Soundboard Ass'n v. Fed. Trade Comm'n

• Decision Date: 27 April 2018
• Docket Number: No. 17-5093,17-5093
• Citation: 888 F.3d 1261
• Parties: SOUNDBOARD ASSOCIATION, Appellant v. FEDERAL TRADE COMMISSION, Appellee
• Court: U.S. Court of Appeals — District of Columbia Circuit

888 F.3d 1261

SOUNDBOARD ASSOCIATION, Appellant

v.FEDERAL TRADE COMMISSION, Appellee

No. 17-5093

United States Court of Appeals, District of Columbia Circuit.

Argued November 6, 2017

Decided April 27, 2018

Karen Donnelly argued the cause for appellant. With her on the briefs was Errol Copilevitz, Kansas City, MO. Daniel W. Wolff, Washington, DC, entered an appearance.

Matthew M. Hoffman, Attorney, Federal Trade Commission, argued the cause for appellee. With him on the brief were David C. Shonka, Acting General Counsel, and Joel Marcus, Deputy General Counsel. Michele Arington and Leslie R. Melman Assistants General Counsel, and Bradley Grossman, Attorney, entered appearances.

Thomas C. Bennigson was on the brief for amicus curiae Public Good Law Center in support of appellee.

Before: Rogers, Millett and Wilkins, Circuit Judges.

Dissenting Opinion filed by Circuit Judge Millett.

Wilkins, Circuit Judge:

This appeal arises from Appellant Soundboard Association's ("SBA's") challenge to a November 10, 2016 informal opinion letter (the "2016 Letter") issued by Federal Trade Commission ("FTC" or "Commission") staff. The 2016 Letter stated it was the FTC staff's opinion that telemarketing technology used by SBA's members is subject to the FTC's regulation of so-called "robocalls," and it announced the rescission of a 2009 FTC staff letter (the "2009 Letter") that had reached the opposite conclusion.

SBA filed suit seeking to enjoin rescission of the 2009 Letter. It argued the 2016 Letter violated the Administrative Procedure Act ("APA") because it was a legislative rule issued without notice and comment and because the FTC's robocall regulation unconstitutionally restricted speech on the basis of content. The FTC opposed both these arguments and also disputed that the 2016 Letter was reviewable final agency action. The District Court concluded the 2016 letter qualified as reviewable final agency action, but the court granted summary judgment for the FTC on the grounds that the 2016 Letter was an interpretive rule not subject to notice and comment and that the interpretation stated in the letter survived First Amendment scrutiny.

We conclude that because the 2016 staff opinion letter does not constitute the consummation of the Commission's decisionmaking process by its own terms and under the FTC's regulations, it is not final agency action. As SBA concedes, its speech claims are pleaded as APA claims under 5 U.S.C. § 706(2)(B) and cannot proceed without final agency action. We therefore vacate the decision below and dismiss the case for failure to state a cause of action under the APA.

I.

A.

SBA is a trade association for companies that manufacture or use "soundboard" telemarketing technology ("soundboard"). Soundboard enables telemarketing agents to communicate with customers over the phone by playing prerecorded audio clips instead of using the agent's live voice. The agent can choose a pre-recorded clip to ask questions of or respond to a customer, while retaining the ability to break into the call and speak to the customer directly. Soundboard also enables agents to make and participate in multiple calls simultaneously. According to SBA, soundboard provides many advantages to telemarketers, including ensuring accurate communication of information and disclaimers, improving call-center performance and cost-effectiveness, and employing individuals who would otherwise have difficulty being understood over the phone due to accent or disability. J.A. 85–86.

The FTC regulates telemarketing pursuant to the Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994, which directs the Commission to "prescribe rules prohibiting deceptive ... and other abusive telemarketing acts or practices." 15 U.S.C. § 6102(a)(1). In 1995, the Commission promulgated the Telemarketing Sales Rule ("TSR"), which restricts telemarketing to certain times of day, creates the "do-not-call" list, and imposes other requirements to prevent fraud, abuse, and intrusions on customer privacy. 60 Fed. Reg. 43842 (Aug. 23, 1995) ; 16 C.F.R. § 310.4(b)(ii), (c). In 2003, the Commission amended the TSR to more closely regulate "predictive dialing," which places multiple simultaneous calls for a single call-center agent and, therefore, can result in "call abandonment"—i.e., abruptly hanging up—when too many customers answer the phone. The 2003 amendment prohibited telemarketers from failing to connect a customer to an agent within two seconds of the customer's completed greeting. 16 C.F.R. § 310.4(b)(1)(iv). The amendment thus effectively prohibited outbound telemarketing campaigns consisting "solely of prerecorded messages"—colloquially known as robocalls—because "consumers who receive a prerecorded message would never be connected to a sales representative." 73 Fed. Reg. 51,164, 51,165 (Aug. 29, 2008).

In 2008, the Commission amended the TSR to prohibit telemarketers from "initiating any outbound telephone call that delivers a prerecorded message" without "an express agreement, in writing" from the consumer with language demonstrating the individual customer's consent to receiving such calls from that telemarketer. Id. at 51,184 ; 16 C.F.R. § 310.4(b)(1)(v)(A). The express-written-consent requirement does not apply to calls made on behalf of charitable organizations intended to "induce a charitable contribution from a member of, or previous donor to," the organization, as long as the donor can opt out of such calls. 16 C.F.R. § 310.4(b)(1)(v)(B). The Commission justified this exception on the grounds that members and prior donors have consented to receiving future charitable solicitation calls and, as a result, have a reduced privacy interest vis-à-vis a charitable organization's speech interest. See 73 Fed. Reg. at 51,193 –94.

In promulgating the 2008 amendments, the Commission explained that the comments it received from customers and industry showed "the reasonable consumer would consider interactive prerecorded telemarketing messages to be coercive or abusive of such consumer's right to privacy. The mere ringing of the telephone to initiate such a call may be disruptive; the intrusion of such a call on a consumer's right to privacy may be exacerbated immeasurably when there is no human being on the other end of the line." Id. at 51,180. The Commission also rejected the industry's argument that an interactive opt-out mechanism for robocalls would adequately protect consumer privacy, reasoning that the "volume of telemarketing calls from multiple sources is so great that consumers find even an initial call from a telemarketer or seller to be abusive and invasive of privacy." Id. (quotation marks omitted).

B.

Before the TSR went into effect in September 2009, a telemarketer and soundboard user, Call Assistant LLC ("Call Assistant"), submitted a "request for a FTC Staff Opinion Letter" regarding whether Call Assistant's use of soundboard was subject to the 2008 amendments. J.A. 230 (emphasis in original). In its request, Call Assistant represented that "[a]t all times" during a soundboard call, "even during the playing of any recorded segment, the agent retains the power to interrupt any recorded message." J.A. 37. It also represented that during soundboard calls, "live agents hear every word spoken by the call recipient, and determine what is said" in response. J.A. 38.

On September 11, 2009, FTC staff responded with an "informal staff opinion" letter from Lois Greisman, the FTC's Associate Director of the Division of Marketing Practices (the "2009 Letter"). J.A. 37. The 2009 Letter stated that "[b]ased on the description of the technology included in [Call Assistant's] letter," "the staff of the [FTC] has concluded that the 2008 TSR Amendments ... do not prohibit telemarketing calls using" soundboard. J.A. 38. Greisman explained that the robocall regulation "prohibit[s] calls that deliver a prerecorded message and do not allow interaction with call recipients in a manner virtually indistinguishable from calls conducted by live operators. Unlike the technology that [Call Assistant] describe[s], the delivery of prerecorded messages in such calls does not involve a live agent who controls the content and continuity of what is said to respond to concerns, questions, comments—or demands—of the call recipient." Id. Greisman quoted the FTC's justification for the TSR's prohibition on robocalls, which "convert the telephone from an instrument for two-way conversations into a one-way device for transmitting advertisements." Id. Given Call Assistant's assertions that soundboard calls featured a "live human being continuously interact[ing] with the recipient of a call in a two-way conversation," "in Staff's view," soundboard use did not implicate the purposes of the TSR. Id.

The 2009 Letter expressly conditioned this conclusion on the factual representations in Call Assistant's request for a staff opinion, and Greisman advised Call Assistant that the letter did not represent the views of the Commission:

Please be advised that this opinion is based on all the information furnished in your request. This opinion applies only to the extent that actual company practices conform to the material submitted for review. Please be advised further that the views expressed in this letter are those of the FTC staff. They have not been reviewed, approved, or adopted by the Commission, and they are not binding upon the Commission. However, they do reflect the opinions of the staff members charged with enforcement of the TSR.

J.A. 39.

After issuing the 2009 Letter, the Commission began to receive consumer complaints and to observe media reports about the use of soundboard that conflicted with factual representations made by Call Assistant. This included complaints that consumers "are not receiving appropriate recorded responses to their questions or comments," that "no live telemarketer intervenes to provide a human response when requested to do so," and that "the call is terminated in...