On March 16, 2018, the D.C Circuit issued a decision invalidating portions of the FCC’s 2015 TCPA Omnibus Declaratory Ruling and Order. Notably, the decision overturns as “arbitrary and capricious” the FCC’s definition of an automated telephone dialing system (“ATDS”) and the one-call safe harbor for calling a phone number that has been reassigned to a non-consenting person. The decision was not a complete victory for businesses as the D.C. Circuit sustained the FCC’s order on both consumers’ ability to revoke consent and the scope of the “time-sensitive healthcare call” exemption.

The FCC’s Definition of ATDS is Arbitrary and Capricious

In the 2015 Order, the FCC defined an ATDS as equipment that contained the potential “capacity” to dial random or sequential numbers, even if that capacity could be added only through specific modifications or software updates, so long as the modifications were not too theoretical or too attenuated. In crafting this definition, the FCC noted that smartphones could be included within the definition and only categorically ruled out a rotary-dial telephones.

In striking down the 2015 Order, the court made it clear that under the current definition of an ATDS, anyone with a smartphone, which the court estimates to be 80% of the population, is at risk of violating the TCPA because “all smartphones, under the Commission’s approach, meet the statutory definition of an autodialer.” Under the FCC’s interpretation, if a person sent a group text message to ten acquaintances without obtaining their express consent, he or she would be liable for ten distinct violations of the TCPA, with a minimum damage recovery of $5,000. In sum, the court held that “[i]t cannot be the case that every uninvited communication from a smartphone infringes federal law, and that nearly every American is a TCPA-violator-in-waiting, if not a violator-in-fact.” The D.C. Circuit held that, if the 2015 Ruling does not encompass smartphones, then the FCC failed to “articulate a comprehensible standard.”

In striking down the FCC’s sweeping definition of an ATDS, the court ordered the FCC going forward to take into account whether a system actually used autodialer functionality or whether it was merely possible to download software to convert a telephone into an ATDS. Additionally, the court held that the FCC must determine whether the definition of an ATDS requires that a system “must itself have the ability to generate random or sequential telephone numbers,” or whether it is “enough if the device can call from a database of telephone numbers generated elsewhere.” Finally, the court left open the issue of human intervention. Based on the decision, if the FCC departs from the statutory requirement of using a random or sequential number generator, it must also tackle the issue of human intervention.

In light of Chairman Ajit Pai’s expression of support for business-friendly reforms to the TCPA, it is likely that the D.C. Circuit’s ruling may result in real change in this area of the law.

The FCC’s One-Call Safe Harbor and Definition of “Called Party” are Arbitrary and Capricious

The court then turned its attention to the distinct challenges raised by the reassignment of cell phone numbers. Under the 2015 Order, a caller could place only a single call to a reassigned number before running afoul of the TCPA. Per the 2015 Order, a “called party” was the current subscriber, i.e. the consumer assigned the number and billed for the call.

The D.C. Circuit rejected both the one-call safe harbor for calling reassigned numbers and the definition of “called party.” The court held that issues related to calls or texts to reassigned numbers where the prior owners had provided consent to be contacted, present a looming challenge because “there is no dispute that millions of wireless numbers are reassigned each year.”

The court set aside the FCC’s post-reassignment interpretation on the ground that a one-call safe harbor is “arbitrary and capricious.” In reaching this result, the court focused on the FCC’s own determination that callers must be able to reasonably rely on the consent provided by former subscribers when calling or texting. Based on the record before it, the court held that it was not reasonable to hold that placing a single call to a reassigned number was likely to afford a caller reasonable notice that the number was one of the millions of numbers reassigned each year. By striking down the one-call safe harbor and the definition of “called party,” the court provided defendants with a potential defense to avoid liability for calling reassigned numbers if a defendant can establish that its reliance on the former subscriber’s consent was reasonable at the time it placed calls to the new subscriber.

Critically, in addition to striking down the one-call safe harbor, the court set aside the definition of “called party” as the “current subscriber” on the grounds that it would impose strict liability for calls to reassigned numbers. Thus, it appears that defendants may once again argue that “called party” means “intended recipient” when defending against TCPA claims based on calls or texts to reassigned numbers.

Consumers May Still Revoke Consent in Any “Reasonable” Manner

In upholding consumers’ right to revocation of consent, the court set limits. As an initial matter, a consumer may only revoke consent using “reasonable” means. The reasonableness of the revocation is governed by a totality-of-the-circumstances test. Thus, if a consumer uses creative revocation techniques or declines to follow reasonable revocation procedures set forth by the caller, the revocation may not be reasonable or permissible. Moreover, the D.C. Circuit emphasized that the FCC’s ruling “does not address revocation rules mutually adopted by contracting parties,” meaning that callers and consumers may contractually agree to revocation mechanisms.

TCPA Consent Standards for Healthcare Calls Upheld

The D.C. Circuit declined to expand the scope of calls placed to wireless numbers without express consent “for which there is exigency and that have healthcare treatment purposes.” Under the 2015 Order, calls placed to consumers for certain purposes, including, appointment reminders, pre-operative instructions and lab results do not require consent. In upholding the contours of the 2015 Order, the court declined to except “advertisements, solicitations and post-treatment financial communications” from the consent requirements. The court held that billing communications are not made for “emergency purposes.”

Conclusion

As of now, the state of the TCPA is in flux. Under Chairman Pai, we are cautiously optimistic that the new FCC regime will likely advance more business-friendly rules. We will continue to monitor changes to the law and provide timely updates.