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TCPA Class Action Update: Who Makes the Rules – the FCC or the Trial Courts?

Last week, the Supreme Court granted the Petition for Certiorari in PDR Network, LLC v. Carlton & Harris Chiropractic, Inc., No. 17-1705, 2018 WL 3127423 (U.S. Nov. 13, 2018). The question before the Court is whether the Hobbs Act requires district courts to accept the Federal Communications Commission’s (“FCC”) legal interpretation of the Telephone Consumer Protection Act.

This case presents important questions as to the scope of judicial deference to the FCC rules under the Hobbs Act, which limits the ability of TCPA litigants to challenge FCC rules in private civil litigation and may have a significant impact on how lower courts apply administrative decisions.

Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC

The Petition arises from a TCPA junk fax class action in which Carlton & Harris Chiropractic, Inc. sued PDR Network, LLC for sending a single fax offering a free Physicians’ Desk Reference. Carlton & Harris argued that the fax it received was an unsolicited advertisement as defined in the 2006 Order because it promoted a good at no cost. Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, No. 3:15-14887, 2016 WL 5799301, at *4 (S.D. W. Va. Sept. 30, 2016). The district court however declined to defer to the 2006 Order’s definition, holding that the Hobbs Act did not compel the court to defer to “the FCC’s interpretation of an unambiguous statute.” Id. The district court further held that even under the 2006 FCC Rule, PDR Network’s fax was still not an advertisement because the rule requires an advertisement to have a “commercial aim,” and no such aim existed. Id. Accordingly, the district court granted PDR Network’s motion to dismiss.

The Fourth Circuit disagreed with the district court and found, in a divided opinion, that the district court was required to follow the FCC’s 2006 ruling under the Hobbs Act because the Act “stripped” the court of jurisdiction to consider the validity of the ruling. Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, 883 F.3d 459, 464 (4th Cir. 2018). The district court erred by “declin[ing] to defer” to the FCC rule and issuing a ruling “at odds with the plain meaning” of the 2006 Order’s text. Id. at 462.

PDR Network then appealed to the Supreme Court asserting that the Fourth Circuit opinion created a circuit split with the Second, Sixth, Ninth, and Eleventh Circuits, all of which require a “commercial” nexus for faxes promoting free goods or services to be considered “advertisements” under the TCPA.

PDR Network’s petition for a writ of certiorari asks the Supreme Court to resolve the circuit split regarding whether the Hobbs Act prevents courts from engaging in a typical Chevron analysis of FCC Orders interpreting the TCPA and requires automatic deference to the agency’s order where there has been no challenge to the validity of the order.

Chevron Versus the Hobbs Act

Under Chevron, if a statute is silent or ambiguous with respect to a specific issue, then the lower court must defer to an agency’s ruling on that issue if it is based on a “permissible construction” of the statute. Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 858, 104 S. Ct. 2778, 2789, 81 L. Ed. 2d 694 (1984). The Hobbs Act predates Chevron and requires lower courts to automatically apply administrative rulings because the Act strips the lower courts of jurisdiction to consider the “validity” of those administrative rulings.

The Court’s ruling in Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC will hopefully resolve the tension between these two legal doctrines, including how much deference lower courts give administrative rulings and who decides what the law means.

The Potential Impact

An opinion by the Supreme Court in this case has the potential of affecting whether and under what circumstances lower courts will be bound to follow FCC rules. Given the current business-friendly attitude of the FCC, a ruling by the Court giving the lower courts more deference may be bad news for defendants.

 

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