Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC
Opinion of the Court
Carlton & Harris Chiropractic, Inc. appeals from the district court's dismissal of its claim against PDR Network, LLC, PDR Distribution, LLC, PDR Equity, LLC, and John Does 1-10 (collectively, "PDR Network") for sending an unsolicited advertisement by fax in violation of the
Telephone Consumer Protection Act (the "TCPA"),
Because the Hobbs Act deprives district courts of jurisdiction to consider the validity of orders like the 2006 FCC Rule, and because the district court's reading of the 2006 FCC Rule is at odds with the plain meaning of its text, we vacate the district court's judgment.
I.
We review a district court's dismissal under Fed. R. Civ. P. 12(b)(6) de novo, "assuming as true the complaint's factual allegations and construing all reasonable inferences in favor of the plaintiff."
Semenova v. Md. Transit Admin.
,
A.
Carlton & Harris maintains a chiropractic office in West Virginia. PDR Network is a company that "delivers health knowledge products and services" to healthcare providers. J.A. 33. Among other things, PDR Network publishes the Physicians' Desk Reference , a widely-used compendium of prescribing information for various prescription drugs. PDR Network is paid by pharmaceutical manufacturers for including their drugs in the Physicians' Desk Reference .
On December 17, 2013, PDR Network sent Carlton & Harris a fax. The fax was addressed to "Practice Manager" and its subject line announced: "FREE 2014
Physicians' Desk Reference
eBook-Reserve Now." J.A. 23. The fax invited the recipient to "Reserve Your Free 2014
Physicians' Desk Reference
eBook" by visiting PDR Network's website.
B.
Carlton & Harris sued PDR Network in the Southern District of West Virginia, asserting a claim under the TCPA. The TCPA, as amended by the Junk Fax Prevention Act of 2005, Pub. L. No. 109-21,
the TCPA, damages may be trebled.
PDR Network moved to dismiss the complaint under Rule 12(b)(6) for failure to state a claim. It argued that the fax offering the free e-book could not be considered an unsolicited advertisement as a matter of law because it did not offer anything for sale. In response, Carlton & Harris pointed to a 2006 FCC Rule interpreting the term "unsolicited advertisement." Pursuant to its statutory authority to "prescribe regulations to implement the requirements" of the TCPA,
see
The district court disagreed. The court held that the Hobbs Act did not compel the court to defer to "the FCC's interpretation of an unambiguous statute."
Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC
, No. 3:15-14887,
II.
The question presented is whether and when a fax that offers a free good or service constitutes an advertisement under the TCPA. To resolve it, we must answer two more: first, must a district court defer to an FCC interpretation of the TCPA? And if so, what is the meaning of "unsolicited advertisement" under the 2006 FCC Rule? We address these issues in turn.
A.
The TCPA defines "unsolicited advertisement" to include "any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission, in writing or otherwise."
In this case, the district court applied step one of
Chevron
to the TCPA's definition and found it to be unambiguous. Thus, it declined to defer to the FCC interpretation. We conclude, however, that the Hobbs Act,
The Hobbs Act, also known as the Administrative Orders Review Act, provides a mechanism for judicial review of certain administrative orders, including "all final orders of the Federal Communications Commission made reviewable by section 402(a) of title 47."
The district court erred when it eschewed the Hobbs Act's command in favor of
Chevron
analysis to decide whether to adopt the 2006 FCC Rule. Federal district courts are courts of limited jurisdiction and "possess only that power authorized by Constitution and statute."
Exxon Mobil Corp. v. Allapattah Servs., Inc.
,
This sort of "jurisdiction-channeling" provision, especially in the context of administrative law, is "nothing unique."
Blitz v. Napolitano
,
Every other circuit to consider the issue has reached the same result. In
Mais v. Gulf Coast Collection Bureau, Inc.
, the Eleventh Circuit reversed a district court finding that an FCC interpretation of the TCPA's "prior express consent" exception was inconsistent with the statute.
PDR Network urges us to instead follow the Sixth Circuit's decision in
Sandusky Wellness Ctr., LLC v. Medco Health Sols., Inc.
, which also considered the meaning of "advertisement" under the TCPA.
B.
PDR Network also argues (and our dissenting colleague agrees) that the Hobbs Act should not apply in this case because the district court did not specifically invalidate the 2006 FCC Rule. Instead, PDR Network contends, the court merely chose not to apply it.
See
Carlton & Harris
,
We find this logic unavailing. The Hobbs Act broadly vests federal appellate courts with exclusive jurisdiction to "enjoin, set aside, suspend (in whole or in part), or to determine the validity of" orders like the 2006 FCC Rule.
Invalidation by any other name still runs afoul of the Hobbs Act's constraints. To hold that a district court cannot enjoin or set aside a rule but is nevertheless free to ignore it (or "decline[ ] to defer" to it,
Carlton & Harris
,
For these reasons, we hold that the jurisdictional command of the Hobbs Act requires a district court to apply FCC interpretations of the TCPA. The district court therefore erred by engaging in Chevron analysis and "declin[ing] to defer" to the FCC rule.
C.
Although the Hobbs Act prevents the district court (and this court on appeal) from questioning the validity of the 2006 FCC Rule, the court can, and must, interpret what it says.
See
Cartrette v. Time Warner Cable, Inc.
,
"[O]ur interpretation of regulations begins with their text."
Gilbert v. Residential Funding LLC
,
[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 facsimile 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." 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 [established business relationship].
The rule also distinguishes messages promoting free goods or services, which are unsolicited advertisements, from communications "that contain only information, such as industry news articles, legislative updates, or employee benefit information," which are not.
The district court concluded that even under the 2006 FCC Rule, PDR Network's fax was not an advertisement because the rule includes only faxes with a "commercial aim."
Carlton & Harris
,
We disagree. There is no need to "harmonize" a rule whose meaning is plain. And the district court's interpretation doesn't follow from the rule's plain text. A close reading of the rule reveals a different result. The first sentence of the relevant portion is clear and unambiguous. Setting aside the list of examples (which, set off by the words "such as," is meant to illustrate rather than exhaust), it reads: "[F]acsimile messages that promote goods or services
even at no cost ... are unsolicited advertisements under the TCPA's definition." 2006 FCC Rule. The sentences that follow explain the rationale for that straightforward principle. Offers that are purportedly "free" often have commercial strings attached, either as pretext or as part of an overall marketing campaign.
"The Supreme Court has repeatedly emphasized the importance of the plain meaning rule, stating that if the language of a statute or regulation has a plain and ordinary meaning, courts need look no further and should apply the regulation as it is written."
Gilbert
,
Judge Pierre Leval recently reached a similar conclusion in his concurring opinion in
Physicians Healthsource, Inc. v. Boehringer Ingelheim Pharm., Inc.
,
The district court dismissed the case, holding that the fax was not an advertisement as a matter of law.
See
But in his concurrence, Judge Leval explained that by reading the 2006 FCC Rule "precisely, sentence by sentence, giving each sentence its natural meaning," a different interpretation emerged requiring no commercial nexus at all.
See
We find Judge Leval's logic persuasive and agree that his is the natural and logical reading of the 2006 FCC Rule.
In any event, given the increasing obsolescence of fax machines, we suspect there will be few occasions where this rule serves to block an entity wishing to offer truly free goods or services from doing so.
The district court expressed concern that this interpretation of the 2006 FCC Rule would undermine the text and purpose of the TCPA, which "seeks to curtail faxes with a commercial nature."
Carlton & Harris
,
This case illustrates why the FCC may have decided to implement so broad a rule. At this point in the litigation, Carlton & Harris has not taken any discovery, and few details of PDR Network's business model have emerged. We do know that PDR Network receives money from pharmaceutical companies whose drugs are listed in the Physicians' Desk Reference . And nothing in the record suggests that PDR Network is a charity that distributes free e-books without hope of financial gain. Although PDR Network does not charge healthcare providers money for its e-book, it's certainly plausible that the amount of money it receives turns on how many copies of the Physicians' Desk Reference it distributes. The free distribution of the e-book, then, may not impose a financial cost on healthcare providers, but PDR Network may nevertheless stand to profit when a provider accepts a free copy.
Moreover, giving away products in the hope of future financial gain is a commonplace marketing tactic. PDR Network purports to offer other services to healthcare providers, and it may offer the Physicians' Desk Reference for free in the hopes of establishing relationships with healthcare providers that will lead to future sales of other goods or services. All told, we think it entirely plausible that PDR Network distributes the free e-books to further its own economic interests.
Our musings aside, the FCC through its Congressional mandate to administer and implement the TCPA has declined to require
such a fact-based inquiry. PDR Network sent Carlton & Harris a fax that offered a free good, namely, the
Physicians' Desk Reference
e-book.
III.
To sum up, this case asks us to determine the meaning of the word "advertisement." In doing so, we do not start with a blank slate. Instead, we must follow the guideposts that Congress has set out. The Hobbs Act tells us where to look for an answer: the 2006 FCC Rule. And that rule, in turn, tells us what "advertisement" means.
The Hobbs Act requires a district court to follow FCC interpretations of the TCPA, and under the 2006 FCC Rule, PDR Network's fax offering a free good was indeed an advertisement. PDR Network may think the FCC Rule unwise or unfair, but the district court was "without jurisdiction to consider [its] wisdom and efficacy."
Mais
,
For these reasons, we vacate the district court's judgment and remand the case for further proceedings consistent with this opinion.
VACATED AND REMANDED
Contrary to our colleague's view, we are not here "attempt[ing] to divine the FCC's intent," post at ---- n.2, but simply paraphrasing the text of the FCC Rule.
Our dissenting colleague suggests that we have omitted something from our analysis of Boehringer . See po st at ---- n.1. But we cite the case only to note our agreement with Judge Leval's reading of the FCC Rule.
In his concurrence in
Boehringer
, Judge Leval addressed the concern that his interpretation of the rule would prevent "charitable, nonprofit entities" from sending offers for free goods or services.
See
The primary cases on which PDR Network relies involve informational faxes rather than offers of free goods or services.
See
Sandusky
,
Dissenting Opinion
Because I believe that (1) the district court did not exceed its jurisdiction under the Hobbs Act and (2) the 2006 FCC Rule requires a commercial aim, which is not present here, I respectfully dissent.
I.
Hobbs Act Jurisdiction
Carlton & Harris ("Appellant") argues that the district court exceeded its jurisdiction under the Hobbs Act. Appellant asserts that the Hobbs Act precludes any
Chevron
analysis and requires district courts to simply defer to-or adopt-FCC guidance.
See
Chevron, U.S., Inc. v. Nat. Res. Def. Council
,
A.
Under the Hobbs Act, the federal courts of appeals "ha[ve] exclusive jurisdiction to enjoin, set aside, suspend (in whole or in part), or to determine the validity of ... all final orders of the [FCC]."
The majority concludes that when a court decides that a statute is unambiguous at step one of the Chevron analysis and accordingly does not defer to the agency's construction at issue, it necessarily invalidates the agency's construction. Therefore, the majority's reasoning goes, in order to avoid violating the Hobbs Act by deciding the validity of FCC orders, which is the sole purview of the courts of appeal, district courts must simply defer to FCC guidance and cannot engage in any Chevron analysis at all. See an te at ---- ("We conclude ... that the Hobbs Act ... precluded the district court from even reaching the step-one question [of Chevron ].").
I take issue with the majority's conclusion that the failure of the district court to defer to an agency's construction at step one of the
Chevron
analysis invalidates the agency's construction. Invalidation occurs at step one of
Chevron
only if a court finds that that the agency's construction is in conflict with the unambiguous statutory language.
See, e.g.
,
William v. Gonzales
,
Here, there was no such finding. The district court concluded that the TCPA was unambiguous and therefore did not need to defer to the 2006 FCC Rule. But in reaching that conclusion, the district court did not "determine the validity of" the 2006 FCC Rule.
B.
The majority points to three cases in support of its jurisdictional analysis: (1)
Nack v. Walburg
,
In both
Nack
and
Leyse
, the issue presented was a facial challenge to an FCC regulation. In
Nack
, the defendant asserted an affirmative defense that the FCC regulation, as the basis of the plaintiff's action, was contrary to the unambiguous language of the TCPA.
See
In contrast, here there is no facial challenge to the 2006 FCC Rule. Appellant did not argue to the district court that the 2006 FCC Rule is contrary to the plain language of the TCPA. It also did not argue that the 2006 FCC Rule should be set aside due to procedural deficiencies. Appellant merely argued for a specific interpretation of the 2006 FCC Rule, and Appellee argued for a different interpretation.
Mais
is also distinguishable. In
Mais,
the district court refused to afford any deference to the FCC rule because the rule conflicted with the clear meaning of the TCPA.
See
Mais
,
The Eleventh Circuit held that "the district court exceeded its jurisdiction by declaring the ... FCC [r]uling to be inconsistent with the TCPA."
II.
Chevron Analysis
I now turn to whether an "unsolicited advertisement" under the TCPA must have a commercial aim. In doing so, I apply the familiar
Chevron
framework.
See
Chevron, U.S., Inc. v. Nat. Res. Def. Council
,
A.
At step one of the
Chevron
analysis, we must determine whether the TCPA's definition of "unsolicited advertisement" unambiguously requires faxes to have a commercial aim. Under the TCPA, a person may not "send, to a telephone facsimile machine, an unsolicited advertisement" unless certain notice requirements are met.
When interpreting statutory language, we begin by giving the words of the statute their plain meaning.
See
Gilbert v. Residential Funding LLC
,
The plain language of the statute suggests two competing interpretations: one that requires a commercial aim and one that does not. It follows that a commercial aim would not be required if one accepts the common usage of "advertise" and believes "commercial" is divorced from "quality." Under this interpretation, a fax that simply points out the quality of a good would qualify as an unsolicited advertisement. But, it also follows that a commercial objective would be required if one accepts the "promote sales or attendance" definition of "advertise" and believes "commercial"
modifies "quality." As a result, the TCPA is ambiguous.
B.
I thus move on to step two of the
Chevron
analysis. At step two, I conclude that the 2006 FCC Rule requires a commercial aim and is entitled to substantial deference because it is a "permissible" construction of the TCPA.
Chevron
,
The majority determines that a "natural and logical reading" of the 2006 FCC Rule creates a prophylactic rule that all faxes offering free goods and services are "unsolicited advertisements" under the TCPA. Ante at ----. But in my view, the 2006 FCC Rule makes clear that even faxes that purport to have no commercial aim on their face must nonetheless have a commercial aim in order to be an "advertisement" under the TCPA.
The 2006 FCC Rule states:
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" 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 facsimile 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." 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 [established business relationship].
Rules and Regulations Implementing the Tel. Consumer Prot. Act of 1991; Junk Fax Prevention Act of 2005,
As noted, in interpreting an agency's construction, we begin with the text.
In order to reach its conclusion, the majority reads the first sentence of the 2006 FCC Rule-"[F]acsimile messages that promote goods or services even at no cost ... are unsolicited advertisements under the TCPA's definition."-in isolation.
Specifically, the second sentence of the 2006 FCC Rule redefines the subject faxes as those promoting free offerings with a commercial aim. It states, "In many instances 'free' publications are often part of an overall marketing campaign to sell property, goods, or services."
This is a "permissible" construction.
Chevron
,
III.
Pleading Standard
Having determined that the 2006 FCC Rule requires a commercial aim, I now turn to the relevant pleading standard. Because the TCPA is a remedial statute, it "should be liberally construed and ... interpreted ... in a manner tending to discourage attempted evasions by wrongdoers."
Scarborough v. Atl. Coast Line R. Co.
,
Accordingly, the burden at the pleading stage is minimal. "[W]here it is alleged that a firm sent an unsolicited fax promoting a free [publication containing products or services] that relate[ ] to the firm's [business], there is a plausible conclusion that the fax had the commercial purpose of promoting those products or services."
Boehringer
,
Here, Appellant has not met even this minimal burden. Appellant merely states in its complaint: "Each of the [Appellees] benefit or profit from the sale of the ... [eBook]." J.A. 11 ¶ 12. This statement is contradicted by the fax itself, which demonstrates that the eBook is not offered for sale. See id. at 23 ("FREE 2014 Physicians' Desk Reference eBook-Reserve Now"). Appellant does not even hint that the contents of the eBook relate to Appellees'
business. Thus, Appellant has failed to state a claim.
IV.
For the foregoing reasons, I would affirm the district court, and I respectfully dissent.
The majority also uses
Physicians Healthsource, Inc. v. Boehringer Ingelheim Pharmaceuticals, Inc.
,
As a matter of background, the district court in
Boehringer
interpreted the 2006 FCC Rule to require a commercial aim.
See
Physicians Healthsource, Inc. v. Boehringer Ingelheim Pharms., Inc
., No. 3:14-cv-405,
On appeal to the Second Circuit, Physicians Healthsource argued in its opening brief that the district court violated the Hobbs Act because it "refused to apply the plain language of the [2006 FCC R]ule." Appellant's Br. at 22,
Physicians Healthsource, Inc. v. Boehringer Ingelheim Pharmaceuticals, Inc.
, No. 15-288 (2d Cir. Feb. 2, 2015; filed Mar. 27, 2015), ECF No. 27. The Second Circuit did not address this argument and instead addressed the merits, determining that the 2006 FCC Rule required a commercial aim.
See
Boehringer
,
I see no difference between the district court's decision in Boehringer and the district court's decision here. As in Boehringer , the district court here interpreted the 2006 FCC Rule in accordance with the TCPA to require a commercial aim.
The majority's interpretation of the 2006 FCC Rule goes beyond the plain meaning of the text. The majority attempts to divine the FCC's intent when it states: "Offers that are purportedly 'free' often have commercial strings attached .... For this reason, the FCC chose to interpret the term 'advertisement' broadly to include any offer of a free good or service." Ante at ----.
Reference
- Full Case Name
- CARLTON & HARRIS CHIROPRACTIC, INC., a West Virginia Corporation, Individually and as the Representative of a Class of Similarly-Situated Persons, Plaintiff-Appellant, v. PDR NETWORK, LLC; PDR Distribution, LLC; PDR Equity, LLC; John Does 1-10, Defendants-Appellees.
- Cited By
- 22 cases
- Status
- Published