Consumer Protection – Level of deference afforded to FCC rule to be determined

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Where the parties in a dispute over whether a fax was an unsolicited advertisement never briefed what level of deference should be afforded a 2006 FCC rule interpreting what constitutes an “advertisement” under the Telephone Consumer Protection Act, the case was remanded for the district court to make that determination in the first instance.

Background

Around seven years ago, PDR Network LLC sent a fax to Carlton & Harris instructing how it could reserve a copy of an e-book by going to PDR Network’s website. Carlton & Harris, acting on behalf of itself and a putative class of other similarly situated fax recipients, sued PDR Network for violating the TCPA.

PDR Network moved to dismiss Carlton & Harris’s complaint, arguing that the fax was not an advertisement because it did not offer anything for sale. Carlton & Harris opposed the motion, relying on a 2006 Federal Communications Commission Rule interpreting the meaning of “unsolicited advertisement” within the TCPA.

The district court determined that the fax was not commercial in nature and dismissed Carlton & Harris’s complaint without granting leave to amend. This court then interpreted the 2006 FCC rule to mean that a fax offering free goods and services qualifies as an “advertisement” under the TCPA, regardless of whether it has an underlying commercial purpose.

The Supreme Court then determined that “the extent to which the [2006 FCC rule] binds the lower courts may depend on the resolution of two preliminary sets of questions that were not aired before the Court of Appeals.” The first is whether the 2006 FCC rule is a legislative or interpretive rule, and the second is whether PDR Network had a prior and adequate opportunity to seek judicial review of the rule.

On remand from the Supreme Court, this court ordered supplemental briefing on: (1) whether a remand to the district court for discovery is necessary; (2) whether the 2006 FCC [rule] is a legislative rule or an interpretive rule; (3) whether the defendants had a prior, adequate and exclusive opportunity for review of the 2006 FCC [rule]; (4) whether requiring the district court to accept the FCC’s interpretation of the TCPA would violate the defendants’ due process rights; (5) whether requiring the district court to accept the FCC’s interpretation of the TCPA would violate the separation of powers; (6) whether Chevron deference would be appropriate if the Hobbs Act does not require the district court to accept the FCC’s interpretation of the TCPA and (7) whether the defendants’ arguments on points (2)-(5) are forfeited.

Analysis

To start, neither side believes that a remand for discovery is necessary. Next, both sides, as well as the United States (as amicus curiae), agree that the relevant portions of the 2006 FCC rule are interpretive, rather than legislative. Both sides also agree that the rule’s interpretive nature means that the district court was not bound to follow it. That consensus is correct.

That conclusion also renders moot the third, fourth and fifth questions posed to the parties. Having resolved the first five questions and the seventh, this court turns to the sixth: what level of deference (if any) must the district court afford the 2006 FCC rule. The Supreme Court did not answer this question because the parties did not brief it in the lower courts. The same philosophy underlies the conclusion here. This court therefore declines to decide in the first instance what deference should be given to the 2006 FCC rule.

One other matter merits discussion. At oral argument, the parties disagreed over whether the district court erred by failing to grant Carlton & Harris leave to amend to allege in more detail that PDR Network sent the fax at issue to further a commercial goal. Carlton & Harris contends that the district court’s resolution of its request was an abuse of discretion. PDR Network, in turn, argues that district courts in this circuit do not abuse their discretion by denying requests for leave to amend not made in a formally noticed motion. It is unnecessary to resolve this issue. On remand, this court expects that Carlton & Harris would seek leave to amend in the appropriate manner if the need arises.

Vacated and remanded.

Carlton & Harris Chiropractic Inc. v. PDR Network LLC (Lawyers Weekly No. 001-141-20, 14 pp.) (Albert Diaz, J.) Appeal No. 16-2185. Dec. 7, 2020. From S.D. W.Va. (Robert C. Chambers, J.) Glenn Lorne Hara for Appellant. Mark B. Stern for Amicus United States of America. Kwaku A. Akowuah for Appellees.