Consumer Finance Insights
March 20, 2018

D.C. Circuit Issues Long-Awaited Decision in ACA Challenge to FCC TCPA Rulemaking

On March 16, 2018, the U.S. Court of Appeals for the D.C. Circuit issued its long-awaited decision in ACA International v. FCC, invalidating several key pieces of the Federal Communications Commission’s (FCC’s) 2015 Telephone Consumer Protection Act (TCPA) interpretive order, but upholding other aspects of that order.  Significantly, the D.C. Circuit struck down the FCC’s expansive interpretation of the TCPA’s “automatic telephone dialing system” (ATDS) definition.  It also struck down the FCC’s single-call liability exemption for reassigned numbers, but upheld the FCC’s guidance regarding revocation of consent and the limited healthcare-call exemption.

ATDS Interpretation

The most anticipated aspect of the D.C. Circuit’s ruling involved the FCC’s interpretation of the TCPA’s ATDS definition—47 U.S.C. § 227(a)(1).  The FCC had interpreted this statutory language to cover a broad swath of technology, including equipment with the not just present capacity to make autodialed calls but also the potential capacity to make such calls.  The D.C. Circuit disagreed and invalidated the FCC’s interpretation as, among other things, “unreasonable, and impermissibly expansive.”  Slip. op. at 14-23.  In so doing, the court—consistent with the statutory ATDS definition—reiterated that an ATDS is limited to “equipment with the ‘capacity’ to perform each of two enumerated functions: (i) storing or producing telephone numbers ‘using a random or sequential number generator’ and (ii) dialing such numbers.”  Id. at 7.  As the court explained, this limitation, in turn, “naturally raises two questions: (i) when does a device have the ‘capacity’ to perform the two enumerated functions; and (ii) what precisely are those functions?”  And, as to answers to those two key questions, the court concluded that the FCC’s approach “cannot be sustained.”  Id. at 12.

The court also concluded that the FCC’s purported clarification as to the specific functions that qualify a device as an ATDS fell short of the “reasoned decisionmaking” standard, and so set aside those “clarifications” as well.  Id. at 29.  In so doing, the court concluded that conflicting and uncertain language in the FCC’s 2015 and prior interpretations left regulated entities in a “significant fog of uncertainty about how to determine if a device is an ATDS so as to bring into play the restrictions on unconsented calls.”  Id. at 29.

Relatedly, the court raised (but did not decide because the issue was not before it) whether the FCC’s interpretation that the “statute prohibits any calls from a device with the capacity to function as an autodialer, regardless of whether the autodialer features are used to make a call,” is correct.  In so doing, the court referenced Commissioner O’Reilly’s partial dissent to the 2015 Order construing the “make any call . . . using an ATDS” language in Section 227(b)(1)(A)(iii)  to mean that “‘the equipment must, in fact, be used as an autodialer to make the calls’ before a TCPA violation can be found.”  Id. at 30.  The court noted that Commissioner O’Reilly’s interpretation “would substantially diminish the practical significance of the Commission’s expansive understanding of ‘capacity’ in the autodialer definition.”  Id. at 30-31.

Treatment of Reassigned Numbers

The D.C. Circuit also invalidated the FCC’s order with respect to its treatment of reassigned numbers. In the 2015 Order, the FCC had concluded that the TCPA’s “called-party” provision meant that a new subscriber of a reassigned number who received a call that otherwise violated the TCPA would have a cause of action.  But, recognizing the potential unfairness of this result, the FCC’s order adopted a one-call exemption from liability to recognize that some callers might reasonably rely on prior consent from the previous subscriber when accidentally reaching the new subscriber.  The D.C. Circuit concluded this exemption was arbitrary.  Although the court credited the FCC’s explanation that it created the one-call exemption to allow callers to “reasonably rel[y]” on consent they had previously received, the court found no reason to conclude that reasonable reliance should stop at “a single, post-reassignment call.”  Id. at 36.

Revocation of Consent

The D.C. Circuit upheld the FCC’s revocation interpretation that “a party may revoke her consent through any reasonable means clearly expressing a desire to receive no further messages from the caller.”  Id. at 5, 41.  Petitioners challenged this broad treatment of revocation, arguing that it led to uncertainty, required burdensome precautions, and increased TCPA litigation.  Id.  The court rejected these arguments, explaining that the FCC’s ruling “relieves” callers from adopting systems that impose an undue implementation burden on callers.  Id.  It explained that callers are incented to “avoid TCPA liability through clearly-defined and easy-to-use opt-out methods.”  Similarly, it reasoned the use of unconventional methods by a consumer to revoke consent would not meet the reasonable expectation test.  Id. at 42.  The D.C. Circuit left undisturbed, however, the possibility that callers may contract with customers in ways that limit methods of revocation.  Id. at 43.

Limited Healthcare Exemption

Finally, the D.C. Circuit upheld the FCC’s healthcare exemption interpretation.  In its 2015 Order, the FCC exempted from the TCPA’s consent requirement certain exigent healthcare calls to wireless numbers including calls about “appointment and exam confirmations and reminders, wellness checkups, hospital pre-registration instructions, pre-operative instructions, lab results, post-discharge follow-up intended to prevent readmission, prescription notifications, and home healthcare instructions.”  Id. at 44.  Rite Aid challenged this exemption as conflicting with the Health Insurance Portability and Accountability Act (HIPAA) and as arbitrary because it excluded billing and other account-related healthcare communications.  The D.C. Circuit disagreed, finding there is no obstacle to complying with both the TCPA and HIPAA (id. at 47) and concluding that not all healthcare-related calls satisfy the TCPA’s emergency purposes exception to the consent requirement.  Id. at 51.