Last Friday a three judge panel for the United States Court of Appeals, District of Columbia Circuit, issued a ruling that “the FCC’s 2006 Solicited Fax Rule is . . . unlawful to the extent that it requires opt-out notices on solicited faxes.” The case is Bais Yaakov of Spring Valley v. FCC, Case No. 14-1234 U.S. Court of Appeals D.C. Cir.)
A copy of the court’s opinion can be found here.
The case involved the Junk Fax Prevention Act of 2005, the Federal Communications Commission’s (FCC) 2006 Order requiring opt-out notices on solicited faxes, a 2008 lawsuit against Anda, Inc. (Anda) for allegedly failing to comply with the opt-out notice requirement for solicited faxes, Anda’s 2010 petition to the FCC, and the FCC’s 2014 Order affirming its position on regulation of solicited faxes.
The Junk Fax Prevention Act generally prohibits the use of “any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement.” The Act defines “unsolicited advertisement” as “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person’s prior express invitation or permission, in writing or otherwise.”
In 2006, the FCC issued a rule governing solicited faxes. (Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991; Junk Fax Prevention Act of 2005). The FCC’s 2006 Order required that companies include an opt-out notice in all solicited faxes. Thus, the 2006 Rule requires a sender of a fax advertisement to include an opt-out notice on the advertisement, even when the advertisement is sent to a recipient from whom the sender “obtained permission.”
In 2010, Anda sought a declaratory ruling from the FCC clarifying that the Act does not require an opt-out notice on solicited fax advertisements – that is, those that are sent with the recipient’s prior express permission.
In response to Anda’s petition, the FCC adhered to its interpretation of the Act as providing the FCC with the authority to require opt-out notices on solicited faxes as well as unsolicited faxes (although the FCC said it would waive application of the rule to businesses that sent solicited faxes before April 30, 2015). Commissioner Pai and Commissioner O’Rielly dissented in relevant part. See 2014 Order.
The Court’s Opinion
Per the court’s opinion:
“In this case, businesses that send solicited fax advertisements contend that the FCC’s new rule exceeds the FCC’s authority under the Act. The question is whether the Act’s requirement that businesses include an opt-out notice on unsolicited fax advertisements authorizes the FCC to require businesses to include an opt-out notice on solicited fax advertisements.
Anda is a company that sells generic drugs. As part of its business, Anda faxes advertisements to small pharmacies. Anda’s fax advertisements convey pricing information and weekly specials to the pharmacies. Many pharmacies have given permission to Anda for Anda to send those faxes.
In 2008, Anda had been sued in a class action in Missouri state court for alleged violations of the FCC’s Solicited Fax Rule. Many of the plaintiff pharmacies in that case admitted that they had expressly given permission to Anda for Anda to send fax advertisements to the plaintiffs. But those plaintiffs nevertheless sought over $150 million in damages from Anda because Anda’s fax advertisements allegedly did not include opt-out notices that complied with the 2006 Rule’s requirements.
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.” (Emphasis added by insideARM)
The text of the Act does not grant the FCC authority to require opt-out notices on solicited faxes. We hold that the FCC’s 2006 Solicited Fax Rule is unlawful to the extent that it requires opt-out notices on solicited faxes. The FCC’s Order in this case interpreted and applied that 2006 Rule. We vacate that Order and remand for further proceedings.”
After the court issued its ruling FCC Chairman (then Commissioner) Pai issued a statement entitled “On the Latest D.C. Circuit Rebuke of FCC Overreach.” In his statement, Chairman Pai commented:
“Today’s decision by the D.C. Circuit highlights the importance of the FCC adhering to the rule of law. I dissented from the FCC decision that the court has now overturned because, as I stated at the time, the agency’s approach to interpreting the law reflected ‘convoluted gymnastics.’ The court has now agreed that the FCC acted unlawfully. Going forward, the Commission will strive to follow the law and exercise only the authority that has been granted to us by Congress.”
FCC Commissioner Michael O’Rielly also issued a statement. O’Rielly stated:
“The D.C. Circuit decision overturning the Anda Order reconfirms the proper and appropriate reading of the law. It also signals that the court is willing to call the Commission to task for inappropriately creating authority not provided by Congress. I can only hope this view will be applied elsewhere, such as in the court's other case involving TCPA overreach.”
Readers of this article might question the applicability of this case involving junk faxes to the TCPA litigation that is rampant throughout the ARM industry. The answer can be seen in the two statements above. The ARM industry is well aware of FCC rulings on issues that are seen as outside the scope of the TCPA. The ARM industry is also well aware of the type of litigation exposure that the court highlighted in its opinion.
Similar type issues were raised in ACA International v. Federal Communications Commission. They are:
- The FCC’s redefinition of an ATDS, including its treatment of “capacity”
- The FCC’s treatment of “prior express consent”
It should be noted that the ACA International case is also in the Court of Appeals for the District of Columbia. We will see whether this panel’s analysis and Chairman Pai and Commissioner O’Rielly thoughts on this case carry forward to the ACA International case.