Supreme Court Sends TCPA Case Back to Fourth Circuit
Business Litigation Update
Date: June 24, 2019
On June 20, 2019, the U.S. Supreme Court issued a decision in PDR Network, LLC v. Carlton & Harris Chiropractic, Inc., in which it considered whether the Administrative Orders Review Act, also known as the Hobbs Act, requires a district court to accept the FCC’s legal interpretation of the Telephone Consumer Protection Act (TCPA). The guidance lawyers and businesses thought might come from this highly anticipated decision is yet to arrive, as a plurality decided to remand the case to the Fourth Circuit to determine whether the FCC Order at issue (2006 Order) is legislative or interpretative. That said, Justice Kavanaugh’s concurrence may foreshadow how the Court will ultimately rule.
The plurality held that if the 2006 Order is a legislative rule issued pursuant to the FCC’s statutory authority, it has the force and effect of the law, and no district court would have the authority under the Hobbs Act to disagree with the FCC’s determinations. On the other hand, if it is an interpretative rule designed to provide the FCC’s construction of the statutes and rules it administers, it “may not be binding on a district court, and a district court therefore may not be required to adhere to it.” Finally, even if it were legislative, the plurality would still require a district court to evaluate whether PDR had a prior and adequate opportunity to seek review of the 2006 Order. In his concurrence, Justice Kavanaugh flatly stated that the 2006 Order was not binding on the district court, opening the way for PDR (and other defendants) to challenge the FCC’s conclusions.
The Hobbs Act provides that federal appellate courts have “exclusive jurisdiction to enjoin, set aside, suspend (in whole or in part), or to determine the validity of” certain final orders issued by the FCC (and other administrative agencies) and requires that challenges to those orders be brought within 60 days after entry of the order. In the 2006 Order, the FCC stated that the phrase “unsolicited advertisement” in the TCPA includes faxes that promote even “free” goods or services if the advertisement has a business aim.
PDR sent Carlton & Harris (a medical provider) a fax that offered free copies of its publication (the Physicians’ Desk Reference, a catalogue of pharmaceutical drugs). Carlton & Harris sued PDR in the Southern District of West Virginia, alleging that the fax violated the TCPA. PDR moved to dismiss, arguing that the fax did not constitute an unsolicited advertisement because it offered free goods or services and did not have a business aim. Carlton & Harris responded that under the Hobbs Act, the district court was required to follow the 2006 Order and hold that the fax constituted an unsolicited advertisement, even if it offered only free goods or services. The district court held that it was not required to defer to the FCC’s interpretation of an unambiguous statute, but that even under the 2006 Order, the fax would not qualify as an advertisement. Because the district court concluded that the TCPA’s definition of unsolicited advertisement was unambiguous, it disagreed with the FCC’s interpretation. The district court also held that the fax was not an unsolicited advertisement even under the 2006 Order and dismissed the complaint.
Carlton & Harris appealed to the Fourth Circuit, which held that the Hobbs Act required the district court to follow the 2006 Order, and that the district court had erred in not deferring to the FCC’s interpretation. The Supreme Court granted certiorari to address whether “the Hobbs Act’s commitment of ‘exclusive jurisdiction’ to the courts of appeals requires a district court in a private enforcement suit … to follow the FCC’s 2006 Order interpretation of” the TCPA.
Rather than answering the question, a plurality of the Court stated that there were two questions that had to be answered, neither of which had been addressed by the lower courts. “First, what is the legal nature of the 2006 Order?” Is it a legislative rule issued pursuant to the FCC’s statutory authority, which gives it the force and effect of law? Or is it an interpretative rule advising the public of the FCC’s construction of the TCPA, which would be informative but not necessarily binding on district courts?
The second question posed was if the lower courts determined that the 2006 Order was legislative, did PDR have a prior and adequate opportunity to seek review? What if a challenger was not advertising, or did not exist, at the time of the 2006 Order? The Administrative Procedure Act requires that an agency’s interpretation be subject to judicial enforcement unless “a prior, adequate, and exclusive opportunity for judicial review is provided by law,” and neither of the lower courts had addressed this issue. The plurality held that “it may be that the Administrative Procedure Act permits PDR to challenge the validity of the Order in this enforcement proceeding even if the Order is deemed a ‘legislative’ rule rather than an ‘interpretative’ rule.” The plurality remanded the case back to the lower courts to make this determination.
In a concurring opinion, Justice Kavanaugh agreed with vacating the Fourth Circuit’s decision, but for very different reasons. According to Justice Kavanaugh, the Hobbs Act’s purpose is to require those who want to make a facial pre-enforcement challenge to an agency order to do so promptly (i.e., within 60 days) in a federal court of appeals or run the risk of arguing, perhaps unsuccessfully, against the agency’s interpretation as a defendant in a later enforcement action. In other words, if the party disagrees with the agency’s interpretation but chooses not to challenge it within the 60-day period, the party has the option of violating the order and hoping that its later challenge to the order is successful.
Justice Kavanaugh stated that “[d]enying judicial review of an agency’s interpretation in enforcement actions can be grossly inefficient and unfair. It would be wholly impractical – and a huge waste of resources – to expect and require every potentially affected party to bring pre-enforcement Hobbs Act challenges against every agency order that might possibly affect them in the future.”
More important for future cases, according to Justice Kavanaugh, the Hobbs Act does not (and constitutionally cannot) limit challenges to agency orders to only pre-enforcement proceedings and, as a result, defendants can challenge the FCC’s interpretation of the TCPA in any district court. While a district court may be required to give the FCC’s interpretation deference, the FCC cannot contradict the statute’s plain terms.
Justice Kavanaugh stated that he would vacate the Fourth Circuit’s decision and would hold that PDR may argue (and the district court could hold) that the FCC’s interpretation of the TCPA was incorrect.
Justice Thomas, in a separate concurring opinion joined only by Justice Gorsuch, expressed the view that the Hobbs Act does not apply in the first instance to a private action between two parties, neither of which asked that the 2006 Order be enjoined, set aside or suspended. Justice Thomas also suggested that if the Fourth Circuit’s interpretation of the Hobbs Act was correct, it “would arguably render the Hobbs Act unconstitutional” because it would allow an entity other than Congress to exercise legislative power. Finally, he expressed the view that agency interpretations of statutes are not binding, and that perhaps the Court should reconsider whether even applying deference to such orders is necessary or constitutional.
Although the PDR decision provides some guidance on where the Court could (or, more appropriately, may) end up post-remand, Justice Kavanaugh’s concurring opinion may become persuasive authority for the argument that defendants may challenge the FCC’s interpretation of the TCPA in private lawsuits.
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