In a landmark decision released on June 20, the U.S. Supreme Court ruled 6-3 that the Hobbs Act does not require federal district courts to treat Federal Communications Commission (FCC) orders as binding precedent in private litigation. The majority’s opinion in McLaughlin Chiropractic Associates, Inc. v. McKesson Corp. clarifies the scope of judicial review under the Hobbs Act. The case involved an FCC interpretation of the Telephone Consumer Protection Act (TCPA).
Factual and Procedural Background
This case was brought by a class of plaintiffs who allegedly received unsolicited advertisements sent via fax in violation of the TCPA. The plaintiffs claimed that they did not consent to receive the faxes, and in the alternative, even if there was consent or an established business relationship, they argued that the faxes were noncompliant with the TCPA because they lacked the required opt-out notice.
The district court granted summary judgment in favor of the plaintiffs on the consent claim, but the district court also decertified the plaintiff class and denied the plaintiffs treble damages. The defendant appealed the summary judgement decision, and the plaintiffs cross-appealed the class decertification and denial of treble damages rulings. The Ninth Circuit Court of Appeals took up both appeals and ultimately affirmed all the district court’s rulings. The plaintiffs appealed to the Supreme Court in May 2024 and specifically asked in their appeal for the court to resolve if the Hobbs Act requires a district court to accept the FCC’s interpretation of the TCPA.
FCC’s Interpretation of TCPA
The crux of this case stems from the FCC’s 2019 Amerifactors final order, in which the commission determined that the TCPA does not apply to faxes sent and received through an online fax service. The FCC reasoned that faxes sent through online fax services do not cause the harms the TCPA sought to address, such as rendering fax machines unavailable and using the recipient’s paper and ink without permission. Furthermore, the FCC determined online fax services do not fall within the TCPA’s definition of a “telephone facsimile machine.” Relying on the Amerifactors final order, the district court found, and the Ninth Circuit agreed, that the plaintiff class should be decertified on the grounds that the plaintiffs were unable to distinguish between class members who received faxes sent via traditional methods and those who received faxes via online services.
Majority Opinion
The Supreme Court was asked to determine if the Hobbs Act, which places exclusive pre-enforcement jurisdiction in federal courts of appeals to determine the validity of FCC orders, precludes a district court from varying from FCC interpretations in enforcement actions.
The court’s six conservative justices held the Hobbs Act does not preclude district courts from independently interpreting statutes like the TCPA. The majority found that if Congress intended to preclude FCC orders from judicial review, it must explicitly say so in the statute. District courts should give “appropriate deference” to FCC interpretations, but are not required to treat them as binding precedent. This ruling essentially allows district courts to exercise their own judgment in interpreting rulings issued by agencies subject to the Hobbs Act.
Dissent
The court’s three liberal justices dissented, arguing that the Hobbs Act is clear that parties who did not challenge a rule in the pre-enforcement period cannot contest the agency’s statutory interpretation in district court. The dissent notes that the court’s decision effectively allows a regulated party to “violate an agency’s rule, wait for the agency to discover the offense and bring an enforcement action, and only then challenge the rule as going beyond statutory authority.”
Implications and Next Steps
This decision follows a similar pattern of diminishing agency authority, including last term’s landmark decision in Loper-Bright Enterprises v. Raimondo, which overturned longstanding precedent that courts must defer to agency interpretations of ambiguous law. The TCPA in particular is subject to substantial class action litigation. To mitigate litigation threats, companies expend significant resources in developing compliance programs that are largely predicated on FCC rulings and interpretations. The Supreme Court’s decision, however, undermines reliance on FCC rulings on the scope and meaning of the TCPA that are now potentially subject to multiple interpretations. As but one example, the FCC has recently issued rulings regarding the central issue of consent to receive calls and the ability of consumers to revoke previously granted consent. On the other hand, the ruling could arguably provide some protection to businesses from future FCC orders that align with consumer advocacy group arguments to limit opportunities to communicate.
The court’s ruling also sets up an interesting interplay with Loper, which requires an assessment of the “best reading” of a statute. Should a court, particularly an appellate court, determine that its interpretation constitutes the best reading of a statute, may other courts develop different best readings? The Supreme Court noted it routinely is called upon to settle differing interpretations by appellate courts.
Additionally, there are several federal agencies that are covered by the Hobbs Act’s requirements for review of final agency orders. In addition to final orders by the FCC, certain final orders issued by the Department of Housing and Urban Development (HUD), Department of Agriculture, Department of Transportation, the Federal Maritime Commission, the Atomic Energy Commission and the Surface Transportation Board could face new challenges. See 28 U.S.C. 2342. Challenges could apply to both civil cases and government enforcement actions.
