Antitrust Law Daily Wrap Up, PRIVACY—8thCir: FCC Regulations Under TCPA Require Fax Advertising Sent with Consent of Recipient to Contain an Opt-Out Notice, (May 22, 2013)

By Tobias J. Gillett, J.D., LL.M.

The U.S. Court of Appeals in St. Louis has ruled that it cannot review Federal Communications Commission (FCC) regulations issued pursuant to the Telephone Consumer Protection Act (TCPA), which require facsimile advertisements sent with the consent of the recipient to bear an opt-out notice, to determine if the FCC had statutory authority to issue it until the agency has ruled on the issue. The appellate court overturned a district court ruling that the FCC’s regulation only applied to unsolicited advertisements (Nack v. Walburg, May 21, 2013, Melloy, M.).

Michael Nack received a facsimile advertisement from Douglas Walburg, which Nack had consented to receive. Nonetheless, Nack filed suit against Walburg, asserting class action claims that Walburg’s failure to include opt-out language mandated by FCC regulations violated the TCPA. The district court rejected these claims, concluding that the FCC’s opt-out regulation applied only to unsolicited faxes, and hence did not apply in the present case.

The appeals court explained that the TCPA prohibits sending an unsolicited advertisement to a facsimile machine unless “the unsolicited advertisement contains a notice meeting” certain requirements. The TCPA also provides for a private right of action “based on a violation of this subsection or the regulations prescribed under this subsection.” The FCC’s regulation states that “[a] facsimile advertisement that is sent to a recipient that has provided prior express invitation or permission to the sender must include an opt-out notice.”

Due to confusion over the FCC’s interpretation of its regulation, caused in part by a 2006 FCC order stating that “entities that send facsimile advertisements to consumers from whom they obtained permission” must include an opt-out notice, but also stating that “the opt-out notice requirement only applies to communications that constitute unsolicited advertisements,” the appeals court requested supplemental briefing from the FCC. The FCC’s brief “explained that the regulation reached faxes for which the recipient had granted consent.”

Regulatory interpretation. The appeals court observed that the FCC’s regulation, “read most naturally and according to its plain language, extends the opt-out notice requirement to solicited as well as unsolicited advertisements.” The court found this conclusion to be consistent with the FCC’s interpretation of its own regulation and with its 2006 order, other than the identified contradictory passage. Therefore, the court held that it had to “defer to the FCC’s plain-language interpretation of its own regulation unless the regulation is ‘contrary to unambiguous statutory language’ or ‘application of the regulation is arbitrary or capricious.’”

Challenges to the regulation. The court explained that under the Hobbs Act “the courts of appeals have exclusive jurisdiction to determine the validity of FCC orders,” but that “[a] party challenging an FCC regulation as ultra vires must first petition the agency itself and, if denied, appeal the agency’s disposition directly to the Court of Appeals.” Since Nack had filed a private action, and Walburg had not yet sought a stay of the litigation to pursue administrative remedies through the FCC, no administrative proceeding had yet been held in the present case. Therefore, the court found that it was precluded from holding the regulation invalid.

Private right of action. The court also rejected Walburg’s argument “that if the agency’s promulgation of the regulation was ultra vires or was pursuant exclusively to some statutory authority other than [the relevant provision of the TCPA], the private right of action could not reach violations of the regulation.” The court found this argument to be “wholly indistinguishable from a direct challenge,” noting that it “involves the same need for deference to the agency and nationally uniform determinations as a direct, Hobbs Act challenge,” and that the FCC’s rationale for its regulation “arguably brings the regulation within range of what [the statute] authorized the FCC to regulate.”

Constitutional challenge. Finally, the court declined to take up the issue of the constitutionality of the FCC’s regulation. The court observed that it had held in Missouri ex rel. Nixon v. Am. Blast Fax, Inc., 323 F.3d 649 (2003), “that the TCPA provisions regarding unsolicited fax advertisements were not an unconstitutional restriction upon commercial speech.” Although the court noted that its decision “would not necessarily be the same if applied to the agency’s extension of authority over solicited advertisements,” it pointed out that the issue had not been raised before the district court and thus was not properly before the court.

The case is No. 11-1460.

Attorneys: Phillip Andrew Bock (Bock & Hatch) for Michael R. Nack. Patrick A. Bousquet (Brown & James) for Douglas Paul Walburg.

Cases: Privacy ArkansasNews IowaNews MinnesotaNews MissouriNews NebraskaNews NorthDakotaNews SouthDakotaNews