Supreme Court Considers Deference to FCC

March 25, 2019 Updated: March 25, 2019

WASHINGTON—Supreme Court justices questioned the wisdom of allowing regulators to ban faxed solicitations that seek to give away a product for free during oral arguments on March 25, in a case that could have broader implications for telemarketers and political campaigners.

A ruling for the sender of the unwanted fax could weaken the administrative state by taking power away from unelected bureaucrats who write and enforce rules interpreting laws approved by lawmakers elected by the American people.

Justices Stephen Breyer, Neil Gorsuch, and Brett Kavanaugh expressed concern that compelling a lower court to bow to a statutory interpretation the Federal Communications Commission (FCC) fashioned regarding the federal robocall law may jeopardize due process rights by denying petitioners the opportunity to contest the agency’s ruling. The court is considering if courts must accept the FCC’s interpretation of the Telephone Consumer Protection Act.

In the case, PDR Network LLC of Whippany, New Jersey, sent a single, one-page fax in 2013 to Carlton & Harris Chiropractic Inc. of Huntington, West Virginia, offering a digital “eBook” copy of the “Physicians’ Desk Reference,” free of charge. PDR makes its money from drug companies that pay a fee to have prescription drugs listed in the manual.

In 2014, the chiropractors initiated a class-action lawsuit against PDR deeming the fax an “unsolicited advertisement” contrary to the Telephone Consumer Protection Act (TCPA). The TCPA forbids the use of “any telephone facsimile machine” to “send an unsolicited advertisement” to another “telephone facsimile machine,” and creates a private right of action for infringement of the statute or regulations issued under it. PDR argued the fax could not be an unsolicited advertisement because the company was not offering a product for sale.

But a 2006 FCC interpretational ruling that PDR deems a bureaucratic overreach held unsolicited “facsimile messages that promote goods or services at no cost, such as free magazine subscriptions, catalogs, or free consultations or seminars, are unsolicited advertisements under the TCPA’s definition.”

The trial court applied the first step of so-called Chevron deference analysis in accordance with the principles laid down in the Supreme Court’s landmark administrative ruling in Chevron v. NRDC (1984). The high court held in Chevron that while courts “must give effect to the unambiguously expressed intent of Congress,” where courts find “Congress has not directly addressed the precise question at issue” and “the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.”

On PDR’s motion, the trial court dismissed the lawsuit, finding the TCPA’s definition of “unsolicited advertisement” was “unambiguous, and therefore it was not required to defer to the FCC’s interpretation.” In other words, that court found the fax at issue wasn’t an “unsolicited advertisement” under the TCPA.

But the 4th Circuit Court of Appeals overruled, determining that according to the Administrative Orders Review Act (commonly called the Hobbs Act) the lower court should have treated the FCC ruling, as opposed to the wording of the TCPA, as authoritative. The Hobbs Act should have prevented the trial court from “even reaching the step-one question” of Chevron analysis, the circuit court ruled.

In its original petition to the Supreme Court, PDR argued “[t]his case presents a challenge to the jurisdiction of every court in the nation to interpret and apply the law.” The court’s review was “needed to clarify the jurisdiction of all courts to decide the proper level of deference afforded to interpretive agency guidance.”

“If allowed to stand, the Fourth Circuit’s jurisdiction-stripping ruling would elevate those agencies identified in the Hobbs Act above even the judiciary; empowering agency orders to trump the courts’ fundamental ‘province and duty’ to interpret the law.”

Although the Trump administration has been pushing regulatory reform and a move away from a powerful administrative state, in this case, it sided with the FCC mandarins.

Rachel Kovner, assistant to the solicitor general, told Kavanaugh the Hobbs Act “is far preferable … because the United States gets to be a party.”

“If it’s from a rule-making, you’re going to have the opportunity for other affected parties to participate … to explain why they think the rule should or shouldn’t be changed.”

But such a process may be unfair because someone acting based on the plain wording of the statute could later be tripped up when regulators apply a new meaning to the same language, Kavanaugh implied.

“In that case, you could be subject to millions in liability without ever having an opportunity to say that the rule is illegal,” the court’s newest justice said.

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