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GRINDING: Court Rejects “Sweeping Practical Consequences” to Follow FCC Lead After Chevron Deference Struck Down–But EVERYBODY Has A Lot More Work to Do Now
Friday, July 5, 2024

Well that didn’t take long.

In less than a week the first district court opinion refusing to apply Chevron deference– and rejecting an FCC TCPA ruling following Loper Bright– is out. And this particular court came to the same conclusion as the FCC on a critical TCPA issue, even though it expressly acknowledged it didn’t have to.

Yet the amount of work that went into the analysis–none of which would have been needed a mere 6 days prior to the decision-really calls into question the wisdom of killing Chevron. 

But the issue was an important one–are cellular phones residential lines for DNC purposes under the TCPA? The FCC had held they were. If the Court disagreed, it would be a big deal.

Well the Court in Cacho v. McCarthy & Kelly 2024 WL 3293628 (S.D.N.Y. July 3, 2024) analyzed the issue and became the first court in the nation to expressly reject an FCC TCPA ruling following LoperBright. (Indeed, this may be the first district court ruling anywhere on any topic to reject an agency ruling following the Supreme Court’s massive ruling last Friday.)

Here is the court’s very through and interesting analysis:

The regulations the FCC promulgated pursuant to Section 227(c) of the TCPA govern the telephone solicitation and telemarketing practices of “residential telephone subscriber[s].” 47 C.F.R. §§ 64.1200(c)(2), (d). Notably, “[t]he rules set forth in paragraph (c) and (d) of [Section 64.1200] are applicable to any person or entity making telephone solicitations or telemarketing calls or text messages to wireless telephone numbers to the extent described in the Commission’s Report and Order, CG Docket No. 02-278, FCC 03-153, ‘Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991.’ ” 47 C.F.R. § 64.1200(e) (emphasis added). The pertinent FCC order, in turn, provides that “wireless subscribers may participate in the national do-not call list” and that the Commission “presume[s] wireless subscribers who ask to be put on the national do-not-call list to be ‘residential subscribers.’ ” In Re Rules & Reguls. Implementing the Tel. Consumer Prot. Act of 1991, 18 F.C.C. Rcd. 14014, 14039 (2003); see also id. at 14039 n.139 (explaining this presumption is “for the purposes of section 227” of the TCPA). Numerous courts have applied the presumption the FCC incorporated into its TCPA regulations, and held that an individual who registers her cellphone with the Do Not Call Registry is a residential telephone subscriber.

However, Defendant contends that the FCC’s interpretation of the TCPA is contrary to the statute’s plain text. See Loper Bright Enters. v. Raimondo, 2024 WL 3208360, at *14 (U.S. June 28, 2024) (holding that, even when a court interprets a statute that delegates authority to an administrative agency, the court must nevertheless “independently interpret the statute and effectuate the will of Congress subject to constitutional limits”). “The term ‘residential telephone subscriber’ is not defined by the TCPA.” Miholich v. Senior Life Ins. Co., 2022 WL 410945, at *4 (S.D. Cal. Feb. 10, 2022). But Defendant observes that “the term ‘cellular telephone’ ” appears in Section 227(b). Dkt. No. 13-1 at 24. As stated above, Section 227(b) prohibits any person from using an “automatic telephone dialing system or an artificial or prerecorded voice” to call “any telephone number assigned to a paging service, cellular telephone service, specialized mobile radio service, or other radio common carrier service.” 47 U.S.C. § 227(b)(1)(A)(iii) (emphasis added). Defendant argues that “under the expressio unius est exclusio alterius canon of interpretation [i.e., that the expression of one thing is the exclusion of the other] … the conspicuous absence of any reference to cellular telephones in section 227(c) evidences Congress’ intent to exclude cell phones users from the definition of ‘residential subscribers.’ ” Dkt. No. 13-1 at 24

Defendant’s interpretation of the TCPA would have sweeping “practical consequences.” United States v. Worldwide Indus. Enters., Inc., 220 F. Supp. 3d 335, 345 (E.D.N.Y. 2016) (Bianco, J.) (quoting Cmty. Health Care Ass’n of N.Y. v. Shah, 770 F.3d 129, 151 (2d Cir. 2014)). For more than two decades, cellphone users have been permitted by the FCC to register for the National Do Not Call Registry as “residential subscribers.” See 18 F.C.C. Rcd. at 14038–39. Countless cellphone users have relied upon that protection to ensure their privacy. 5 They have purchased cellphones on the assumption that their devices would be protected against unwanted telemarketing. Telemarketing firms have developed policies and practices to comply with their Do Not Call obligations for cellphone users. See 47 C.F.R. § 64.1200(d). The FCC, Federal Trade Commission, and state agencies alike have enforced the rights of cellphone users on the Registry. See 18 F.C.C. Rcd. at 14034. As Americans increasingly “no longer maintain wireline phone service, and rely only on their wireless telephone service,” id. at 14039, Defendant’s interpretation of the TCPA would effect a sea change in the telemarketing industry and leave many consumers without protections that they have long enjoyed. There is little doubt that if the Court were to apply the deference owed to the FCC’s interpretation of the TCPA at the time Congress enacted the statute, the Court would uphold the FCC’s interpretation as reasonable. See, e.g., Sagar v. Kelly Auto. Grp., Inc., 2021 WL 5567408, at *6 (D. Mass. Nov. 29, 2021); Craig Cunningham v. Technologic USA, Inc., 2020 WL 10356245, at *6 (D. Wyo. June 17, 2020). But the Court need not defer to an agency interpretation here. 6 “[A]fter applying all relevant interpretative tools,” Loper Bright, 2024 WL 3208360, at *16, the Court concludes that users of cellphones are not categorically excluded from the definition of “residential subscriber” under the TCPA.

Defendant’s reliance on the expressio unius canon is misplaced. That canon is instructive only when “it is fair to suppose that Congress considered the unnamed possibility and meant to say no to it.” Yet the “contention that the statute divides cellular phones and residential phones into two discrete and exclusive worlds is unpersuasive; it simply runs counter to the text enacted by Congress.” Section 227(b) differs from Section 227(c) in that the former forbids the use of artificial and prerecorded messages to enumerated categories of phone technologies. Those include “cellular telephone[s]” and “residential telephone line[s],” as well as a variety of other specific technologies like “emergency telephone line[s],” “paging service[s],” and “radio common carrier service[s].” Section 227(b)’s technological focus is similarly evident in its proscription on the “use [of] any telephone facsimile machine, computer, or other device” to send an unsolicited advertisement “to a telephone facsimile machine.” 47 U.S.C. § 227(b)(1)(C). Defendant’s expressio unius argument therefore amounts to a category mistake: Cellular telephone —like telephone lines, paging services, radio common carrier services, and telephone facsimile machines —are a kind of telephonic communications technology. 

A “residential subscriber,” by contrast, does not refer to the specific phone technology, but to the type or identity of the subscriber to the technology. Thus, a “residential subscriber” and a cellular telephone are not members of the same genus. The inclusion of that term in Section 227(b) and its exclusion from Section 227(c) does not connote that Congress intentionally omitted cellphones used by “residential subscribers” from Section 227(c)’s protections or defined “residential subscriber” by the form of technology used by the subscriber. Rather, Congress used the term “line” and not “subscriber” to refer to a fixed line dedicated to a particular location. “Had Congress wished to limit section 227(c) to specified telephone technologies rather than specified telephone subscribers, it would have indicated somewhere in that section that the [Do Not Call] registry is limited to a ‘residential telephone line,’ as Congress used that term in the preceding subsection.” Jackson v. Direct Bldg. Supplies LLC, 2024 WL 184449, at *6 (M.D. Pa. Jan. 17, 2024) (emphasis in original); see also Chennette, 50 F.4th at 1227 (Bress, J., concurring).

Defendant’s interpretation also presumes that the term “residential,” as used in the phrase “residential subscriber,” denotes a landline, not a cellphone, such that only persons who subscribe to landlines and not those who subscribe to a cellphone can be residential subscribers. See Dkt. No. 13-1 at 24. Carried to its logical limits, that argument would admit of absurd consequences —ones that Congress could not have intended and contrary to Congress’s purposes. See Pereira v. Sessions, 585 U.S. 198, 212 (2018) (“We are not willing to impute to Congress … [an] absurd purpose.” (quoting United States v. Bryan, 339 U.S. 323, 342 (1950))); see also Yates v. United States, 574 U.S. 528, 536 (2015). Under Defendant’s interpretation, an individual who eschews landline service and who uses a cellphone exclusively in his residence (perhaps because he is homebound) would be deprived of the TCPA’s protection simply because his phone lacks a cord.

Congress’s language does not lead to that result. The Court interprets the TCPA “as a whole,” United States v. Kennedy, 233 F.3d 157, 162 (2d Cir. 2000) (Sotomayor, J (quoting Connecticut v. U.S. Dep’t of the Interior, 228 F.3d 82, 89 (2d Cir.2000)), “giv[ing] effect, if possible, to every clause and word of [the] statute,” United States v. Davis, 961 F.3d 181, 188 (2d Cir. 2020) (quoting Duncan v. Walker, 533 U.S. 167, 174 (2001)). Because the Court ascribes meaning to Congress’s particular choice of words, “language used in one portion of a statute … should be deemed to have the same meaning as the same language used elsewhere in the statute,” United States v. Daugerdas, 892 F.3d 545, 556 (2d Cir. 2018) (quoting Mertens v. Hewitt Assocs., 508 U.S. 248, 260 (1993)), while “statutory use of different terms evinces intent to express different meanings,” Union of Needletrades, Indus. & Textile Emps., AFL-CIO, CLC v. INS, 202 F. Supp. 2d 265, 271 (S.D.N.Y. 2002), aff’d, 336 F.3d 200 (2d Cir. 2003). Considered in a vacuum, the term “residential subscriber” is ambiguous as to whether it is limited to landlines. See Enters. Rent-A-Car Co. v. Advantage Rent-A-Car, Inc., 330 F.3d 1333, 1341 (Fed. Cir. 2003) (“The language of the statute standing alone and divorced from its context, purpose, and history is perhaps ambiguous.”). However, the TCPA’s text, structure, and purpose demonstrate that the term “residential subscriber” is indifferent to technology. In Section 227(b), Congress used the word “line,” in making it unlawful to initiate a telephone call to a “residential telephone line” with an artificial or prerecorded voice. 47 U.S.C. § 227(b)(1)(B). And, in Section 227(c), Congress directed the FCC to regulate with respect to “residential telephone subscribers’ privacy rights.” 47 U.S.C. § 227(c)(1). The term “residential” cannot refer to the telephone technology. Were that so, Congress’s reference to a residential telephone “line” would be surplusage, as a residential telephone would necessarily be a landline instead of a cellphone; Congress could just as easily have referred to a residential telephone, and not to a residential telephone line. See Adelson v. Harris, 973 F. Supp. 2d 467, 497 (S.D.N.Y. 2013), aff’d, 876 F.3d 413 (2d Cir. 2017). The term “line” must be given meaning and it is evident from its context that the meaning it must receive is that it refers to the equipment or technology. Just as Section 227(b)(1)(A)(ii)’s reference to the “telephone line of any guest room or patient room” of a hospital or similar facility means the equipment attached to that room and not just a phone that can be used in a guest room, so too must “residential telephone line” in Section 227(b)(1)(B) be read to refer to equipment that is dedicated to a residence and not just one that can be used in a residence. 7 See Est. of Cowart v. Nicklos Drilling Co., 505 U.S. 469, 479 (1992) (noting “the basic canon of statutory construction that identical terms within an Act bear the same meaning”).

Since Congress’s use of the word “line” in Section 227(b) must be understood to refer to the nature of the equipment, it follows that Congress’s omission of the word “line” in Section 227(c) and its substitution of that word with “subscriber” demonstrates that Section 227(c)’s applicability depends on the type of subscriber and the function for which the subscriber uses the phone rather than on the particular technology the subscriber uses. See Mantha, 2022 WL 325722, at *4 (holding that “residential” is “a functional term not tethered to a particular technology”). Construing the TCPA according to its plain language, a “residence” is simply “[t]he place where one actually lives,” that is, one’s “dwelling.” Residence, Black’s Law Dictionary (11th ed. 2019). And “residential” means “of or relating to residence or residences.” Residential, Merriam Webster Dictionary (2024), https://www.merriam-webster.com/dictionary/residential. A “subscriber” is “[a] person who makes a regular payment in return for entitlement to … access to a commercially provided service.” Subscriber, Oxford English Dictionary (2024), https://www.oed.com/dictionary/subscriber. Thus, a residential subscriber is one who maintains a phone “for residential purposes,” Gillam v. Reliance First Cap., LLC, 2023 WL 2163775,at *4 (E.D.N.Y. Feb. 22, 2023)—i.e., for personal activities associated with his or her private, domestic life, see Rose v. New TSI Holdings, Inc., 2022 WL 912967, at *2 (S.D.N.Y. Mar. 28, 2022); Marks v. Unique Lifestyle Vacations, LLC, 2021 WL 5495778, at *3 (E.D. Pa. Nov. 22, 2021); Izor v. Abacus Data Sys., Inc., 2019 WL 3555110, at *2 (N.D. Cal. Aug. 5, 2019). Statutory context confirms that reading. See generally Diaz v. United States, 2024 WL 3056012, at *6 (U.S. June 20, 2024) (“[A] word’s meaning is informed by its surrounding context.”). Congress used the term “residential” in “the broader sense of ‘relating to a resident’ to distinguish such a subscriber from a business or commercial telephone subscriber.” Jackson, 2024 WL 184449, at *5); see Rose, 2022 WL 912967, at *2; Blalack v. RentBeforeOwning.com, 2022 WL 7320045, at *4 (C.D. Cal. Oct. 11, 2022); see also Shelton v. Fast Advance Funding, LLC, 805 F. App’x 156, 159 (3d Cir. 2020). Congress’s definition of an “established business relationship”—a term that is used to exempt from the statute certain communications that are made for business purposes, see 47 U.S.C. § 227(b)(1 (C)(i)—expressly distinguishes between a business subscriber and a residential subscriber. The definition states that the term “established business relationship” shall have the meaning given by regulation except that “such term shall include a relationship between a person or entity and a business subscriber subject to the same terms applicable under such section to a relationship between a person or entity and a residential subscriber.” 47 U.S.C. § 227(a) (2)(A) (emphasis added). That distinction would make little sense if the term “residential subscriber” referred to users with landlines physically located in their residences, rather than users who use their phones for residential purposes, because many individuals operate home-based businesses. See Chennette, 50 F.4th at 1224–25 (explaining when a subscriber’s use of a phone for a home-based business renders her no longer a residential subscriber under Section 227(c)). The FCC has also adopted that view in regulations—albeit under a different telecommunications statute—defining “residential subscriber” as “a subscriber to telephone exchange service that is not a business subscriber.” 47 C.F.R. § 64.2305(d); see also Rose, 2022 WL 912967, at *2; Katz v. CHW Grp., Inc., 2023 WL 6445798, at *5 (W.D. Ark. Sept. 29, 2023); Ailion v. Healthcare Sols. Team, LLC., 2023 WL 2333299, at *5 (N.D. Ill. Mar. 2, 2023).


How long was that?

And what’s crazy is that’s not even the whole analysis, I just got tired of cutting and pasting.

So first, this is a GREAT analysis by the court–not to say I agree with it, but it was well thought out and plodding. Piece by piece. Brick by brick and well supported and reasoned.

But also… long.

In the old days–last last Thursday–the Court could have just cited to the FCC ruling and stopped. One line became several pages. And while this court was willing to do the work–and impressively, and quickly!–most courts will not be.

The the Supremes have now given courts a choice– do a bunch of hard work to likely arrive at the same conclusion the agency did, or just shoot from the hip.

Cacho shows just how much labor goes into a court getting the analysis done for itself, and how unrewarding it is when ultimately the court just landed where the FCC had already been. Doesn’t seem like a great use of resources.

And, of course, this is just one ruling by one judge. The next judge could come to a different conclusion.

So are cellular phones residential lines for DNC purposes? Ask your local judicial official.

Except, maybe not. Remember the Hobbs Act also comes into play in TCPA rulings under the Communications Act–and the Hobbs Act, where applicable, strips the court of the jurisdiction to do the very analysis the Cacho court just did.

So how did the Hobbs Act apply in Cacho? It didn’t:

Because the Court concludes that Plaintiff’s allegations satisfy both the plain text of the TCPA and the FCC’s implementing regulations, the Court need not address the difficult and entirely unbriefed—question of whether the Hobbs Act constrains the Court’s review of the FCC’s determination that cellphones qualify for TCPA protection.

Get it?

Because the court agreed with the FCC it did not need to consider whether or not it had to agree with the FCC. And the parties did not even address the issue–another miss by law firms that don’t really understand the TCPAWorld.

Regardless, the Cacho ruling is even more interesting–to me at least–because the court ultimately cncluded the case needed to be dismissed anyway.

The Plaintiff had failed to allege the law firm at issue actually controlled or ratified the conduct of the lead generator that had gotten it sued:

Yet the mere fact that “an agreement imposes constraints on [a] service provider does not mean that the service recipient has an interim right to give instructions to the provider. Thus, setting standards in an agreement for acceptable service quality does not of itself create a right of control.” Restatement (Third) of Agency § 1.01 cmt. f (2006); see also CFPB v. Stratfs, LLC, 2024 WL 911518, at *9 (W.D.N.Y. Mar. 4, 2024). That Defendant allegedly placed restrictions on the kind and number of leads it would accept from the telemarketers thus does not distinguish the relationship between Defendant and the telemarketer from an arms-length contractual relationship and does not constitute the kind of interim control necessary to establish an agency relationship with actual authority…

The Court need go no further than to observe that Plaintiff’s Complaint is bereft of any allegation from which one could reasonably infer that Defendant knew or should have known that the telemarketers were violating the TCPA and its implementing regulations. The Complaint cannot be sustained based on Plaintiff’s legal conclusions, couched as factual allegations, that Defendant “knowingly and actively attempted to accept business that originated through illegal telemarketing” and “knew (or reasonably should have known) that their telemarketers were violating the TCPA on their behalf.”

While these are great tidbits that TCPA litigators should always have handy, this piece of the analysis essentially made the forgoing piece unnecessary. More work down the drain. But impressive analysis nonetheless.

One last piece here– notice the Defendant was a Plaintiff’s law firm. The lead supplier was calling for Camp Lejune leads. A very common purpose of calls–at least a couple years ago. Just another reminder that Plaintiff’s law firms are NOT immune from TCPA claims.

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