You will find more details on the most significant August meeting items after the break:

C-Band Auction Procedures: The draft Public Notice would establish the procedures for Auction 107, the auction of new flexible-use overlay licenses in the 3.7-3.98 GHz band. It will be the FCC’s second auction of mid-band spectrum and is scheduled to begin on December 8, 2020. Auction 107 will offer 5,684 new licenses in the C-band, and the 280 MHz of spectrum available will be licensed on an unpaired basis in three blocks divided into 20 MHz sub-blocks by partial economic area (“PEA”) in the contiguous states and in D.C. The Commission would use an ascending clock auction format for bidding for each PEA, with an initial clock phase for bidding on generic blocks in successive rounds and a subsequent assignment phase for bidding on frequency-specific license assignments. The draft Notice details the FCC’s procedures, terms, conditions, dates, and deadlines for Auction 107, as well as the post-auction application and payment processes. Notably, the FCC would open the application filing window for auction participation on September 9, 2020 and close the window on September 22, 2020.

Inmate Calling Services Reform: The draft Report and Order on Remand and Fourth Further Notice of Proposed Rulemaking (“FNPRM”) would respond to remands from the U.S. Court of Appeals for the D.C. Circuit on inmate calling services reform and propose further rate reforms. The Order would find that ancillary service charges, or separate fees that are not included in per-minute rates assessed for individual inmate calling services calls, cannot be segregated between interstate and intrastate jurisdictions, except in a limited number of cases. This determination would prohibit inmate calling service providers from imposing any charges for ancillary services, other than those charges permitted by the FCC’s rules, and would prohibit providers from imposing such charges that exceed the FCC’s ancillary service fee caps. The FNPRM would seek comment on further rate reforms of inmate calling services, proposing to lower the interstate rate caps to $0.14 per minute for calls from prisons and $.16 for calls from jails, and proposing to cap rates for international inmate calling services, which are currently uncapped. Comments on the FNPRM would be due 30 days after publication in the Federal Register, with reply comments due 60 days following publication.

TCPA litigation has largely focused on the autodialer restriction over the past decade. In 2015, the Federal Communications Commission (“FCC”) adopted an expansive interpretation of the restriction, which the U.S. Court of Appeals vacated and remanded in 2018. While the industry has waited for the FCC to offer further guidance, entities making calls and sending texts have navigated an environment plagued by uncertainty. Several courts of appeals have adopted conflicting interpretations of the autodialer provision. Meanwhile, the FCC could offer its interpretation at any time, throwing the issue into further litigation in all probability. In this environment, the Supreme Court agreed to hear the constitutionality of one TCPA exemption in the Barr case. Many are hoping for a decision that goes beyond the 2015 amendment and offers definitive guidance on the autodialer provision’s scope. This post discusses what to expect – and what to watch for – in the Supreme Court’s oral argument this week.

Background

In Am. Ass'n of Political Consultants v. Sessions, 323 F. Supp. 3d 737 (E.D.N.C. 2018), a group of political and polling organizations who wished to use autodialer technology to contact potential voters, sued the Government challenging the constitutionality of the TCPA’s autodialer ban. The group argued that the autodialer ban is a content-based restriction on speech, which does not survive strict scrutiny under First Amendment jurisprudence. According to the plaintiffs, the autodialer restriction fails strict scrutiny’s narrow tailoring requirement because it allows the FCC to promulgate various exemptions based on the content of the call and the 2015 amendment exempts calls related to the collection of government debt. Therefore, the law is not narrowly tailored to advance the privacy interests of the TCPA. Additionally, Plaintiffs asserted that less restrictive means could advance the TCPA’s interests.

The district court disagreed with the Plaintiffs and found that the government debt collection exemption survived strict scrutiny because it is a narrow exception, which furthers the compelling interest of government debt collection. Additionally, the court declined to consider the constitutionality of the FCC’s exemptions because it reasoned that it was not the correct court to hear such challenges. Regarding Congressional delegation of authority to the FCC to create exemptions, the court reasoned that the delegation “does not substantively except any communications” and therefore “is not facially or inherently content-based.” Lastly, the court concluded that the supposed less restrictive means would not be as effective in achieving the purposes of the TCPA.

Plaintiffs appealed the decision to the Fourth Circuit. In Am. Ass'n of Political Consultants, Inc. v. Fed. Commc'ns Comm'n, 923 F.3d 159 (4th Cir. 2019), the Fourth Circuit held that the government debt exemption failed strict scrutiny due to under-inclusiveness. The Fourth Circuit concluded that the exemption is underinclusive because: (1) the exemption “subverts the privacy protections underlying the ban” by authorizing many intrusive calls, and (2) debt collection calls are “among the most intrusive, disruptive, and complained of phone calls.” However, instead of invalidating the entire TCPA, the court relied on a severance clause in the Communications Act of 1934 (which contains the TCPA) and severed the government debt collection exemption. The court reasoned that severance was appropriate because Congress explicitly intended the severance of constitutionally infirm portions of the Communications Act and the autodialer restriction had worked effectively for twenty-four years before Congress amended it to exempt government debt collection calls.

Consequently, on November 14, 2019, the Solicitor General petitioned the Supreme Court to review the Fourth Circuit’s decision to settle the question of the TCPA’s constitutionality and to provide clarity on the severance of unconstitutional portions of the statute. On January 10, 2020, the Supreme Court accepted the petition for review.

Previewing the Supreme Court Review

The Supreme Court accepted two questions regarding the TCPA:

1. Is the 2015 government debt collection exemption constitutional, and
2. Is the appropriate remedy to sever the provision from the TCPA?

On the first question, the Government argued that the government debt collection exemption is not content-based but relationship-based as it is dependent on the relationship between debtors (called parties) and their creditor (the Government). Therefore, it argued, the government debt collection exemption is actually subject to intermediate scrutiny, which it passes since it is a narrow exception, which applies to a few calls only and furthers the significant interest of protecting the public fisc. This comports with the autodialer restriction, which is a content-neutral time, place, and manner restriction. The American Association of Political Consultants (Respondents in the Supreme Court) asserted that the Fourth Circuit correctly found that the autodialer restriction as currently written is a content-based restriction, which fails strict scrutiny and renders the TCPA unconstitutional.

Remedy

As to the second question, Respondents argued that First Amendment jurisprudence mandates that courts should issue decisions that protect speech and not abridge it. Thus, Respondents argued, finding the TCPA to contain a content-based restriction on speech, the proper remedy should have been to strike down the restriction on speech, not to sever the “speech-promoting exception.” Respondents also argued that the autodialer restriction must be invalidated because the TCPA, even after the Fourth Circuit’s remedy, continues to be an unconstitutional restriction on speech. .

Amicus Curiae Positions

In addition to the arguments presented by the litigants, interested parties filed 17 amicus curiae briefs. On the one hand, supporting the government and the constitutionality of the exemption were many states, members of Congress, student loan servicing centers and several consumer interest groups. In the amicus brief submitted by the states, the states argued, among other things, that the robocall ban should be upheld because it prohibits highly intrusive robocalls regardless of content and therefore passes First Amendment scrutiny. In the amicus brief submitted by the members of Congress, they argued that the TCPA is a critical law that stops intrusions on Americans’ privacy, deters scams, and protects the integrity of the telephone as a means of communication. Consumer groups similarly argued that the TCPA protects government interests “of the highest order” (according to Public Citizen) and argued that invalidation would harm consumer privacy. The consumer interests generally argued that, even if the government debt collection provision fails to satisfy scrutiny, the remainder of the TCPA should survive.

Notably, while not supporting either party, consumer groups the National Consumer Law Center and Consumer Federation of America, joined by telecommunications carrier Verizon, argued that the government’s interest is compelling and argued in support of the TCPA’s restrictions on calling, particularly restrictions on unconsented calls to cellular phones.

On the other hand, supporting the position that the provision is unconstitutional were the U.S. Chamber of Commerce, debt collection companies, several business groups and several free speech groups. In its amicus brief, the Chamber of Commerce argued that the TCPA should be invalidated because the autodialer restriction has become a tremendous source of meritless litigation that FCC guidance has not addressed. Similarly, trade groups such as the Retail Energy Supply Association argued that the government debt collection exemption is not severable because Congress would not have adopted such broad restrictions on automated calls without the exemptions adopted in the statute. Debt collectors such as Portfolio Recovery Associates sounded a similar point, arguing that the TCPA’s “open ended delegation of authority” to the FCC to create exemptions renders the statutory scheme unconstitutional. The Retail Litigation Center, while ostensibly not taking a position on either issue, offered an extensive critique of the TCPA’s “real world effects” on communications with customers and urged the Court to “address this dysfunction” in its disposition of the case.

What to Watch For in Oral Argument

With this lineup of arguments, the Supreme Court will hear oral argument in a highly unusual setting. Due to the COVID-19 pandemic, the Supreme Court scheduled its first-ever arguments to be held via teleconference for this week, giving court-watchers an unprecedented opportunity to hear arguments live, rather than via audio files released after the argument. Due to the teleconferencing format, the Justices will ask questions in order of seniority, rather than the customary rapid-fire open questioning format. In earlier arguments this week, the approach permitted a more straightforward examination of the issues, with fewer interruptions in the litigant’s arguments.

The resolution of Barr could affect many stakeholders. A key question to watch will be the extent to which the Court entertains questions relating to severability of the government debt collection exemption and the broader TCPA critiques offered by various amicus parties. While the Supreme Court has ruled in several TCPA cases recently, thus far, it has addressed the issues narrowly or on grounds not exclusive to the TCPA. We will be watching to see if the Court may deviate from this approach in Barr and bring some clarity to the more contentious provisions of the TCPA.

Commissioner Starks most recently served as an Assistant Bureau Chief in the FCC’s Enforcement Bureau, where he primarily worked on competition and Universal Service Fund matters. He joined the Commission in 2015 from the Department of Justice, where he was Senior Counsel in the Office of the Deputy Attorney General. Prior to that, he was an associate attorney in private practice, a clerk for the U.S. Court of Appeals for the Eighth Circuit, a legislative staffer in the Illinois State Senate, and a financial analyst at Goldman Sachs. He earned a degree in social studies and graduated magna cum laude from Harvard College, and then graduated from Yale Law School.

Joining Commissioner Starks’ staff are three FCC veterans. Daudeline Meme will serve as Acting Chief of Staff and Acting Legal Advisor for wireless and international matters. She previously served as Deputy Chief in the FCC’s International Bureau, Legal Advisor to Commissioner Clyburn, Chief of Staff and Assistant Chief for spectrum issues in the Enforcement Bureau, and in the Office of former Chairman Tom Wheeler. Michael Scurato will be Acting Legal Advisor for media and consumer protection matters. He comes from the Enforcement Bureau, where he served as Special Counsel for the Bureau Chief. He previously served as Legal Advisor for Commissioner Clyburn and as Vice President of Policy at the National Hispanic Media Coalition. Commissioner Starks’ Acting Legal Advisor for wireline and public safety matters will be Randy Clarke, who most recently served as FCC counsel to the Senate Committee on Commerce, Science, and Transportation. Before that he was Acting Deputy Chief of the Wireline Competition Bureau, where he served in various roles since 2004.

Mr. Starks’ swearing in occurred just prior to his first Commission meeting on January 30—a truncated meeting containing no item votes due to the recently-concluded partial government shutdown. Commissioner Starks takes his seat after a long-delayed confirmation process. He was nominated by President Trump on June 4, 2018, and was slated for a quick confirmation alongside the reconfirmation of Republican Commissioner Brendan Carr. In September 2018, Republican Senator Dan Sullivan placed a hold on Commissioner Carr’s reconfirmation due to concerns over the FCC’s management of the Universal Service Fund Rural Health Care Program. Mr. Starks’ confirmation was delayed as a result, as the Senate intended to vote on the nominees as a package. The hold was lifted in late-December 2018 and Congress confirmed both Mr. Starks and Mr. Carr on January 2, 2019, the last full day of the 115th Congress. Mr. Starks’ swearing in was further delayed due to the government shutdown.

As we previously discussed, the Order effectively reverses the Commission’s 2015 Open Internet Order, reclassifying broadband Internet access service as a lightly regulated Title I "information service" and eliminating the 2015 Order's open Internet rules (while retaining a modified version of the transparency requirement).

The Order will not go into effect until after the Office of Management and Budget completes its Paperwork Reduction Act review, which could take several months. However, last Thursday’s publication is significant because it triggers deadlines for challenges to the Order, both in the courts and in Congress.

The Federal Register publication gives litigants ten days to file petitions for review in federal courts of appeals if they would like to be included in a court lottery to determine the venue for consolidating the Order’s challenges. The following petitions have already been filed:

• New York District Attorney General Eric Schneiderman announced he and 22 other Democratic attorneys general filed a petition for review at the U.S. Court of Appeals for the D.C. Circuit;
• Public Knowledge, Mozilla, Vimeo, National Hispanic Media Coalition, and New America’s Open Technology Institute each filed petitions for review in the D.C. Circuit;
• The California Public Utilities Commission and Santa Clara County each filed appeals in the Ninth Circuit;

Federal Register publication also allows lawmakers to formally introduce a Congressional Review Act (CRA) resolution of disapproval, which would reverse the Order and prevent the Commission from subsequently introducing a substantially similar Order. While CRA resolutions are a powerful tool in the hands of the majority – as we saw with the rollback of the Broadband Privacy Order earlier this year – as the minority party, the Democrats are at a significant disadvantage. Senator Ed Markey, D-MA, and House Communications Subcommittee ranking member Mike Doyle, D-PA, have led the Democrat’s effort to draft a CRA resolution to nullify the Order. At the time of this blog post, the CRA resolution had 50 Senator co-sponsors, including all 49 Democratic senators and Senator Susan Collins, R-ME. President Trump is not expected to support the CRA resolution, even if the measure passed both chambers of Congress.

In addition to activities in federal court and in Congress, 26 states are considering net neutrality legislation, and five state governors have issued executive orders regarding net neutrality following the Commissioners’ December 2017 vote.

We will follow up this blog post with a more comprehensive review of the Restoring Internet Freedom Order soon. In the meantime, contact any of the authors of this blog post for more information on the proceeding.

Background on the Case

Laci Satterfield became a registered user of Nextones in order to receive a free ring tone. During the registration process, Ms. Satterfield checked a box which read, in part: "I would like to receive promotions from Nextones affiliates and brands." On January 18, 2006, Ms. Satterfield received a text message from Simon & Schuster advertising a novel by Stephen King. Shortly thereafter, Ms. Satterfield filed a class action lawsuit alleging that Simon & Schuster's text message campaign violated the TCPA.

In June 2007, the Federal Court for the Northern District of California granted summary judgment to Simon & Schuster holding that the company did not violate the TCPA. Specifically, the court determined that the text message campaign did not violate the TCPA's prohibition against using an automatic telephone dialing system (an "ATDS") because the device used to send the messages did not fall within the statutory definition of an ATDS. Moreover, the court found that Ms. Satterfield had agreed to receive text messages when she registered for Nextones.

Ninth Circuit Opinion

On Friday, June 19, 2009, the Ninth Circuit Court of Appeals reversed the district court decision and remanded the case for further proceedings. The Ninth Circuit held that the district court had erred because (1) the text message was a "call" within the meaning of the TCPA, (2) there was a disputed issue of material fact as to whether the system Simon & Schuster used was an ATDS, and that (3) Ms. Satterfield did not consent to receive messages from Simon & Schuster because Simon & Schuster is not an affiliate or brand of Nextones.

The TCPA applies to certain types of "calls." Simon & Schuster had argued that the sending of text messages did not constitute a "call" under the TCPA. Although the district court did not rule on that point, the Ninth Circuit disagreed with Simon & Schuster's argument. The term "call" is not defined by the TCPA. However, the Federal Communications Commission has noted that the statute

encompasses both "voice calls and text calls to wireless numbers including, for example, short message service (SMS) calls, provided the call is made to a telephone number assigned to such service." The Ninth Circuit found this interpretation to be reasonable and, therefore, that the text message campaign was subject to the TCPA.

The TCPA generally prohibits the use of an ATDS to place "calls" to a mobile number without the "prior express consent of the called party." An ATDS is equipment that has "the capacity to store or produce telephone numbers to be called, using a random or sequential number generator and to dial such numbers." The district court had held that the system used to send the messages was not an ATDS because the system did not actually store, produce, or call numbers using a random or sequential number generator. The Ninth Circuit, however, held that the proper question was whether the system had the capacity to do those things. There was no evidence in the record on that point.

Simon & Schuster had argued, and the district court agreed, that Ms. Satterfield had consented to receive text messages when she signed up for Nextones. The Ninth Circuit noted, however, that the term to which Ms. Satterfield had agreed specifically referred to promotions from Nextones "affiliates" and "brands." The Ninth Circuit found that Simon & Schuster was not an affiliate of Nextones because Nextones neither owns nor controls Simon & Schuster. Moreover, Simon & Schuster was not a brand of Nextones. Therefore, the consent that Ms. Satterfield provided on the registration form did not apply to the messages sent by Simon & Schuster.
It's important to note that the Ninth Circuit didn't decide that Simon & Schuster violated any law. Instead, it decided that the district court should not have granted summary judgment in the company's favor because of various outstanding factual issues. Nevertheless, this decision — along with whatever the district court decides on remand — is likely to affect every company that sends text messages to consumers.

What This Means for Marketers

Consumers are showing a greater willingness to interact with companies on their mobile devices. However, consumers are only willing to interact on their own terms, and they don't want to receive unsolicited messages. If a consumer gets a text message he didn't want, that consumer is likely to complain. Moreover, those complaints are likely to lead to lawsuits and regulatory actions. In recent years, many companies have paid high prices — up to $7 million — for failing to get adequate consent in mobile promotions. Those types of challenges are likely to continue, so companies need to make sure they comply with relevant laws.

The key lesson for mobile marketers is that they should not send text messages to any consumer unless the consumer has provided express consent to receive messages from the sender. When seeking consent from consumers, it's important to make sure that the consumer understands the terms to which he is being asked to agree. Marketers have little to gain and a lot to lose from sending messages that consumers did not specifically want. Therefore, it is important to clearly disclose what types of messages a consumer can expect to receive and which company will send the messages.

Kelley Drye Client Advisory: Ninth Circuit Issues Opinion on a Mobile Marketing Campaign