PDR Networks v. Carlton & Harris Chiropractic

Whether the Hobbs Act required the district court in this case to accept the FCC's legal interpretation of the Telephone Consumer Protection Act.

Summary

This case concerns federal courts' jurisdiction to disregard FCC interpretations of statutes like the Telephone Consumer Protection Act. Carlton & Harris Chiropractic sued PDR Networks after receiving an unsolicited fax offering a copy of the “Physicians Desk Reference,” a guide to pharmaceuticals. PDR offers the guide for free to health care providers, but collects fees from drug companies whose wares appear in the book. PDR moved to dismiss the case, claiming that the fax was not an “unsolicited advertisement” under the TCPA or the FCC's interpretation of the statute. Carlton & Harris argued that the fax was within FCC's definition of “unsolicited advertisement," and that the Hobbes Act prevented the district court from disregarding the FCC's interpretation in favor of the statutory language in the TCPA. The District Court sided with PDR in its understanding of the FCC definition, but also found that it did not have to accept the FCC's interpretation because the TCPA was unambiguous in its definition of "advertisement." Carlton & Harris appealed. The Fourth Circuit reversed, finding that the Hobbes Act requires district courts to apply FCC interpretations of the TCPA, and prevents them from turning to the statutory language for an alternative interpretation. PDR filed a petition for review in the U.S. Supreme Court, which was granted on November 13, 2018.

Background

Factual Background

PDR Network publishes the Physicians’ Desk Reference, a compendium of pharmaceutical information for physicians. PDR generally offers the reference book to physicians for free. PDR makes money by collecting fees from drug companies that pay to have their pharmaceutical labels printed in the book. PDR sent faxes to physicians offering a free eBook version of its reference book. Carlton & Harris Chiropractic received one of these faxes.

Legal Background

The Telephone Consumer Protection Act protects consumers from robocalls and junk faxes. Under the law, companies are prohibited from sending faxes containing "unsolicited advertisements.” The TCPA defines “unsolicited advertisement” as “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's express invitation or permission, in writing or otherwise.”

In 2006, the FCC issued an order interpreting “unsolicited advertisement.” The order states, in relevant part,

52. We conclude that facsimile messages that promote goods or services even at no cost, such as free magazine subscriptions, catalogs, or free consultations or seminars, are unsolicited advertisements under the TCPA's definition. In many instances, “free” seminars serve as a pretext to advertise commercial products and services. Similarly, “free” publications are often part of an overall marketing campaign to sell property, goods, or services. For instance, while the publication itself may be offered at no cost to the fascimile recipient, the products promoted within the publication are often commercially available. Based on this, it is reasonable to presume that such messages describe the “quality of any property, goods, or services.”186 Therefore, facsimile communications regarding such free goods and services, if not purely “transactional,” would require the sender to obtain the recipient's permission beforehand, in the absence of an EBR.”

In most cases involving agency interpretations of statutes, courts determine whether to defer to an agency interpretation using the two-step Chevron framework, named after the U.S. Supreme Court case that formalized the analysis. Under Chevron step one, a court examines whether the statutory language is unambiguous. If the court determines that the statutory language is ambiguous, then at Chevron step two, the court decides whether the agency's interpretation is reasonable. If the answer in Chevron step two is yes, the court must defer to the agency’s interpretation.

FCC interpretations are treated differently. The Hobbs Act, 28 U.S.C. § 2342, restricts federal courts’ jurisdiction over cases challenging the final orders of several administrative agencies, including the FCC. Federal courts of appeals have consistently held that, outside the statutory procedure for challenging FCC orders under the Hobbs Act, courts must accept FCC interpretations of statutes the agency administers.

Under the Hobbs Act, parties wishing to challenge a final order of the FCC must file a petition in the federal circuit court in which the petitioner resides, or in the D.C. Circuit, within 60 days of the order’s entry. If several petitions are filed challenging the same order, the petitions will be consolidated in one court of appeals. After the Hobbs Act period has lapsed, a challenger of FCC action is not without recourse: they may file a petition for agency action at the FCC, or even comment on a pending petition, and then petition a court of appeals for review of the outcome of the agency petition. District Courts have discretion to stay their proceedings pending agency resolution of a relevant petition.

The Hobbs Act has blocked both TCPA plaintiffs and defendants in private litigation from arguing that FCC interpretations should be ignored. Several TCPA plaintiffs have been prevented from arguing that the FCC’s interpretation of “prior express consent” conflicts with the clear meaning of the TCPA. TCPA plaintiffs have also failed in arguing that the FCC’s definition of an “established business relationship” defense should be ignored because Congress did not authorize the FCC to establish it. TCPA defendants have been blocked from challenging the FCC’s requirement that faxes have opt-out language even when they are sent with the consent of the recipient. Crucially, the Hobbs Act has prevented TCPA defendants from nullifying the FCC’s autodialer definition.

Procedural History

U.S. District Court for the Southern District of West Virginia

Carlton & Harris filed a putative class action in federal district court after receiving a fax from PDR Network offering a free eBook copy of PDR’s Physician’s Desk Reference. Carlton & Harris claimed that PDR violated the TCPA’s prohibition on “junk faxes” containing “unsolicited advertisements.” PDR filed a motion to dismiss, arguing that the text of the TCPA as well as the FCC’s 2006 Order interpreting the junk fax prohibition require that an “advertisement” offer goods or services for purchase. Because PDR offered its book for free, the corporation argued, the fax it sent to Carlton & Harris and others was not an “advertisement” under the TCPA. Carlton & Harris urged that, under the Hobbs Act, the court must adopt the FCC’s interpretation of “advertisement.” Carlton & Harris also argued that, contra PDR, the FCC’s interpretation of “advertisement” included offers of free goods and services from commercial entities.

The District Court agreed with PDR. First, the court decided that it need not defer to the FCC’s interpretation of “advertisement” under the Hobbs Act because the court was not planning to “determine the validity” of the order. In fact, the court said, it presumed the FCC order was valid. The court then determined, according to Chevron step one, that the TCPA’s definition of “advertisement” was unambiguous. The FCC’s interpretation of “advertisement” was thus not due “substantial deference” under Chevron, and the court declined to defer to it. The court went on to explain that, even if it were to defer to the FCC’s interpretation, the plaintiff would lose. The court found that both the plain text of the TCPA and the FCC’s 2006 order required an “advertisement” to have a “commercial aim” by either offering a good for sale or offering a free good that is “a pretext for a commercial transaction that will inevitably follow from the fax.” Because PDR’s fax did not offer anything for sale, nor did PDR “plausibly benefit commercially from the free distribution” of its book, PDR’s fax was not an “advertisement” under either the plain text of the TCPA or the FCC’s 2006 Order.

U.S. Court of Appeals for the Fourth Circuit

Carlton & Harris appealed to the Fourth Circuit, which reversed. The court found that the Hobbs Act deprived the district court of jurisdiction to consider the validity of the 2006 FCC Order, that the district court was precluded from engaging in any Chevron analysis, and that the plain text of the FCC order created a broad prohibition on faxes offering free goods and services. First, the Fourth Circuit rejected the district court’s contention that the Hobbs Act only applies to direct challenges to the validity of FCC orders, finding instead that what matters is the “practical effect” of a ruling —- and ignoring an FCC order is tantamount to invalidating it. According to the Fourth Circuit, under the Hobbs Act, the district court should have applied the FCC order -— and that is all. Further, the Fourth Circuit concluded that the district court’s construction of the FCC order contradicted the plain text of the order.

One dissenting judge on the Fourth Circuit would have found that the Hobbs Act did not prohibit the district court from reaching Chevron step one. The judge argued that a court invalidates an agency’s order only when it finds the agency’s construction in conflict with an unambiguous statutory provision, which the district court did not do in this case. The dissent went on to find that the TCPA’s definition of “advertisement” was ambiguous, but the judge would have upheld the district court’s interpretation of the 2006 Order.

U.S. Supreme Court

PDR filed a petition for a writ of certiorari at the U.S. Supreme Court, seeking reversal of the Fourth Circuit’s decision. PDR requested review on two issues:

  1. Does the Hobbs Act strip courts of jurisdiction to engage in a traditional Chevron analysis and require automatic deference to an agency’s order even if there has been no challenge to the “validity” of such order?
  2. Must faxes that “promote goods and services even at no cost” have a commercial nexus to a firm’s business to qualify as an “advertisement” under the TCPA, or does a plain reading of the FCC’s 2006 order create a per se rule that such faxes are automatically “advertisements”?

The Court granted certiorari on one question: Whether the Hobbs Act required the district court in this case to accept the FCC’s legal interpretation of the TCPA. The Court will not review the Fourth Circuit’s interpretation of “advertisement.”

EPIC's Interest

EPIC has an interest in ensuring that the TCPA’s privacy protections remain strong. EPIC contributed to the formation of the TCPA, and has since worked to ensure that telephone users are protected from invasive practices. In 2006, EPIC submitted comments to the FCC on the order at issue in the underlying case. EPIC has continued to submit comments to the FCC on implementation of the TCPA. In 2016, EPIC submitted an amicus brief in ACA International v. FCC, a case where corporations challenged the FCC’s 2015 Order implementing several robocall prohibitions in the TCPA. In 2018, EPIC filed an amicus brief in Gallion v. Charter Communications, in which EPIC described various strategies corporations are using to undermine the TCPA’s protections at the FCC and in federal court.

Legal Documents

U.S. Supreme Court, No. 17-1705

Petition Stage

Merits Stage

U.S. Court of Appeals for the Fourth Circuit, No. 16-2185

U.S. District Court for the Southern District of West Virginia, No. 3:15-cv-14887

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