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D.C. Circuit Strikes Down FCC Rule Requiring Opt-Out Notices on Solicited Faxes

By Alexander M. Smith

Printer-2178752_1920In November 2016, this blog reported that the D.C. Circuit appeared “sympathetic” to the position that the Telephone Consumer Protection Act (“TCPA”), which regulates “unsolicited” fax advertisements, did not empower the FCC to require opt-out notices on solicited fax advertisements.  Last Friday, a divided panel of the D.C. Circuit issued an opinion striking down the FCC’s 2006 rule requiring opt-out notices on solicited fax advertisements. 

In 2010, a group of businesses facing class action lawsuits involving solicited faxes without opt-out notices sought a declaratory ruling from the FCC clarifying that the TCPA does not require an opt-out notice on solicited fax advertisements.  The FCC responded to their petition by reiterating its position that the TCPA authorized it to require opt-out notices on solicited faxes, but it stated that it would waive application of this rule to businesses that sent solicited faxes before April 30, 2015.  The petitioners then sought review from the D.C. Circuit.  (A separate group of class action plaintiffs also appealed the FCC’s decision to grant a retroactive waiver.) 

Judge Kavanaugh, joined by Judge Randolph, concluded that the plain language of the TCPA, which prohibits the use of fax machines to send “an unsolicited advertisement” (i.e., one “transmitted to any person without that person’s prior express invitation or permission”), did not “grant the FCC authority to require opt-out notices on solicited fax advertisements.”  The court concluded that “Congress drew a line in the text of the statute between unsolicited fax advertisements and solicited fax advertisements,” and it emphasized that the court was required “to respect the line drawn by Congress, not to redraw it as we might think best.”  The court likewise rejected the FCC’s argument that the statute empowered the FCC to regulate solicited fax advertisements because it did not define the term “prior express invitation or permission”; although the court acknowledged that the FCC “can reasonably define that concept within statutory boundaries” and can “reasonably provide . . . that a recipient may revoke previously granted permission by sending a request to the sender,” it nonetheless emphasized that the statute did not authorize the FCC to require an opt-out notice on solicited faxes to facilitate the process of revoking consent.  Whether or not such an opt-out requirement was “good policy,” the court noted, “the fact that the agency believes its Solicited Fax Rule is good policy does not change the statute’s text.” 

Judge Pillard dissented.  She argued that the FCC’s requirement of an opt-out notice on solicited faxes was a reasonable means of ensuring that recipients would be able to revoke their consent if they were inclined to do so.  Because Congress had not defined the term “prior express permission or invitation”—and had expressly authorized the FCC to “prescribe regulations to implement” the TCPA’s prohibition on unsolicited faxes—Judge Pillard concluded that the statute permitted the FCC to implement a rule requiring opt-out notices on solicited faxes.  She hypothesized that “[t]he likely result of the court’s decision is to make it harder to control what comes out of their fax machines (and so perhaps more hesitant to receive fax ads in the first place)—precisely the sort of anti-consumer harm Congress intended to prevent.” 

Because the court invalidated the FCC’s rule requiring opt-out notices on solicited faxes, it did not reach the question of whether the FCC  had good cause to waive the application of that rule to solicited fax advertisements sent before April 30, 2015.  Judge Pillard separately noted that, had the court reached that issue, she would have found that the FCC did not establish good cause for waiving the rule. 

It is possible that the class action plaintiffs will seek rehearing en banc by the D.C. Circuit or will appeal the decision to the Supreme Court.  We will continue to monitor this case. 

Bais Yaakov of Spring Valley v. Federal Communications Commission, No. 14-1234, --- F.3d ----, 2017  WL 1192909 (D.C. Cir. 2017).