Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC

• Decision Date: 07 December 2020
• Docket Number: No. 16-2185,16-2185
• Citation: 982 F.3d 258
• Parties: CARLTON & HARRIS CHIROPRACTIC, INC., a West Virginia Corporation, individually and as the representative of a class of similarly-situated persons, Plaintiff - Appellant, v. PDR NETWORK, LLC; PDR Distribution, LLC ; PDR Equity, LLC; John Does 1-10, Defendants – Appellees. United States of America, Amicus Supporting Appellant, and Inovalon, Inc., Amicus Supporting Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

982 F.3d 258

CARLTON & HARRIS CHIROPRACTIC, INC., a West Virginia Corporation, individually and as the representative of a class of similarly-situated persons, Plaintiff - Appellant,

v. PDR NETWORK, LLC; PDR Distribution, LLC ; PDR Equity, LLC; John Does 1-10, Defendants – Appellees.United States of America, Amicus Supporting Appellant,andInovalon, Inc., Amicus Supporting Appellee.

No. 16-2185

United States Court of Appeals, Fourth Circuit.

Argued: September 10, 2020

Decided: December 7, 2020

ARGUED: Glenn Lorne Hara, ANDERSON + WANCA, Rolling Meadows, Illinois, for Appellant. Mark B. Stern, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Amicus United States of America. Kwaku A. Akowuah, SIDLEY AUSTIN LLP, Washington, D.C., for Appellees. ON BRIEF: Brian J. Wanca, ANDERSON + WANCA, Rolling Meadows, Illinois; D. Christopher Hedges, David H. Carriger, THE CALWELL PRACTICE PLLC, Charleston, West Virginia, for Appellant. Jeffrey N. Rosenthal, Philadelphia, Pennsylvania, Ana Tagvoryan, BLANK ROME LLP, Los Angeles, California; Marc E. Williams, Robert L. Massie, NELSON, MULLINS, RILEY & SCARBOROUGH LLP, Huntington, West Virginia; Carter G. Phillips, Kathleen Moriarty Mueller, SIDLEY AUSTIN LLP, Washington, D.C., for Appellees. Joseph H. Hunt, Assistant Attorney General, Michael S. Raab, Lindsey Powell, Civil Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Michael B. Stuart, United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Charleston, West Virginia; Thomas M. Johnson, Jr., General Counsel, Ashley S. Boizelle, Deputy General Counsel, Jacob M. Lewis, Associate General Counsel, Scott M. Noveck, FEDERAL COMMUNICATIONS COMMISSION, Washington, D.C., for Amicus United States of America. Kamyar Daneshvar, Associate General Counsel and Assistant Secretary, INOVALON, INC., Bowie, Maryland; Daniel S. Blynn, Elizabeth C. Rinehart, Meryl E. Bartlett, VENABLE LLP, Washington, D.C., for Amicus Inovalon, Inc.

Before DIAZ, THACKER, and HARRIS, Circuit Judges.

Vacated and remanded by published opinion. Judge Diaz wrote the opinion, in which Judge Harris and Judge Thacker joined.

DIAZ, Circuit Judge:

This case is before us for a second time, and we must once again consider whether the district court erred when it dismissed Carlton & Harris Chiropractic, Inc.’s complaint more than four years ago. Along the case's journey from the district court, through this court, to the United States Supreme Court, and back to this court, the principal legal issues have changed, expanded, and become more complex. Indeed, most of the arguments that the parties now make bear little resemblance to those that the district court and this court previously considered. As we explain, rather than resolve new issues in the case for the first time, we conclude that the most prudent course of action is to narrow the inquiry and remand what remains to the district court for its consideration.

I.

We review a district court's dismissal of a complaint under Federal Rule of Civil Procedure 12(b)(6) de novo, "assuming as true the complaint's factual allegations and construing all reasonable inferences in favor of the plaintiff." Semenova v. Md. Transit Admin. , 845 F.3d 564, 567 (4th Cir. 2017) (internal quotation marks omitted).

II.

PDR Network, LLC publishes the Physicians’ Desk Reference , a compendium of prescription drug information widely used by medical providers. Around seven years ago, PDR Network sent a fax to Carlton & Harris, a chiropractic office in West Virginia. The fax's subject line read "FREE 2014 Physicians’ Desk Reference eBook – Reserve Now." The body of the fax instructed Carlton & Harris that it could reserve a copy of the eBook by going to PDR Network's website. The fax also included PDR Network's contact information and described how the Physicians’ Desk Reference could benefit medical practices. J.A. 23.

After receiving the fax, Carlton & Harris, acting on behalf of itself and a putative class of other similarly situated fax recipients, sued PDR Network for violating the Telephone Consumer Protection Act (the "TCPA"). Relevant here, the TCPA prohibits the use of a fax machine to send "unsolicited advertisement[s]." 47 U.S.C. § 227(b)(1)(C).

PDR Network moved to dismiss Carlton & Harris's complaint, arguing that the fax wasn't an advertisement because it didn't offer anything for sale.¹ See Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC , No. 3:15-14887, 2016 WL 5799301, at *1 (S.D. W. Va. Sept. 30, 2016). Carlton & Harris opposed the motion, relying on a 2006 Federal Communications Commission Rule (the "2006 FCC Rule") interpreting the meaning of "unsolicited advertisement" within the TCPA. That rule states that "facsimile messages that promote goods or services even at no cost ... are unsolicited advertisements under the TCPA's definition." Rules and Regulations Implementing the Tel. Consumer Prot. Act of 1991; Junk Fax Prevention Act of 2005, 71 Fed. Reg. 25,967, 25,973 (May 3, 2006).

Carlton & Harris contended that the fax was an "unsolicited advertisement" under the 2006 FCC Rule because the fax offered a "free good or service." It further argued that the Hobbs Act required the district court to abide by the FCC's interpretation of the TCPA because that statute gives federal courts of appeals—not district courts—the "exclusive jurisdiction to ‘enjoin, set aside, suspend [ (in whole or in part) ], or to determine the validity of’ " FCC orders.² Carlton & Harris , 2016 WL 5799301, at *3 (quoting 28 U.S.C. § 2342(1) ).

In its reply brief, PDR Network rejected the notion that it was asking the district court to "ignore" or "decline to ‘adopt’ " the 2006 FCC Rule. It argued that, instead, it wanted the court to "apply" the Rule, but merely interpret it in PDR Network's favor. J.A. 80–81.

The district court, however, took a third approach that neither party advanced. The court held that the Hobbs Act didn't require it to adopt the FCC's interpretation of the TCPA because the Hobbs Act doesn't control when no party "has challenged the validity of the FCC's interpretation of the TCPA." Carlton & Harris , 2016 WL 5799301, at *3. Acting under the presumption that the FCC's interpretation was valid, the court then applied Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc. , 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), to determine that it need not defer to the 2006 FCC Rule because the TCPA's definition of "advertisement" is unambiguous.³ Id. at *3–4.

The district court concluded that, under the TCPA, unsolicited fax advertisements are not actionable unless they have a commercial purpose. Because PDR Network's fax offered the Physician's Desk Reference for free, and because Carlton & Harris didn't plausibly allege that PDR Network benefitted commercially from offering the book for free, the court determined that the fax wasn't commercial in nature and dismissed Carlton & Harris's complaint without granting leave to amend. Id . at *4–5 ; J.A. 137.

Carlton & Harris appealed. Before us, PDR once again argued that it didn't dispute the validity or finality of the 2006 FCC Rule, but merely sought a favorable interpretation of that rule. We held that the district court erred in conducting a Chevron analysis because the Hobbs Act required the court to adopt the FCC's interpretation of the TCPA. Carlton & Harris, 883 F.3d at 464. We 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. Id. at 466–69.

PDR Network petitioned the Supreme Court for certiorari, and the Court granted review as to the following issue: "[w]hether the Hobbs Act required the district court in this case to accept the FCC's legal interpretation of the Telephone Consumer Protection Act." PDR Network, LLC v. Carlton & Harris Chiropractic, Inc. , ––– U.S. ––––, 139 S. Ct. 2051, 2055, 204 L.Ed.2d 433 (2019). Rather than answer that question, however, the Supreme Court 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." Id. 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.⁴

The Court suggested that if the 2006 FCC Rule is an interpretive rule, or if PDR Network didn't have a prior and adequate opportunity to seek review, the Rule "may" not bind the district court. Id. at 2055–56. The Court vacated our decision and remanded for us to consider "these preliminary issues, as well as any other related issues that may arise in the course of resolving this case." Id. at 2056.

On remand, we ordered the parties to submit supplemental briefing on seven issues:

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 doesn't require the district court to accept the FCC's interpretation of the TCPA; and,

7. Whether the defendants’ arguments on points (2), (3), (4), and (5) are forfeited.

See Order Directing Suppl. Brs. 1–2.

We consider the issues in turn.

III.

A.

To start, neither side believes that a remand for discovery is necessary.⁵ We will not require discovery that no party desires. United States v. Oliver , 878 F.3d 120, 126 (4th Cir. 2017) ("[A]ppellate courts do not sit as self-directed boards of legal inquiry and...