Nearly two and a half years following the appeal of the Federal Communications Commission’s (FCC) July 2015 Order, the U.S. Court of Appeals for the District of Columbia issued a ruling on March 16, 2018.  On appeal, over a dozen entities sought review of the 2015 Order, in which the FCC interpreted various aspects of the Telephone Consumer Protection Act (TCPA).  The appeal addressed four issues: (1) which devices constitute an automatic telephone dialing system (ATDS or “autodialer”); (2) whether a call to a reassigned phone number violates the TCPA; (3) whether the FCC’s approach to revocation was too broad; and (4) whether the FCC’s exemption for certain healthcare related calls was proper.

In short, the court set aside the FCC’s definition of an ATDS and vacated the FCC’s approach to calls placed to reassigned numbers.  The court upheld, however, the FCC’s broad approach to a party’s revocation of consent and sustained the scope of the FCC’s exemption for time-sensitive healthcare calls.

1. ATDS

The FCC’s 2015 Order held that the analysis of whether equipment constitutes an ATDS is not limited to its present capacities, but also includes its “potential functionalities”—therefore having the apparent effect of encompassing ordinary smartphones. On appeal, the D.C. Circuit concluded that the FCC’s approach could not be sustained in light of the “unchallenged assumption that a call made with a device having the capacity to function as an autodialer can violate the statute even if autodialer features are not used to make the call.”  The court reasoned that if a device’s capacity includes functions that could be added through app downloads and software additions, and if smartphone apps can introduce ATDS functionality into the device, then all smartphones would meet the statutory definition of an autodialer—and therefore, the TCPA’s restrictions on autodialer calls “assume an eye popping sweep.”  Accordingly, the court found the FCC’s interpretation that all smartphones qualify as autodialers is unreasonably and impermissibly expansive.

Regarding functionality, the FCC identified a basic function of an ATDS as the ability to “dial numbers without human intervention,” but declined to clarify this point, apparently suggesting that a device might still qualify as an autodialer even if it cannot dial numbers without human intervention.  The FCC further said that another basic function of an ATDS is to dial thousands of numbers in a short period of time, but the ruling provides no additional guidance on whether that is a necessary, sufficient, or relevant condition, leaving affected parties “in a significant fog of uncertainty.”  In addressing these questions, the court found the FCC’s guidance gave no clear answer and in many ways provided contradictory interpretations. The court seemed particularly concerned with the practical implications that the FCC ruling seemingly imposed liability even if a system was not used to randomly or sequentially generate a call list, as “[a]nytime phone numbers are dialed from a set list, the database of numbers must be called in some order—either in a random or some other sequence.”  The court set aside the FCC’s ruling on what type of functionality a device must employ to qualify as an autodialer, finding that the FCC could not promote competing interpretations in the same order.

2. Reassigned numbers and consent

If a call is made to a consenting party’s number, but that number has been reassigned to a nonconsenting party, the FCC’s 2015 Order stated that this situation violates the TCPA—except in the instance of a one-call safe harbor, which enables a caller to avoid liability for the first call to a wireless number following reassignment.  The court found that the FCC’s limitation of the safe harbor to only the first call was arbitrary, questioning why a caller’s “reasonable reliance” on the previous subscriber’s consent necessarily stops being reasonable after there has been only one call, as the first call may give the caller no indication of a possible reassignment.  The court set aside the FCC’s treatment of reassigned numbers in its entirety, finding it could not, without consequence, excise the one-call safe harbor, but leave in place the FCC’s interpretation that the “called party” refers to the current subscriber, and not the intended recipient.  This, the court found, would mean a caller is strictly liable for all calls made to the reassigned number, even without knowledge of the reassignment.

3. Revocation of consent

The FCC, in declining to unilaterally prescribe the exclusive means for consumers to revoke their consent, instead concluded that a called party may revoke consent at any time and through any reasonable means that clearly expresses a desire to receive further messages.  In upholding the FCC’s approach to revocation, the court found that the FCC’s ruling absolves callers of any responsibility to adopt a system that would entail undue burdens, like training every retail employee on the “finer points of revocation.”  And, under this approach, callers have every incentive to avoid TCPA liability by making available clearly-defined and easy-to-use opt-out methods, therefore making a call recipient’s unconventional and idiosyncratic revocation requests unreasonable.  Finally, the court concluded that nothing in the 2015 Order “should be understood to speak to the parties’ ability to agree upon revocation procedures”—thereby leaving open the possibility of contractually specified revocation methods.

4. Healthcare-related exemption

The final challenge concerns the scope of the FCC’s exemption of certain healthcare related calls from the TCPA’s prior-consent requirement for calls to wireless numbers.  The exemption is limited to calls that have a healthcare treatment purpose, and excludes calls related to telemarketing, solicitation, or advertising.  The court rejected the argument that any partial exemption of healthcare related communications is unlawful because HIPAA supersedes any TCPA prohibition, finding that the two statutes provide separate protections and, therefore, there is no obstacle to complying with both.  Moreover, the court found that the FCC did not act arbitrarily in affording a narrower exemption for healthcare related calls made to wireless callers, finding that the TCPA assumes the fact that residential and wireless numbers warrant different treatment.  Finally, the court rejected the argument that the FCC erred in failing to recognize that all healthcare related calls satisfy the TCPA’s “emergency purposes” exception to the consent requirement, reasoning that it is implausible to conclude that calls related to telemarketing, solicitation, or advertising are made for emergency purposes.  Therefore, the court upheld the way in which the FCC narrowly fashioned the exemption for healthcare related calls.

Without question, the long-awaited ruling will significantly impact TCPA compliance and litigation.  Stay tuned for additional analysis on the impact of the D.C. Circuit’s ruling.