Bais Yaakov of Spring Valley v. Fed. Commc'ns Comm'n

• Decision Date: 31 March 2017
• Docket Number: 14-1302,14-1295,C/w 14-1235,14-1294,14-1297,14-1293,14-1239,14-1279,14-1292,14-1243,14-1299,14-1270
• Citation: 852 F.3d 1078
• Parties: BAIS YAAKOV OF SPRING VALLEY, et al., Petitioners v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents Quill Corporation, et al., Intervenors
• Court: U.S. Court of Appeals — District of Columbia Circuit

852 F.3d 1078

BAIS YAAKOV OF SPRING VALLEY, et al., Petitioners

v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, RespondentsQuill Corporation, et al., Intervenors

C/w 14-1235

14-1239

14-1243

14-1270

14-1279

14-1292

14-1293

14-1294

14-1295

14-1297

14-1299

14-1302

United States Court of Appeals, District of Columbia Circuit.

Argued November 8, 2016

Decided March 31, 2017

Matthew A. Brill argued the cause for Class Action Defendant Petitioners. With him on the briefs were Matthew T. Murchison, Jonathan Y. Ellis, Samuel L. Feder, Matthew E. Price, Robert A. Long, Yaron Dori, Michael Beder, Washington, DC, Marie Tomassi, St. Petersburg, FL, Joseph R. Palmore, Washington, DC, Thomas R. McCarthy, Arlington, VA, Helgi C. Walker, Washington, DC, Kim E. Rinehart, Jeffrey R. Babbin, New Haven, CT, Blaine C. Kimrey, Chicago, IL, and Bryan K. Clark.

Megan L. Brown and Brett A. Shumate, Washington, DC, were on the brief for amici curiae National Federation of Independent Business Small Business Legal Center and Consumers' Research in support of the Class Action Defendant Petitioners. Karen R. Harned, Nashville, TN, entered an appearance.

Aytan Y. Bellin argued the cause for Waiver Petitioners Bais Yaakov of Spring Valley, et al. With him on the briefs were Roger Furman, Los Angeles, CA, Phillip A. Bock, and Glenn L. Hara, Chicago, IL. David M. Oppenheim entered an appearance.

Allison M. Zieve and Scott L. Nelson, Washington, DC, were on the brief for amicus curiae Public Citizen, Inc. in support of the Waiver Petitioners.

Matthew J. Dunne, Counsel, Federal Communications Commission, argued the cause for respondent. With him on the brief were William J. Baer, Assistant Attorney General, U.S. Department of Justice, Robert B. Nicholson and Steven J. Mintz, Attorneys, Jonathan B. Sallet, General Counsel, Federal Communications Commission, David M. Gossett, Deputy General Counsel, and Jacob M. Lewis, Associate General Counsel. Kristen C. Limarzi, Attorney, U.S. Department of Justice, and Richard K. Welch, Deputy Associate General Counsel, Federal Communications Commission, entered appearances.

Aytan Y. Bellin argued the cause for intervenors Bais Yaakov of Spring Valley, et al. in support of the respondent on the statutory authority issue. With him on the brief were Roger Furman, Los Angeles, CA, Phillip A. Bock, and Glenn L. Hara, Chicago, IL.

Robert A. Long argued the cause for intervenors in support of the respondent on the waiver issue. With him on the brief were Yaron Dori, Michael Beder, Matthew A. Brill, Matthew T. Murchison, Jonathan Y. Ellis, Washington, DC, Marie Tomassi, St. Petersburg, FL, Joseph R. Palmore, Washington, DC, Blaine C. Kimrey, Chicago, IL, Bryan K. Clark, Samuel L. Feder, Matthew E. Price, Washington, DC, Thomas R. McCarthy, Arlington, VA, Helgi C. Walker, Washington, DC, Kim E. Rinehart, and Jeffrey R. Babbin, New Haven, CT.

Before: Kavanaugh and Pillard, Circuit Judges, and Randolph, Senior Circuit Judge.

Dissenting opinion filed by Circuit Judge Pillard.

Kavanaugh, Circuit Judge:

Believe it or not, the fax machine is not yet extinct. Some businesses send unsolicited advertisements by fax. This case arises out of Congress's efforts to protect consumers from unsolicited fax advertisements.

The Junk Fax Prevention Act of 2005 bans most unsolicited fax advertisements, but allows unsolicited fax advertisements in certain commercial circumstances. When those unsolicited fax advertisements are allowed, the Act requires businesses to include opt-out notices on the faxes. See 47 U.S.C. § 227(b).

In 2006, the FCC issued a rule that requires businesses to include opt-out notices not just on unsolicited fax advertisements, but also on solicited fax advertisements. The term "solicited" is a term of art for faxes sent by businesses with the invitation or permission of the recipient.

In this case, businesses that send solicited fax advertisements contend that the FCC's new rule exceeds the FCC's authority under the Act. The question is whether the Act's requirement that businesses include an opt-out notice on unsolicited fax advertisements authorizes the FCC to require businesses to include an opt-out notice on solicited fax advertisements. Based on the text of the statute, the answer is no.

We hold that the FCC's 2006 Solicited Fax Rule is therefore unlawful to the extent that it requires opt-out notices on solicited faxes. The FCC's Order in this case interpreted and applied that 2006 Rule. We vacate that Order and remand for further proceedings.

I

In 1991, Congress passed and President George H.W. Bush signed the Telephone Consumer Protection Act. See Pub. L. No. 102-243, 105 Stat. 2394 (codified as amended at 47 U.S.C. § 227 ). In 2005, Congress passed and President George W. Bush signed the Junk Fax Prevention Act, which amended the 1991 Act. See Pub. L. No. 109-21, 119 Stat. 359 (codified at 47 U.S.C. § 227 ). For simplicity, we will refer to the combined and amended legislation as "the Act."

The Act generally prohibits the use of "any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement." 47 U.S.C. § 227(b)(1)(C). The Act defines "unsolicited advertisement" as "any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission, in writing or otherwise ." Id . § 227(a)(5) (emphasis added).

The Act contains an exception that allows certain unsolicited fax advertisements. The statute permits unsolicited fax advertisements where (1) "the unsolicited advertisement is from a sender with an established business relationship with the recipient"; (2) the sender obtained the recipient's fax number through "voluntary communication" with the recipient or "the recipient voluntarily agreed to make" his information available in "a directory, advertisement, or site on the Internet"; and (3) the unsolicited advertisement "contains a notice meeting the requirements under paragraph (2)(D)." Id . § 227(b)(1)(C)(i)-(iii). Paragraph (2)(D), in turn, provides, among other things, that the notice must be "clear and conspicuous" and "on the first page of the unsolicited advertisement," must state that the recipient may opt out from "future unsolicited advertisements," and must include a "cost-free mechanism" to send an opt-out request "to the sender of the unsolicited advertisement." Id . § 227(b)(2)(D).

That third requirement—the opt-out notice—is central to this case.

Congress has authorized the FCC to issue regulations to implement the Act. See id . § 227(b)(2). Fax senders face a stiff penalty for violating the FCC's regulations. Importantly, the Act supplies a private right of action to fax recipients for them to sue fax senders that send unsolicited fax advertisements in violation of FCC regulations. See id . § 227(b)(3). The Act allows plaintiffs to obtain from fax senders at least $500 for each violation. See id . Those penalties can add up quickly given the nature of mass business faxing.

In 2006, the FCC issued a new rule governing solicited faxes. See Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991; Junk Fax Prevention Act of 2005 , 71 Fed. Reg. 25,967, 25,971 -72 (May 3, 2006) (now codified at 47 C.F.R. § 64.1200(a)(4)(iv) ). We will refer to that rule as the Solicited Fax Rule. The Solicited Fax Rule requires a sender of a fax advertisement to include an opt-out notice on the advertisement, even when the advertisement is sent to a recipient from whom the sender "obtained permission." 71 Fed. Reg. at 25,972. In other words, the FCC's new rule mandates that senders of solicited faxes comply with a statutory requirement that applies only to senders of unsolicited faxes.

Petitioner Anda is a company that sells generic drugs. As part of its business, Anda faxes advertisements to small pharmacies. Anda's fax advertisements convey pricing information and weekly specials to the pharmacies. Many pharmacies have given permission to Anda for Anda to send those faxes.

In 2010, Anda sought a declaratory ruling from the FCC clarifying that the Act does not require an opt-out notice on solicited fax advertisements—that is, those that are sent with the recipient's prior express permission. See Anda Petition for Declaratory Ruling, CG Docket No. 05-338 (Nov. 30, 2010).

That issue was of great importance to Anda. In 2008, Anda had been sued in a class action in Missouri state court for alleged violations of the FCC's Solicited Fax Rule. Many of the plaintiff pharmacies in that case admitted that they had expressly given permission to Anda for Anda to send fax advertisements to the plaintiffs. But those plaintiffs nevertheless sought over $150 million in damages from Anda because Anda's fax advertisements allegedly did not include opt-out notices that complied with the Solicited Fax Rule's requirements.

Let that soak in for a minute: Anda was potentially on the hook for $150 million for failing to include opt-out notices on faxes that the recipients had given Anda permission to send. If the Act actually provides the FCC with the authority to issue the Solicited Fax Rule, then Anda could be subject to that large class-action damage award. But if the Act does not provide the FCC with the authority to issue the Solicited Fax Rule, then Anda would be off that hook. Several other businesses facing similar class-action lawsuits joined Anda's petition to the FCC.

In response to Anda's petition, the FCC adhered to its interpretation of the Act as providing the FCC with the authority to require opt-out notices on solicited faxes as well as unsolicited faxes (although the FCC said it would waive application of the rule to businesses that sent solicited faxes before April 30, 2015). See Order, Petitions for Declaratory Ruling, Waiver, and/or Rulemaking Regarding the Commission's Opt-Out Requirement for Faxes Sent with the ...