Unified Data Servs., LLC v. Fed. Trade Comm'n

• Decision Date: 13 July 2022
• Docket Number: 20-16128
• Citation: 39 F.4th 1200
• Parties: UNIFIED DATA SERVICES, LLC ; Compliance Consultants, LLC; American Technology Services, LLC ; Richard Zeitlin, Plaintiffs-Appellants, v. FEDERAL TRADE COMMISSION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

39 F.4th 1200

UNIFIED DATA SERVICES, LLC ; Compliance Consultants, LLC; American Technology Services, LLC ; Richard Zeitlin, Plaintiffs-Appellants,

v.FEDERAL TRADE COMMISSION, Defendant-Appellee.

No. 20-16128

United States Court of Appeals, Ninth Circuit.

Argued and Submitted January 13, 2022 Pasadena, California

Filed July 13, 2022

Thomas Kimble (argued) and Robert Bernhoft, Bernhoft Law Firm S.C., Austin, Texas; for Plaintiffs-Appellants.

Bradley Dax Grossman (argued), Attorney; Joel Marcus, Deputy General Counsel; James Reilly Dolan, Acting General Counsel; Federal Trade Commission, Washington, D.C.; Christopher Chou, Acting United States Attorney; Brian W. Irvin, Assistant United States Attorney; United States Attorney's Office, Las Vegas, Nevada; for Defendant-Appellee.

Before: Richard R. Clifton and Milan D. Smith, Jr., Circuit Judges, and Stephen Joseph Murphy III,^* District Judge.

Opinion by Judge Clifton ;

Partial Concurrence and Partial Dissent by Judge Milan D. Smith, Jr.

CLIFTON, Circuit Judge:

This appeal arises from the dismissal of a complaint against the Federal Trade Commission ("FTC"). Plaintiffs, an individual and his telemarketing companies, sued the FTC over its alleged prohibition of most uses in telemarketing of soundboard technology, a product described as allowing a live call center agent to simulate a natural conversation by dispatching prerecorded messages in response to comments by the person who was called.

This case first requires us to consider our appellate jurisdiction. The district court dismissed Plaintiffs' complaint without prejudice for want of subject matter jurisdiction based on Plaintiffs' lack of standing. The court recognized that amending the complaint might not be futile, but it did not grant leave to amend the complaint. The FTC contends that the district court's order was not final and appealable. We disagree. We have appellate jurisdiction based on the principles set forth in WMX Technologies, Inc. v. Miller , 104 F.3d 1133 (9th Cir. 1997) (en banc), and subsequent precedents, because we conclude, based on the whole record, that the district court's dismissal was final.

We next agree with the district court that Plaintiffs have failed to plead facts establishing an injury in fact for purposes of standing under Article III of the Constitution. The complaint provided virtually no information about Plaintiffs' use or concrete plans to use soundboard technology in a manner that contravenes FTC regulations, nor did it offer any indication that the threat of FTC enforcement against them was credible or imminent. We thus affirm the district court's dismissal for lack of subject matter jurisdiction.

I. Background

The Telemarketing and Consumer Fraud and Abuse Prevention Act requires the FTC to "prescribe rules prohibiting deceptive telemarketing acts or practices and other abusive telemarketing acts or practices." 15 U.S.C. § 6102(a)(1). Pursuant to that authority, the FTC promulgated the Telemarketing Sales Rule (hereinafter, "the Rule"). In 2008, the FTC amended the Rule to prohibit unsolicited robocalling in the form of "any outbound telephone call that delivers a prerecorded message," by telemarketers without prior consent from the consumer. 16 C.F.R. § 310.4(b)(1)(v) ; see Telemarketing Sales Rule, 73 Fed. Reg. 51,164, 51,184 –85 (Aug. 29, 2008). The Rule makes an exception for calls made to "induce a charitable contribution from a member of, or previous donor to, a non-profit charitable organization," which may use prerecorded messages without prior consent subject to certain constraints, such as permitting the recipient to opt out in the future. 16 C.F.R. § 310.4(b)(1)(v)(B).

Plaintiffs, identified in the complaint as "Richard Zeitlin and his associated companies," Unified Data Services, LLC, Compliance Consultants, LLC, and American Technology Services, LLC, sued the FTC over the application of this scheme to soundboard technology. According to the complaint, the allegations in which we take as true for purposes of this appeal, soundboard technology "works by allowing highly trained and skilled call center agents to interact and converse with consumers on a real-time basis using recorded sound files." With soundboard, a call center agent, who remains active on the call and has the ability to intervene with his or her own voice if necessary, can "select[ ] and substitute[ ] appropriate audio clips ... in such a way that the consumer experiences a natural conversation."

In 2009, Michael Bills, the CEO of Call Assistant, a marketing firm in Utah using soundboard and not a party to the action before us, sought an opinion from FTC staff regarding the use of soundboard technology in telemarketing. See 16 C.F.R. 1.3(a) (permitting the FTC or its staff to issue advisory opinions). In response, FTC staff issued an advisory letter that concluded that soundboard, as the use of the technology was described by Bills in his request, did not violate the Rule's robocalling restrictions.

But in 2016, FTC staff changed course.¹ Based on "evidence of the widespread use of soundboard technology in a manner that does not represent a normal, continuous, two-way conversation between the call recipient and a live person," FTC staff determined in a subsequent advisory letter that using soundboard indeed constituted prohibited robocalling.² The 2016 letter concluded that it was "indisputable" that soundboard technology, which "delivers a prerecorded message" under 16 C.F.R. § 310.4(b)(1)(v), fell within the plain language of the Rule. The letter further stated, "Given the actual language used in the [Rule], the increasing volume of consumer complaints, and all the abuses we have seen since we issued the September 2009 letter, we have decided to revoke the September 2009 letter," giving telemarketing industry members six months to "bring themselves into compliance" with the new guidance.³

Plaintiffs sued the FTC in response to the 2016 letter. They brought six counts under the Administrative Procedure Act ("APA") and the First Amendment, and Plaintiffs sought various forms of declaratory and injunctive relief. Among other things, they asked for a declaration that the 2016 letter impermissibly restricts protected speech, vacatur of the 2016 letter, a declaration that the 2009 letter "remains in full force and effect," and an injunction barring the FTC from enforcing the Rule against soundboard users.

The complaint contains little information about Plaintiffs or how Plaintiffs themselves use soundboard technology. From what is explicit or implicit in the complaint, Zeitlin owns the corporate plaintiffs, and Plaintiffs together are members of "the telemarketing sales industry." Plaintiffs have "nonprofit clients" who may be subject to the Rule's special provisions for charitable calls. Plaintiffs allege that they are among those "Soundboard users" who face "serious civil penalties for failure to comply with the new rule" set forth in the 2016 letter. Plaintiffs allege that they, "together with many others, have invested millions of dollars and spent countless hours in training and development to implement Soundboard technology and its concomitant business model." The 2016 letter, they allege, renders the industry "whipsawed between abandoning its business and laying off thousands of workers to whom they have paid good salaries for years and facing potentially ruinous enforcement actions and penalties."

The FTC moved to dismiss the complaint on several grounds, only one of which we need to discuss here. The FTC argued that the district court lacked subject matter jurisdiction because the complaint failed to allege a sufficient injury in fact suffered by Plaintiffs for standing purposes under Article III.

The district court agreed. It granted the motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) on standing grounds because "plaintiffs have failed to show the ‘when, to whom, where, or under what circumstances’ of the FTC's purported enforcement and, consequently, have not established a credible threat of enforcement." The order concluded, "However, the defect in plaintiffs' complaint may be cured by amendment, so the court dismisses plaintiffs' claims without prejudice."⁴ Despite this observation, the district court did not grant Plaintiffs leave to amend their complaint. On the same day the order was filed, the clerk of the district court entered judgment "in favor of the Defendant and against the Plaintiffs without prejudice." Plaintiffs appealed.

II. Appellate Jurisdiction

We begin with our jurisdiction. See In re Application for Exemption from Elec. Pub. Access Fees by Jennifer Gollan & Shane Shifflett , 728 F.3d 1033, 1036 (9th Cir. 2013) ("The question of appellate jurisdiction must always be resolved before the merits of an appeal are examined or addressed." (quotation marks and citation omitted)). "Pursuant to 28 U.S.C. § 1291, we only have appellate jurisdiction over ‘final decisions’ of district courts." Van Dusen v. Swift Transp. Co. Inc. , 830 F.3d 893, 896 (9th Cir. 2016).

The district court's order dismissed the complaint without prejudice and acknowledged that amendment may not be futile. The FTC contends that this appeal must be dismissed for want for appellate jurisdiction because, it says, such an order is not final under 28 U.S.C. § 1291.

We disagree. We have appellate jurisdiction because, looking at the record as a whole, "the district court intended its order to end the case." Knevelbaard Dairies v. Kraft Foods, Inc. , 232 F.3d 979, 983 (9th Cir. 2000). Despite acknowledging that amendment of the complaint might not be futile, the district court did not grant leave to amend. That omission, combined with the district court clerk's entry of judgment on the same day, demonstrates that the dismissal order was final and appealable.

In WMX Technologies , an en banc panel of this court considered whether a dismissal without prejudice and with leave to amend constituted a final,...