Last Friday, a panel of the D.C. Circuit issued its decision in ACA International v. FCC (pdf).  The decision, which arrived nearly 17 months after the oral argument, struck down key elements of the FCC’s controversial 2015 Declaratory Ruling and Order interpreting the Telephone Consumer Protection Act  (TCPA).

Here are the key takeaways from the decision:

  • The court held that the FCC’s broad definition of an automatic telephone dialing system (ATDS), which threatened to include all smartphones, is arbitrary and capricious, and required the FCC to reconsider its definition.
  • The court overturned the FCC’s conclusion that a caller could be subjected to liability for calls placed or text messages sent to a phone number that had been reassigned after a “safe harbor” of a single errant call or text. Because the “safe harbor” ruling was arbitrary and capricious, the court concluded that the FCC was required to reexamine whether a caller should be liable for any calls or texts to reassigned numbers.
  • The panel sustained the FCC’s rule authorizing consumers to retract their consent to receive autodialed calls or text messages through “any reasonable means.” But the panel decision notes that the FCC’s rule doesn’t speak to situations where parties have contractually agreed to a specific method of revocation.

Unless the FCC seeks further appellate review (which seems unlikely), the agency will be reconsidering the autodialer and reassigned-number issues. Notably, the composition of the FCC has changed since the 2015 order; the chairman of the FCC is Commissioner Ajit Pai, who dissented from the 2015 ruling.

We summarize the decision in detail below. In the meantime, we expect businesses facing TCPA litigation to take at least three possible approaches.

First, the D.C. Circuit’s decision reopens a number of questions that plaintiffs have argued were resolved by the FCC’s 2015 ruling, and parties will seek to litigate those issues.

Second, the FCC will have something new to say on each of the issues remanded to it by the D.C. Circuit, and businesses and trade associations will doubtless want to participate in that regulatory discussion—especially given their extensive experience on the receiving end of TCPA lawsuits.

Third, and relatedly, a number of courts will surely find it more efficient to wait for the FCC’s pronouncements on these issues before allowing TCPA litigation to proceed.

Continue Reading DC Circuit issues long-awaited TCPA decision and invalidates FCC’s 2015 autodialer and reassigned-number rules

Good news for businesses that use fax machines to communicate with customers: A panel of the D.C. Circuit has just struck down the FCC’s 2014 order mandating that even faxes requested by the recipient that contain advertising material include a special opt-out notice. The decision issued today in Bais Yaakov of Spring Valley v. FCC, No. 14-1234 (D.C. Cir. Mar. 31, 2017), is available here (pdf).

Continue Reading DC Circuit invalidates FCC’s opt-out requirement for solicited faxes

Today, a panel of the D.C. Circuit—composed of Judges Srinivasan and Pillard and Senior Judge Edwards—heard argument in ACA International v. FCC, the consolidated appeals from the FCC’s 2015 Declaratory Ruling and Order, which greatly expanded the reach of the Telephone Consumer Protection Act (“TCPA”). (An audio recording of the argument is here, and Kevin attended the argument.) The case has been closely watched, and a number of TCPA class actions around the country have been stayed to await the D.C. Circuit’s decision.  More detail is below the fold, but here are our quick impressions from the argument:

  • The panel asked tough questions of lawyers for both sides in an argument that went two full hours over the allotted 40 minutes.
  • The panel focused most of its attention on the FCC’s new—and far-reaching—definition of an automatic telephone dialing system (ATDS, or “autodialer”). All three judges expressed discomfort with the fact that the FCC’s new definition could be read to cover smartphones.
  • Judge Edwards repeatedly voiced criticisms of the FCC’s expansive readings of the TCPA across the board, and may be inclined to vacate large portions of the FCC’s Declaratory Ruling.
  • Judge Pillard seemed the most receptive to the FCC’s arguments.
  • Judges Srinivasan was the hardest to read, but it seems possible that he might join Judge Edwards in setting aside major portions of the FCC’s Declaratory Ruling.

Continue Reading D.C. Circuit Weighing FCC’s Controversial 2015 TCPA Declaratory Ruling

The rule (pdf) just proposed by the Consumer Financial Protection Bureau to regulate arbitration agreements is not a surprise: the Bureau has said for months that it was developing such a rule.

This post examines the details of the proposal—how it would regulate arbitration, its scope, and its effective date. We also discuss the course of the rulemaking process, including potential judicial review of any final rule. In a future post, we’ll evaluate the CFPB’s purported justifications for the regulation.

The bottom line: The CFPB’s proposal is effectively a blanket ban on the use of arbitration by companies in the consumer financial services arena. It is an attempt to overrule by regulation the Supreme Court’s landmark decision five years ago in AT&T Mobility LLC v. Concepcion (in which we represented AT&T). Businesses that are concerned about the ramifications of this proposal will have 90 days from the date the proposal is published in the Federal Register to submit comments to the agency, and if a rule is adopted in the present form of the proposal, parties are certain to seek judicial review.

Continue Reading The CFPB’s Proposed Anti-Arbitration Rule

We recently noted that the Ninth Circuit had granted a Rule 23(f) petition in Chen v. Allstate Insurance Co.—on the issue whether a named plaintiff can refuse an offer of judgment for full relief and persist in litigating a class action—and was expected to issue a briefing schedule soon. Leaving aside the substance of the case, there is nothing unusual about the practice the Ninth Circuit followed in Chen. That is standard operating procedure virtually everywhere, although in a few rare instances courts of appeals have ordered briefing and argument on both the Rule 23(f) petition and the merits of the class certification ruling. E.g., In re Rail Freight Fuel Surcharge Antitrust Litig. (pdf), 725 F.3d 244 (D.C. Cir. 2013); Tilley v. TJX Cos., 345 F.3d 34, 36 (1st Cir. 2003). See also Lienhart v. Dryvit Sys., Inc., 255 F.3d 138, 141 (4th Cir. 2001) (after hearing argument on the Rule 23(f) papers, the court granted the petition and vacated the class certification order).

The Seventh Circuit is different. Sometimes it will follow grant a Rule 23(f) petition and order briefing on the merits. See, e.g., Abbott v. Lockheed Martin Corp. (pdf), 725 F.3d 803 (7th Cir. 2013); McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, 672 F.3d 482 (7th Cir. 2012); Ross v. RBS Citizens, N.A., 667 F.3d 900 (7th Cir. 2012).

But in many cases it skips the second step: it grants the petition and rules on the merits at the same time, based on only the parties’ Rule 23(f) papers and without oral argument. See, e.g., Hughes v. Kore of Ind. Enters. (pdf), 2013 WL 4805600, at *1 (7th Cir. Sept. 10, 2013); Butler v. Sears, Roebuck & Co., 702 F.3d 359 (7th Cir. 2012); Creative Montessori Learning Ctrs. v. Ashford Gear LLC (pdf), 662 F.3d 913, 915 (7th Cir. 2011); CE Design Ltd. v. King Architectural Metals, 637 F.3d 721, 722–23 (7th Cir. 2011); Pella Corp. v. Saltzman, 606 F.3d 391, 393 (7th Cir. 2010); Am. Honda Motor Co. v. Allen, 600 F.3d 813 (7th Cir. 2010).

The parties have no way of knowing which procedure the Seventh Circuit will use in any given case—it depends entirely on the discretion of the judges who happen to be on the motions panel when the court considers the Rule 23(f) petition. The parties do not learn which approach the court will follow in a particular case until it issues its decision on the petition.

The Seventh Circuit’s unique approach to handling Rule 23(f) petitions has significant implications for parties filing and responding to Rule 23(f) petitions in that court. Most importantly, the parties should endeavor to make all of their merits arguments in their Rule 23(f) papers, because they may not get another chance. This is often difficult; the petition and response are limited to 20 pages each, and the petitioner will not have a right to file a reply brief (although petitioners occasionally are given leave to file a reply). Moreover, respondents should be wary of following a strategy of not responding to a Rule 23(f) petition, on the theory that the decision below is obviously correct or that responding may make the case seem more worthy of immediate review. In at least two cases where there was no response to a Rule 23(f) petition, the Seventh Circuit has granted the petition and overturned the district court’s ruling, reversing decertification of a class in Hughes—a controversial recent decision by Judge Posner that the plaintiffs’ bar has been citing with regularity—and vacating class certification in Creative Montessori Learning Centers.

At this point, some 15 years after the adoption of Rule 23(f), it seems unlikely that other circuits will opt to embrace the Seventh Circuit’s approach. But in the Seventh Circuit, the practice of granting a Rule 23(f) petition and ruling on the merits simultaneously shows no sign of abating.

One final practitioners’ note: The Seventh Circuit follows a similar practice when it comes to appeals under the Class Action Fairness Act of orders granting or denying remand, so the same caveats apply equally in that context. Examples include Knudsen v. Liberty Mut. Ins. Co., 435 F.3d 755, 758 (7th Cir.2006), and In re Safeco Ins. Co. of Am. (pdf), 585 F.3d 326, 327 (7th Cir. 2009).

 

6SDCD5ARNUKS

We’ve blogged about the D.C. Circuit’s ruling in Noel Canning v. NLRB (pdf) that President Obama’s three 2012 recess appointments to the National Labor Relations Board are unconstitutional. The consequence of that decision was to invalidate the NLRB decision against Noel Canning for lack of a quorum of NLRB members. The decision also cast a dark cloud over many other NLRB decisions, as well as the recess appointment of Consumer Financial Protection Bureau head Richard Cordray.

As we mentioned, the Solicitor General already filed a petition for certiorari in Noel Canning. The National Chamber Litigation Center has just filed a brief in response—the first time that Chamber lawyers have ever directly represented a member company before the Supreme Court.

The Chamber’s brief (pdf) agrees that the D.C. Circuit’s decision is worthy of Supreme Court review, and explains why the D.C. Circuit’s decision should be upheld.

Under the current schedule, the Supreme Court will consider the petition during the June 20, 2013 conference and possibly act on it in the orders list on June 24. If the Solicitor General waives the right to file a reply brief, however, the petition could be resolved a week earlier, on June 17.

In related news, in another case, the Third Circuit agreed with the D.C. Circuit’s conclusion that the Constitution permits recess appointments only during “intersession breaks”—that is, during periods between sessions of the Senate. As with the 2012 recess appointments at issue in Noel Canning, the 2010 recess appointment at issue in the Third Circuit case, NLRB v. New Vista Nursing & Rehabilitation (pdf), was made during a break in the middle of a session. Judge Smith wrote the decision, which Judge Van Antwerpen joined. Judge Greenaway dissented. Presumably, the Solicitor General will file a petition for certiorari in New Vista asking that the case be held pending the outcome of Noel Canning.

Here’s a common scenario:  After unsuccessfully moving for class certification and having a petition for review under Federal Rule of Civil Procedure 23(f) rebuffed, the plaintiff wants to take another shot at an appeal.  Can the plaintiff simply settle his individual claims—subject to his right to appeal the denial of class certification—so that he has a dismissal giving him an automatic right to an immediate appeal?

If you’re in the Third, Seventh, Eighth, or Ninth Circuit, the answer is no. Each of these courts have held that they lack jurisdiction over the appeal of a would-be class representative following such a settlement.

The most recent of these decisions is the  Eight Circuit’s opinion in Ruppert v. Principal Life Ins. Co. (pdf), No. 11-2554 (8th Cir. Feb. 13, 2013), which involved an ERISA claim by the plaintiff against his insurer. The district court denied class certification for lack of commonality and typicality. And the Eighth Circuit denied a Rule 23(f) petition for review. So the plaintiff next tried entering into a settlement, accepting $80,000 in exchange for a dismissal of his individual claims. In the agreement, the plaintiff reserved the right to appeal the denial of class certification and, if the Eighth Circuit were to reverse, to seek a share of any recovery to the class. The Eighth Circuit dismissed the appeal for lack of appellate jurisdiction.

The Eighth Circuit held that there was no final judgment because the settlement “allows for [the plaintiff’s] individual claims to spring back to life.” The Third, Seventh, and Ninth Circuits have also dismissed appeals for lack of finality, concluding that such settlements are impermissible attempts to manufacture appellate jurisdiction. See India Breweries, Inc. v. Miller Brewing Co., 612 F.3d 651, 656-57 (7th Cir. 2010); Fed. Home Loan Mortg. Corp. v. Scottsdale Ins. Co., 316 F.3d 431, 440 (3d Cir. 2003); Dannenberg v. Software Toolworks, Inc., 16 F.3d 1073, 1076 (9th Cir. 1994). By contrast, the Second Circuit deems a decision to be final, despite the plaintiff’s ability to reassert a dismissed claim on remand, if the “plaintiff’s ability to reassert a claim is made conditional on obtaining a reversal” on appeal. Purdy v. Zeldes, 337 F.3d 253, 258 (2d Cir. 2003).

The Eight Circuit also held that the settlement of the plaintiff’s individual claims deprived him of standing to appeal the denial of class certification. The Eighth Circuit acknowledged that the Supreme Court has held that a would-be class representative has standing to challenge the denial of class certification even if his individual claims are involuntarily extinguished. See United States Parole Comm’n v. Geraghty, 445 U.S. 388, 404 (1980). But when the claims are voluntarily settled—even under terms that give the plaintiff a stake in the class recovery—the case is moot. In so holding, the Eighth Circuit sided with the Fourth Circuit and rejected the position of the D.C. Circuit. Compare Rhodes v. E.I. du Pont de Nemours & Co., 636 F.3d 88, 100 (4th Cir. 2011) with Richards v. Delta Air Lines, Inc., 453 F.3d 525, 529 (D.C. Cir. 2006).  (The fact that the D.C. Circuit’s decision rests on an application of Deposit Guaranty National Bank v. Roper, 445 U.S. 326 (1980)—which the Supreme Court recently suggested might no longer be good law—suggests that the Eighth Circuit has the better side of this split.)

Although Ruppert deepens two preexisting circuit splits, the court’s docket suggests that the plaintiff is not seeking further review.  Accordingly, unless and until the Supreme Court decides the issue, if you’re a class-action defendant and the plaintiff comes to you with a proposal for one of these settlements, consult the law of the relevant circuit before deciding whether the offer is too good to pass up.

On January 25, 2013, the D.C. Circuit held in Noel Canning v. NLRB (pdf) that President Obama’s three recess appointments last year to the NLRB are unconstitutional.  The decision casts a shadow over every action taken by the NLRB since those appointments were made on January 4, 2012.  Moreover, because Richard Cordray received a recess appointment to head the Consumer Financial Protection Bureau (CFPB) on the same day, the DC Circuit’s decision provides grounds for challenging certain CFPB actions.  Please see our report on the DC Circuit’s decision and the implications for challenges by companies to agency actions.