In a March 31, 2017 ruling, the US Court of Appeals for the DC Circuit invalidated a 2006 Federal Communications Commission (FCC) rule requiring businesses to include opt-out notices on solicited fax advertisements sent with the express permission of the recipient. The court, in Bais Yaakov of Spring Valley et al. v. FCC, 14-1234 (D.C. Cir. Mar. 31, 2017), held that the FCC lacked the authority under the Telephone Consumer Protection Act (TCPA) to require opt-out notices on solicited faxes because the Junk Fax Prevention Act of 2005 (JFPA)1 requires only that opt-out notices be included on unsolicited faxes. For the majority of the court, allowing the FCC to promulgate a rule requiring opt-out notices on solicited faxes was beyond the scope of the authority delegated by Congress. The ruling clarifies how businesses can communicate with customers via fax and provides relief for businesses defending against TCPA/JFPA claims based on a failure to include opt-out language in solicited faxes.
Anda, Inc., a global distributor of pharmaceuticals and one of the petitioners in Bais Yaakov, was sued in a class action for sending fax advertisements to pharmacies without the opt-out notice required under the FCC rule, even though the pharmacies consented to receive the faxes sent by Anda. This subjected Anda to potential nine-figure liability. As the DC Circuit noted: “Let that soak in for a minute: Anda was potentially on the hook for $150 million for failing to include opt-out notices on faxes that the recipients had given Anda permission to send.” In 2010, Anda petitioned the FCC for a declaratory ruling clarifying that the JFPA does not require businesses to place opt-out notices on solicited faxes. In October 2014, the FCC issued an Order affirming that the JFPA allowed the FCC to require the inclusion of the notices on all fax advertisements, regardless of whether the recipient had given permission.2 The FCC subsequently denied an Application for Review along with several other petitions regarding the same issue, confirming its position that all fax advertisements must include instructions that provide recipients a clear and unambiguous method to opt out of future communications, “even if [recipients] previously agreed to receive fax ads from [the] senders.” Anda appealed the FCC’s Order to the DC Circuit.
The DC Circuit overturned the FCC’s rule requiring opt-out notices on solicited fax advertisements. The court reasoned that the plain language of the JFPA does not give the FCC the authority to require notices on solicited faxes. In its briefing and at oral argument, the FCC argued that it could regulate notices on solicited faxes, “so long as Congress has not prohibited the agency action in question.” Specifically, the FCC relied on the “express invitation or permission” language in the statute to argue that requiring opt-out notices on solicited faxes ensured that whatever consent was given by the customer remained valid. To this, the court stated: “If you are finding the FCC’s reasoning on this point difficult to follow, you are not alone. We do not get it either.” The court rejected the FCC’s argument, finding that the FCC “has it backwards as a matter of basic separation of powers and administrative law” and stating that the “FCC may only take action that Congress has authorized. Congress has not authorized the FCC to require opt-out notices on solicited fax advertisements. And that is all we need to know to resolve this case.”
The court further explained that, even if having opt-out language in the faxes would be good policy, the FCC’s rule requiring such notices was outside of the authority given to the FCC under the statute, which is clear that the notices are only required for unsolicited fax advertisements. The court noted that the FCC’s concern about providing a sufficient opt-out method was misplaced, given that the FCC already requires that a recipient may revoke permission by sending a request to the sender. DC Circuit Judge Nina Pillard dissented and lamented that the majority opinion “shortchanges the FCC’s statutory authority to implement Congress’s ban on unsolicited fax ads.” In her opinion, the authority given to the FCC to prescribe regulations to implement the JFPA, and the absence of Congressional guidance on how permission may be withdrawn, meant that the agency could promulgate rules requiring businesses to communicate clear methods of opting out.
The reversal of the FCC’s 2006 Anda Order in Bais Yaakov is good news for businesses engaged in active litigation involving faxes sent with consent but lacking opt-out language. The decision also forecloses a line of attack for potential plaintiffs and their counsel hoping to take advantage of the seemingly limitless damages available under the TCPA. Following the court’s ruling, FCC Chairman Ajit Pai issued a statement praising the decision and reiterating his view that the agency’s 2006 rule interpreting the JFPA reflected “convoluted gymnastics.” Given Chairman Pai’s reaction to the decision, it is unlikely that the case will be appealed to the US Supreme Court.
The ruling also shows the court’s willingness to hold the FCC accountable when it takes actions outside of its authority, which portends well for parties challenging other FCC orders. Interestingly, Judge Pillard is also on the panel of judges that is considering whether the FCC overstepped its bounds in ACA International, where the petitioners have challenged the FCC’s 2015 Omnibus TCPA Order that expansively interpreted certain provisions of the TCPA such as what constitutes adequate revocation of consent and what types of technology qualify as an “automatic telephone dialing system.”
Going forward, even though the Bais Yaakov decision takes some wind out of the sails of would-be plaintiffs seeking to capitalize on the nuances of the TCPA and FCC rules, businesses and their counsel should remain mindful of the core requirements of the statute and the impact of this decision. Best practices include the following:
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Unsolicited fax advertisements are generally prohibited by the TCPA, even if an opt-out notice is included on the fax.
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A fax advertisement may be sent to a party with whom the sender has an established business relationship (EBR), subject to various requirements. An opt-out notice is required if the sender is relying on the EBR.
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For a solicited fax advertisement (sent with the express permission of the recipient), an opt-out notice is no longer strictly required by the TCPA, but inclusion of an opt-out notice on all faxes is a best practice.
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An opt-out notice should contain each of the elements required by the FCC rules, which are specific on the mechanisms and disclosures that must be included.
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For solicited faxes, businesses must maintain appropriate records so that they are aware of recipients who have provided express consent and those who have opted out of receiving further communications.
1 In 2005, the TCPA was amended by the JFPA, 47 U.S.C. § 227(b), which generally prohibits unsolicited fax advertisements and requires opt-out notices for unsolicited faxes. In 2006, the FCC issued a rule requiring opt-out notices to be included on solicited faxes as well.
2See Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991; Junk Fax Prevention Act of 2005, Application for Review filed by Anda, Inc.; Petitions for Declaratory Ruling, Waiver, and/or Rulemaking Regarding the Commission’s Opt-Out Requirement for Faxes Sent with the Recipient’s Prior Express Permission, CG Docket Nos. 02-278, 05-338, Order, FCC 14-164 (Oct. 30, 2014).
