With Hobbs Act Case Pending in Supreme Court, 4th Circuit’s Decision May Implicate Fate of Other FCC-Created Exceptions and Allowances Under TCPA’s Automated-Call Ban

The U.S. Court of Appeals for the 4th Circuit has held that an exemption Congress created in 2015 to the Telephone Consumer Protection Act (TCPA), allowing autodialed and/or prerecorded calls for collecting debts owed to or guaranteed by the federal government, as an exception to the act’s general statutory ban on such calls, violates the First Amendment. However, the court held that this exemption is severable from the preexisting statute, and thus rejected efforts to strike the autodialer/prerecorded-call prohibition altogether, in favor of invalidating just the government-debt-collection exemption.

The TCPA, enacted in 1991, is primarily a consumer-privacy statute, implemented by the FCC, designed to protect against telephonic intrusions. The act and its implementing rules principally regulate two areas—use of automatic dialing systems, and placement of telemarketing and telephone solicitation calls (though it also governs unsolicited fax ads). Among other things, the statute and its rules contain essentially identical bans against: initiating or making “any call (other than … for emergency purposes or … with the prior ex­press consent of the called party) using an automatic telephone dialing system or an artificial or prere­corded voice … to any telephone number assigned to a … cellular telephone service … or other radio common carrier service, or any service for which the called party is charged for the call.” For these purposes, text messages are “calls” under the TCPA.

Over time, the FCC adopted different rules for “prior express consent” based on whether an autodialed and/or prerecorded call is for marketing or non-marketing purposes. It also has created various exceptions or allowances, such as for autodialed/prerecorded calls made for debt-collection generally, for those involving healthcare or exigent financial services purposes, and for text-message opt-out confirmations, among others. The statute and rules also have similar restrictions and requirements for prerecorded calling to residential lines, though the FCC has exempted certain calls, including those made for noncommercial purposes and those for commercial purposes but that do not involve marketing.

As part of the Bipartisan Budget Act of 2015, Congress amended the TCPA to exempt from the prohibition on autodialed/prerecorded calls those made for purposes of collecting debts owed to or guaranteed by the federal government. The FCC in turn adopted regulations implementing the exemption. In American Association of Political Consultants v. FCC, plaintiffs challenged the TCPA’s automated dialing provisions in federal district court in North Carolina, on grounds that the exemption violates the First Amendment, by transforming the statute into a content-based regulation of speech. (The plaintiff also originally targeted certain FCC-created exceptions and allowances, but abandoned the claims after the government urged they were barred by the Hobbs Act, a federal statute under which FCC rules and decisions can be challenged only within a limited period after they originally issue, on direct appeal to a federal court of appeals.)

The district court agreed the statute was content-based, and thus subject to strict scrutiny, but held it withstood First Amendment review by being narrowly tailored so as to not subvert the privacy interests furthered by the TCPA’s ban on autodialed/prerecorded calls. It also held that less restrictive alternatives, such as time-of-day limitations, caller ID disclosure, and/or do-not-call rules (all of which are found in telemarketing regulations) would not further TCPA privacy interests, or were otherwise implausible. It thus held the statute passed constitutional muster.

On appeal, the 4th Circuit disagreed. It, too, held the federal debt-collection exemption to the autodialer/prerecorded-call prohibition was content-based and subject to strict scrutiny, but held that, even accepting that the law targets compelling governmental interests in protecting personal and residential privacy, the statute as amended is fatally under-inclusive. Unlike exceptions for calls made with prior consent or for emergency purposes, which the court viewed as consistent with or at least not undermining privacy goals, the court held that unwanted calls to collect government-held or guaranteed debts are disruptive and invasive of personal privacy. As such, the exemption creates an unconstitutional content-based restriction on speech in violation of the First Amendment. However, rather than granting plaintiffs the relief sought of striking down the TCPA’s autodialing/prerecorded-call prohibition in full, the court held the more recently enacted 2015 exemption for calls to collect debts held or guaranteed by the federal government is severable from the statute, leaving intact the general, pre-existing automated call ban that has existed since 1991.

The 4th Circuit’s decision and the rationale underlying it raise significant questions about the constitutional viability of exceptions that the FCC has created over the years. For example, and most analogously, in 2008, an FCC declaratory ruling held that autodialed and/or prerecorded calls to collect debts generally may be made under the prior express consent standard, if the caller obtained the phone numbers dialed in connection with transactions with the called parties that gave rise to the debts. Such an allowance seems to be similarly content-based as are calls to collect federally held or guaranteed debts, and would seem to pose the same kinds of privacy incursions. The FCC later adopted allowances for package-delivery confirmations, and in its 2015 “omnibus” declaratory rulings, created allowances for certain healthcare-related and exigent financial services calls, which also on turn the content of the calls to carve out exceptions to generally applicable TCPA rules. The FCC’s rules also treat telemarketing and non-marketing calls differently, including (but not limited to) with respect to the type of consent needed for autodialed/prerecorded calls. Many of these exceptions initially were flagged in the Association of Political Consultants litigation, but as noted were dropped after the Hobbs Act was raised.

Significantly, however, the Supreme Court currently has before it, and recently heard argument on, the scope of the Hobbs Act with respect to FCC pronouncements under the TCPA, in PDR Network v. Carlton & Harris Chiropractic. Although that case involves unsolicited faxes as regulated by the TCPA, the question presented is whether the Hobbs Act requires district courts to accept the FCC’s legal interpretations and implementation of the TCPA. Should the Supreme Court rule there is room under the Hobbs Act for district courts to revisit FCC pronouncements on the TCPA, it could open the door to the kinds of First Amendment challenges to FCC-created exceptions to the TCPA’s autodialer/prerecorded-call ban that fell to the wayside in Association of Political Consultants. As a result, the outcome in PDR Network now bears watching for additional reasons in the wake of the 4th Circuit’s Political Consultants decision.