Hobbs Act On the Ropes in the Eleventh Circuit!: Panel Rejecting Solicited Fax TCPA Rule Absolutely Torches Hobbs Act in Published Ruling

Well that was unexpected.

The Circuit Court of Appeal that brought the nation’s strongest rebuke of a district court failing to honor Hobbs Act jurisdiction in a TCPA appeal— see Mais v. Gulf Coast Collection Bureau, 768 F.3d 1110 (11th Cir. 2014)—just turned around and all but eviscerated the Hobbs Act in a new TCPA appeal.

Talk about a curveball. I am somewhat stunned.

While the decision in Gorss Motels, Inc. v. Safemark Systems, Inc., Case Nos. 18-12511, 18-15232, (11th Cir. 2019) is ostensibly about the fitful death of the FCC’s solicited fax rule—more on that below—it is actually a continuation of the battle between the various branches of government launched in PDR ResourcesThe ruling is here: Gorss Decision In 11th Circuit

As I have been saying for some time, the TCPA is a pawn in a huge power struggle between the Courts and Congress (through delegated authority to agencies) over the reach and interpretation of statutes. Although the stated position of the United States Supreme Court remains that Congress—again through agencies using delegated power—continues to get to dictate the meaning of statutes, four justices of the Supreme Court have been busy heaping scorn on that principle over the last few weeks. Those opinions have not gone unnoticed in the Eleventh Circuit it appears.

In a concurring opinion that tracks virtually word for word—and certainly point by point— the anti-deference analysis of dissenting justices in PDR Resources, three Eleventh Circuit circuit judges argue and urge:

Our precedents’ interpretation of the Hobbs Act ignores the statutory context, generates absurd results, and raises serious constitutional doubts. In the earliest appropriate case, we should correct our mistake en banc.

Wow.

So, what exactly is the Hobbs Act? Its a statute that says district courts lack the jurisdiction to set aside or vacate actions taken by the FCC. In TCPA cases the Hobbs Act is of critical importance because it gives the FCC binding power to interpret and implement the act–providing some stability to TCPAWorld. In Mais the Eleventh Circuit Court of Appeal seemingly cemented the importance of FCC TCPA rulings, finding that any refusal by a district court to apply an FCC TCPA order necessarily violates the Hobbs Act and is invalid. But in PDR Resources the Supreme Court subsequently suggested that not all FCC orders are entitled to deference, and four Justices urged outright dismantling of Hobbs Act protections for any FCC orders in private suits.

The concurring opinion in Gorss picks up where the PDR Resources dissent leaves off, and goes on to explain why the Hobbs Act is an absurd little animal that ought not be mechanically applied. The most powerful argument against the doctrine of Mais is that a court does not actually set aside or invalidate an FCC ruling by applying a different rule of law in a case—sort of like a successful “as applied” constitutional challenge does not actually deem a statute unconstitutional in all of its applications— and thus a court making a determination contrary to an agency in a pending suit does not hamper the jurisdictional bar imposed by the Hobbs Act. But the panel dresses up its position with other arguments related to the statutory scheme and sprinkles in some separation-of-powers flair for good measure.

While the official panel ruling does not dismiss the Hobbs Act, it does yet make gratuitous mention of the dissents in PDR Resources to the effect that the Hobbs Act might not actually prevent review of FCC action by district courts after all.  This is all so entirely fascinating, and the vehicle used to enable the court’s review is absolutely perfect—a repeat TCPA player trying to use the Hobbs Act as a shield to thwart retroactive application of a district court ruling setting aside prior agency action. Que bella.

Let’s break this thing down a bit.

We’ve recounted time, and time, and now time again, the misadventures of Gorss Motels, Inc. in its repeated effort to hold companies liable for solicited faxes that lack certain previously required opt out language. I’ve also told the tale of the FCC’s now-defunct solicited fax rule a few times already but, in essence, the rule required faxers to include opt out language in all marketing faxes—even those that that were solicited. But Congress never gave the FCC the power to regulate solicited faxes. So the D.C. Circuit Court of Appeal struck down the rule. And then the FCC withdrew the rule the day after the Supreme Court granted cert. in PDR Resources, challenging the application of a related-but-separate portion of the solicited fax rule. Unsurprisingly, therefore, Gorss Motels, Inc.’s repeated certification bids leveraging the now-defunct rule have failed—whether or not the faxes at issue to class members were solicited is an individualized issue.

But in true never-give-up and never-think-things-through fashion, Gorss Motels, Inc. took its latest certification bid on interlocutory appeal to the Eleventh Circuit in a case culminating in the decision in Gorss Motels, Inc. v. Safemark Systems, Inc., Case Nos. 18-12511, 18-15232, (11th Cir. 2019). The procedural posture here is just delicious. With the appeal bid pending the district court refused to stay the proceedings below. Then the FCC withdrew the solicited fax rule. The next day the district court issued summary judgment against Gorss Motels finding that it had consented to the faxes at issue. Then Gorss appealed the summary judgment ruling, resulting in the Eleventh Circuit combining both appeals and ultimately—as discussed below—ruling that the district court properly granted summary judgment to the Defense, thus mooting the original appeal from the certification ruling.

Follow all of that? Good. Then let’s talk merits.

First the appellate court determined that the district court properly concluded the faxes were solicited in nature. Gorss Motels had entered into a franchise agreement with the faxer that specifically authorized affiliates to share information with them. Since the agreement did not limit the method of transmitting that information, faxes from affiliates were permitted-including the faxes at issue from Safemark. Importantly, the Court ruled that the subjective intention and understanding of Gorss Motel’s owner regarding the manner in which information might be shared was irrelevant; the objective interpretation of the agreement controlled.

But all of that is small potatoes. With the key substantive issue decided against it, Gorss Motels decided to shoot the moon and argue that the FCC’s old-and-now-withdrawn solicited fax ruling was somehow still binding. Its rationale? The Hobbs Act! In Gorss Motel’s view of the world, the district court was stuck applying the FCC’s ruling because it didn’t matter if the D.C. Circuit Court of Appeal had set it aside or not—jurisdictionally it was bound to follow the vacated rule.

Gross right?

Unsurprisingly the majority opinion cast a little scorn on such a mechanical application of the Hobbs Act, but the concurring judges recognized the opportunity for exactly what it was—a perfect fringe case demonstrating the horrors of the Hobbs Act in application. Even a vacated FCC rule might be deemed binding under current Eleventh Circuit precedent, thus presenting a surefire rational for setting aside the rule. (Ironically this is sort of like an “as applied” challenge to the Hobbs Act being used to set aside the Hobbs Act in all of its applications, which is exactly what the circuit judges suggest the earlier Eleventh Circuit panel misconstrued district court action as accomplishing in Mais, but that’s too meta for this blog.)

But the PDR Resources analysis did not end up being dispositive. Rather the Court traced the history of the withdrawal of the solicited fax rule by the FCC following the D.C. Circuit Court of Appeal’s action in Bais Yakoov and concludes the rule with withdrawn. As such, the Court finds rather starkly:

The solicited-fax rule no longer stands as an operative regulation.

With no FCC rule to defer to, the Eleventh Circuit panel was deprived of its vehicle to invalidate the Hobbs Act and so resigns itself to so very much dicta on the subject. And so the FCC appears to have saved itself from a ruling depriving its orders of binding effect in the Eleventh Circuit by withdrawing a portion of the same rule that four justices of the Supreme Court would later use to suggest those rulings lacked binding effect to begin with. (Proving once and for all that we are in the Matrix.)

Never acknowledging defeat (and apparently blissfully unaware of the much larger forces at work here) Gorss Motels fought on arguing that that the FCC’s elimination of the solicited fax rule only applies prospectively because… well its not exactly clear why that would be the case. And it isn’t. The Eleventh Circuit Court of Appeal swiftly rejects the “prospective only” argument and concludes the FCC plainly intended its withdrawal of the solicited fax rule to have retroactive impact. As the Court addressed the issue: “The Commission did not merely determine that the solicited-fax rule was bad policy and should be repealed; instead, it accepted the holding of Bais Yaakov that the solicited-fax rule was invalid and, as a result, was never legally in force at all.”

This last piece, of course, is critically important in the context of the current public notice proceeding following the ACA Int’l court’s rejection of the 2015 TCPA Omnibus. Just as the FCC’s solicited fax rule was determined to be invalid and the resulting withdrawal of the rule by the FCC was given retroactive impact, so too the FCC’s declaratory ruling respecting the reach of the TCPA should carry such retroactive impact where issued on the heels of a mandate order from the same district court of appeal that invalidated the solicited fax rule. But I digress.

The point of all of this—I think—is that the Hobbs Act is on the ropes in the Eleventh Circuit, the one place where the doctrine of supreme deference to the FCC seemed the safest. The real question now is whether the FCC’s new TCPA ruling—which will be expressly mandated by Congress if the Stopping Bad Robocalls Act becomes law—might somehow be gutted by the savage beating the Hobbs Act just took in Gorss Motels.  

Indeed, the SBRA may set up the ultimate battle in the separation of powers war: a clear instruction by Congress to an agency empowered to issue rulings protected by the Hobbs Act to clarify a vague statute.  One cannot imagine a clearer case for deference– but will it be enough?

More to come and I can’t wait to find out what happens next.

 

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