Antitrust Law Daily TCPA fax ad case remanded for further evaluation of FCC interpretation of ‘unsolicited advertisement’
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Thursday, June 20, 2019

TCPA fax ad case remanded for further evaluation of FCC interpretation of ‘unsolicited advertisement’

By Jody Coultas, J.D.

The required deference by district courts to an FCC Order depends on the resolution of two preliminary sets of questions that need to be answered on remand.

The U.S. Supreme Court vacated and remanded a case involving whether the Hobbs Act required a district court to adopt and follow a Federal Communication Commission (FCC) Order interpreting the term "unsolicited advertisement" as including certain faxes that promote "free" goods. The answer, according to the Supreme Court, depends upon the resolution of two preliminary issues that the Fourth Circuit must answer: (1) is a FCC Order the equivalent of a "legislative rule," which is "issued by an agency pursuant to statutory authority" and has the "force and effect of law; and (2) did the fax sender have a "prior" and "adequate" opportunity to seek judicial review of the Order. Justice Breyer delivered the opinion of the Court, in which Chief Justice Roberts and Justices Ginsburg, Sotomayor, and Kagan joined. Justices Thomas and Kavanaugh filed concurring opinions (PDR Network, LLC v. Carlton & Harris Chiropractic, Inc., June 20, 2019, Breyer, S.).

Carlton & Harris Chiropractic, Inc., a chiropractic office in West Virginia, received a fax from the PDR Network, an organization that publishes the Physician’s Desk Reference, a widely-used compendium on prescription drugs and prescribing information. PDR Network charges drug companies for including their drugs in the publication. The chiropractic office sued PDR Network claiming the fax violated the TCPA, which prohibits using a fax machine to send unsolicited advertisements.

The district court granted PDR Network’s motion to dismiss for failure to state a claim, holding that the TCPA’s definition of "unsolicited advertisement" was unambiguous and required a commercial aim. The court concluded that the Hobbs Act did not compel the court to defer to FCC’s interpretation of an unambiguous statute, citing Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843 (1984)). The chiropractic office appealed.

The U.S. Court of Appeals in Richmond, Virginia vacated the judgment, holding that the West Virginia federal district court acted beyond its scope of authority when it failed to defer to the FCC interpretation of a 2006 FCC Rule. Further, the Fourth Circuit held that faxes that offer something for free are "unsolicited advertisements" under a 2006 FCC Rule. The Hobbs Act precluded the district court from using the Chevron analysis in the first place, the appellate court held. Thus, the district court erred in holding that an advertisement must have a commercial aim to fall under the TCPA.

In its petition for certiorari, PDR Networks asked the Court to determine whether the Hobbs Act strips courts of jurisdiction to engage in a traditional Chevron analysis and requires automatic deference to an agency’s order even if there has been no challenge to the "validity" of such order. The federal government filed a brief in support of upholding the Fourth Circuit decision. The American Bankers Association, Consumer Bankers Association, Independent Community Bankers of America, and Electronic Privacy Information Center (EPIC) also filed briefs in support of the respondent.

The Hobbs Act states that the courts of appeals have "exclusive jurisdiction to enjoin, set aside, suspend (in whole or in part), or to determine the validity of . . . final orders of the Federal Communication Commission made reviewable by section 402(a) of title 47." Also, the Act provides that "[a]ny party aggrieved" may bring such a challenge in the court of appeals "within 60 days after" the entry of the FCC order in question. At issue in this case was whether the Hobbs Act’s grant of "exclusive jurisdiction" to the courts of appeals requires a district court to follow the FCC’s 2006 Order interpreting the Telephone Act. That order stated that the term "unsolicited advertisement" includes certain faxes that "promote goods or services even at no cost," including "free magazine subscriptions" and "catalogs."

Because the Fourth Circuit had not addressed certain preliminary issues, the Supreme Court vacated the appellate court judgment and remanded the case, so the court of appeals may consider these preliminary issues and any other related issues that may arise. The first issue the appellate court must decide is the legal nature of the 2006 FCC Order. Specifically, the court must determine whether the Order is the equivalent of a "legislative rule" or an "interpretive rule." A legislative rule is "‘issued by an agency pursuant to statutory authority’" and has the force of law, while an interpretive rule simply "‘advise[es] the public of the agency’s construction of the statutes and rules which it administers’" and lacks the force and effect of law. An interpretive rule may not be binding on a district court, although the Court did not definitively resolve this issue. "That may be so regardless of whether a court of appeals could have "determin[ed]"during the 60-day review period that the Order is "vali[d]"and consequently could have decided not to "enjoin, set aside, [or] suspend" it, the Court said. And that may be so no matter what degree of weight the district court ultimately gives the FCC’s interpretation of the statute under Chevron.

The second issue the appellate court must decide is whether PDR had a "prior" and "adequate" opportunity to seek judicial review of the 2006 FCC Order, the Court determined. The Administrative Procedure Act provides that "agency action is subject to judicial review in civil or criminal proceedings for judicial enforcement" except "to the extent that [a] prior, adequate, and exclusive opportunity for judicial review is provided by law." The Supreme Court found that it was important to determine whether the Hobbs Act’s exclusive-review provision afforded PDR a "prior" and "adequate" opportunity for judicial review of the Order. If PDR did not have that opportunity, 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 "interpretive" rule. That issue was left for the appellate court to decide.

Concurring opinions. Justice Thomas, joined by Justice Gorsuch, concurred, but wrote separately based on their belief that the majority’s decision rests on a mistaken—and possibly unconstitutional—understanding of the relationship between federal statutes and the agency orders. The Fourth Circuit, according to Justice Thomas, erred in holding that the Hobbs Act precluded the district court from reaching the question of the TCPA’s meaning because the district court cannot reach that question without "‘rubbing up against the Hobbs Act’s jurisdictional bar.’"

"Interpreting a statute does not ‘determine the validity’ of an agency order interpreting or implementing the statute," the concurring opinion continued. The concurring opinion noted that the Fourth Circuit’s decision was based on the assumption that Congress can constitutionally require federal courts to treat agency orders as controlling law, without regard to the text of the governing statute. A similar assumption underlies our precedents requiring judicial deference to certain agency interpretations. "This case proves the error of that assumption and emphasizes the need to reconsider it," said Thomas.

Justice Kavanaugh, joined by Justices Thomas, Alito, and Gorsuch, wrote a concurring opinion stating that he would have reached the issue presented by the petition for certiorari and concluded that PDR may argue that the FCC’s interpretation of the TCPA is incorrect, and that the district court is not required to accept the FCC’s interpretation of the TCPA. Because the Hobbs Act does not expressly preclude judicial review of agency orders, PDR was not barred by the Hobbs Act from arguing that the FCC’s legal interpretation of the TCPA is incorrect. Similarly, the district court was not bound by the FCC’s interpretation and should have interpreted the statute as courts traditionally do under the usual principles of statutory interpretation, affording appropriate respect to the agency’s interpretation. Justice Kavanaugh noted that if the court on remand concludes that the FCC’s order was not subject to the Hobbs Act in the first place or concludes that pre-enforcement review was not adequate for PDR, PDR will be able to argue that the FCC’s interpretation of the TCPA is incorrect. However, if the court on remand reaches neither of those conclusions, it will confront the question that was not reached by the Supreme Court.

The concurring opinion noted that the general rule of administrative law is that in an enforcement action, a defendant may argue that an agency’s interpretation of a statute is wrong, at least unless Congress has expressly precluded the defendant from advancing such an argument. Because the Hobbs Act does not expressly preclude judicial review of an agency’s statutory interpretation in an enforcement action, PDR may challenge the FCC’s interpretation before the district court. Also, the district court is not bound by the FCC’s interpretation of the TCPA. The district court should interpret the TCPA under usual principles of statutory interpretation, affording appropriate respect to the agency’s interpretation.

The case is Dkt 17-1705.

Attorneys: Carter G. Phillips (Sidley Austin LLP) and Jeffrey Neal Rosenthal (Blank Rome LLP) for PDR Network, LLC, et al. Glenn L. Hara (Anderson + Wanca) for Carlton & Harris Chiropractic, Inc.

Companies: PDR Network, LLC; Carlton & Harris Chiropractic, Inc.

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