Hobbs Act Remains a Formidable Obstacle in Challenging FCC Regulations Under the TCPA

In Nack v. Walburg, the plaintiff consented to receive a fax advertisement from the defendant. But, because the fax lacked an “opt-out” notice arguably required by regulations promulgated under the Telephone Consumer Protection Act (“TCPA”), plaintiff filed a class action complaint, seeking millions of dollars in class-wide statutory damages under the TCPA. The district court granted summary judgment in favor of the defendant, holding that the pertinent regulation should be narrowly interpreted to require opt-out notices only for unsolicited faxes, not invited faxes. The Eighth Circuit, however, relying on an amicus brief from the FCC, disagreed and reversed, holding that the Hobbs Act prevented judicial review of administrative regulations, except on appeal from a prior agency review. The court expressed skepticism as to “whether the regulation (thus interpreted) properly could have been promulgated under the statutory section” at issue but suggested that defendant seek a stay of the civil proceedings while it pursued administrative remedies.

Defendant petitioned for a writ of certiorari to the Supreme Court, arguing that the Eighth Circuit (and Seventh Circuit) conflicted with a Sixth Circuit decision that held that courts have authority to review the plaintiff’s arguments that an FCC rule exempting certain broadcaster prerecorded calls to consumers as regulated “advertisements” under the TCPA was unlawful. An amicus petition also raised due process concerns and argued that the ruling permits administrative agencies to insulate themselves from judicial review while denying those harmed by their regulations the right to defend themselves. Two other petitions were also filed; one underscored the “crippling” practical effect of the Eighth Circuit’s ruling on business, and the other argued that the Eighth Circuit misconstrued the Hobbs Act. Despite the circuit split and constitutional arguments, on March 24, 2014, the Supreme Court denied certiorari.

In light of the Court’s decision not to consider the issue, the Hobbs Act remains a daunting hurdle for defendants to challenge the TCPA. Now, a business facing massive liability in a TCPA class action in the Seventh or Eighth Circuits cannot challenge the statutory basis of the administrative rule in court, even if the rule blatantly exceeds the agency’s statutory authority, and even if the rule is unconstitutional. Instead, a defendant may only challenge an FCC rule by petitioning the agency itself, but the agency has thus far declined to take final action in response to any such petitions and has even taken the position that it has no duty at all to resolve such petitions. Furthermore, this decision opens the door for a fresh round of TCPA class actions based on the opt-out provision for a new group of professional plaintiffs who actively solicit and consent to receiving fax advertisements with the hopes of receiving treble damages.

Companies should be aware of this new class of potential plaintiffs, and, until the FCC decides many pending petitions for reconsideration and declaratory ruling of its TCPA rules, defendants are limited in their efforts to challenge the agency rules that often form the basis of such lawsuits.

Caroline E. Oks is an Associate in the Gibbons Business & Commercial Litigation Department.
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