SCOTUS Punts on TCPA Fax Case; Court Conservatives Would Go Further

The Supreme Court handed down what's essentially a middle of the road decision in a junk fax case, PDR Network v. Carlton & Harris Chiropractic, but its decision has implications for the FCC and the communications bar, lawyers following the case said Thursday. The opinion was expected to answered the question of whether the FCC has the long-assumed power to exclusively implement the Telephone Consumer Protection Act (see 1904250006) but stopped well short of that. The issues raised appear far from settled for the FCC, since four of the justices would have gone further, lawyers said.

“The court’s decision is an underwhelming cliffhanger,” said Mark Brennan of Hogan Lovells, who works on TCPA cases. “We still don’t know the level of deference that a given court owes specific FCC TCPA decisions in litigation,” he said. “No clear victor this time. Consumers and businesses continue to face uncertainty about how much weight to accord FCC TCPA decisions and the degree to which they can be challenged in court.”

“It’s clearly a middle of the road decision, without question,” said Joseph Boyle of Kelley Drye. “It may even be less than that as it relates to the FCC.” The court “punts on the fundamental legal question,” said DLA Piper’s Peter Karanjia.

“The question here is whether the Hobbs Act’s vesting of ‘exclusive jurisdiction’ in the courts of appeals to ‘enjoin, set aside, suspend,’ or ‘determine the validity’ of FCC ‘final orders’ means that a district court must adopt, and consequently follow, the FCC’s Order interpreting the term ‘unsolicited advertisement’ as including certain faxes that promote ‘free’ goods,” Justice Stephen Breyer wrote for the court. “We have found it difficult to answer this question.”

Justices vacated the judgment of the 4th U.S. Circuit Court of Appeals and remanded the case to decide two questions. The first is “what is the legal nature” of the 2006 FCC order in question. “Is it the equivalent of a ‘legislative rule,’ which is ‘issued by an agency pursuant to statutory authority’ and has the ‘force and effect of law’?” the court asked. If it is instead an “interpretive rule,” it may not be binding on a district court, Breyer wrote.

The other question is whether PDR had “adequate” opportunity to seek judicial review of the order, Breyer said. “If the answer is ‘no,’ 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.”

“Because the Court of Appeals has not yet addressed the preliminary issues we have described, we vacate the judgment of the Court of Appeals and remand this case so that the Court of Appeals may consider these preliminary issues,” Breyer said. He noted the Supreme Court considers itself a court of “review,” not “first view.”

Conservatives Disagree

The court was united in the decision. But Justices Clarence Thomas and Brett Kavanaugh wrote concurring opinions, saying the decision was too narrow, a view shared by most of the court’s conservatives.

“Ruling narrowly, the Court does not answer the question presented,” Kavanaugh said in an opinion supported by Justices Thomas, Neil Gorsuch and Samuel Alito. “My analysis of that question is straightforward: 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. The Hobbs Act does not expressly preclude judicial review of an agency’s statutory interpretation in an enforcement action.” Justices heard argument in March (see 1903250068).

“There’s a lot for PDR to like in the four-justice concurring opinion” by Kavanaugh, “which would have resolved the overarching question in PDR’s favor,” Karanjia said. “If the case returns to the Supreme Court on remand, which is unclear at this stage, PDR’s goal will clearly be to try to pick up at least one more vote.”

Free State Foundation President Randolph May said the concurring opinions could have big implications long term. “Thomas seizes the opportunity to again make the point that, in his view, the Chevron deference doctrine should be jettisoned because it is inconsistent with separation of powers principles. And Justice Kavanaugh, in arguing for a default rule under the Hobbs Act that would not preclude district court review of interpretations of the lawfulness of FCC orders, demonstrated through his scholarly analysis, why he is likely to become a leader among the justices in administrative law.”

FCC Implications

The decision, though cautious and narrow, could have significant impact for the FCC and regulated companies in the subsidiary questions remanded to the 4th Circuit, said administrative law and communications lawyer Kevin King of Covington and Burling. The Kavanaugh concurrence seems to open the door to a third option of lower courts going further and saying the Hobbs Act doesn't cut off challenging the merits of an FCC order, he said. Those routes could apply to any Communications Act enforcement suit that turns on an FCC order, opening up "a broad new frontier" for defendants, he said. King said justices expect to be dealing with the Hobbs issue again.

The case probably has bigger implications for a private litigant than for the FCC, Boyle said. “The majority recognizes the statutory scheme that exists and that the Hobbs Act is there essentially to address challenges to an FCC rulemaking proceeding.” The court sees a “fairness” issue for litigants, Boyle said. If a rule is found to be “interpretive,” the court seems to say the district court would have jurisdiction, he said, noting many FCC rules are primarily interpretive. The court also offers plaintiffs an out if they didn’t have a fair chance to challenge the rule in the past, Boyle told us. Many defendants have likely gained an “avenue” they didn’t have to defend themselves in TCPA and other cases, he said.

“The decision may affect a small category of cases involving petitions for review of FCC actions that are arguably governed by earlier decisions,” said Georgetown University Law Center Institute for Public Representation's Andrew Schwartzman. “Every now and then, the commission invokes the 60-day limit in the Hobbs Act to obtain dismissal of a challenge to a decision that relies on an older rulemaking or declaratory ruling decision. There is language at the end of Breyer's decision that may give more latitude to future cases challenged on that basis.”

King said Chief Justice John Roberts likes to avoid 5-4 decisions and thus often will take incremental approaches to big changes. The Kavanaugh concurrence shows his expertise on administrative law, having come from the D.C. Circuit, which "lives administrative law daily," he said. The Kavanaugh concurrence also shows what's likely the future trend for federal courts broadly, with more willingness to scrutinize agency actions, King said.