Following in the wake of last years’ Loper Bright and Relentless, Inc. decisions that ended agency deference, the Supreme Court ruled on Friday in McLaughlin Chiropractic Assoc., Inc. v. McKesson Corp. that the Hobbs Act likewise does not bind district courts to an agency’s order regarding the meaning of a statute.
This decision, like Loper Bright and Relentless, Inc. before it, will most likely provide district courts with additional grounds to review orders promulgated by certain federal agencies, like the FCC, under a de novo standard of review.
What is the Hobbs Act?
In 1950, President Truman signed the Administrative Orders Review Act, aka the Hobbs Act. The Hobbs Act provides for pre-enforcement judicial review of orders promulgated by the FCC (along with a number of other federal agencies). But to obtain pre-enforcement judicial review, a party must file a petition in a federal appeals court within 60 days of the challenged FCC order. Unless timely and successfully challenged under the Hobbs Act’s pre-enforcement review process, long-standing precedent established that, in an enforcement proceeding, district courts had to follow the FCC’s (or other agencies’) statutory interpretations.
As the majority in McLaughlin noted, this rule makes some sense because “[t]hat pre-enforcement review process avoids the delays and uncertainty that otherwise could ensue from multiple pre-enforcement suits filed across time in multiple district courts and from subsequent appeals in the courts of appeals.”
But what about a situation where a party does not timely seek pre-enforcement review? Are they still bound by an FCC decision and does a district court have absolutely no leeway to disagree with the FCC order? Enter McLaughlin.
What Happened in McLaughlin?
McLaughlin involves an FCC order that interprets a provision of the Telephone Consumer Protection Act of 1991 (TCPA). The TCPA’s intended purpose is to protect businesses and consumers from intrusive telemarketing communications, including sending an unsolicited advertisement by fax to a “telephone facsimile machine.” What constitutes a “telephone facsimile machine” has been litigated and debated over the years. Regardless, the TCPA provides for a private right of action and also provides for significant statutory penalties per violation of the statute. This has led to significant class action litigation for violation of the TCPA.
In 2009 and 2010, the respondent sent unsolicited fax advertisements to medical practices throughout the country. One of those practices that received the unsolicited fax was the petitioner and it ultimately sued the respondent in district court in California on a class-wide basis, alleging that it violated the TCPA. Ultimately, the district court certified a class of fax recipients, not distinguishing between individuals and business that received a fax on a traditional fax machine or through online services.
While that lawsuit was pending, another company with no connection to the lawsuit petitioned the FCC for a declaration about whether the TCPA applies to faxes received through an online fax service. Post-class certification in McLaughlin, the FCC issued an order (known as the Amerifactors order) interpreting the term “telephone facsimile machine” to not include an online fax service.
As the parties conceded, if FCC orders are in fact binding on a district court under the Hobbs Act, that would undermine the class certification in McLaughlin. And that is exactly how the McLaughlin district court treated the Amerifactors order. It granted summary judgment to the respondent on the claims related to online fax services and then decertified the class. That left the petitioner with exactly 12 unsolicited faxes on a traditional fax machine, or approximately $6,000 in statutory damages.
What did the Court Decide?
The petitioner sought certiorari and, for the second time in five years, the Supreme Court agreed to take up the question of whether the Hobbs Act required a district court to follow the FCC’s interpretation of the TCPA.
According to Justice Kavanaugh, who wrote the majority opinion, the:
“critical [] question is whether the Hobbs Act bars different parties in subsequent enforcement proceedings from arguing—and district courts from concluding—that the agency incorrectly interpreted the statute.”
According to the majority, the answer to that question is an unequivocal no.
Justice Kavanaugh first focused on three categories of statutes that authorize pre-enforcement review:
- those that expressly preclude judicial review,
- those that expressly authorize judicial review,
- and those that fall in between, noting that the Hobbs Act is one such statute.
Because statutes like the Hobbs Act are silent on judicial review, the majority fell back on fundamental principles of administrative law to find that: “[i]n an enforcement proceeding, a district court must independently determine for itself whether the agency’s interpretation of a statute is correct.”
As Justice Kavanaugh further noted, the default rule is just that – only a default – and Congress can certainly preclude judicial review in enforcement proceedings should it otherwise choose to do so.
The Dissent Says…
According to the dissent, not only does the majority’s opinion ignore the plain meaning of the Hobbs Act, but it also
“prevents the Hobbs Act from functioning as Congress wanted—by allowing regulated parties to end-run the Act’s pre-enforcement judicial review scheme, and thereby undermine the stability and efficacy of administrative programs.”
What Does it Mean?
McLaughlin follows last term’s Loper Bright and Relentless, Inc. decisions, and is another blow to the administrative state and agency deference. No longer is a district court beholden to an FCC order that was not timely challenged under the Hobbs Act. Rather, and in accordance with Loper Bright and Relentless, Inc., district courts have the authority to determine what an ambiguity in a statute might mean, even if that interpretation contradicts an agency’s interpretation or order. And while some district courts will most likely continue to consider an agency’s interpretation in deciding what a statutory ambiguity means, the upshot of McLaughlin is that under the Hobbs Act, the FCC will no longer have the last word on interpreting a statute at the district court level.
