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TCPA Class Action Update: Eleventh Circuit Confirms the FCC’s Solicited Fax Rule is Dead and Reverses Course on Interpretation of the Hobbs Act in TCPA Appeal

Eleventh Circuit Confirms the FCC’s Solicited Fax Rule is Dead and Reverses Course on Interpretation of the Hobbs Act in TCPA Appeal

In Gorss Motels, Inc. v. Safemark Systems, Inc., Case Nos. 18-12511, 18-15232, 2019 U.S. App. LEXIS 22352, at *3 (11th Cir. July 26, 2019), the Eleventh Circuit considered whether two hotel franchisees provided prior express permission to receive faxes from Safemark Systems, the franchisor’s affiliate, and, if so, whether the faxes needed to contain opt-out notices under the FCC’s solicited fax rule. The circuit court ultimately upheld the dismissal of the franchisees’ proposed class action, finding they consented to receive the faxes, and the messages did not have to contain opt-out notices because the FCC’s solicited fax rule was invalid. The Eleventh Circuit’s findings on the elimination of the solicited-fax rule meant it did not need to address the franchisees’ argument that the trial court violated the Hobbs Act by refusing to apply a federal agency’s rule. Nevertheless, three circuit judges issued a lengthy opinion stating that the Eleventh Circuit previously misunderstood the Hobbs Act to mean that a district court cannot consider any argument questioning the validity of an agency ruling.

Procedural History

The franchisees filed an interlocutory appeal after the district court denied class certification and concluded that the solicited-fax rule – an FCC regulation that required solicited faxes to include compliant opt-out notices – was invalid. The district court refused to stay the proceedings, and both parties moved for summary judgment. Meanwhile, on November 14, 2018, the FCC issued an order eliminating the solicited-fax rule in light of Bais Yaakov of Spring Valley v. Fed. Commc’ns Comm’n, 852 F.3d 1078, 1083 (D.C. Cir. 2017), cert. denied 138 S. Ct. 1043, 200 L. Ed. 2d 300 (2018), which held “the FCC’s 2006 Solicited Fax Rule is unlawful to the extent that it requires opt-out notices on solicited faxes.” The next day the district court granted summary judgment in favor of Safemark, finding that the faxes at issue were solicited and thus not subject to the TCPA because the franchisees had given their prior express permission to receive the faxes. The franchisees subsequently appealed the summary judgment ruling.

Eleventh Circuit Confirms Death of Solicited Fax Rule and Dismissal

First, the Eleventh Circuit determined that the district court properly concluded the faxes were solicited in nature. The franchisees had entered into a franchise agreement that specifically authorized affiliates of the franchisor to offer assistance to them with purchasing items used at or in their facility. The franchisees also provided their fax numbers as part of the franchise agreement. The circuit court concluded that by agreeing that the affiliates could offer them assistance and providing their fax numbers, the franchisees had expressly agreed to receive the faxes. The court rejected the franchisees’ argument that the franchise agreements only demonstrate “implied” permission, reasoning that “to constitute express permission, the agreements need not use magic words.” 2019 U.S. App. LEXIS 22352, at *14. The court also rejected the argument that the fax sender must obtain prior express permission directly from the recipient and found instead that the franchisees gave their permission to receive faxes from third parties when they agreed to the terms of the franchise agreement. Finally, the court noted that the subjective intention and understanding of one of the owners of one of the franchises regarding the manner in which information might be shared was irrelevant; the objective interpretation of the agreement controlled.

Second, the Eleventh Circuit found that “[e]ven if the hotels could have prevailed when the solicited-fax rule was extant, the Commission has eliminated the rule and has unambiguously abated liability for any past violations of its requirements. So Safemark is entitled to judgment as a matter of law.” 2019 U.S. App. LEXIS 22352, at *27. The court reasoned it was clear the rule was no longer valid given (1) the FCC’s rationale for eliminating the rule was based on the D.C. Circuit’s decision in Bais Yaakov of Spring Valley v. FCC, which held that the solicited-fax rule was never legally in force at all and (2) the FCC’s dismissal of pending motions for a waiver from the solicited-fax rule, including one from Safemark, as moot. The court concluded in no uncertain terms, “[t]he solicited-fax rule no longer stands as an operative regulation.” Id. at *24.

Eleventh Circuit Rethinks The Hobbs Act

Notably, a concurring opinion by U.S. Circuit Judge William Pryor called for the full Eleventh Circuit to review its precedent holding that the Hobbs Act requires district courts to treat agency orders interpreting federal laws as binding precedent. Judge Pryor wrote that the appeals court’s case law appears to have misunderstood the Hobbs Act’s granting of “exclusive jurisdiction” to circuit courts to hear petitions directly challenging the validity of such agency orders as meaning that a district court cannot consider any argument questioning the validity of an agency ruling. He went as far as stating “[o]ur precedents’ interpretation of the Hobbs Act ignores the statutory context, generates absurd results, and raises serious constitutional doubts. In the earliest appropriate case, we should correct our mistake en banc.” Id. at *29.

The concurring opinion is significant for at least two reasons (1) it is the first time that an appellate court addresses the interpretation of the Hobbs Act in the context of the FCC’s TCPA regulations, since the Supreme Court punted on the issue in PDR Network, LLC v. Carlton & Harris Chiropractic, Inc., 139 S. Ct. 2051, 2056, 204 L. Ed. 2d 433 (2019), and (2) it signals the Eleventh Circuit’s intent to overturn precedent that requires district courts to treat agency orders interpreting federal laws as binding precedent. If other circuits follow suit, it will likely mean greater inconsistency in the interpretation of the TCPA across courts nationwide.

 

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Monthly TCPA Digest – August 2019

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Authors

Joshua Briones

Member / Managing Member, Los Angeles Office

Joshua Briones is a commercial litigator who defends consumer class actions for Mintz. He's represented clients in a wide range of industries, including financial services, life sciences, manufacturing, and retail, in cases involving false advertising, unfair trade practices, and other claims.
E. Crystal Lopez is a Mintz Associate who focuses her practice on class action defense, with an emphasis on consumer fraud, data privacy, marketing, and compliance issues claims. She has defended corporate clients against class actions at all stages of litigation.