On November 8, 2016, a three judge panel (Judges Brett M. Kavanaugh, Cornelia T.L. Pillard, and A. Raymond Randolph) of the United States Court of Appeals for the D.C. Circuit heard oral argument in Bais Yaakov of Spring Valley v. FCC, No. 14-1234. The argument (which lasted ninety minutes) was divided into two portions: argument regarding whether the FCC had authority to require the inclusion of opt-out notices on solicited faxes, and argument regarding whether the FCC was authorized to grant retroactive waivers of that requirement. The audio recording of the argument is available here.

With regard to the FCC’s authority to regulate solicited faxes, the class action defendants argued that Congress drew a “stark” distinction between solicited and unsolicited faxes and that the FCC’s requirement of an opt-out notice on solicited faxes “obliterated” that distinction, that nothing in the TCPA authorized the FCC to require opt-out notices on solicited faxes, and that requiring an opt-out notice on solicited faxes posed serious First Amendment concerns. The FCC and the class action plaintiffs argued in response that the FCC’s imposition of regulations on solicited faxes was a natural and necessary part of the regulation of unsolicited faxes, and that there was nothing in the TCPA prohibiting the FCC from regulating solicited faxes.

With regard to the FCC’s authority to waive its regulation requiring opt-out notices on solicited faxes, the class action plaintiffs argued that the FCC did not have the right to use its waiver authority to extinguish a statutory right of action; that the regulation itself was clear despite any shortcomings in the FCC orders regarding the regulation; that prudent counsel should have advised clients to comply with the most restrictive reading of the rule; that the FCC did not require any showing of actual confusion to grant waivers, but rather had granted them based on a “vapor” or “ether” of confusion; and that the standard the full FCC created for granting waivers permitted granting waivers to petitioners who admitted that they were simply unaware of the regulations, and that denials of petitions based on ignorance of the law was based on a standard that “the Bureau seems to have created later on” and that “there is nothing in the [Anda] Order that says ignorance of the TCPA, you don’t get a waiver.” The FCC argued in response that the order was flatly contradictory and therefore set a presumption of confusion; that the waiver process was “a mess of the agency’s own making” and the FCC decided the best way to clean up that mess was to grant retroactive waivers; and that the violation complained of for which waivers were granted was the agency’s own rule, not an express statutory requirement. The FCC also expressed frustration that parties had not sooner pointed out to the FCC the discrepancy in the order via a petition for a declaratory ruling.

The panel was active from the start (Judge Pillard asked the first question less than a minute into the argument), and the arguments played out more through questions, answers, comments, and prompting from the bench rather than through prepared remarks from counsel.

Based on comments and lines of questioning, Judge Pillard appeared to be quite skeptical of the class action defendants’ arguments regarding the ability of the FCC to regulate solicited faxes, focusing instead on the policy goals driving the FCC’s approach—obtaining consent and facilitating its revocation, and stopping “the problem” of unwanted faxes. She also challenged the arguments made by the FCC regarding the waiver process: she asserted that the regulation itself was not confusing and that granting waivers without any showing of actual confusion (and in some cases based on ignorance of the regulation altogether) appeared to be setting a very low bar, and suggested that when the FCC was balancing the interests in granting a waiver to defendants, it failed to properly consider the costs plaintiffs had incurred over years in seeking to enforce a regulation that the FCC then waived.

Judge Kavanaugh and Judge Randolph, on the other hand, seemed deeply troubled by the FCC’s and the class action plaintiffs’ arguments regarding the FCC’s authority to regulate solicited faxes. Judge Kavanaugh, for example, invoked statements from Commissioners O’Rielly and Pai regarding the legislative goals and history of the JFPA (but prefaced his inquiry regarding Commissioner O’Rielly’s statement of the legislative history by calling his own question about the statement the “sketchiest kind of bank shot legislative history”), and stated that while the FCC might have some good policy reasons for attempting to regulate solicited faxes, “[t]hat’s not what Congress said in the statute. That’s the problem,” and that the FCC “using the authority that’s attached to unsolicited faxes to regulate faxes that are sent with permission . . . seems [to be] a problem, doesn’t it?”

Judge Randolph similarly stated that it was “hard for [him] to see” how the FCC had authority to regulate solicited faxes under Section 227 as the FCC argued rather than under its general rule-making authority (the latter of which Judge Randolph indicated was a more defensible position that the FCC had eschewed), and expressed strong disagreement with the position that the lack of a specific Congressional prohibition on regulating solicited faxes entitled the FCC to regulate them, calling such an argument a “power grab by the agency.”

Judge Kavanaugh also seemed troubled by the retroactive nature of the waiver process and the boundaries of the FCC’s authority: he described the waiver as a “step beyond” (but not necessarily an impermissible step beyond) the usual prospective waiver process, questioned whether the FCC could have changed its rules retroactively based simply on a change in its view of the wisdom of policy (i.e., asking how important “confusion” was to a finding of good cause), and characterized allowing the FCC to waive its regulations as “huge authority” for an agency to have because it was an “on/off switch” to retroactively extinguish private causes of action.

Judges Kavanaugh and Randolph also questioned what impact their ruling would have outside of the D.C. Circuit since district court judges elsewhere would not be bound by their ruling, in their view.

The argument was punctuated by several moments of levity. When counsel for the class action plaintiffs invoked Mourning v. Family Publications Service, Inc., 411 U.S. 356 (1973) in support of his argument that the FCC’s authority should be construed broadly, Judge Randolph, appearing to disagree, responded, “I remember it well. I argued the case for the defendants, the agencies . . . . I was surprised that we won.” When counsel for the class action plaintiff respondents later invoked Natural Resources Defense Council v. EPA,777 F.3d 456 (D.C. Cir. 2014) in response to a question from Judge Kavanaugh, Judge Kavanaugh, appearing to disagree that it stood for the proposition for which it had been invoked, responded “Well, I didn’t argue that, but I wrote it.” And when the counsel for the class action plaintiffs argued that the FCC’s regulation was clear because the confusing footnote was just one footnote among hundreds of footnotes, Judges Kavanaugh and Randolph disagreed: Judge Kavanaugh pointed out that “footnotes can be where all the important stuff happens,” and Judge Randolph chimed in that “Justice Douglas once quoted Chief Justice Hughes in an opinion where he was dissenting and the quotation was ‘footnotes don’t count.’ Right? But he said it in a footnote.”