Consumer Finance Insights
April 10, 2017

D.C. Circuit: TCPA Does Not Empower FCC to Mandate Opt-Out Notices in Solicited Faxes

On March 31, 2017, the D.C. Circuit held in Bais Yaakov of Spring Valley v. FCC that, based on a plain reading of the TCPA, the FCC does not have the authority to mandate that senders of solicited fax advertisements include opt-out notices in their fax advertisements.  The decision overturned an FCC rule and, in so doing, shut down a theory of liability that had threatened significant class-action exposure for senders of fax advertisements.  The ruling may signal that the D.C. Circuit will favor a narrower reading of the TCPA’s authority going forward.

At issue in the Yaakov case is 47 U.S.C. § 227(b)(1)(C), a section of the TCPA that prohibits transmission of unsolicited fax advertisements unless a very specific set of circumstances exist:  the sender and recipient have an established relationship, the recipient consented to receive unsolicited faxes in one of two ways specified by the statute, and the faxes contain a notice under section 227(b)(2)(D).  Section 227(b)(2)(D), in turn, requires a “clear and conspicuous” opt-out notice on the first page of the fax.  In 2006, the FCC introduced a rule that extended the requirements of § 227(b)(2)(D) to solicited faxes in addition to unsolicited faxes.

The petitioner in the Yaakov case was a pharmaceutical company that sent solicited faxes to its customers without opt-out notices, and was sued by a class seeking $150 million in damages—hefty potential exposure because the TCPA permits recovery of $500 per violation.  After being hit with the class action, the petitioner applied to the FCC for a declaratory ruling that § 227(b)(2)(D) requirement does not apply to solicited faxes.  After the FCC upheld its prior interpretation of the rule in a split decision, the petitioner appealed to the D.C. Circuit.  The  D.C. Circuit reversed the FCC’s administrative ruling, finding that the plain language of the TCPA does not empower the FCC to make any ruling whatsoever relating to solicited fax opt-out notices.  Notably, the court rejected an overly-expansive reading of statutes granting authority to administrative agencies as a general principle of statutory interpretation:  “The FCC and the dissent seem to suggest that the agency may take an action . . . so long as Congress has not prohibited the agency action in question.  That theory has it backwards as a matter of basic separation of powers and administrative law.  The FCC may only take action that Congress has authorized.”

The Yaakov case may signal that the D.C. Circuit will apply a similarly narrow interpretation of other TCPA regulations, which could help curtail increasingly-popular theories of liability under the statute.  But that is far from certain, as the dissent took another view of authority granted by the TCPA, concluding that it broadly granted to the FCC the power to “prescribe regulations to implement” prohibitions on fax advertising—and, therefore, as long as Congress does not expressly proscribe regulation in a certain manner, then the FCC is empowered to regulate.  Time will tell which view the D.C. Circuit and other courts will follow in the future, and LenderLaw Watch will continue to report developments as they occur.