In U.S. Supreme Court news, the justices heard oral argument in a Telephone Consumer Protection Act case with broad implications and denied certiorari in an appeal of the Federal Trade Commission’s (FTC) stance that the use of soundboard technology constitutes a robocall.
In the case before the Court, PDR Network, LLC v. Carlton & Harris Chiropractic Inc., a chiropractic office brought a putative TCPA class action against Prescribers’ Digital Reference, a health knowledge provider. The office brought the suit based on an unsolicited fax PDR had sent that offered a free physicians’ desk reference in e-book format. The question before the Court is whether the Hobbs Act, 18 U.S.C. §1951 (which grants jurisdiction to interpret final orders of the Federal Communications Commission to the DC Circuit) compels district courts to defer to the FCC’s interpretation of the TCPA.
Carlton & Harris sued PDR Network in West Virginia federal court under the TCPA, which forbids sending unsolicited advertisements by facsimile and provides a private right of action to those who receive such unsolicited advertisements. PDR Network moved to dismiss the complaint, arguing that because the e-book offered by the fax was free, the fax did not offer anything for sale and therefore wasn’t an “unsolicited advertisement.”
In response, the chiropractic office pointed to a 2006 FCC Rule interpreting the term “unsolicited advertisement” that provided “facsimile messages that promote goods or services even at no cost … are unsolicited advertisements under the TCPA’s definition.” The district court ruled that the Hobbs Act did not compel it to defer to the FCC’s interpretation and granted the motion to dismiss.
The U.S. Court of Appeals for the Fourth Circuit reversed the decision, holding that a district court must defer to an FCC interpretation of the TCPA. Applying the 2006 FCC Rule, a majority of the panel held that a fax that offers a free good or service constitutes an advertisement under the statute.
The defendant filed a writ of certiorari with the Supreme Court and the justices accepted the case.
At oral argument in March, the Court appeared divided on the question of whether the Hobbs Act mandates the district court’s acceptance of the FCC’s legal interpretation of the TCPA. The Hobbs Act allows parties to challenge agency rules within 60 days of issuance, but as Justice Neil Gorsuch noted, PDR Network could not have challenged the 2006 FCC Rule because it was in a different business at the time the rule was issued. He asked if a party that failed to challenge a regulation when issued would be “forever barred” from doing so.
Chief Justice John Roberts pointed out that an alternative procedure does exist, where a party can ask the agency to review its decision and then appeal that conclusion to a federal appellate court. But Justice Stephen Breyer noted that agencies receive “enormous” deference when choosing to reconsider past decisions.
A decision from the Court is expected later this term.
Not long after, the Court passed on taking up another TCPA case, this time in a writ filed by the Soundboard Association. In 2008, the FTC amended the Telemarketing Sales Rule to require that telemarketers obtain written “express agreement” before initiating most outbound calls using a prerecorded message.
With soundboard technology, unlike true robocalls, a sales agent plays prerecorded audio clips in response to the consumer’s statements. The technology also allows the sales agent to break into the call and speak directly to the consumer, if needed.
In 2008, the FTC had agreed that soundboard technology was not prohibited, but it changed course in 2016 and took the position that using soundboard technology was the functional equivalent of placing a prerecorded-message robocall.
The Soundboard Association asserted that the letter was a legislative rule that the FTC was required to promulgate through the notice-and-comment process of the Administrative Procedure Act and that the new stance ran afoul of the First Amendment.
A DC federal court sided with the FTC, holding that the letter was final agency action, but that it was an “interpretive” rule not subject to the APA. Last year, the DC Circuit went further, holding that the letter did not constitute final agency action at all. The Soundboard Association asked the justices to take the case, but they refused without comment.
The denial of cert leaves the decisions of the DC Circuit—and the FTC’s opinion letter—in effect.
To read the transcript of oral argument in PDR Network, LLC v. Carlton & Harris Chiropractic, Inc., click here.
To read the Court’s order list denying cert, click here.
Why it matters: No clear consensus appeared during the oral argument in PDR Network and court watchers were hesitant, as usual, to predict the outcome. A decision could impact not only the FCC’s 2006 rule regarding advertisements, but also any FCC rules regarding the TCPA, which would be binding on district courts should Carlton & Harris prevail. The decision will have broad implications beyond the TCPA, affecting rules issued by numerous other agencies as well as the FCC. As for the denial of cert in the soundboard technology dispute, industry members should ensure their familiarity with the FTC’s opinion letter, which remains in force.