Editor’s Note: This is a MUST READ article folks–and I never say that. Tell a friend.
TCPAWorld is such a weird place.
Legal principles are constantly shifting. Indeed, TCPAWorld is the only corner of the law where developments move so quickly that if a doctrine can survive five years or so it is considered vaunted immovable bedrock.
Yet, even bedrock isn’t certain in TCPAWorld since nobody—not even Appellate Court judges—can figure out the law, as the decision in Carlton & Harris Chiropractic Inc. v. PDR Network, LLC, No. 16-2185, 2020 U.S. App. LEXIS 38073 (4th Cir. Dec. 7, 2020)(“PDR IV”) perfectly demonstrates.
This is a story eleven years in the making and starts—as TCPA stories often do—in the Ninth Circuit Court of Appeals. In 2009, the Ninth Circuit handed down the decision in Satterfield v. Simon & Schuster, Inc., 569 F. 3d 946 (9th Cir. 2009) holding, for the first time, that courts must give Chevron deference to FCC rules related to the TCPA.
For my lay readers– this means that Courts must do what the FCC says when it comes to interpreting the TCPA. That made the FCC quite powerful when it came to impacting the flood of TCPA litigation that would follow.
An interesting wrinkle. The FCC often issues declaratory rulings interpreting the TCPA, rather than engaging in formal notice and comment rulemaking. Satterfield noted that Chevron deference is technically only available to more formal legislative proceedings but—citing later Supreme Court law—reasoned and held that Congress often delegates authority to interpret statutes to agencies like the FCC and that delegation (and the resulting rules) are likewise entitled to Chevron deference.
Keep this point in mind, it’ll be important later.
If Satterfield made FCC TCPA rulings important, a little-known decision by a district court the year prior actually exalted such rulings to near omnipotence. In Leckler v. CashCall, Inc., 2008 WL 5000528 (N.D.Cal. Nov. 21, 2008) the district court held that something called the Hobbs Act—more formally the Administrative Orders Review Act—deprived district courts of the ability to reconsider or alter FCC TCPA orders. In essence, these orders were viewed as beyond the jurisdiction of federal courts—and only a very specific and formal review by the D.C. Circuit Court of Appeals could alter or amend such rulings.
The ruling in Leckler resulted in a TCPA defendant catching a break—the district court originally concluded providing a phone number to a caller was “implied consent” and not the kind of “express consent” needed under the TCPA. So the Plaintiff was all set to win the case.
But the Defendant sought reconsideration arguing that the FCC had issued a ruling back in 2008 to the effect that supplying a number to a caller actually is express consent and–Defendant urged–the district court HAD to follow this ruling because the Hobbs Act said so. The Leckler court reluctantly agreed and, although the district court felt that Chevron deference was not strong enough to convert the word “express” to “implied” in the statute, the Hobbs Act gave the FCC the power to turn night into day and water into wine. So the Court had no choice but to accept that the FCC’s interpretation of express consent and dismissed the case in favor of the caller.
If TCPA defendants high fived following Leckler their joy would soon turn to ash. It turns out the FCC did more than expand the confines of express consent in its 2008 ruling—it also radically expanded the scope of the TCPA by stretching the statute beyond random or sequential number generators for the first time to include predictive and other forms of automatic dialers. But this expansion was so out of step with the prevailing notion of what the TCPA applied to—few dreamed that a dusty “junk fax” enactment applied to modern dialers—that it took three years for anyone to realize the true importance of the ruling.
In 2011, the Plaintiff’s bar hit the mother lode when a district court in Illinois held—for the first time—that the FCC’s ruling expanding the TCPA’s ATDS definition was binding law. See Vance v. Bureau of Collection Recovery, LLC, No. 10-cv-06324, 2011 WL 881550, at *2 (N.D.Ill. Mar. 11, 2011). All of a sudden courts across the country were flooded with TCPA cases with the Plaintiff’s bar screaming “Hobbs Act” at the top of their lungs.
And it worked. Court after court after court—including 10 Circuit Courts of Appeal—eventually issued rulings concluding that the Hobbs Act rendered the FCC’s many TCPA rulings—including interpretative declaratory rulings—to be absolutely binding on district courts.
If ever a doctrine were certain in TCPAWorld it was this: FCC TCPA rulings are gospel. And for seven or so long years this was the undisputed state of the law.
Then the weirdest thing happened.
The Supreme Court granted cert. in a case called PDR Resources, which dealt with the application of a junk fax FCC ruling from 2006 to a fax sent in 2014, in order to determine whether district courts were required to give deference to FCC TCPA rulings pursuant to the Hobbs Act after all.
Why would the Supreme Court take this case? There was a 10-0 consensus amongst the Circuit Courts of Appeal that the Hobbs Act rendered FCC TCPA rulings untouchable (no circuit split). Dozens of district courts had reached the same conclusion. Plus, who really cared if some FCC junk fax ruling from 2006 is binding or not? Hardly a matter of urgent national import that should consume the highest court’s time.
Yet this seemingly unimportant case about a legal doctrine that seemed entirely beyond doubt was accepted by the Supreme Court for review. You knew something BIG was going to happen—and you were right.
The TCPA was merely a pawn in a larger game. The real battle afoot was between Article III judges and the power of Congress through delegation to agencies. And a number of the Supreme Court’s justices were looking for a vehicle to wrest authority from agencies in favor of the judiciary. A good place to start: destroying this idea that district courts were unable to review FCC rulings pursuant to the Hobbs Act.
It almost happened too, except the Chief Justice wouldn’t quite go along with the rest of the conservative wing. The ruling stopped short of stripping final FCC rulings of Hobbs Act authority, but the Supreme Court did send the matter back to the Fourth Circuit for further consideration of two key points: i) was the FCC’s action a “final” legislative ruling of the sort the Hobbs Act covers; and ii) if so, was the Defendant given an opportunity to object to the rulemaking at the time it was determined.
While the Supreme Court did not declare precisely what the import of these two questions was, it seemed rather clear that non-final legislative rulings were not going to get Hobbs Act love, but shouldn’t they still get Chevron deference?
Well, this week the Fourth Circuit issued its ruling on remand from the big PDR Resources Supreme Court case and gave its answer: FCC TCPA interpretive rulings (at least those lacking notice and comment) are NOT entitled to Hobbs Act OR even Chevron deference. At best they are entitled to something called Skidmore deference—which just means the district court can consider the rulings and give it as much credit as it thinks the ruling deserves.
Translation: Certain FCC TCPA rulings just went from absolute gospel to potentially-meaningless guidelines, depending on a court’s view of the squishy Skidmore doctrine.
How the mighty have fallen.
But, all is not lost. Perhaps only a small portion of the FCC’s robust TCPA catalog might qualify as “mere” interpretive rulings right? Unfortunately, under a broad read of PDR IV, the majority of the FCC’s TCPA rulings are NOT “final” rules entitled to Hobbs Act deference.
How can you tell the difference?
Well under a narrow read, PDR IV does not directly address the question at all. Indeed, the parties in PDR IV stipulated that the 2006 Fax Order was not an expression of delegated legislative authority– the FCC didn’t even proceed with a notice and comment period ahead of the ruling. So the Fourth Circuit Court of Appeals was not called upon to address what constitutes a “final” legislative rule entitled to Hobbs Act deference and it probably shouldn’t have said anything about it.
But it did anyway.
In Section III B. of the opinion PDR IV panel uses loose language and mixes doctrines– referencing the need to follow “formal notice and comment procedures to issue legislative rules” in seeming to suggest that only formal agency rules following the APA’s NPRM procedures are “final.” To support that conclusion–that it, again, was not called upon to make–it cites to Perez v. Mortg. Bankers Ass’n, 575 U.S. 92, 96-97 (2015), where the Supreme Court outlined APA rulemaking guidelines but did not purport to address what sorts of agency rulings are “final” and which are not.
Backing up, there are generally three types of FCC rulings: i) Report and Orders that the Commission issues without notice; ii) Declaratory Rulings that it issues following a Notice and Comment period, but without an NPRM; and iii) formal agency “Rules” that follow an NPRM and result (usually) in a change to the CFR
PDR IV seems to hold–by stipulation of the parties–that type i) rulings are not entitled to deference. On the other hand, formal agency (type iii)) rules that follow a Notice of Proposed Rulemaking are certainly “final” legislative rules–such as the one the FCC undertook back in 1992or the one that was just issued in connection with the TRACED Act.
But what about all those rulings in between? The ones–like the 2008 order at issue in Leckler–where the FCC indeed issued a Notice and sought Public Comment, but did not float a proposed “rule” that was later converted to an implementing regulation?
A broad reading of PDR IV–i.e. an analysis that takes Section III.B. of the opinion as more than dicta–would seem to treat such rulings as merely interpretive in nature and not entitled to any meaningful deference because the APA’s NPRM procedure was not followed.
What a mistake.
In the course of three years, then, FCC declaratory rulings may have just gone from forming the absolute bedrock of the TCPAWorld to being uncertain castles build upon sand. And this revelation has all sorts of dire consequences. Sure it means that FCC rulings expanding the TCPA are now entitled to far less deference—but those were already headed out the door, if not entirely superseded by subsequent case law. But what about the critical ruling that underpinned Leckler: that numbers provided by consumers necessarily amount to express consent to receive informational autodialed calls? It makes me shiver to think of it.
So is the sky really falling?
Hopefully not. I happen to think PDR IV got it wrong in leaping to strip declaratory rulings of deference– if that is what it did. I do NOT expect courts to follow that portion of the ruling in lockstep as that is i) dicta; ii) a VERY debatable conclusion in light of additional Supreme Court authority that PDR IV does not meaningfully address; and iii) rests on a plain misapplication of Perez. (In my opinion, at least.)
Nonetheless, PDR IV is a critical ruling. While it is only one Circuit Court of Appeals’ take on the issue—it is a vastly important one and one likely to throw TCPAWorld into convulsions anew. If the approach is adopted by other circuits then the sky might really be falling– much of the vast body of TCPA case law over the years (roughly 800 opinions annually) rest on findings made in FCC declaratory rulings. If the foundation upon which these hundreds of TCPA rulings are based is suddenly ripped away we really are back in wild wild west.
I mean, even more wilder and westier than usual.
We’ll have more coverage on this important development to come—but TCPAWorld really needs to pause and take stock of this one.