TSR Not ‘Applicable’ to Ringless Voicemails, Says Motion to Dismiss FTC Suit

Another set of defendants among the network of companies and individuals accused by the FTC of delivering tens of millions debt relief robocalls to U.S. consumers via the Stratics Networks ringless voicemail (RVM) platform (see 2302170032) moved Thursday to dismiss the agency’s complaint. But, unlike the motion to dismiss a day earlier from Ace Business Solutions for failure to state a claim (see 2306090032), defendant Atlas and its top officers argue the case should be thrown out because RVMs don’t qualify as phone calls for the purposes of the Telemarketing Sales Rule.

DOJ sued Feb. 16 on the FTC's behalf alleging that among the robocalls delivered to consumers were millions of calls marketing Atlas’ debt relief services, in violation of the TSR. But the “plain statutory and regulatory language” of the TSR, plus the legislative and regulatory histories, “clearly demonstrate that a telephone call must cause a recipient’s telephone to ring and must be capable of being answered by the called party,” said Atlas’ motion to dismiss (docket 3:23-cv-00313) in U.S. District Court for Southern California in San Diego. The TSR isn't “applicable” to RVMs, it said.

Another basis for dismissal is that the FTC “failed to provide fair notice of its intent” to regulate RVMs, said the motion. “If the government intended to interpret the TSR to regulate ringless voicemail, it had an obligation to provide adequate notice of its position and to explain with specificity that such conduct was encompassed by the TSR,” it said. “The government failed to do so.”

The FTC also exceeded its authority by “seeking to declare,” through “instant adjudication” rather than a “formal rulemaking,” that the TSR covers RVMS, said the motion. Congress empowered the FTC “to engage in formal rulemaking to adopt new rules and to amend existing rules,” it said. The FTC “engaged in such rulemaking to expand the TSR on multiple occasions,” it said. In so doing, the commission provided interested parties the opportunity to comment and provide feedback, it said. “These procedures were not followed here.”

The failure to do a formal rulemaking is “particularly inappropriate where, as here, the government is seeking to pronounce an expansive interpretation of the TSR that will have general application,” and isn’t specific to the parties in this litigation, said the motion. A rulemaking also is required where the government’s new interpretation would subject the Atlas defendants to “crushing” civil penalties, it said.

DOJ isn’t authorized to pursue civil penalties in this action, said the motion. DOJ’s prosecutorial authority in this action is “coextensive with the FTC’s,” said the motion. Congress’ expansion of the FTC’s authority to seek civil penalties “was and remains unconstitutional, and is inconsistent with the FTC’s role as an independent agency,” it said. This “defect” is “fatal,” whether the FTC brings this action or the DOJ does so on the FTC’s behalf, it said.

The government isn’t entitled to permanent injunctive relief, which is available only where a defendant is violating a law regulated by the FTC, said the motion. “But here, the government alleges conduct that ceased years ago,” it said. Injunctive relief isn’t appropriate “to remedy past conduct,” it said. The complaint should also be dismissed on the grounds that the government’s attempt to “regulate through enforcement,” especially through the imposition of harsh civil penalties, violates “principles of fair notice” under the constitution’s due process clause, it said.

The FTC’s enforcement action is “constitutionally infirm” because it violates the “non-delegation and major questions doctrines,” said the motion. The FTC Act and the Telemarketing and Consumer Fraud and Abuse Prevention Act fail to provide an “intelligible principle” to guide the FTC’s exercise of authority in prohibiting unfair or deceptive acts or practices, it said. Congress delegates rulemaking authority to an agency over questions of great economic or political magnitude “only when it does so explicitly,” it said. “No such explicit directive has been provided on the novel issue of ringless voicemail and congressional intent shows otherwise,” it said.