Supreme Court to Further Examine Agency Authority in TCPA Case

On October 8, 2024, the Supreme Court granted certiorari in the case of McLaughlin Chiropractic Associates Inc. v. McKesson Corporation et al. to address whether the Hobbs Act requires district courts to accept the Federal Communication Commission’s legal interpretation of the Telephone Consumer Protection Act (TCPA).

What is the Hobbs Act?

Passed into law in 1950, the Administrative Orders Review Act, commonly known as the Hobbs Act, governs judicial review of certain federal agency orders, including those of the Federal Communications Commission (FCC). This means that district courts are generally precluded from reviewing the validity of such agency orders and must defer to the agency's interpretation unless the order is challenged directly in the court of appeals.

However, there is a split among federal courts on how to interpret the Hobbs Act’s implications for agency deference. Some courts, like the Ninth Circuit Court of Appeals, have held that the Hobbs Act’s exclusive jurisdiction provision prevents district courts from reconsidering an agency’s interpretation. The Fourth Circuit, in contrast, has determined that district courts should decide how much deference to give agency rulings

In 2019, the Supreme Court addressed the Hobbs Act in PDR Network v. Carlton & Harris Chiropractic but did not resolve the core question of whether district courts must follow agency interpretations. Specifically, four justices (Thomas, Alito, Gorsuch, and Kavanaugh) expressed the view that the Hobbs Act does not expressly preclude judicial review of an agency’s statutory interpretation in an enforcement action.

Hobbs Act vs. Chevron Deference

Chevron Deference is a principle derived from the Supreme Court case Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., which mandates that courts defer to an agency's interpretation of a statute it administers if the statute is ambiguous and the agency's interpretation is reasonable. This deference applies when Congress has delegated authority to the agency to make rules carrying the force of law, and the agency's interpretation is rendered in the exercise of that authority.

While Chevron Deference focuses on the reasonableness of an agency's interpretation of ambiguous statutes within its purview, the Hobbs Act channels jurisdiction for reviewing the validity of agency orders to the courts of appeals, thereby precluding district courts from such reviews. This jurisdictional channeling ensures that challenges to agency orders are consolidated and reviewed in a uniform manner by the appellate courts.

However, on June 28, 2024, a group of New Jersey herring fishermen landed a significant victory when the Supreme Court elected to overturn Chevron deference in the case of Loper Bright Enterprises v. Raimondo, stating that courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority.

The McLaughlin Case

In granting certiorari to hear the McLaughlin case, the Supreme Court stands to address the critical question that generated the circuit cour split referenced above; whether the Hobbs Act requires district courts to accept the FCC’s interpretation of a federal statute, namely the TCPA.

McLaughlin is a class action lawsuit Filed in 2013 in the Northern District of California, the dispute underlying the McLaughlin case began when the McKesson Corporation used an a traditional fax machine and an online faxing service to send unsolicited advertisements to class members, including McLaughlin Chiropractic, which the named plaintiff contends violated the TCPA.

The case was pending for six years, but after the class in the suit was certified, the FCC issued an order in a separate matter stating that the TCPA specifically excluded “online fax services” from its definition of a “telephone facsimile machine.” Under the FCC’s interpretation, an online fax service that receives faxes sent as email over the Internet does not qualify as “equipment which has the capacity to transcribe text or images (or both) from an electronic signal received over a regular telephone line onto paper," and therefore "falls outside the scope of the statutory prohibition."

The District Court determined that it was bound by the FCC’s interpretation, and, the class in McLaughlin was decertified, as it was impossible to identify which faxes had been sent by a traditional fax machine and which were sent by an online fax service. This decision was upheld by the Ninth Circuit, holding that the Hobbs Act precluded the district court from considering whether the FCC’s interpretation of the TCPA is wrong.

The plaintiff appealed, and the Supreme Court granted cert to resolve the circuit court split and rule on the extent to which the Hobbs Act requires courts to give deference to federal agency statutory interpretations.

The Potential Impact of McLaughlin

The outcome of McLaughlin could significantly impact TCPA-related litigation, particularly if the Court limits the FCC's authority under the Hobbs Act to interpret the TCPA's provisions.

Historically, the FCC has used the TCPA as a foundation to regulate emerging technologies, including those underlying today’s lead generation industry. A Supreme Court ruling that reduces deference to the FCC, especially in line with Loper-Bright, could lead to an uptick in court challenges to the enforceability of FCC rules. Such challenges might result in varying interpretations of key terms and rules across jurisdictions, complicating compliance for businesses that rely on these regulations.

It is important to note that the petitioner in McLaughlin did not claim a lack of prior opportunity to seek appellate review of the FCC’s order under the Hobbs Act. As a result, a Supreme Court decision in against Hobbs Act deference may have a narrower scope and a more limited practical impact than some anticipate.

Nevertheless, businesses should closely monitor ongoing legal developments and adjust practices in response to an evolving legal landscape.