may be waiting awhile before they can take advantage of it.  The FCC will not put the database in place until it hires an administrator, and the FCC stated that it intends to start the bidding process for an administrator “within the next twelve months.”  The FCC otherwise set no deadline for the database’s implementation.

 

 

 

 

 

FCC Chairman Ajit Pai proposed the creation of a comprehensive reassigned numbers database, addressing a significant compliance challenge under the TCPA. The TCPA’s prohibitions on the use of automatic telephone dialing systems (ATDS) allows calls to be made with the express consent of the recipient. However, as the Chairman noted in the press release announcing this proposal, millions of phone numbers are reassigned each year. Because businesses who have received prior express consent cannot rely on consumers to inform them of a reassignment, they risk violating the TCPA by placing any calls with an ATDS to those numbers after they have been reassigned.

The Chairman’s press release and proposed order recognize this challenge and outline the establishment of a database of all phone numbers that have been permanently disconnected (and that are therefore eligible for reassignment). With a single, comprehensive, and authoritative repository for this information, business callers can check the database and determine whether a recipient’s number has become eligible for reassignment. This will allow callers to know before placing an ATDS call whether the consumer who consented to receive calls still holds that phone number—and thus whether the prior express consent is still valid.

If approved by the FCC, the proposed order would establish a database based on information provided by phone companies obtaining geographic numbers from the North American Numbering Plan. Voice providers would report all permanently disconnected numbers (i.e., numbers that have thus become eligible for reassignment) on a monthly basis. The draft order would also require an aging period of 45 days before permanently disconnected numbers may be reassigned, ensuring that eligible numbers will be in the database before reassignment occurs. An independent third-party administrator would be responsible for managing the data with funding assessed from voice providers.

Although the TCPA compliance problems around reassigned numbers have existed for years, these issues took on new importance this year after the DC Circuit set aside two components of the FCC’s 2015 Declaratory Ruling and Order in ACA International v. FCC. The ACA International decision both eliminated the FCC’s one-call safe harbor for calls placed to reassigned numbers and set aside the FCC’s interpretation of “called party” to mean the current actual subscriber instead of the intended recipient, increasing the uncertainty faced by business callers. The FCC issued a notice seeking comments on this and other issues arising from the ACA International decision in April. This was followed later in the summer by a bipartisan letter from two U.S. Senators calling for the establishment of a reassigned number database, demonstrating consensus that a comprehensive solution to reassigned numbers is overdue.

While the establishment of a reassigned numbers database would certainly be a welcome development, it would not resolve all of the compliance challenges relating to reassigned numbers that resulted from ACA International. The chairman’s draft order establishing the database specifically says it would not address “how a caller’s use of this database would impact its potential liability under the TCPA for calls to reassigned numbers” but “that use of the database will be a consideration” when the FCC does address the other topics raised in the May 2018 notice.

We recently addressed these and other TCPA compliance developments on our podcast, including the FCC’s response to a number of other issues raised by the ACA International decision around what constitutes an ATDS and how a party can revoke prior express consent to receive calls.

The FCC is expected to vote on the Chairman’s database proposal at its next Open Commission Meeting on December 12.

The Federal Communications Commission (FCC) has issued a notice asking for comment on what constitutes an automatic telephone dialing system (ATDS) under the TCPA following the Ninth Circuit’s September 20, 2018 decision in Marks v. Crunch San DiegoIn May 2018, the FCC issued a notice announcing that it was seeking comments on several TCPA issues following the D.C. Circuit’s decision in ACA International v. FCC.  The FCC’s new notice states that it is now seeking comment “to supplement the record developed in response to our prior Public Notice.”  Comments are due by October 17, 2018 and reply comments are due by October 24, 2018.

In Marks, a unanimous Ninth Circuit three-judge panel held that the TCPA’s definition of an 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.

The TCPA defines an ATDS as equipment that “has the capacity—(1) to store or produce telephone numbers to be called, using a random or sequential number generator; and (2) to dial such numbers.”  The Ninth Circuit concluded that the statutory definition of an ATDS was “ambiguous on its face” regarding whether it is limited to devices with the capacity to call numbers produced by “a random or sequential number generator” or also includes devices with the capacity to store numbers and to dial such numbers automatically.

In its notice, the FCC states that the ACA International court “held that the TCPA unambiguously foreclosed any interpretation of the TCPA that ‘would appear to subject ordinary calls from any conventional smartphone to the Act’s coverage.’”  The FCC raises the following series of questions in an effort to obtain further comment on how to apply the ATDS statutory definition in light of Marks and “how that decision might bear on the analysis set forth in ACA International”:

  • To the extent the ATDS definition is ambiguous, how should the FCC exercise its discretion to interpret such ambiguities?
  • Does the Marks interpretation mean that any device with the capacity to dial stored numbers automatically is an ATDS?
  • What devices have the capacity to dial stored numbers and do smartphones have such capacity?
  • What devices that have the capacity to dial stored numbers also have the capacity to automatically dial such numbers and do smartphones have such capacity?

The FCC also asks for comment on any other issues addressed in Marks that it should consider in interpreting the ATDS definition.

The Senate Committee on Commerce, Science, and Transportation has scheduled a hearing for tomorrow, August 16, titled “Oversight of the Federal Communications Commission.”  The Committee’s website indicates that the hearing will examine policy issues before the FCC and review the FCC’s ongoing duties and activities.

The witnesses scheduled to appear are the four sitting FCC Commissioners (Chairman Pai and Commissioners O’Reilly, Carr, and Rosenworcel).  The FCC’s response to the D.C. Circuit’s ACA International decision, particularly with regard to the TCPA robocall prohibition, is expected to be a significant focus of the hearing.

 

Two U.S. Senators, one a Republican and the other a Democrat, have sent a letter to FCC Chairman Pai to encourage the FCC to proceed with a rulemaking to create a database of reassigned telephone numbers.

The TCPA’s autodialed call prohibition excepts calls made “with the prior express consent of the called party.”  In its March 2018 decision in ACA International v. FCC, the D.C. Circuit set aside the FCC’s one-call safe harbor as well as its interpretation that the “called party” means the current subscriber rather than the intended recipient.

In April 2018, the FCC published a notice in the Federal Register seeking comment on a variety of issues relating to the creation of a reassigned numbers database, including how the ACA decision impacts its ability to create a safe harbor from TCPA liability for callers who voluntarily use such a database.

In their letter, the Senators discuss various features that should be part of a database, such as comprehensiveness, accuracy, and accessibility.  They also suggest that a safe harbor from TCPA liability for making calls to reassigned numbers may be appropriate where (1) the caller took all reasonable steps to properly use a reassigned numbers database, (2) the call to the reassigned number resulted from inaccurate information in the database, (3) the caller had the consent of the call’s intended recipient, and (4) the caller took appropriate steps to stop calling the reassigned number and reported the inaccuracy.

 

The FCC has issued a notice announcing that it is seeking comments on several TCPA issues following the D. C. Circuit’s decision in ACA International v. FCC.  Comments are due by June 13, 2018 and reply comments are due by June 28, 2018.

The FCC’s notice follows the filing of a petition by several industry trade groups seeking clarification of the TCPA’s definition of “automatic telephone dialing system” (ATDS) in light of the D.C. Circuit decision.  The FTC seeks comment on the issues described below.

  • What constitutes an ATDS
    • The TCPA defines an ATDS 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 D.C. Circuit reversed the FCC’s interpretation of “capacity” as overly expansive.  The FCC seeks comments “on how to more narrowly interpret the word ‘capacity’ to better comport with the congressional findings and intended reach of the statute.”
    • The FCC seeks comment on the functions a device must perform to qualify as an ATDS. The D.C. Circuit set aside the FCC’s interpretations regarding whether a device must be able to generate and dial random and sequential numbers to be an ATDS and whether a device must be able to dial numbers without human intervention to be an ATDS.  The court also noted that uncertainty was created by the FCC’s statement that another “basic function” of an ATDS is “to dial thousands of numbers in a short period of time.”  Among the questions asked by the FCC are whether, to be “automatic,” a system must dial numbers without human intervention and dial thousands of numbers in a short period of time (and, if so, what constitutes a short period of time).  It also asks whether a system can be an ATDS if it cannot dial random or sequential numbers.
    • The D.C. Circuit noted that the statutory prohibition on making calls using an ATDS raised the question of whether the prohibition only applies to calls made using a device’s ATDS functionality.  The FCC seeks comment on that question.
  • How to treat calls to reassigned numbers
    • The TCPA’s autodialed call prohibition excepts calls made “with the prior express consent of the called party.” The D.C. Circuit set aside the FCC’s one-call safe harbor as well as its interpretation that the “called party” means the current subscriber rather than the intended recipient.  The FCC seeks comment on how to interpret the term “called party” for calls to reassigned numbers.
  • How a called party can revoke prior express consent to receive calls
    • The D.C. Circuit upheld the FCC’s ruling that a called party can revoke consent to receive autodialed calls at a wireless number “at any time and through any reasonable means that clearly expresses a desire not to receive further messages.”  In response to concerns that the ruling would make it burdensome to adopt systems to implement revocations using methods chosen by consumers, the court observed that “callers will have every incentive to avoid TCPA liability by making available clearly-defined and easy-to-use opt-out methods” and that, if such methods were afforded to consumers, consumers’ use of  “idiosyncratic or imaginative revocation requests might well be seen as unreasonable.”  The FCC seeks comment on “what opt-out methods 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.'”  (In its 2017 Reyes decision, the Second Circuit held that TCPA consent cannot be revoked when it is part of the bargained-for exchange memorialized in the parties’ contract.)
  • Whether contractors acting on behalf of federal, state, and local government are “persons” under the TCPA (The issue as to federal contractors is raised by two pending petitions for reconsideration of the FCC’s 2016 Broadnet Declaratory Ruling.  The FCC states that it is seeking renewed comment on the petitions in light of the D.C. Circuit’s decision.)
  • The interplay between the Broadnet ruling and the 2015 TCPA amendment that removed a prior express consent requirement for autodialed calls ”made solely to collect a debt owed to or guaranteed by the United States.” The FCC asks whether its 2016 Federal Debt Collection Rules would apply to a federal contractor collecting a federal debt if a federal contractor is not a “person” under the TCPA.  (The FCC also seeks renewed comment on a pending petition for reconsideration of its 2016 Federal Debt Collection Rules because the issues raised in the petition include the applicability of the TCPA’s limits on calls to reassigned numbers and such limits were addressed by the D.C. Circuit.)

Ballard Spahr’s TCPA Team has deep experience in FCC comment letters and related filings.

 

 

 

Yesterday, a coalition of numerous trade organizations, including, among others, the U.S. Chamber of Commerce, the American Bankers Association, the Consumer Bankers Association, and the Mortgage Bankers Association, filed a Petition for Declaratory Ruling with the Federal Communications Commission (the “FCC”), seeking clarification of the definition of “automatic telephone dialing system” (“ATDS”) under the Telephone Consumer Protection Act (“TCPA”).  Specifically, Petitioners request that, in light of the D.C. Circuit’s recent guidance on this topic in ACA International v. FCC, the FCC (1) confirm that to be an ATDS, equipment must use a random or sequential number generator to store or produce numbers and dial those numbers without human intervention, and (2) find that only calls made using actual ATDS capabilities are subject to the TCPA’s restrictions.

The Petition sets the stage for its request by explaining that the TCPA’s original purpose was to prevent a specific type of abusive call by telemarketers, but that its implementation has resulted in a whirlwind of litigation against legitimate businesses attempting to lawfully communicate with their customers.  The Petition further asserts that the current state of TCPA litigation is hurting businesses, not helping consumers, and instead is just serving as a boondoggle for plaintiffs’ lawyers.  The Petitioners then urge the FCC to use the D.C. Circuit’s recent decision in ACA as an opportunity to rationalize the dysfunctional TCPA landscape.

Turning to their specific requests, the Petitioners argue that the FCC should not deviate from the straightforward text of the TCPA in defining ATDS.  Thus, Petitioners contend that for equipment to constitute an ATDS, it must be able to generate numbers in either random order or sequential order, be able to store or produce those numbers, and be able to dial those numbers.  The Petitioners also request the FCC to make clear that if human intervention is required in generating the list of numbers to call or in making the call, then the equipment in use is not an ATDS.

In addition, the Petitioners argue that the FCC should make clear that the ATDS functions must be actually – not theoretically – present and active in a device at the time the call is made.  Thus, a device that requires alteration to add auto dialing capability is not an ATDS.  Rather, the capability must be inherent or built into the device for it to constitute an ATDS.  For example, if a smartphone required downloading an app or changing software code to gain autodialing capabilities, the smartphone would not qualify as an ATDS.

Finally, the Petitioners request that the FCC clarify that a caller must use the statutorily defined functions of an ATDS to make a call for liability to attach.  As such, a device’s potential capabilities would not be relevant to determining whether it is an ATDS, because the inquiry will focus only on the functions actually used to make the call or calls in question.

The Petitioners repeatedly urge the FCC to take prompt and speedy action on their Petition.  Significantly, the FCC is now controlled by Republicans, two of whose dissents from the FCC’s 2015 TCPA Declaratory Ruling and Order demonstrate that they strongly prefer a narrow interpretation.  We will keep a close watch on the progress of the Petition, and report on developments as they occur.

As we previously reported, on March 23, 2018 in Washington, D.C., the FTC and FCC will co-host a joint policy forum that will cover recent policy changes and enforcement actions as well as the agencies’ efforts to encourage private sector technological solutions.  We believe the event will be of interest to clients who launch legitimate account management or marketing campaigns from autodialers as well as those whose names have been misappropriated by fraudulent telemarketers.

Because it comes on the heels of the D.C. Circuit’s March 16 decision addressing a number of critical issues involving the Telephone Consumer Protection Act’s restrictions on the use of autodialers, the forum is likely to include a discussion of the decision.  Ballard has issued a legal alert summarizing the decision and will hold a webinar on April 3, 2018 in which the participants will address the decision’s implications and its potential impact on pending and future TCPA litigation.  (Our legal alert includes a link to register for the webinar.)

The tentative agenda and other information about the event, including how to access a live video feed, can be found here.