April 2017

RECENT NEWS

D.C. Circuit Limits FCC Jurisdiction on Fax Advertisements

On March 31, 2017, the United States Court of Appeals for the District of Columbia issued a decision in Bais Yaakov of Spring Valley v. FCC, No. 14-1234, holding that the FCC’s 2006 Solicited Fax Rule is unlawful to the extent that it requires opt-out notices on faxes sent with the recipient’s consent (i.e., “solicited” faxes).  2017 U.S. App. LEXIS 5589, at *4 (Mar. 31, 2017).  The decision also vacated the FCC’s October 30, 2014 Fax Advertisement Waiver Order insofar as it attempted to enforce the rule and grant retroactive waivers to certain parties of the opt-out notice requirement.  Id. at *12.  This decision is a big win for defendants in a recent wave of class action cases based on a failure to include opt-out notices on solicited faxes.  These defendants – nearly 150 of whom had received retroactive waivers from the FCC – now will not face liability for faxes sent with the recipient’s permission.

The opinion is based on the Court’s statutory interpretation of the Junk Fax Protection Act of 2005 (the “Act”).  After examining the relevant language of the Act, which prohibits the sending of unsolicited fax advertisements, and contains an exception allowing certain unsolicited fax advertisements, provided they contain an appropriate opt-out notice, the Court found that the text of the Act provided a “clear answer” to the question of the FCC’s jurisdiction with regard to solicited fax advertisements.  In particular, according to the Court of Appeals: “Congress has not authorized the FCC to require opt-out notices on solicited fax advertisements.  And that is all we need to know to resolve this case.”  Id. at *10-11.  As such, the Court of Appeals did not need to give deference to the FCC’s decision, pursuant to Chevron U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 & n. 9 (1984).

The Court rejected the FCC’s reasoning that its authority to regulate solicited faxes derived from its authority to define the phrase “prior express permission” in the Act.  The FCC had reasoned that because it reasonably defined the term “prior express permission” to mean that such permission lasted only until revoked, it was also within the FCC’s authority to require that all fax advertisements contain a means to revoke that permission.  The Court found this argument illogical and unpersuasive.  Id. at *11.


The Court further rejected the FCC’s view that it could take any action, so long as Congress had not prohibited such action.  “That theory has it backwards … The FCC may only take action that Congress has authorized.”  Id. at *10 (emphasis in original).

Finally, the Court rejected the FCC’s position that requiring opt-out notices for all fax advertisements was “good policy.”  The Court stated: “The fact that the agency believes its Solicited Fax Rule is good policy does not change the statute’s text.”  Id. at *12.


After the decision was released, both Chairman Pai and Commissioner O’Rielly (both of whom dissented from the order) praised the decision and pledged that future FCC decisions would adhere to the limits of the Commission’s statutory authority.

The decision will have an immediate impact on dozens of TCPA class actions based on the failure to include opt-out language in fax communications.  The D.C. Circuit has confirmed that if a fax recipient has consented to receive the fax in question, the FCC may not require companies to include specific language in the facsimile (i.e., an opt-out provision).  Moreover, because the ruling concludes that the FCC has no jurisdiction over solicited faxes, other regulations applicable to such faxes would be foreclosed as well
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FCC Adopts “Robocall” NPRM and NOI at March Meeting

On March 23, 2017, the FCC Commissioners voted unanimously to adopt a Notice of Proposed Rulemaking (NPRM) and Notice of Inquiry (NOI) through which the Commission aims to develop rules-based and other solutions to reduce the number of robocalls placed to consumers.  The NPRM seeks input from the public on several issues and questions related to robocalls, including the adoption of rules that would allow providers to block spoofed robocalls either upon request from a subscriber whose telephone number is being spoofed or if the calls are placed from “invalid numbers, valid numbers that are not allocated to a voice service provider, [or] valid numbers that are allocated but not assigned to a subscriber.”  It also seeks comment on a proposal to establish a corresponding safe harbor from the provider’s call completion obligations, methods to address spoofing from internationally-originated numbers, and other safeguards the Commission should put in place to minimize blocking of lawful calls.  Initial comments on the NPRM/NOI will be due 45 days after the item is published in the Federal Register, and reply comments will be due 30 days after that.
 

FCC PETITIONS TRACKER

With the rise in TCPA litigation, numerous parties have sought clarification of the rules. Kelley Drye’s Communications group has compiled this comprehensive summary of the pending petitions.

NUMBER OF PETITIONS PENDING
  • 19 (+9 seeking a retroactive waiver of the opt-out requirement for fax ads)
     
  • 1 petition for reconsideration of the rules to implement the government debt collection exemption
     
  • 1 application for review of the decision to deny a request for an exemption of the prior-express-consent requirement of the TCPA for “mortgage servicing calls”
     
  • 3 requests for reconsideration of the 11/2/16 fax waiver in response to petitions by 22 parties
     
  • 1 request for reconsideration of the 10/14/16 waiver of the prior express written consent rule granted to 7 petitioners

NEW PETITIONS FILED
  • M3 USA Corporation – seeking a declaratory ruling that certain fax transmissions (e.g. market research survey invitations) are not advertisements

UPCOMING COMMENTS
  • M3 USA Corporation – seeking a declaratory ruling that certain fax transmissions (e.g. market research survey invitations) are not advertisements (Comments due 4/27/17; replies due 5/15/17)

DECISIONS RELEASED
  • Bais Yaakov of Spring Valley v. FCC – vacating FCC “solicited fax” rule and 2014 order granting retroactive waiver of opt-out notice requirement

Click here to see the full FCC Petitions Tracker.

 

CASES OF NOTE

Another TCPA Class Certification Motion Denied Due to Individualized Inquiries

The federal judge in the Southern District of California refused to certify the following putative TCPA wrong number, non-customer class because “a complete analysis of the customer status issue would require an inquiry into each call recipient’s individual circumstances,” Davis v. AT&T Corp., No. 3:15-cv-02342-DMS-DHB, 2017 U.S. Dist. LEXIS 46611 at *16 (S.D. Cal. Mar. 28, 2017):
 
All persons within the United States who had or have a number assigned to a cellular telephone service and received at least two telephone calls from Defendant or its agents through the use of any ATDS and/or with an artificial or pre-recorded voice, without their prior express consent, within the four years prior to the filing of the Complaint in this action who were not customers of Defendant at the time of the calls, where Defendant’s records indicate that prior to the second and/or any subsequent call, the call recipient indicated that Defendant had reached a “wrong number” or similar notation in Defendant’s customer account records.

The plaintiff failed to explain a method for determining, “via class-wide proof,” inquiries into the circumstances of each call recipient. A “wrong number” notation in the defendant’s records alone would not suffice. For example, was the recipient a past customer, or did another person with adequate authority over the called number provide consent?

The district court joined the holdings in True Health Chiropractic, Inc. v. McKesson Corp., No. 4:13-cv-02219-HSG, 2016 U.S. Dist. LEXIS 111657 (N.D. Cal. Aug. 22, 2016), and Shelby v. LVNV Funding, LLC, No. 3:13-cv-01383-BAS-BLM, 2016 U.S. Dist. LEXIS 83940 (S.D. Cal. June 22, 2016), which it cited, as well as similar holdings from other circuits that struggled to figure out how to determine class-wide consent. See, e.g., Stein v. Monterey Fin. Servs. Inc., No. 2:13-cv-01336, 2017 WL 412874, 2017 U.S. Dist. LEXIS 12707 (N.D. Ala. Jan. 31, 2017); Ung v. Universal Acceptance Corp., No. 15-127, 2017 WL 354238, 2017 U.S. Dist. LEXIS 10078 (D. Minn. Jan. 24, 2017). Well before the class certification stage in a putative class action, TCPA defendants should analyze the viability of an early motion to strike such proposed classes based on the need for mini-trials to determine the status of call recipients, and whether facts predominate under Rule 23(b)(3) of the Federal Rules of Civil Procedure.

A TCPA Defendant Takes a Stand, and a Putative Class Action Against It Goes Away

Last month, a serial TCPA plaintiff agreed to dismiss without prejudice the putative class claims against a defendant that fought back.  In its answer, the defendant asserted counterclaims under California unfair business practices laws that the plaintiff and his prolific TCPA class counsel orchestrated a scheme to generate TCPA lawsuits by registering and publicizing nearly 30 separate phone numbers, then suing entities that called those numbers. The plaintiff’s attorney would then generate claims, file carbon copy lawsuits, and share recovered fees according to the defendant. The defendant’s briefing noted the plaintiff and his counsel’s filing of nearly 390 TCPA cases in the Central District of California alone, and the defendant’s decision to “take a stand against . . . ‘legalized extortion.’” In November, the district court denied the plaintiff’s special motion to strike and dismiss defendant’s counterclaims that the serial plaintiff “masquerades as legitimate businesses online, with his personal number listed for the purpose of ‘manufacturing’ these lawsuits.” Alan v. BrandRep, Inc., No. 8:16-cv-01040-DOC-DFM, 2016 U.S. Dist. LEXIS 185780 at *12 (C.D. Cal. Nov. 28, 2016).

Every TCPA defendant would do well to understand the history of the named plaintiff(s) as early as possible, and confer with counsel familiar with the many serial plaintiffs and their firms specializing in TCPA litigation.

 

SPEAKING ENGAGEMENTS

The First 100 Days

Join us in Washington, D.C. on May 3 for a complimentary seminar to review the first 100 days of the Trump Administration and the potential implications for the next four years and beyond on a series of topics, including the Telephone Consumer Protection Act. For more information, please click here.