Distilling the DC Circuit's TCPA Decision in ACA International v. FCC

In a case we have been tracking closely, a unanimous panel of the D.C. Court of Appeals set aside two key determinations of the FCC's interpretations of the Telephone Consumer Protection Act. In ACA International, et al. v. FCC, Judge Sri Srinivasan found that the FCC's "explanation of what qualifies" as an automated telephone dialer service (ATDS) and its one-call safe harbor for calling a phone number that has been reassigned to a non-consenting person was arbitrary and capricious. However, the Court sustained the FCC's rulings on revocation of consent "through any reasonable means clearly expressing a desire to receive no further messages" and the scope of the exemption for "time-sensitive healthcare calls."

ACA International had petitioned the D.C. Circuit to review the FCC's interpretation of the definition of what devices qualify as an ATDS. Specifically, should the definition focus on a device's "present capacity" or its "potential functionalities or future possibilities"? The FCC focused on the latter, resulting in multiple legal challenges throughout the country, and split decisions by several district courts. The Court, finding the FCC's interpretation as unnecessarily expanding the TCPA, particularly as it would include any smartphone with the addition of a downloaded app or software into an ATDS, the Court was concerned about anomalous outcomes that Congress did not intend. For example, the Court reasoned, a person wishing to send an invitation to an individual they had recently met and obtained cell phone contact information for, would "ostensibly commit a violation of federal law by calling or sending a text message from her smartphone." Such an act would expose the individual sending the invite to a $500 penalty for each message or call. The Court suggested that Congress could not have contemplated the applicability of the restrictions of the TCPA to a commonplace device used by millions every day. Nonetheless, the Court opened the door by allowing the FCC to "fashion exemptions" preventing the unintended outcomes that the Court sought to protect.

The Court also tackled the FCC's competing views regarding a device's ability to generate and dial "random or sequential numbers." On one hand, the FCC's rulings have included devices that generate and dial random or arbitrary list of numbers; on the other hand, the FCC's rulings also have included equipment that lack such capacity. The Court ruled that the FCC may adopt either interpretation but cannot "espouse both competing interpretations in the same order." In this regard, the Court found that the FCC's prior approaches to the issue failed to "satisfy the requirement of reasoned decision making." This lack of clarity led the Court to set aside the FCC's interpretations in this respect but the Court did not elaborate further.

In setting aside the FCC's finding of a one-call safe harbor as arbitrary and capricious, the Court found that the FCC's "reasonable reliance" justification for the one-call safe harbor fell short of what is required: "[W]hy does a caller's reasonable reliance on a previous subscriber's consent necessarily cease to be reasonable once there has been a single, post-reassignment call?" The Court noted that the FCC could have provided further justification for its one-call mandate but having not provided any, it acted arbitrarily. The Court did note that the FCC was already exploring methods for avoiding the one-call safe harbor rule and thus, the ruling on this point, may well be mooted by new regulations from the FCC. Relatedly, the Court also upheld the FCC's interpretation of "called party" as the "current subscriber" in situations where a phone number has been reassigned. Adopting the Seventh Circuit's reasoning in Soppet v. Enhanced Recovery Co., the Court concurred that the phrase "intended recipient" does not appear in the TCPA and, therefore, the FCC was not "compelled" to interpret the "called party" as the "intended recipient."

The Court did reject ACA's arguments with respect to the means of revoking prior express consent, upholding the FCC's determination of not allowing "callers to designate the exclusive means of revocation" but leaving such means of revocation to the called party by any reasonable means, either orally or in writing, so long as it "clearly expresses a desire not to receive further messages." The Court also upheld the FCC's exemption for calls that have a "healthcare treatment purpose" such as medical appointments and reminders, check-ups, hospital instructions, lab results, and prescription notifications, but did not allow an exemption to include calls for "accounting, billing, debt-collection or other financial content." Petitioner Rite Aid argued that such a partial exemption conflicted with the Health Insurance Portability and Accountability Act (HIPAA), but the Court did not agree because the FCC "did not restrict communications that HIPAA requires be permitted to flow freely."

Of all of the rulings from this long-awaited decision, narrowing the definition of what constitutes an ATDS significantly impacts the industry because it will be harder to sue under the TCPA. With respect to the other rulings, the FCC will most likely embark on new exemptions to address the problematic situations identified by the Court.