Alert

SCOTUS Hears Arguments on Judicial Interpretation of Agency Authority Under the TCPA

January 28, 2025

On January 21, 2025, the Supreme Court heard oral arguments in McLaughlin Chiropractic Associates, Inc. v. McKesson Corporation, et al., a case and decision that may have an outsized impact on the nature of judicial review of federal agency legal interpretations. At issue before the Court was whether the Hobbs Act requires district courts to follow the Federal Communications Commission’s (FCC) interpretation that the Telephone Consumer Protection Act (TCPA) does not prohibit unsolicited advertisements via fax.

Background

The case stems from a 2013 class action filed in the Northern District of California, in which class representative McLaughlin alleged that McKesson sent unsolicited advertisements to class members.

In 2019, however, after the case had already been pending for six years, the FCC issued an order excluding “online fax services” from the definition of “telephone facsimile machine,” thereby essentially inoculating these types of claims from the TCPA.

In response to the FCC’s order, the Northern District of California decertified the class because the class could no longer identify what faxes were sent by an “online fax service” versus an “original fax machine.” Thus, actionable communications, and thereby the class itself, could not be identified. The Ninth Circuit affirmed the decertification.

The Supreme Court granted certiorari, ostensibly to resolve a circuit split as to whether FCC orders are binding on district courts.

At the time of this writing, the 2^nd, 3^rd, 4^th, and 8^th Circuits have held that FCC orders interpreting the TCPA are not binding on district courts. However, as shown above, the 9^th Circuit has taken an opposing view that district courts are bound by rules issued by the FCC, whether interpretive or final. The 7^th Circuit has gone further than all other jurisdictions, holding that district courts are not bound by FCC rules regardless of their status as an interpretive or final rule.

Oral Argument

At oral argument, McLaughlin argued that the 4^th Circuit, in particular, in the case Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, properly construed that the Hobbs Act does not require district courts to treat agency orders that interpret federal statutes as binding precedent. Instead, according to McLaughlin, it “operates just like other pre-enforcement channeling statutes by providing for direct review of agency orders in the courts of appeals.” McLaughlin contended that the Ninth Circuit’s interpretation would bind courts, including the Supreme Court itself, not only to final agency rules’ interpretations of federal statutes, but also to interpretive rules.

Conversely, McKesson, as well as the U.S. government, which filed an amicus brief in support, purport that under the Hobbs Act, the lower court could not impose liability on McKesson for engaging in conduct that the FCC stated in an interpretive rule did not violate the TCPA—particularly where a plaintiff concedes they had adequate opportunity for judicial review under the Hobbs Act.

According to McKesson, the issue is not about agency versus court but about when a party has the right and opportunity to challenge an agency’s interpretive rule. Moreover, if an agency order is unlawful, the proper avenue would be for a party to directly challenge the order via the Hobbs Act court, rather than in district court between two parties in dispute.

Potential Implications

The Ninth Circuit is the only federal circuit holding that district courts are bound by both agency interpretive and legislative rules. That would lead one to believe that SCOTUS will eventually rule in petitioners’ favor, but of course, one can only speculate at this time.

A ruling in favor of petitioners, nonetheless, will likely lead to an increase in TCPA litigation and more plaintiff’s-side cases alleging violations of the same, specifically with respect to automated dialing systems and other novel communication technologies. We will also likely see an abrupt increase in potential challenges to other FCC regulations, particularly those involving the TCPA and other consumer protection statutes.