D.C. Circuit Court of Appeals Sets Aside FCC’s Definition of “Called Party” Under the TCPA—What Comes Next?

The Telephone Consumer Protection Act (“TCPA”) makes it unlawful to make autodialed calls without the prior express consent of the “called party.” 47 USC §227(b)(1)(A). The statute does not define the term “called party,” leaving parties on both sides of the aisle scratching their collective heads as to what person or persons fall within this category.

The definition of “called party” is particularly important because prior express consent of the called party is a complete defense to the TCPA. Thus, identifying the “called party” is a crucial component to any TCPA compliance regime and/or lawsuit.


The “Called Party” Contenders

There are four possible interpretations for the phrase “called party”: (1) the person whom the caller was trying to reach—the “intended recipient”; (2) the subscriber of the wireless number; (3) the non-subscriber but customary user of the wireless number; or (4) the person who simply answers the call. Somewhat remarkably, all four have been adopted by various district courts at different times.

From a policy perspective, it seems clear that Congress likely intended “called party” to mean the “intended recipient” in this portion of the TCPA. Congress intended the statute to afford a ready defense to a caller that had received consent from the person it was trying to call. Interpreting “called party” to mean anyone else seems foolish—a caller cannot know who is likely to pick up the phone or who is subscribing to the phone at the time the call is attempted. Not surprisingly, therefore, the first district courts to look at the issue concluded that the “called party” was the intended recipient. See Cellco P’ship v. Dealers Warranty, LLC, 2010 U.S. Dist. Lexis 106719 (D.N.J. Oct. 5, 2010); Leyse v Bank of Am., 2010 U.S. Dist. Lexis 58461 (S.D.N.Y. June 14, 2010); Kopff v World Research Group, LLC, 568 F Supp. 2d 39 (D.D.C. 2008).

The case law evolved over time, however, and the Seventh Circuit took a very different approach in Soppet v. Enhanced Recovery Co., LLC, 679 F.3d 637 (7th Cir. 2012). There, elevating form over substance, Judge Easterbrook wrote a brief opinion concluding that because Congress used the phrase “called party” to mean the subscriber in other portions of the TCPA, it must also mean “subscriber” in the express consent portion of the statute. This is true although the purpose of the express consent provision is quite different from other provisions of the statute where the phrase “called party” is used—the express defense provision was intended to provide a ready defense to a caller and (in a caller’s view at least) ought to be read consistent with that purpose.

Following on the heels of Soppet came Osorio v. State Farm Bank, F.S.B., 746 F.3d 1242 (11th Cir. 2014), which reached the same conclusion with limited additional analysis.

In July 2015, the Federal Communications Commission (“FCC” or “Commission”) issued its much ballyhooed TCPA Omnibus ruling, in which it was revealed that the “called party” is not one but two persons—both the customary user of the phone and the subscriber. This approach paid deference to Soppet but also afforded callers a more ready defense—they could rely on consent provided by customers without asking who owned their phone. Then again, it still resulted in harsh results—callers were strictly liable anytime a customer provided a wrong number or a number changed hands without the caller’s knowledge.

In 2015, the Third Circuit in Leyse v. Bank of Am. Nat’l Ass’n, 804 F.3d 316 (3d Cir. 2015) relied on the TCPA Omnibus ruling to reverse a district court’s determination that the “intended recipient” was the “called party.”

Since Leyse, the vast majority of district court opinions have followed the FCC’s “called party” approach.

2015 FCC Declaratory Ruling and Subsequent Appeal to the D.C. Circuit

As noted above, the FCC issued its 2015 Omnibus TCPA ruling and interpreted “called party” to mean the current subscriber and/or customary user of the wireless number. However, the Commission sought to ameliorate the harshness of this rule in the recycled number context—where callers would otherwise be held immediately liable for calls made using regulated technology to their customer’s former phone numbers—and afforded callers a one-call safe harbor.

In order to justify the one-call safe harbor, the FCC opined that a caller should be able to “reasonably rely” on the consent of the previous subscriber to the wireless number. The FCC determined, however, that the reasonable reliance ended on the first attempt after reassignment.

Petitioners—several aggrieved industry groups effected by the Omnibus—challenged the Omnibus TCPA Ruling to the D.C. Circuit, with one of the central issues on appeal being the definition of “called party.” The Petitioners argued that the only correct reading of “called party” is the “intended recipient” approach because “there is no reliable way to ascertain whether a given cell phone number has been reassigned” and “the consequences of liability …[at] $500 or $1,500 a call . . . could . . . prove catastrophic.” See Petitioners’ Opening Brief in ACA Int’l v. FCC, No. 15-1211 (D.C. Cir. Nov. 25, 2015). The Petitioners also argued that the one-call safe harbor was arbitrary and capricious—seemingly a risky gamble as the Commission did not have to afford a safe harbor at all.

The D.C. Circuit’s Decision Sets Aside the FCC’s Treatment of Calls to Recycled Cell Phone Numbers and the “Called Party” Definition  

In its much-anticipated and long-awaited decision, the D.C. Circuit found that the FCC’s definition of “called party” as the “current subscriber” is a plausible definition. ACA Int’l v. FCC, No. 15-1211 (D.C. Cir. Mar. 16, 2018). In reaching this portion of its decision, the D.C. Circuit pointed to the Seventh Circuit’s decision in Soppet discussed above. Relying on Soppet, the D.C. Circuit held that the FCC “could permissibly interpret ‘called party’ . . . [as] the current subscriber,” and that the FCC “was not compelled to interpret ‘called party’ in §227(b)(1)(A) to mean the ‘intended recipient.'” See id. at 35.

However, the D.C. Court did not stop there. After acknowledging the harsh impact a “subscriber” approach has upon callers—again, callers become immediately and strictly liable for inadvertent calls made to customers after numbers change hands—the Court found that the FCC’s one-call safe harbor is incompatible with the “reasonable reliance” approach it adopted to express consent. Specifically, the Court repeatedly referenced the FCC’s view that callers must be able to reasonably rely on the prior subscriber’s consent, and concluded that the FCC acted arbitrarily and capriciously when it elected to find that “reasonable reliance” ends with the first attempted call. On that ground, the D.C. Circuit struck down the Commission’s limited one-call safe harbor.

Recognizing that striking down the defense while simultaneously upholding the Commission’s interpretation of “called party” would leave callers in the harshest possible circumstance—which the FCC had previously acknowledged it did not want to do—the D.C. Circuit invalidated the entirety of the FCC’s approach to recycled numbers, including its initial determination that “called party” does not refer to the “intended recipient.” The important portion of the ruling is as follows:

If we were able excise the Commission’s one-call safe harbor alone, that would leave in place the Commission’s interpretation that ‘called party’ refers to the new subscriber. And that in turn would mean that a caller is strictly liable for all calls made to the reassigned number, even if she has no knowledge of the reassignment.

We cannot be certain the agency would have adopted that rule in the first instance. . . .

As a result, we must set aside the Commissions’ treatment of reassigned numbers as a whole.

ACA Int’l at 39-40.

What We Should Expect

On remand to the FCC, we expect the following issues to be addressed: (1) definition of “called party;” and (2) if “called party” is not the “intended recipient,” then where does the “reasonable reliance” on the prior subscriber’s consent end?

As the FCC is now overseen by Chairman Ajit Pai, it is worth looking back at his previous statements on the subject to determine how the FCC might rule in reconsidering the definition of “called party.” Notably, in his dissent to the Omnibus ruling, Chairman Pai states: “Interpreting the term ‘called party’ to mean the expected recipient—that is, the party expected to answer the call—is by far the best reading of the statute.” That is pretty definitive. Perhaps his position has softened on the issue over time, however, and only time—and the content of the new Omnibus ruling—will tell.

Assuming that the FCC does retain its “subscriber/customer user” approach to “called party,” we can expect a much more lenient recycled phone number safe harbor out of the new-look Commission. More than likely, this will include a requirement that callers subscribe to the FCC’s soon-to-be-launched recycled phone number database. As the D.C. Circuit points out, the existence of such a database “would naturally bear on the reasonableness of calling numbers that have in fact been reassigned . . .” See ACA Int’l at 40. So perhaps a comprehensive fix on recycled numbers—including a database that callers can actually rely on in trying to avoid wrong numbers—will be available at the time the Commission next addresses the issue.

For now, three circuit courts—the Third, Seventh, and Eleventh Circuits—have found that the definition of “called party” refers to the current subscriber of the wireless number, although the Third Circuit’s approach seems ripe for reconsideration, since it relied on the FCC’s invalidated Omnibus approach.  No other circuit courts have provided an answer on the issue, which will leave callers in the remaining circuits to argue that “intended recipient” is the right and natural way to interpret the phrase “called party.”

Dorsey & Whitney

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