The U.S. Court of Appeals for the Seventh Circuit held in Patriotic Veterans v. Indiana that the state’s automatic dialing-announcing device (ADAD) statute is not preempted by provisions that govern prerecorded calls and automated telephone dialing systems (ATDS or autodialer) in the federal Telephone Consumer Protection Act (TCPA), even with respect to interstate calls. The appellate court’s decision is significant to the extent it runs counter to a position staked by the Federal Communications Commission (FCC) that its TCPA rules “almost certainly” would be both the “floor” and “ceiling” for regulating interstate calls governed by the TCPA.

Patriotic Veterans, which utilizes automated prerecorded calls to disseminate political messages, challenged on preemption and First Amendment grounds Indiana’s ADAD law, which generally prohibits automated prerecorded calls with only very limited exceptions for where there is prior consent by the called party and for, e.g., school districts calling students/parents, or employers sending messages to employees. Patriotic Veterans argued that the state’s law was preempted as to calls made into Indiana from outside the state, by the federal TCPA regime. Under the TCPA, autodialed and/or prerecorded calls are prohibited to cell phones, hospitals, emergency lines and similar numbers in the absence of prior express consent, and such calls are likewise prohibited to residential lines, unless there is consent or the FCC grants exceptions. The FCC’s TCPA rules allow prerecorded calls to residential lines if they are not for commercial purposes and/or do not include advertising, or if they are for an emergency or charitable purpose.

Thus, under TCPA rules, Patriotic Veterans’ prerecorded calls for political, non-profit purposes are permitted to residential lines, but they do not fit within any exception in Indiana’s law. The TCPA expressly states that it does not preempt any state law that “imposes more restrictive intrastate requirements or regulations on, or which prohibits” the use of autodialers and/or prerecorded messages. Under this language, the FCC explained, in its 2003 rulemaking updating its TCPA rules (to, among other things, implement national do-not-call registry rules), while states may impose more restrictive regulations on intrastate calling, state law that differs from the TCPA rules, as to interstate calls, “almost certainly would conflict with and frustrate the federal scheme and almost certainly would be preempted.”

The trial court granted Patriotic Veterans’ preemption challenge, holding the TCPA preempted Indiana’s statute as it applies to the interstate use of autodialers, in that this TCPA’s state-law savings clause only allowed more restrictive intrastate rules. The Seventh Circuit reversed, holding that the plain language of the reverse preemption provision allowed Indiana to impose “more restrictive intrastate requirements or regulations” on matters governed by the TCPA, or to “prohibit the use of” autodialers and/or prerecorded calls, without regard to whether they are intrastate or interstate. It did not matter, the appellate court held, that the Indiana law did not prohibit autodialer or prerecorded call use outright, insofar as it has exemptions and exclusions. That did not make Indiana’s law a “restriction or regulation” on autodialer/prerecorded-call use, which would be limited to intrastate application under the TCPA, but rather still acted as a “prohibition” that could be imposed without regard to the “intrastate” qualifier.

Upon holding the “plain language” of the TCPA’s reverse preemption provision did not preclude application of Indiana’s ADAD statute to Patriotic Veterans’ interstate calls, the Seventh Circuit went on to hold the TCPA also did not control under any implied preemption theory, whether it be field preemption, or either “impossibility” or “purposes and objectives” conflict preemption. It accordingly reversed the lower court’s opinion preempting the state law, and returned the case for consideration of Patriotic Veterans’ First Amendment challenge.

The Seventh Circuit’s decision is troubling because it seems to directly conflict with the FCC’s recognition – and common understanding – that, as to interstate calls, federal TCPA rules would control. It is also significant that the Seventh Circuit appears to view any state law that purports to “prohibit” ADAD or ATDS/prerecorded-call use, regardless of whether it has exceptions or caveats, may apply to both interstate and intrastate calling as “prohibition” rather than as a “restriction or regulation” that can apply only to intrastate calls. That accordingly would seem to limit such matters as time-of-day restrictions, or whether rules apply to only residential numbers as opposed to mobile or other phones, and similar ancillary concerns, as the only “restrictions” or “regulations” as to which state authority is limited to intrastate calling. Callers should thus take particular care to understand how and whether state law applies to their autodialing and/or prerecorded message use, not just for intrastate calls, but interstate as well, especially for states in the Seventh Circuit.