TCPA Tracker - November 2018

Recent News

In early November, the FCC released two Public Notices aimed at reducing the number of unwanted phone calls.

First, FCC Chairman Pai requested that the phone industry adopt a robust call authentication system to combat illegal caller ID spoofing.  On November 5, 2018, Chairman Pai sent letters to 11 voice providers asking those that had not yet established concrete plans to implement the Signature-based Handling of Asserted Information Using toKENs (SHAKEN) and the Secure Telephone Identity Revised (STIR) standards to implement such standards without delay.  Chairman Pai’s outreach also underscored the importance of private actors to combat illegal spoofing and unwanted robocalls.  According to the FCC, such an enhanced call authentication framework would reduce the ability of callers to illegally spoof caller IDs.  In the press release, Chairman Pai warned, ​“Carriers need to continue working together to make this happen and I am calling on those falling behind to catch up.  …  If it does not appear that this system is on track to get up and running next year, then we will take action to make sure that it does.”

Second, on November 6, 2018, the FCC sent letters to 8 voice providers who are not participating in an industry-led ​“traceback” effort, requesting that they assist industry efforts to trace scam robocalls that originate or pass through their networks.  The FCC reported that it receives more consumer complaints about unwanted calls – including scam calls that use spoofing to trick consumers – than any other subject.  By increasing their participation in traceback efforts, voice providers would be assisting in guarding against illegal traffic and in helping the FCC identify the source of illegal calls.  Recipients of the letters also were asked to report back to the FCC on the safeguards they take to identify and to stem the flow of illegal calls.

Taken together, these actions signal a renewed effort by the Commission to reduce the volume of unwanted phone calls.  It also may be the first step in the FCC’s efforts to address the many pending proceedings before the agency at this time.  There is increased speculation that action on the remand in ACA International v. FCC will be coming in the next several months.

Ninth Circuit Declines to Rehear Marks

On October 30, 2018, the Ninth Circuit denied the defendant’s Petition for Rehearing En Banc in Marks v. Crunch San Diego, LLC, No. 14-56834.  As we previously reported in October’s TCPA Tracker, on September 20, a three-member panel of the Ninth Circuit ruled that an ATDS includes devices with the capacity to automatically dial stored telephone numbers.  On October 4, the defendant filed the Petition, arguing that the panel’s decision is inconsistent with the statutory text, legislative history, and Ninth Circuit precedent.  Additionally, the defendant contended that the decision contradicted rulings from the Third and D.C. Circuits, creating a circuit split that will cause more uncertainty and litigation. The Ninth Circuit denied the Petition in a one-page order.

FCC Petitions Tracker

Kelley Drye’s Communications group prepares a comprehensive summary of pending petitions and FCC actions relating to the scope and interpretation of the TCPA.

Number of Petitions Pending

• 28 (+9 seeking a retroactive waiver of the opt-out requirement for fax ads)
• 1 petition for reconsideration of the rules to implement the government debt collection exemption
• 1 application for review of the decision to deny a request for an exemption of the prior-express-consent requirement of the TCPA for ​“mortgage servicing calls”
• 3 requests for reconsideration of the 11/2/16 fax waiver in response to petitions by 22 parties
• 1 request for reconsideration of the 10/14/16 waiver of the prior express written consent rule granted to 7 petitioners

• None

• Comment on Petition for Emergency Declaratory Ruling Filed By IHS Markit Ltd. – comments on a petition for declaratory ruling seeking confirmation that ​“non-telemarketing calls related to motor vehicle safety recalls are ​‘made for emergency purposes [ ]’ . . . and [are] thus exempt from the [Telephone Consumer Protection Act’s] consent requirements for autodialed or prerecorded calls to wireless numbers.” (Replies Due 11/20/2018).

• None

Click here to see the full FCC Petitions Tracker.

Cases of Note

On November 13, 2018, the Supreme Court agreed to decide whether the Hobbs Act required the district court to accept the FCC’s legal interpretation of the TCPA.  PDR Network, LLC v. Carlton & Harris Chiropractic, Inc., No. 17-1705.  The plaintiff, Carlton & Harris Chiropractic, brought a class action against the defendant, PDR Network, because the defendant sent it a single fax that offered a free e-book containing information about prescription drugs.  The district court granted the defendant’s motion to dismiss for failure to state a claim upon which relief can be granted.  The court of appeals vacated the dismissal.

Chief Judge Robert C. Chambers of the Southern District of West Virginia granted the motion to dismiss because the fax was not an unsolicited advertisement under the TCPA.  Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, No. 3:15-cv-14887 (S.D.W. Va. Sept. 30, 2016).  The FCC issued a rule in 2006, which stated that faxes promoting goods or services for free are unsolicited advertisements under the TCPA.  Id. at 7-8.  Under the Hobbs Act, the courts of appeals have the exclusive jurisdiction to set aside or determine the validity of final FCC orders.  See 28 U.S.C. § 2342(1).  Judge Chambers determined that the Hobbs Act does not require the courts to adopt the FCC’s interpretation of the TCPA, even if a rule is valid.  Carlton & Harris Chiropractic, Inc., No. 3:15-cv-14887, slip op. at 7.  He applied the Chevron test, which does not require a court to defer to an agency’s interpretation of an unambiguous statute.  Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 843 (1984).

Judge Chambers found that the TCPA’s definition of advertisement was unambiguous and requires a commercial aim.  Carlton & Harris Chiropractic, Inc., No. 3:15-cv-14887, slip op. at 7.  Here, “[t]he essential commercial element of an advertisement is missing” because ​“there is ​‘no hope to make a profit’ from the offer and distribution of the reference book.”  Id. at 6.  He also interpreted the FCC rule as requiring a commercial aim, which the court of appeals also vacated.  However, the Supreme Court limited its grant of certiorari to whether the Hobbs Act required the district court in this case to accept the FCC’s rule.

The Fourth Circuit, in a 2-1 decision, vacated the dismissal.  Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, 883 F.3d 459 (4th Cir. 2018).  The court held that the Hobbs Act barred the district court from applying the Chevron test to the FCC rule.  Id. at 464.  The district court exceeded its jurisdiction by refusing to defer to the FCC rule because the Hobbs Act grants the courts of appeals the exclusive jurisdiction to set aside or determine the validity of the FCC’s interpretations of the TCPA.  Id.  The Fourth Circuit determined that choosing not to apply or declining to defer to an FCC rule is the same as declaring it invalid.  Id. at 465.  It concluded that the Hobbs Act requires a district court to apply the FCC’s interpretations of the TCPA.  Id. at 466.  In dissent, Judge Stephanie Thacker stated that the district court did not exceed its jurisdiction because it found that the FCC rule did not conflict with the statute, since each requires a commercial aim.  Id. at 470.  Therefore, the district court did not invalidate the FCC rule.  Id. 

District of Arizona Applies Marks to Grant Summary Judgment Due to Plaintiffs’ Lack of Proof

In Shupe v. Capital One Bank, the District of Arizona granted the defendant’s summary judgment motion on the plaintiffs’ TCPA claim, finding that the plaintiffs failed to show that the defendant used an ATDS, which was necessary for the plaintiffs’ claim.  The plaintiffs argued that their lack of evidence was the defendant’s fault.  Judge Jennifer Zipps rejected this argument because the plaintiffs had the opportunity to obtain discovery on the ATDS issue and the plaintiffs did not show that the defendant failed to meet its discovery obligations on this issue.  In defining an ATDS, Judge Zipps cited Marks, which ruled that ATDS devices ​“include ​‘equipment that could engage in automatic dialing, rather than equipment that operated without any human oversight or control.’”

On October 24, 2018, Judge Timothy Hillman of the District of Massachusetts denied the plaintiff’s motion for class certification because the defendant presented adequate evidence that the class members consented to receiving fax advertisements or had an active, ongoing relationship with the defendant.  Bais Yaakov of Spring Valley v. ACT, Inc., No. 12-cv-40088-TSH, 2018 WL 5281746 (D. Mass. Oct. 24, 2018).  The plaintiff is a private high school while the defendant provides student assessment services, including administering the ACT test.  The defendant sent fax advertisements to high schools, such as advertisements showing the registration deadlines for upcoming ACT tests.

The plaintiff moved to certify two nationwide classes.  The first class comprised all people to whom the defendant sent or caused to be sent a fax advertisement without an opt-out notice.  Judge Hillman held that common issues of law or fact did not predominate over individual questions, as Rule 23(b)(3) requires.  The defendant met its burden of showing ​“that affirmative defenses present individual inquiries precluding a finding of predominance.”  Id. at *4.  He found that the predominant issue would be individual consent because the deposition testimony and declarations showed that many schools requested or consented to receiving faxes and the defendant had established and ongoing relationships with thousands of schools.  Id.  The defendant presented declarations from seventy-eight schools.  Id. at *5.  Further, the evidence of consent varied because the schools contacted the defendant through multiple methods, such as telephone, mail, email, fax, and online forms.  Id.  Judge Hillman contrasted this situation from one where the members gave their consent in a standard form.  Id.  Therefore, if the court certified the class, the court would have to ​“parse through each unique relationship to filter out those members to whom Defendant is not liable.”  Id.

The second class consisted of all people to whom the defendant sent or caused to be sent an unsolicited fax advertisement without an opt-out notice.  Judge Hillman denied the plaintiff’s motion to certify this class because it is a ​“fail-safe class,” which means that ​“class membership is defined by whether or not members have a valid claim.”  Id. at *6.  Judge Hillman declined to refine the class definition to include solicited fax advertisements because it would fail for the same reasons as the first class.  Id.

On October 11, 2018, Judge Gershwin Drain of the Eastern District of Michigan granted the defendants’ motion for summary judgment, finding that the defendants’ text messaging system was not an automated telephone dialing system (ATDS) under the TCPA’ plain language.  Gary v. Trueblue, Inc., No. 17-cv-10544, 2018 U.S. Dist. LEXIS 175021 (E.D. Mich. Oct. 11, 2018).  The defendants, TrueBlue, Inc., and its successor PeopleReady, Inc., are staffing companies that inform blue-collar workers of job opportunities in the local community through text messages.

The issue was whether the defendants’ messaging platform, WorkAlert, is an ATDS.  The defendants presented evidence that WorkAlert requires human intervention to search for recipients and compose the message.  Id. at *2-3.  WorkAlert operates in conjunction with a third-party aggregator, mBlox, which receives the text messages from WorkAlert and sends them to the recipients’ wireless carriers.  Id. at *4.  The plaintiff, Kevin Gary, argued that mBlox is fully automated so the combination of WorkAlert and mBlox creates TCPA liability for the defendants.  The plaintiff also contended that the combination violates the TCPA because WorkAlert and mBlox contain automated functions and send messages through a web browser.

Judge Drain rejected the plaintiff’s arguments.  First, he ruled that ACA International v. FCC, 885 F.3d 687, 691 (D.C. Cir. 2018), which set aside the FCC’s expansive definition of an ATDS, binds the court.  Id. at *7-8.  Therefore, Judge Drain applied the TCPA’s plain language.  He determined that, to constitute an ATDS, ​“a piece of equipment must have the capacity to (1) store or produce telephone numbers to be called, using a random or sequential number generator, and (2) dial such numbers.”  Id. at *10-11 (citing 47 U.S.C. § 227(a)(1)).

Second, he held that the plaintiff failed to show ​“that WorkAlert, when combined with mBlox, has the capacity to randomly or sequentially dial or text phone numbers.”  Id. at *10.  The evidence that the plaintiff presented about mBlox ​“in no way demonstrates that [it] has the capacity to randomly or sequentially dial or text phone numbers.”  Id. at *12.  Notably, the plaintiff did not join mBlox as a defendant, despite having the opportunity to do so, which would have entitled it to discovery on how the system operates.  Id. at *12-13.

Third, Judge Drain ruled that the TCPA’s plain language does not categorically prohibit the use of devices with automated functions or web-based browsers to send text messages.  Id. at *14-16.

On October 29, 2018, the Supreme Court denied, without explanation, a TCPA class action plaintiff’s Petition for a Writ of Certiorari, which sought to reverse the dismissal of his case because the defendant had derivative sovereign immunity.  Cunningham v. General Dynamics Information Technology, Inc., No. 18-206.  Defendant made robocalls under a contract with the Centers for Medicare & Medicaid Services.  The robocalls were related to the Affordable Care Act and explained health insurance options to the recipients.  The plaintiff, Craig Cunningham, argued that these calls violated the TCPA because he did not provide his prior consent.

The Eastern District of Virginia granted the defendant’s motion to dismiss for lack of subject matter jurisdiction under the Yearsley doctrine, which provides derivative sovereign immunity to federal contractors who act within the scope of valid governmental authorization.  See Yearsley v. W.A. Ross Constr. Co., 309 U.S. 18 (1940).  The Fourth Circuit affirmed.  The plaintiff made three arguments in his Petition.  First, Yearsley confers an affirmative defense, under which the defendant has the burden of proof, rather than a jurisdictional defense, under which the plaintiff has the burden of proof.  Second, Yearsley allows a federal agency to direct a contractor to violate only state laws.  Third, a federal statute’s grant of general authority to an agency to administer a program does not empower the agency to direct a contractor to violate another federal statute.

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