DC Cir. Holds FCC Exceeded Its Authority Under TCPA as to ‘Solicited Fax’ Rule

The U.S. Court of Appeals for the District of Columbia Circuit recently held that the Federal Communications Commission’s 2006 Solicited Fax Rule exceeded its authority under the federal Telephone Consumer Protection Act (TCPA) to the extent that it requires opt-out notices on fax advertisements sent with the permission of the recipient (“solicited” faxes) as well as on unsolicited fax advertisements.

A copy of the opinion in Bais Yaakov of Spring Valley, et al v. FCC, et al is available at:  Link to Opinion.

A company that sells generic drugs faxed advertisements to small pharmacies containing weekly pricing information and “specials.” Many small pharmacies gave consent to receive the faxes.  The drug company was sued in a class action lawsuit for allegedly sending fax advertisements that did not include the opt-out notice required by the FCC’s Solicited Fax Rule, even though many of the recipients had given consent.

The drug company and other similarly situated companies petitioned the FCC in 2010 for a declaratory ruling “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.”  The FCC entered an administrative order declaring that the TCPA gives it the power to require opt-out notices on both solicited and unsolicited faxes, although it agreed to waive application of the rule to faxes sent prior to April 30, 2015.

The petitioners sought review of the order in the U.S. Court of Appeals for the District of Columbia Circuit pursuant to 47 U.S.C. § 402(a) and 28 U.S.C. § 2342(1).

The Court of Appeals began its opinion by explaining that the TCPA became law in 1991 and was amended in 2005 by the Junk Fax Prevention Act (collectively, the “TCPA”).

The TCPA “generally prohibits the use of ‘any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement.’”  The Court noted that the TCPA 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.”

However, the D.C. Circuit noted, the TCPA allows unsolicited fax advertisements in three situations if: “(1) ‘the unsolicited advertisement is from a sender with an established business relationship with the recipient’; (2) the sender obtained the recipient’s fax number through ‘voluntary communication’ with the recipient or ‘the recipient voluntarily agreed to make’ his information available in ‘a directory, advertisement, or site on the Internet’’; and (3) the unsolicited advertisement ‘contains a notice’ … [that is] ‘clear and conspicuous’ and ‘on the first page’ … must state that the recipient may opt out from ‘future unsolicited advertisements,’ and must include a ‘cost-free mechanism’ to send an opt-out request ‘to the sender of the unsolicited advertisement.’”

The TCPA provides a private right of action to fax recipients and provides that aggrieved plaintiffs can recover from fax senders at least $500 per violation.

In 2006, the FCC promulgated the Solicited Fax Rule, which “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 other words, the FCC’s new rule mandates that the senders of solicited faxes comply with the statutory requirement that applies only to senders of unsolicited faxes.”

The Court of Appeals disagreed with the FCC’s interpretation of the TCPA, finding that the clear language of the TCPA requires an opt-out notice on unsolicited faxed ads, but does not require an opt-out notice on solicited faxes. In addition, the D.C. Circuit held, the TCPA does not provide the FCC with the power to require the inclusion of opt-out notices on solicited faxed ads.

The Court rejected the FCC’s argument that it could require opt-out notices on solicited faxes as long as Congress had not expressly prohibited it because “[t]hat theory has it backwards as a matter of basic separation of powers and administrative law. The FCC may only take action that Congress has authorized.”

Because the text of the statute did not expressly authorize the FCC to require the inclusion of opt-out notices on solicited faxes, the D.C. Circuit held that “the FCC’s Solicited Fax Rule is “unlawful to the extent that it requires opt-out notices on solicited faxes.” Because the FCC administrative order interpreted its 2006 Solicited Fax Rule, the Court vacated the order and remanded for further proceedings.

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Hector Lora has substantial experience in all phases of complex commercial litigation, including motion practice, written discovery, depositions, mediations, bench and jury trials, and appellate practice. For more than a decade, his practice has focused extensively on the defense of civil enforcement actions filed by the FTC, as well as real estate litigation, and contested mortgage and condominium lien foreclosures and foreclosure of security interests under UCC Article 9. Hector also has substantial experience in advising a variety of types of businesses regarding their compliance with applicable federal and state laws, including the Federal Trade Commission Act, the Telephone Consumer Protection Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Telemarketing Sales Rule, the Controlling the Assault of Nonsolicited Pornography and Marketing Act of 2003, and Florida laws governing telephone solicitation and communication. Hector received his Juris Doctor from the Georgetown University Law Center, and his undergraduate degree with honors from the University of Florida.