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From Banking and Finance Law Daily, May 23, 2013

Fax Ad Requires Opt-Out Language Even Where Recipient Consented to Receipt

By J. Preston Carter, J.D., LL.M.

The receipt of a fax advertisement that did not contain opt-out language violated the Telephone Consumer Protection Act (TCPA) even though the recipient consented to receive the fax, the United States Court of Appeals for the Eighth Circuit has decided. Regulations under the TCPA require the opt-out language even if the sender received prior express authorization to send the fax, the court determined, stating that this plain-language interpretation of the regulation is consistent with the FCC’s interpretation. The court could not entertain arguments that the unambiguous regulation is contrary to unambiguous statutory language as such challenge would be precluded by the Hobbs Act. The court reversed the judgment of the trial court and remanded for further proceedings, during which the trial court may entertain requests to stay proceedings for pursuit of administrative determination of the issues (Nack v. Walburg, May 21, 2013, Melloy, Circuit Judge).

Background. After consenting to receive, and then receiving, the fax advertisement at issue, Nack filed a complaint against Walburg alleging violation of the TCPA (47 USC §227(b)(3)) and its regulation (47 CFR 641200(a)(3)(iv).

The regulation prohibits faxing unsolicited advertisements unless the ad contains a notice identifying a cost-free mechanism for the recipient to opt-out of receiving future unsolicited advertisements. The TCPA also creates a private cause of action based on violation of the regulation. The regulation states that “A facsimile advertisement that is sent to a recipient that has provided prior express invitation or permission to the sender must include an opt-out notice…” This provision, the court stated, “read most naturally and according to its plain language, extends the opt-out notice requirement to solicited as well as unsolicited fax advertisements.” The statute itself does not expressly impose similar requirements on the sending of solicited or consented-to fax ads.

The trial court concluded that the regulation applied only to unsolicited faxes and did not apply in the present case. In reaching this conclusion, the trial court reviewed commentary including an FCC order from 2006 that, the trial court itself noted, set forth a “confusing and inconsistent assertion” regarding the regulation. Therefore, the court solicited the views of the FCC as an amicus.

FCC views. In its brief, the FCC confirmed its plain-language interpretation of its regulation. The FCC explained that the regulation reached faxes for which the recipient had granted consent because consent, once granted, need not be interpreted as permanent. The FCC sought to ensure that even recipients who consented to receive a fax could easily and without expense stop the sending of any possible future faxes.

Walburg’s argument. Through supplemental briefing in response to the FCC’s brief, Walberg focused his argument upon the validity of the regulation and the scope of the private right of action. He argued that the regulation could not have been properly promulgated pursuant to the TCPA because the statute itself does not reach solicited fax advertisements. Also, he argued, the FCC’s statutory authority for the regulation of solicited fax advertisements could not come from the particular statutory section that authorized the private cause of action.

Regulatory interpretation. When an agency is specifically charged with enforcing a statute and promulgating regulations to implement the statute, the court defers to the agency’s interpretations unless it finds that a “regulation is contrary to unambiguous statutory language, that the agency’s interpretation of its own regulation is plainly erroneous or inconsistent with the regulation, or that application of the regulation [is] arbitrary or capricious.” The court decided that the regulation as written requires the senders of fax advertisements to employ the opt-out language even if the sender received prior express permission to send the fax. This interpretation, the court noted, is consistent with the FCC’s interpretation. Therefore, the court determined that it must defer to the FCC’s plain-language interpretation of its own regulation because that regulation is not “contrary to unambiguous statutory language” nor could it be determined that “application of the regulation [is] arbitrary or capricious.”

Hobbs Act. The Hobbs Act provides that the courts of appeals have exclusive jurisdiction to determine the validity of FCC orders. The court stated that any party challenging an FCC regulation as ultra vires must first petition the agency itself and, if denied, appeal directly to the Court of Appeals. It noted that here, there was no administrative proceeding because Nack filed a private action. To allow an attack on the enforcement of the regulation as being invalid, where the issue has arisen in private litigation, the court concluded, would “permit an end-run around the administrative review mandated by the Hobbs Act.”

Scope of private right of action. The private right of action authorized by the TCPA extends to violations of the statute and regulations prescribed under it, the court stated. It determined that Walburg’s challenge to the scope of that right also constituted an impermissible challenge to the regulation under the Hobbs Act.

The case is No. 11-1460.

Attorneys: Phillip Andrew Bock (Bock & Hatch), Max G. Margulis (Margulis Law Group), and Brian J. Wanca (Anderson & Wanca) for Michael R. Nack. Patrick A. Bousquet , Robert L. Carter, Thomas Michael Ward, Russell F. Watters, and Timothy J. Wolf (Brown & James) for Douglas Paul Walburg.

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