Supreme Court to consider validity of TCPA exemption in new case

On Jan. 10, the U.S. Supreme Court granted a petition for writ of certiorari to review the 4th U.S. Circuit Court of Appeals decision on the constitutionality of an exemption to the Telephone Consumer Protection Act, 47 U.S.C. Section 227 et seq. The petition at issue is one of three recent petitions on the exemption, has the potential to reshape the TCPA, and may have implications on government restrictions on speech.

The TCPA is among the most frequently litigated statutes in federal court. The TCPA limits the use of automated equipment to dial phone numbers and place calls. When it was enacted in 1991, the TCPA contained only two statutory exemptions for calls made to cellular phones using an automatic telephone dialing system ("ATDS") or with a prerecorded or artificial voice: calls made for an emergency purpose and calls made with the prior express consent of the called party. In 2015, Congress amended the statute and added a third exemption for calls made "solely to collect a debt owed to or guaranteed by the United States."

In American Association of Political Consultants v. Sessions, a group of political organizations and pollsters wanted to be able to use an ATDS and prerecorded messages to further their causes. Using an ATDS and prerecorded messages costs much less than hiring and paying operators to either manually dial phone numbers or to obtain consent to call using automated technology. The groups sued the Federal Communications Commission and Attorney General Jeff Sessions, arguing that the TCPA's restriction on the use of automated technology to make calls to cellular phones without consent was an unlawful, content-based restriction on speech. The groups argued that the ban was underinclusive and not narrowly tailored in light of other regulatory and statutory exemptions which permit calls in such circumstances, such as the government debt exemption.

The district court awarded summary judgment to the government. In so doing, it agreed with the political groups that the statute's exemption for the collection of debts owed to or guaranteed by the government was a content-based speech restriction, but held that the exemption passed strict scrutiny. It found two compelling interests: the privacy rights of individuals who are protected by the statutory ban on the use of an ATDS without prior consent, and the government's interest in collecting debts owed to it. However, the court concluded that the ATDS restriction was narrowly tailored to achieve the interest of consumer privacy, and that the government debt exemption was not impermissibly underinclusive.

On appeal, the 4th Circuit agreed with the district court's finding that the ATDS rules are a content-based restriction on speech requiring application of strict scrutiny, but reversed the district court's grant of summary judgment in favor of the government. The 4th Circuit disagreed that the provision was narrowly tailored to serve a compelling interest. The court found the exemption "fatally underinclusive" because it "subverts the privacy protections" underlying the TCPA's ban on automated calls to cellular phones and "deviates from the purpose of the automated call ban." Though the 4th Circuit held that the exemption is an unconstitutional content-based restriction on free speech, the court severed the offending exemption and left the rest of the TCPA intact, rather than invalidate the entire statute as the political groups had requested.

The 4th Circuit's decision is just one of three recent appellate decisions on the constitutionality of the same exemption. In Duguid v. Facebook, Inc., in response to a lawsuit about a text message alert that the plaintiff's account was accessed from an unrecognized device, Facebook challenged the constitutionality of the entire TCPA. Likewise, in Gallion v. Charter Commc'ns Inc., Charter argued that the TCPA is unconstitutional because it prevents all debt collectors -- except government-backed collectors -- from using an ATDS to make collection calls and thus treats speakers differently based on their identity and the content of their speech. In both Duguid and Gallion, the 9th Circuit held that the government debt exemption was unconstitutional, but severed the exemption and left intact the remainder of the statute.

The Supreme Court's decision to grant certiorari in the Am. Ass'n of Political Consultants case -- since renamed to Barr v. Political Consultants -- may have wide-reaching implications. The 4th Circuit's decision (and the 9th Circuit's decisions) expanded the scope of the TCPA at the expense of government contractors tasked with collecting debt for the government. If the government debt exemption is found to pass strict scrutiny, the contractors will be able to continue to operate as they had once before. If the government debt exemption fails strict scrutiny, the question then becomes whether the Supreme Court will adopt the 4th and 9th Circuits' remedy of severing the offending provision. If the Supreme Court also finds that the ATDS provision is an unconstitutional restriction on speech, it could have major consequences.

A remedy which extends beyond the government debt exemption and strikes the ATDS provision would have a dramatic impact on the frequency by which the statute is litigated in federal court. The TCPA was enacted in 1991, when far fewer persons owned cellular telephones. The TCPA has failed to keep pace with changing technologies in the quarter of a century since. At the same time, the damage structure of the statute -- which awards $500 to $1,500 per call or text message -- and the potential to aggregate penalties in a class action makes the statute lucrative for consumers and the plaintiffs' bar. By some estimates, the average cost of a TCPA settlement is more than $6 million, and settlements sometimes reach seven-figures. Removing the ATDS provision could mean a steep reduction in the number of TCPA class action lawsuits and allow companies which engage in telephone marketing to operate without the burden of complying with an outdated statute.

However, Congress is aware of consumers' displeasure over the frequency of spam calls, and there is bipartisan support to do something about it. Last year, Congress overwhelmingly passed on a vote of 417-3 in the House and 97-1 in the Senate the TRACED Act, which requires carriers to employ a technological framework to prevent call spoofing and gives the FCC additional tools to pursue bad actors. In December, the President signed the TRACED Act into law. If the Supreme Court strikes the ATDS provision of the TCPA, Congress could step in and draft a new statute which protects consumer privacy while taking into consideration the technology actually being employed in the year 2020. 