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ACA International v. Federal Communications Commission

United States Court of Appeals, District of Columbia Circuit

March 16, 2018

ACA International, et al., Petitioners
v.
Federal Communications Commission and United States of America, Respondents Cavalry Portfolio Services, LLC, et al., Intervenors

          Argued October 19, 2016

         On Petitions for Review of an Order of the Federal Communications Commission

          Shay Dvoretzky argued the cause for petitioners ACA International, et al. With him on the joint briefs were Helgi C. Walker, Monica S. Desai, Amy L. Brown, Jonathan Jacob Nadler, Christopher J. Wright, Jennifer P. Bagg, Elizabeth Austin Bonner, Robert A. Long, Yaron Dori, Brian Melendez, Tonia Ouellette Klausner, Keith E. Eggleton, Kate Comerford

          Todd, Steven P. Lehotsky, and Warren Postman. Lindsay S. See entered an appearance.

          Charles R. Messer, pro se, was on the brief for amicus curiae Charles R. Messer in support of ACA International's petition.

          Paul Werner argued the cause for petitioner Rite Aid Hdqtrs. Corp. With him on the briefs was Brian Weimer.

          Thomas C. Mugavero, Steven A. Augustino, Jonathan E. Paikin, Jonathan G. Cedarbaum, Blaine C. Kimrey, and Bryan K. Clark were on the joint briefs for intervenors MRS BPO LLC, et al. in support of petitioners.

          Don L. Bell, II was on the brief for amicus curiae The National Association of Chain Drug Stores, Inc. in support of petitioner Rite Aid Hdqtrs. Corp.

          H. Russell Frisby, Jr., Harvey L. Reiter, Aryeh Fishman, Michael Murray, and Jay Morrison were on the brief for amici curiae American Gas Association, et al. in support of petitioners.

          Charles H. Kennedy was on the brief for amici curiae The American Bankers Association, Credit Union National Association and The Independent Community Bankers of America in support of petitioners.

          Andrew B. Clubok, Susan E. Engel, and Devin S. Anderson were on the brief for amicus curiae The Internet Association in support of petitioners.

          Joseph R. Palmore and Seth W. Lloyd were on the brief for amici curiae Retail Litigation Center, Inc., National Retail Federation, and National Restaurant Association in support of petitioners.

          Bryan N. Tramont and Russell P. Hanser were on the brief for amicus curiae CTIA-The Wireless Association in support of petitioners.

          Eric J. Troutman was on the brief for amici curiae American Financial Services Association, Consumer Mortgage Coalition, and Mortgage Bankers Association in support of petitioners. Jan T. Chilton and Kerry W. Frarnich entered appearances.

          Amy M. Gallegos was on the brief for amicus curiae Communication Innovators in support of petitioners.

          Scott M. Noveck, Counsel, Federal Communications Commission, argued the cause for respondents. With him on the brief were William J. Baer, Assistant Attorney General, U.S. Department of Justice, Kristen C. Limarzi, Steven J. Mintz, Attorneys, Jonathan B. Sallet, General Counsel, Federal Communications Commission, David M. Gossett, Deputy General Counsel, and Jacob M. Lewis, Associate General Counsel.

          Craig L. Briskin and Julie Nepveu were on the brief for amici curiae National Consumer Law Center, et al. in support of the Federal Communications Commission 2015 Omnibus Declaratory Ruling and Order.

          Marc Rotenberg and Alan Butler were on the brief for amici curiae Electronic Privacy Information Center (EPIC) and Six Consumer Privacy Organizations in support of respondents.

          Before: Srinivasan and Pillard, Circuit Judges, and Edwards, Senior Circuit Judge.

          OPINION

          SRINIVASAN, CIRCUIT JUDGE.

         Unwanted robocalls are an all-too-familiar phenomenon. For years, consumers have complained to the Federal Communications Commission about automated telemarketing calls and text messages that they did not seek and cannot seem to stop.

         Congress sought to address consumers' concerns with undesired robocalls in the Telephone Consumer Protection Act of 1991. The TCPA generally prohibits the use of certain kinds of automated dialing equipment to call wireless telephone numbers absent advance consent. The Act vests the Commission with authority to implement those restrictions.

         In this case, a number of regulated entities seek review of a 2015 order in which the Commission sought to clarify various aspects of the TCPA's general bar against using automated dialing devices to make uninvited calls. The challenges encompass four issues addressed by the agency's order: (i) which sorts of automated dialing equipment are subject to the TCPA's restrictions on unconsented calls; (ii) when a caller obtains a party's consent, does a call nonetheless violate the Act if, unbeknownst to the caller, the consenting party's wireless number has been reassigned to a different person who has not given consent; (iii) how may a consenting party revoke her consent; and (iv) did the Commission too narrowly fashion an exemption from the TCPA's consent requirement for certain healthcare-related calls.

         We uphold the Commission's approach to revocation of consent, under which a party may revoke her consent through any reasonable means clearly expressing a desire to receive no further messages from the caller. We also sustain the scope of the agency's exemption for time-sensitive healthcare calls.

         We set aside, however, the Commission's effort to clarify the types of calling equipment that fall within the TCPA's restrictions. The Commission's understanding would appear to subject ordinary calls from any conventional smartphone to the Act's coverage, an unreasonably expansive interpretation of the statute. We also vacate the agency's approach to calls made to a phone number previously assigned to a person who had given consent but since reassigned to another (nonconsenting) person. The Commission concluded that calls in that situation violate the TCPA, apart from a one-call safe harbor, regardless of whether the caller has any awareness of the reassignment. We determine that the agency's one-call safe harbor, at least as defended in the order, is arbitrary and capricious.

         We therefore grant the petitions for review in part and deny them in part.

         I.

         The federal government's efforts to combat unwanted robocalls have spanned nearly three decades, involving two federal agencies and a number of congressional enactments. In the Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994, 15 U.S.C. § 6101 et seq., Congress empowered the Federal Trade Commission to regulate the telemarketing industry. The FTC's measures include a general bar against calling any telephone number on the "do- not-call registry" without consent or an established business relationship. 16 C.F.R. § 310.4(b)(1)(iii)(B); see 15 U.S.C. § 6151(a). This case does not concern the FTC's initiatives.

         This case instead concerns the Federal Communications Commission's efforts to combat unwanted robocalls pursuant to its authority under the TCPA. Some of the Commission's restrictions on telemarketing calls mirror measures established by the FTC. Compare 16 C.F.R. §§ 310.4(b)(1)(iii)(B), 310.4(c), with 47 C.F.R. § 64.1200(c). But the agencies' initiatives also differ in various respects. Of relevance here, only the TCPA specifically restricts the use of an "automatic telephone dialing system" to make calls. 47 U.S.C. § 227(b)(1)(A). Petitioners challenge the Commission's interpretation and implementation of various TCPA provisions pertaining to automated dialing equipment.

         A.

         Congress enacted the TCPA in 1991 based on findings that the "use of the telephone to market goods and services to the home and other businesses" had become "pervasive due to the increased use of cost-effective telemarketing techniques." 47 U.S.C. § 227 note, Pub. L. No. 102-243, § 2(1), 105 Stat. 2394, 2394. "Many consumers, " Congress determined, "are outraged over the proliferation of intrusive, nuisance calls to their homes from telemarketers." Id. § 2(6)-(7).

         The TCPA restricts calls both "to any residential telephone line" and to "any telephone number assigned to a . . . cellular telephone service." 47 U.S.C. § 227(b)(1)(A)(iii), (B). This case solely concerns the latter restrictions on telephone calls to wireless numbers.

         Congress, in that regard, made it "unlawful . . . to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system . . . to any telephone number assigned to a . . . cellular telephone service, " "unless such call is made solely to collect a debt owed to or guaranteed by the United States." Id. § 227(b)(1)(A)(iii). The statute defines an "automatic telephone dialing system" (ATDS, or autodialer) as "equipment which has the capacity-(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers." Id. § 227(a)(1).

         In short, the TCPA generally makes it unlawful to call a cell phone using an ATDS. And an ATDS is 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 those numbers. The general prohibition on autodialer calls to wireless numbers is subject to three exceptions. The central exception for purposes of this case is for calls made with "prior express consent." There are also exceptions for emergency calls and calls made to collect government debts.

         The TCPA vests the Commission with responsibility to promulgate regulations implementing the Act's requirements. Id. § 227(b)(2). The Act also grants the Commission specific authority to fashion exemptions from the general prohibition on autodialer calls to wireless numbers, where the calls are "not charged to the called party." Id. § 227(b)(2)(C). As Congress explained, the FCC "should have the flexibility to design different rules for those types of automated or prerecorded calls that it finds are not considered a nuisance or invasion of privacy." Id. § 227 note, Pub. L. No. 102-243, § 2(13), 105 Stat. 2394, 2395.

         Since the TCPA's enactment, the FCC has issued a series of rulemakings and declaratory rulings addressing the Act's reach. In 2003, for instance, the agency concluded that the statute's restrictions on "mak[ing] any call" using an ATDS encompass the sending of text messages. See In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991 (2003 Order), 18 FCC Rcd. 14, 014, 14, 115 ¶ 165 (2003).

         The Act contains a private right of action permitting aggrieved parties to recover at least $500 in damages for each call made (or text message sent) in violation of the statute, and up to treble damages for each "willful[] or knowing[]" violation. 47 U.S.C. § 227(b)(3). There is no cap on the amount of recoverable damages. The Commission has noted a surge in TCPA lawsuits (including class actions) in recent years, likely attributable in part to the "skyrocketing growth of mobile phones." In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991 (2015 Declaratory Ruling), 30 FCC Rcd. 7961, 7970 ¶¶ 6-7 (2015).

         B.

         In a Declaratory Ruling and Order issued in 2015, the Commission (with two Commissioners dissenting) addressed 21 separate petitions for rulemaking or requests for clarification. In this court, petitioners and intervenors seek review of four aspects of the Commission's order.

         First, the Commission sought to clarify which devices for making calls qualify as an ATDS-i.e., 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." 47 U.S.C. § 227(a)(1). With regard to whether equipment has the "capacity" to perform the enumerated functions, the Commission declined to define a device's "capacity" in a manner confined to its "present capacity." Instead, the agency construed a device's "capacity" to encompass its "potential functionalities" with modifications such as software changes. 2015 Declaratory Ruling, 30 FCC Rcd. at 7974 ¶ 16.

         The Commission also addressed the precise functions that a device must have the capacity to perform for it to be considered an ATDS. The Commission reaffirmed prior orders deciding that "predictive dialers"-equipment that can dial automatically from a given list of telephone numbers using algorithms to predict "when a sales agent will be available"-qualify as autodialers. Id. at 7972 ¶ 10 & n.39. The Commission further explained that a "basic function[]" of an autodialer is to "dial numbers without human intervention." Id. at 7975 ¶ 17. At the same time, the Commission also declined to "clarify[] that a dialer is not an autodialer unless it has the capacity to dial numbers without human intervention." Id. at 7976 ¶ 20.

         Second, the Commission spoke to whether, and when, a caller violates the TCPA by calling a wireless number that has been reassigned from a consenting party to another person without the caller's knowledge. The Act specifically permits autodialer calls "made with the prior express consent of the called party." 47 U.S.C. § 227(b)(1)(A). If the "called party" for those purposes refers to the intended recipient of a call or message, a caller would face no liability when using an ATDS to call a number believed to belong to a consenting party, even if the number in fact has been reassigned to another person who has not consented.

         The Commission, though, determined that the term "called party" refers not to "the intended recipient of a call" but instead to "the current subscriber" (i.e., the current, nonconsenting holder of a reassigned number rather than a consenting party who previously held the number). 2015 Declaratory Ruling, 30 FCC Rcd. at 7999 ¶ 72. But the Commission did not hold a caller strictly liable when unaware that the consenting party's number has been reassigned to another person. Instead, the agency allowed one-and only one-liability-free, post-reassignment call for callers who lack "knowledge of [the] reassignment" and possess "a reasonable basis to believe that they have valid consent." Id. at 8000 ¶ 72.

         Third, the Commission clarified the ways in which a consenting party can revoke her consent to receive autodialer calls. The Commission decided that callers may not unilaterally designate the acceptable means of revocation. It also declined to prescribe its own set of mandatory revocation procedures. Rather, it concluded that "a called party may revoke consent at any time and through any reasonable means"-whether orally or in writing-"that clearly expresses a desire not to receive further messages." Id. at 7989-90 ¶ 47; id. at 7996 ¶ 63.

         Fourth, and finally, the Commission exempted from the autodialer provision's consent requirement certain calls to wireless numbers "for which there is exigency and that have a healthcare treatment purpose." Id. at 8031 ¶ 146. It declined, however, to give the exemption the reach desired by certain parties that are in the business of healthcare-related marketing calls.

         We will take up the challenges to those four aspects of the Commission's 2015 ruling in the same order.

         II.

         Under the Administrative Procedure Act, we assess whether the Commission's challenged actions in its 2015 order were "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). We review the lawfulness of the Commission's interpretations of the TCPA using the two-step Chevron framework. That inquiry calls for examining whether "Congress has directly spoken to the precise question at issue, " and, if not, whether "the agency's answer is based on a permissible construction of the statute." Chevron U.S.A. Inc. v. Nat'l Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984).

         To be lawful, the Commission's challenged actions must also satisfy the Administrative Procedure Act's requirement that they not be arbitrary or capricious. Arbitrary-and-capricious review includes assuring that the agency "engaged in reasoned decisionmaking." Judulang v. Holder, 565 U.S. 42, 53 (2011). Review of agency action for arbitrariness and capriciousness sometimes entails essentially the same inquiry as review of an agency's exercise of statutory interpretation under Chevron's second step. See id. at 52 n.7; Agape Church, Inc. v. FCC, 738 F.3d 397, 410 (D.C. Cir. 2013).

         Applying those standards to petitioners' four sets of challenges to the Commission's 2015 Declaratory Ruling, we set aside the Commission's explanation of which devices qualify as an ATDS, as well as its understanding of when a caller violates the Act by calling a wireless number previously held by a consenting party but reassigned to a person who has not given consent. We sustain, however, the Commission's ruling that a party can revoke consent through any reasonable means clearly expressing a desire to ...


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