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_________________________ ____________________

The Kennedy Privacy Law Firm 1050 30th Street, NW

Washington, DC 20007

www.kennedyonprivacy.com

Charles H. Kennedy

Phone: (202) 250-3704

Mobile: (202) 450-0708

ckennedy@kennedyonprivacy.com

February 21, 2017

eMarketing Newsletter

The TCPA in 2017: What’s Next?

In 2015 the FCC, over the objection of its two

Republican commissioners, adopted a

strained and harmful reading of the TCPA’s

autodialer restriction.1 According to its

Omnibus Order released in July of that year,

an autodialer is any device with the potential

capacity to function as an autodialer,

including a smartphone of the kind used by

millions of consumers every day; and the

potential capacity to dial numbers

automatically from a database qualifies as

autodialer functionality, even if the numbers

were not generated randomly or in sequence.

The Order also declares that a call to a person

to whom a customer’s number was

reassigned can be a TCPA violation, even if

the caller had no reason to know the number

had been reassigned; and businesses must

1 Rules and Regulations Implementing the Telephone

Consumer Protection Act of 1991, CG Docket No.

02-278, WC Docket No. 07-135 (Declaratory Ruling

and Order released July 10, 2015). (I’ll refer to this

order here as the Omnibus Order, the July 2015

Order or simply the Order.) 2 The TCPA’s autodialer restriction prohibits the use

of an automatic telephone dialing system (“ATDS” or

“autodialer)” to make non-emergency calls to certain

telephone numbers without the prior express consent

honor opt-out requests made in any way

consumers decide to make them.2

The Order was a blow to businesses’ ability

to engage in efficient consumer

communications, and parties affected by the

Order promptly sought relief in the D.C.

Circuit Court of Appeals.3

The New Year dawned more hopefully, with

many of us encouraged by the prospect of a

Republican FCC. Ajit Pai, the newly-

appointed chairman, is a harsh critic of the

2015 Order. His fellow Republican

Commissioner, Michael O’Rielly, has

expressed similar views, and the third

Republican commissioner is likely to agree

with his or her Republican colleagues. In

time, a well-crafted petition or petitions to the

of the called party. Mobile telephone numbers are

one of the prohibited categories, along with

emergency, healthcare-related and other classes of

numbers identified in the statute. 47 U.S.C. §

227(b)(1)(A). 3 ACA International et al. v. Federal

Communications Commission and United States of

America, No. 15-1211 (and consolidated cases)

(pending in the United States Court of Appeals for

the District of Columbia Circuit) (“ACA”).

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new Commission might result in rulings that

undo the damage done in 2015.

That said, the Commission will see no point

in issuing rulings that might have to be

reconsidered almost immediately in light of a

court of appeals decision. Accordingly,

petitions to the Commission aren’t likely to

be fruitful until after the pending judicial

challenge to the Order is decided (which

could happen as early as next month).

When the court does rule, the time will be

ripe to bring petitions to the FCC; but the

content of those petitions will be determined

by how the court rules and how it explains its

ruling.

As an example of how this multi-dimensional

chess game might play out, let’s focus on the

FCC’s challenged interpretation of the

autodialer definition.4 What options does the

court have in dealing with this part of the

FCC Order, and how will the court’s choice

influence our next steps at the FCC, in the

lower courts and in our own compliance

programs?

The petitioners in ACA have challenged two

elements of the Commission’s ATDS

interpretation: the “capacity” element and the

“function” element. The first is the FCC’s

finding that a device is an ATDS even if it has

only the potential capacity – not necessarily

the present capacity – to perform ATDS

functions. The second is the FCC’s finding as

to what the ATDS functions are: specifically,

its finding that the ATDS category includes

devices that dial numbers retrieved from a

4 The TCPA defines an “automatic telephone dialing

system” 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.” 47 U.S.C. § 227(a)(1). 5 In its brief to the court, the FCC tried to take the

function issue out of play on the ground that it was the

database, but that do not generate those

numbers randomly or in sequence.5

The court can dispose of these two issues in

any of several ways. It can uphold both

Commission findings; it can rule that both

findings are erroneous and remand them to

the FCC for further proceedings; or it can

uphold one finding while remanding the

other. And, if the court remands one or both

of the Commission’s findings, it can do so

with or without vacating (that is, immediately

nullifying) the finding or findings.

Let’s look at each of these options, and its

consequences for us, in turn.

The Court Upholds Both Findings

If the court upholds both the capacity finding

and the function finding, the unsatisfactory

status quo will continue. Affected businesses

will have no choice but to go on assuming

that automated dialing from a database is an

autodialer function, and that devices with

even the potential capacity to dial numbers

retrieved from a database qualify as

autodialers. TCPA lawsuits based upon the

2015 Order will go forward, and courts

hearing those lawsuits will continue to defer

to the FCC’s reading of the autodialer

definition.

However, a court decision upholding the

Commission’s findings will not prevent the

Commission from acting to change or even

reverse those findings in the future. The court

is unlikely to say that the FCC’s capacity and

function findings are the only reasonable

interpretations of the autodialer definition –

at most, it will say that those findings are a

subject of previous Commission orders that were not

challenged in the petition for review. If the court

accepts this claim, then it will rule only on the capacity

question, leaving the Commission’s function

interpretation in place until such time as the

Commission, itself, decides to overturn it.

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permissible interpretation of the statute,

without ruling out the possibility that

different interpretations also might be

permitted.6 If the court’s decision takes this

form, the FCC will be free to adopt different

findings that also are consistent with the

statute, and affected parties will be free to ask

it to make such findings.

Post-Decision Action Items if Both Findings

are Upheld:

Petition the FCC to reconsider and

reject the 2015 Order’s

misinterpretation of the autodialer

definition.

The Court Remands Both Findings without

Vacatur

Next, suppose the court of appeals rejects

both of the Commission’s autodialer

6 The court is likely to apply the analysis set out in

Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984)

(“Chevron”), which requires the court first to decide

whether the TCPA autodialer definition is

ambiguous. If the court finds that the definition is not

ambiguous, it will decide whether the Commission’s

reading is permitted without giving any deference to

the Commission’s expertise. However, if (as seems

likely here) the court finds that there is some

ambiguity in the autodialer definition, it will uphold

the Commission’s interpretation unless it finds that

interpretation to be arbitrary or lacking a rational

findings. Suppose, also, that the court sends

those findings back to the FCC (i.e., remands

the findings), but permits the findings to

remain in effect pending further FCC action.

A remand of this kind, known as a remand

without vacatur, typically is ordered when the

court finds that the agency’s action is not

necessarily contrary to the statute, but has

been inadequately explained or based on a

defective agency process.7

A remand without vacatur will open a period

of uncertainty. The FCC will be permitted to

go on enforcing the autodialer rule as

interpreted in the 2015 Order, but will be on

notice that it must withdraw its

interpretations or base them on sounder

reasoning or procedure. Businesses that

engage in automated calling will be required

to continue to follow the 2015 Order pending

further FCC action. Defendants in TCPA

class action suits that are based upon the

conclusions of the 2015 Order might wish to

bring motions to dismiss those lawsuits in

light of the ACA court’s rejection of the

Order, but plaintiffs will resist such motions

on the ground that the Order remains in

effect.

The awkwardness will not be resolved until

the FCC takes further action in response to

the court of appeals’ decision. The

Commission might adopt a new order that

withdraws the erroneous findings of 2015; or

the Commission might choose to confirm the

conclusions it reached in the 2015 Order, but

basis. A decision for the Commission under this

second step of the Chevron test does not mean that

the FCC’s reading is without fault or that the court, if

it substituted its own judgment for that of the

Commission, would come to the same conclusion.

Such a decision does not rule out the possibility that

different Commission findings might have been at

least as reasonable as those under review. 7 See Kristina Daugirdas, “Evaluating Remand

without Vacatur: a New Judicial Remedy for

Defective Agency Rulemakings,” 80 N.Y.U. L. Rev.

278 (2005) (“Daugirdas”).

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base those conclusions on a rationale that

corrects the flaws pointed out by the D.C.

Circuit. The FCC likely will invite public

comments before abandoning or

reconfirming its conclusions of 2015.8

Post-Decision Action Items if Court

Remands both Findings without Vacatur:

Affected parties should ask the

Commission to initiate remand

proceedings as soon as possible.

Affected parties should participate

actively in remand proceedings to

encourage adoption of a sensible

reading of the autodialer definition.

8 Unless the court of appeals sets a deadline, the FCC

will be under no compulsion to act promptly.

Aggressive petitioning by affected parties will be in

order if remand proceedings are delayed. 9 “The D.C. Circuit does not [remand without

vacatur] where it finds that the agency’s rules violate

the statute that the agency is administering. In this

category of cases, new legislation would be a

prerequisite for reenacting the same rule.”

Daugirdas, supra at 283.

The Court Remands Both Findings with

Vacatur

The court also could enter a remand order that

vacates the Commission’s findings

concerning the autodialer definition. This

option, known as a remand with vacatur,

would deprive the Commission’s autodialer

findings of all authority. The Commission

then could not lawfully bring TCPA

enforcement actions based upon its 2015

findings; affected businesses could consider

placing calls to mobile numbers, using

devices that dial automatically from

databases, without first obtaining customers’

prior express consent; and TCPA class action

defendants could move to dismiss complaints

that are based upon the reading of the

autodialer definition adopted in the 2015

Order. None of these consequences would be

contingent on further Commission action.

Also, depending upon the exact language of

the court of appeals’ decision, it might not be

possible for the Commission to rehabilitate

the findings of the 2015 Order in the

proceedings on remand. A vacatur order is

likely to state that the Commission’s reading

of the autodialer definition violates the

language of the TCPA. The FCC will not be

able to cure this problem simply by

supporting the same findings with better

reasoning.9 If the Commission chooses to

make another attempt at construing the

autodialer definition, it must do so within the

limits of the court’s decision.10

10 So, for example, if the court decided that “capacity”

in the TCPA definition refers only to present capacity,

the Commission could not resurrect its “future

capacity” standard using different reasons. The best

reasoning in the world cannot support a finding that

violates the statute. Similarly, if the court rules that

dialing of numbers retrieved from a database is not an

autodialer function within the TCPA definition, the

FCC will not be able to resurrect its contrary reading

of the statute.

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Post-Decision Action Items if Court

Remands both Findings with Vacatur:

Reassess compliance measures in

light of court’s decision.

Participate in FCC remand

proceedings.

Assess possible motions to dismiss

pending TCPA class-action suits.

The Court Remands the Capacity Finding

without Vacatur, Upholds the Function

Finding

Nothing requires the court to treat both of the

Commission’s autodialer findings the same:

the forthcoming order might uphold the

capacity finding while rejecting the function

finding, or uphold the function finding while

rejecting the capacity finding. Just to add to

the confusion, the rejected findings might be

remanded with or without vacatur.

Suppose the capacity finding is remanded

without vacatur while the function finding is

upheld. The immediate result will be that

both findings remain in effect pending further

Commission proceedings. During that

interim period, the enforcement, compliance

and class-action landscape will be as if the

2015 Order had been entirely upheld.

At some point after the court’s decision is

entered, however, the FCC likely will initiate

proceedings on remand concerning the

capacity finding. Those proceedings could

result in the Commission’s abandonment of

the capacity finding.

If the FCC does not also overturn the 2015

Order’s function finding, we might find

ourselves subject to the function finding but

not the capacity finding. This could mean that

an autodialer is any device with the present

capacity to dial from a database. This will

confer no significant benefit compared to the

status quo, because most dialers in use today

have the present capacity to dial numbers

retrieved from a database. Accordingly, it

will be important for affected parties not only

to participate in the “capacity remand,” but

also to urge the Commission to overturn the

function finding.

Post-Decision Action Items if Court

Remands the Capacity Finding without

Vacatur, Upholds Function Finding:

Urge FCC to commence remand

proceedings concerning capacity

finding as soon as possible.

Participate in remand proceedings

concerning capacity finding.

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Petition the FCC for a declaratory

ruling that overturns the function

finding.

The Court Remands the Capacity Finding

with Vacatur, Upholds the Function Finding

As noted earlier, the D.C. Circuit is unlikely

to remand with vacatur unless the remanded

finding violates the statute. In such a case, the

Commission will have no choice but to

abandon the finding.

This scenario would create an environment in

which the capacity finding no longer applied.

As noted earlier, however, the persistence of

the function finding would create an

unsatisfactory compliance and litigation

environment, and petitions would need to be

brought before the FCC to abandon both

findings.

Post-Decision Action Items if Court

Remands Capacity Finding with Vacatur and

Upholds Function Finding:

Reassess compliance practices in

light of court’s decision.

Participate in FCC remand

proceedings.

Assess possible motions to dismiss

TCPA class-action suits that rely

upon capacity finding.

Bring FCC petitions to overturn

function finding.

The Court Remands the Function Finding

without Vacatur, Upholds the Capacity

Finding

This scenario also leaves the present

environment in place until the FCC

concludes further proceedings. If the

Commission decides on remand to withdraw

the function finding, an autodialer will be any

device with the potential capacity to generate

numbers randomly or in sequence, but will

not include any device with the potential

capacity to dial from a database. The category

also will include any device with the present

capacity to generate numbers randomly or in

sequence and to dial those numbers. This

would be an improvement over the present

environment, but interested parties should

press the FCC to abandon both findings.

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Post-Decision Action Items if Court

Remands Function Finding without Vacatur,

Upholds Capacity Finding:

Assess compliance measures in light

of court’s decision.

Participate in FCC remand

proceedings re function finding.

Petition the FCC for a declaratory

ruling that overturns the capacity

finding.

The Court Remands the Function Finding

with Vacatur, Upholds the Capacity Finding

In this case, the function finding loses effect

immediately, leaving us with an environment

in which an autodialer is any device with the

potential capacity to generate numbers

randomly or in sequence and to dial those

numbers, but does not include a device with

the present or potential capacity only to dial

numbers from a database. This result will

improve very little on the status quo, because

plaintiffs in TCPA suits will continue to raise

questions of fact about the potential

capabilities of the devices used by

defendants. Accordingly, affected parties

will want to press the FCC for a declaratory

ruling that abandons the 2015 Order’s

capacity finding. At the same time, affected

parties should assess whether this limited

victory permits any change to the parties’

compliance practices, or creates an opening

for motions to dismiss pending TCPA

lawsuits that depend upon the function

finding.

Post-Decision Action Items if Court

Remands the Function Finding with Vacatur,

Upholds Capacity Finding:

Petition FCC for declaratory ruling

that overturns the capacity finding.

Consider possible changes to

compliance practices in light of

court’s rejection of function finding.

Consider possible motions to dismiss

pending TCPA class-action suits in

light of court’s rejection of function

finding.

Wild Cards

The scenarios we have explored here are a

rough guide to the options affected parties

might have after the court rules in the ACA

case. The options we actually confront,

however, might vary from these scenarios,

depending upon how the court frames the

issues and articulates its findings. Courts

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sometimes do not strictly follow the

formulation of the issues as offered by the

parties, and sometimes do not express their

disposition of the issues with the clarity we

might desire. That said, the discussion here

should give a fair idea of the decisions we

will face during the remand proceedings and

beyond.

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____________________________________

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I’m also interested in receiving questions and

comments.