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FCC deference at issue (again) in new Supreme Court case

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Last week, Twitter was, well, atwitter with news that the Supreme Court had declined to review the DC Circuit’s decision upholding the Federal Communications Commission’s (FCC) now-repealed 2015 Open Internet Order. Though many hailed this denial as an implicit endorsement of agency deference, the reality is somewhat more mundane: The high court hears few cases each year, and was unlikely to review the legality of a defunct rule.

via Twenty20

But this week finds the agency again before the Court, at least indirectly. On Tuesday the Court granted certiorari in PDR Network v. Carlton & Harris Chiropractic. On its surface, the case presents a seemingly mundane dispute about junk faxes. But lurking beneath the surface is a potentially significant question about deference and lower courts’ power to review agency rules.

The Telephone Consumer Protection Act

At issue is the FCC’s interpretation of the Telephone Consumer Protection Act. As amended by the Junk Fax Prevention Act of 2005, the statute generally makes it illegal to send an “unsolicited advertisement” by fax machine. “Unsolicited advertisement,” in turn, is defined as “any material advertising the commercial availability or quality of any property, goods, or services” without permission. The act allows victims to sue for $500 for each unsolicited fax — which, when multiplied by thousands of faxes potentially involved in one advertising blast, can be like catnip to class action attorneys.

The decision below

But was the fax at issue an “advertisement”? The defendant is PDR Network, publisher of the Physician’s Desk Reference, an eBook described as “a widely-used compendium of prescribing information for various prescription drugs.” PDR makes the eBook available to physicians for free, and collects fees from pharmaceutical manufacturers to list their drugs in the book. The fax invited the recipient to reserve a free copy of the 2014 edition of the book by visiting PDR Network’s website.

PDR Network argued that the fax did not violate the act because it did not offer anything for sale. Plaintiff Carlton & Harris Chiropractic, a recipient of the fax, pointed to a 2006 FCC rule holding that “facsimile messages that promote goods or services even at no cost . . . are unsolicited advertisements under the TCPA’s definition.” The District Court ruled for PDR Network, finding that the statute unambiguously requires that a fax be commercial to trigger liability, and therefore there was no need to reference the FCC rule. (It also found that, to the extent the rule was relevant, it supported the court’s decision.) The Fourth Circuit reversed, finding that the FCC rule controlled the proceeding and that the fax fell under the rule. The Supreme Court granted certiorari.

What’s at stake: Hobbs Act vs. Chevron deference

One might ask, given its limited docket, why the Supreme Court would take such interest in a banal statute about a nearly obsolete technology. The answer lies in the Hobbs Act, which I discussed last month in connection with California’s net neutrality law. To promote judicial efficiency, the Hobbs Act vests exclusive jurisdiction in the courts of appeals to “determine the validity of” FCC rules. The Fourth Circuit held that, by interpreting the statute rather than uncritically applying the FCC rule, the district court ruled on the validity of the rule in violation of the Hobbs Act.

The case thus pits the Hobbs Act against the Chevron doctrine, a cornerstone of administrative law. Chevron famously created a two-step process for courts facing agency interpretations of statutes that the agency administers: (1) determine whether the statutory provision is clear or ambiguous; (2) if clear, apply Congress’s clear language, but if ambiguous, defer to the agency’s interpretation as long as that interpretation is reasonable.

In recent years, Chevron has come under scrutiny for being too deferential to agencies. Indeed, much has been made of the skepticism that new Justices Gorsuch and Kavanaugh have shown toward the doctrine, suggesting Chevron may be pared back in the years to come. But the Fourth Circuit’s ruling would replace Chevron with an even more deferential regime, at least in district courts where the Hobbs Act is implicated. And while the case has obvious implications for FCC rules, the Hobbs Act applies to an eclectic mix of agencies across the spectrum, including the Department of Agriculture, the Nuclear Regulatory Commission, various transportation agencies, and the Department of Housing and Urban Development with respect to the Fair Housing Act.

The Court ruling could decide the narrow question of when a district court decision “determine[s] the validity” of a rule, or it could speak more broadly about the future of the Chevron doctrine. But regardless of how the Court decides this clash between two conceptions of congressional intent, lawyers in telecommunications and a host of other fields will be hanging closely on the outcome of this odd little case about junk faxes.

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