Federal Appeals Court Calls Off Agency’s Robocall Ruling

“Are robocalls driving you nuts?”

Probably. Every second, one thousand automatic calls are dialed in the United States—amounting to about 98 million robocalls every day. Hundreds of thousands of consumers have complained, prompting federal agencies to work to reduce these rampant calls.

But a federal appeals court recently rejected one agency’s automated call restrictions. Regulated parties—led by ACA International, an association of credit collection professionals—asked the U.S. Court of Appeals for the District of Columbia Circuit to review four parts of a 2015 order by the U.S. Federal Communications Commission (FCC), in which the agency interpreted the law governing robocalls. In response, the D.C. Circuit struck down two of the FCC’s interpretations.

Specifically, the court invalidated the FCC’s interpretation of which devices it regulates and its interpretation of the provision about calling people who have switched their cell phone numbers. But the court approved the FCC’s explanation of how users can withdraw consent to robocalls as well as the FCC’s clarification on the kinds of healthcare calls exempt from legal restrictions.

The court explained that the Telephone Consumer Protection Act of 1991 (TCPA) prohibits people from using automatic telephone dialing systems to call or text message people on their cell phones except in certain situations, such as where the recipient has given “prior express consent” or in cases of an emergency. The TCPA authorizes the FCC to make regulations to enforce this prohibition against automatic dialing systems, which the statute defines as equipment that has the capacity to “store or produce telephone numbers to be called” and “to dial such numbers.”

From 2011 to 2014, numerous regulated entities—including ACA International—had asked the FCC to interpret certain provisions of the TCPA. In 2015, the FCC issued an order addressing their requests, four parts of which the regulated entities then challenged and the D.C. Circuit reviewed in ACA International v. FCC.

In ACA International, the court considered whether the FCC’s interpretations demonstrated “reasoned decisionmaking” under the Administrative Procedure Act’s “arbitrary and capricious standard.” The court also incorporated Chevron analysis—here, whether the FCC provided a “permissible” interpretation of the TCPA—into its review for reasoned decisionmaking.

The first issue addressed by the D.C. Circuit centered on the FCC’s interpretation that “autodialers” includes any device that can produce and then dial telephone numbers without human assistance. The court said this “expansive” definition would inevitably include smartphones, since a user can easily download an app or other software that could turn the phone into an autodialer. By that logic, the court reasoned, the TCPA’s prohibitions would “assume an eye-popping sweep,” given smartphones’ ubiquity. This sweep does not align with the purpose of the TCPA, which seeks to limit “hundreds of thousands” of telemarketing callers—not “hundreds of millions of everyday callers.” For this reason, the court held that the FCC’s interpretation was not reasonable and could not be supported even under Chevron’s deferential standard of review.

The court offered an illustrative hypothetical. A person who wants to invite someone to a party would break the law if she asks a mutual friend for the invitee’s cell phone number and then texts the invitee without “prior express consent” to do so. If she sent a group text message to 10 people using the same method, she would have violated the TCPA 10 “distinct times” and would have to pay at least $5,000 in penalties under the TCPA. The court held that this “anomalous” result from such a common act rendered the FCC’s interpretation “unreasonable” and “impermissible.”

The court also rejected the FCC’s contention that smartphones would not necessarily count as automated dialers, a finding the court said was arbitrary and capricious. Such an interpretation would create “differential treatment of seemingly like cases” between smartphones and other autodialers, even though the devices are functionally the same.

“In short,” the court summarized, the FCC’s interpretation was troubling due to its “lack of clarity” in defining the traits of autodialers, which the “unreasonableness” of the FCC’s “expansive understanding” of autodialers exacerbated.

The second main issue centered on the FCC’s explanation that TCPA violations will automatically result from robocalls to a “reassigned” number whose new user has not given consent to such calls—even if the number’s previous user had consented. The FCC allowed each caller one strike: If a caller dials a reassigned number without knowing of the reassignment but becomes aware of it in that one phone call, the caller avoids liability.

Vacating the FCC’s ruling, the court held that this “one-call safe harbor” was arbitrary and capricious. The FCC failed to articulate why only one attempt—as opposed to any other number of attempts—at reaching a recipient would allow the caller to become aware of a reassignment. The court reasoned that the caller might need to make multiple attempts to do so, especially if the recipient does not respond to the first call or text message. The court reasoned that the caller cannot “divine” who the recipient will be or whether the recipient grants consent.

The court did not strike down the FCC’s order in its entirety, though. The panel of judges upheld the FCC’s declaration that recipients can withdraw their consent by a reasonable method of their choosing. This rulemaking was not arbitrary and capricious because it relieves callers of any obligation to follow a specific process to revoke consent, the court explained.

Finally, the court endorsed the FCC’s decision to limit exemptions to the prohibition on robocalls to “emergency purposes,” which the FCC defines as “any situation affecting the health and safety of consumers.” The FCC determined that even calls about examination reminders or lab results fall into the “emergency purposes” category, since they involve “exigency” and implicate the “public interest.” Rite Aid, one of the parties to the case, disputed the FCC’s decision not to extend the exemption to calls about healthcare marketing or billing. But the court accepted the FCC’s definition, noting that “financial communications” do not fall within the exemption category for emergencies under the TCPA.

The court’s decision in ACA International, decided on March 16, 2018, immediately made precedential waves. Just weeks later, a federal district court in Nevada cited it to hold that a “Manual Clicker Application” device—which allow individuals to click on the recipients they wish to dial—does not qualify as an autodialer under the TCPA.

Nevertheless, federal agencies continue their fight against robocalls. Separate from its order, the FCC joined forces with the Federal Trade Commission to hold a “Stop Illegal Robocalls Expo” in April, with the aim of identifying technological methods to crack down on the practice.