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D.C. Circuit upholds majority of FCC order overturning net neutrality rules
On October 1, the U.S. Court of Appeals for the D.C. Circuit issued a decision, which mostly ratifies the FCC’s 2017 reversal of the net neutrality rules barring internet service providers (ISPs) from slowing down or speeding up web traffic based on business relationships. (See previous InfoBytes coverage here.) Notably, however, the decision vacates a portion of the FCC’s 2018 Restoring Internet Freedom Order (Order), which preempted states from issuing their own net neutrality rules on requirements that the FCC “‘repealed or decided to refrain from imposing’ in the Order or that [are] ‘more stringent’ than the Order.”
The D.C. Circuit held that the FCC’s decision to reclassify broadband internet access as a Title I service under the Telecommunications Act—allowing for a “light-touch” regulatory framework for ISPs instead of the more heavily regulated Title II—deserves Chevron deference. The appellate court also noted that while “[p]etitioners dispute that the transparency rule, market forces, or existing antitrust and consumer protection laws can adequately protect internet openness. . . . [we] are ultimately unpersuaded.”
The D.C. Circuit also concluded that the FCC failed to adequately address how the reversal of the net neutrality rules could affect public safety issues, holding that the FCC must address this issue. The appellate court stressed that “[u]nlike most harms to edge providers incurred because of discriminatory practices by broadband providers, the harms from blocking and throttling during a public safety emergency are irreparable.” Additionally, the appellate court instructed the FCC to revisit its analysis on how the reversal will affect the regulation of pole attachments as well as low-income households that receive the internet through an FCC subsidy program. Furthermore, while the appellate court concluded that the FCC overreached its authority in prohibiting states from passing their own net neutrality rules, Judge Williams—who concurred in part and dissented in parted—reasoned that the internet cannot be divided into state markets, and that state actions “would frustrate an agency’s authorized policy.”
D.C. Circuit: Maintaining a U.S. correspondent account can subject a foreign bank's records located abroad to USA PATRIOT Act subpoenas; Chinese banks subject to subpoenas in case claiming sanctions evasion
On August 6, the U.S. Court of Appeals for the D.C. Circuit affirmed a district court ruling that ordered three Chinese banks to comply with subpoenas seeking customer records stemming from a DOJ investigation into a now-defunct Chinese company’s evasion of North Korean sanctions, or face contempt fines each of $50,000 per day. According to the DOJ, the banks allegedly facilitated transactions for the Chinese company that may have operated as a front for the North Korean government in violation of U.S. sanctions. In 2017, the DOJ obtained grand jury subpoenas seeking records related to U.S. correspondent banking transactions of the defunct company from two of the banks with U.S. branches, and served the third bank, which did not have U.S. branches, with a Patriot Act subpoena. After the banks refused to comply with the subpoenas, the district court granted the DOJ’s motion to compel.
On appeal, the D.C. Circuit concluded that the district court had personal jurisdiction to enforce the subpoenas. The appellate court held that the two banks with U.S. branches consented to jurisdiction when they opened those branches because they had executed agreements with the Federal Reserve which required compliance with relevant provisions of federal law. For the bank without U.S. branches, the D.C. Circuit determined that “it had sufficient contact with the [U.S.] as a whole and the subpoena[] sufficiently related to that contact so as to support the court’s personal jurisdiction.” The court also held that the foreign records sought from the bank without U.S. branches were within the scope of the PATRIOT Act subpoena, noting that the PATRIOT Act authorized the DOJ to issue a “subpoena to any foreign bank that maintains a correspondent account in the [U.S.] and request records related to such correspondent account, including records maintained outside of the [U.S.] relating to the deposit of funds into the foreign bank.” The appellate court also affirmed the district court’s decision to hold the banks in contempt, dismissing the banks’ argument that this move was improper because they had done all they could to obtain approval from the Chinese government to produce the subpoenaed records.
D.C. Circuit: Receipt containing complete credit card information constitutes concrete injury
On July 2, the U.S. Court of Appeals for the D.C. Circuit reversed a district court’s ruling that a consumer lacked Article III standing to allege a violation of the Fair and Accurate Credit Transaction Act (FACTA) when a merchant included all 16 digits of her credit card account number, her full name, and the expiration date on a receipt, because the receipt was not thrown away. Under FACTA, merchants are prohibited from including on a receipt (i) more than the last five digits of a consumer’s credit card number; and (ii) a credit card’s expiration date. The consumer alleged that the merchant violated the restriction, but the district court ruled that the consumer lacked standing to sue because she failed to describe a concrete risk of “actual or imminent” injury to a protected interest as defined in the U.S. Supreme Court’s decision in Spokeo, Inc. v. Robins. According to the district court, because the consumer did not dispose of the receipt, and was the only person who ever saw the receipt, her risk of identity theft had not increased. Moreover, the district court stated that the burden of protecting the non-compliant receipt did not constitute a concrete injury.
On appeal, the D.C. Circuit reversed, holding that printing a receipt containing all 16 digits of a consumer’s credit card number is an “egregious” enough violation of FACTA to confer standing. According to the panel, the harm inflicted on the consumer by the merchant’s mishandling of her receipt had a “close relationship” to the type of harm that gives rise to a “breach of confidence” claim. Moreover, the panel stated that it was irrelevant that the consumer had been able to protect herself by safeguarding the receipt because: (i) FACTA protects an interest in avoiding an increased risk of identity theft, which the panel considered to be sufficiently concrete; and (ii) under the facts presented, the violation of the truncation requirement created a “risk of real harm” to such concrete interest. The D.C. Circuit remanded the case for further proceedings consistent with its findings. Notwithstanding, the panel was clear that not every violation of FACTA’s truncation requirement creates a risk of identity theft.
Notably, while the D.C. Circuit’s decision is in agreement with an 11th Circuit opinion issued in April (prior InfoBytes coverage here), it conflicts with other appellate decisions, including an opinion issued by the 3rd Circuit in March (covered by InfoBytes here), wherein the 3rd Circuit held that, without concrete evidence of harm, a consumer lacks standing under FACTA to sue a merchant for including too many digits of a credit card account number on a receipt. The D.C. Circuit noted, however, that the 3rd Circuit “recognized its analysis would be different if it were presented with the facts [the consumer] presents to us.”
9th Circuit denies petition for en banc rehearing of TCPA action against gym
On October 30, the U.S. Court of Appeals for the 9th Circuit denied a California gym’s petition for a rehearing en banc of the court’s September decision reviving a TCPA putative class action. As previously covered by InfoBytes, the appeals court vacated a district court order granting summary judgment in favor of the gym, concluding that there was a genuine issue of material fact as to whether the text system used by the gym—which stores numbers and dials them automatically to send the messages—qualified as an “autodialer” under the TCPA. Notably, in vacating the summary judgment order, the 9th Circuit performed its own review of the statutory definition of an autodialer in the TCPA, because the recent D.C. Circuit opinion in ACA International v. FCC (covered by a Buckley Sandler Special Alert) set aside the FCC’s definition. Through this review, the appeals court concluded that the TCPA defined an autodialer broadly as “equipment which has the capacity—(i) to store numbers to be called, or (ii) to produce numbers to be called, using a random or sequential number generator—and to dial such numbers automatically (even if the system must be turned on or triggered by a person).”
9th Circuit ruling broadens the definition of automatic telephone dialing system under TCPA
On September 20, the U.S. Court of Appeals for the 9th Circuit vacated the district court’s order granting summary judgment in a TCPA action, in light of the recent D.C. Circuit opinion in ACA International v. FCC (covered by a Buckley Sandler Special Alert). The case arises from a plaintiff’s allegations that a California gym violated the TCPA by sending three text messages to the plaintiff’s cell phone. In October 2014, the district court granted summary judgment for the gym, holding that the automatic text messaging system used by the gym was not an “automatic telephone dialing system” (autodialer) under the TCPA because it lacked the capacity “to store or produce telephone numbers to be called, using a random or sequential number generator.” In 2016, the 9th Circuit stayed the appeal of the district court’s ruling pending the ACA International decision, which was issued in March of this year. In ACA International, the D.C. Circuit struck down the FCC’s definition of an autodialer, reasoning that the FCC’s definition “unreasonably, and impermissibly” included all smartphones while inadequately describing the functions that made a device an autodialer.
Because the ACA International decision set aside the FCC’s definition, the 9th Circuit performed its own review of the statutory definition of an autodialer in the TCPA. Through this review, the court concluded that the TCPA defined an autodialer as “equipment which has the capacity—(i) to store numbers to be called, or (ii) to produce numbers to be called, using a random or sequential number generator—and to dial such numbers automatically (even if the system must be turned on or triggered by a person).” Because the text system used by the gym stores numbers and dials them automatically to send the messages to the stored list of phone numbers, the 9th Circuit held there is a genuine issue of material fact as to whether the system qualified as an “autodialer” and remanded the case to district court for further proceedings.
D.C. Circuit remands SEC case to be heard by new ALJ
On September 19, the U.S. Court of Appeals for the D.C. Circuit remanded an SEC case against an investment adviser and his company for a new hearing before another Administrative Law Judge (ALJ) or before the Commission in accordance with the U.S. Supreme Court decision in Lucia v. SEC. As previously covered by InfoBytes, in June, the Supreme Court held that SEC ALJs are “inferior officers” subject to the Appointments Clause of the Constitution. After the decision in Lucia, the SEC moved to remand the case for a new hearing. In response, the investment adviser moved to have the SEC’s previous orders, including those imposing penalties, set aside in whole, arguing that remand is not authorized in this circumstance; citing to Lucia, the investment adviser argued the penalties resulted from an unconstitutional hearing and the language concerning remand for a new hearing in Lucia was dicta and carried no weight. The D.C. Circuit rejected this argument and denied the motion to set aside in part, citing D.C. Circuit precedent in stating “carefully considered language of the Supreme Court, even if technically dictum, generally must be treated as authoritative.”
CFPB Succession: Leandra English steps down, seeks to dismiss appeal; Mulvaney selects close advisor to be new deputy
On July 9, Leandra English filed a motion for voluntary dismissal with the U.S. Court of Appeals for the D.C. Circuit, effectively ending her eight-month legal battle over the appointment of Mick Mulvaney as acting director of the CFPB. The motion follows an announcement released via Twitter on July 6 that English will be stepping down from her position as deputy director of the Bureau “in light of the recent nomination of a new Director.” (As previously covered by InfoBytes, President Trump nominated Kathy Kraninger, currently serving as the associate director for general government at the Office of Management and Budget (OMB), to be the director of the Bureau for a five-year term.) In April, the D.C. Circuit heard oral arguments in English’s litigation. Unlike previous arguments, which focused on the president’s authority to appoint Mulvaney under the Federal Vacancies Reform Act (FVRA), the court spent considerable time discussing Mulvaney’s concurrent role as head of the OMB, and whether that dual role is inconsistent with the Bureau’s independent structure as established by the Dodd-Frank Act. A decision was pending at the time English submitted her dismissal of the case.
Following English’s resignation, Mulvaney announced the selection of Brian Johnson as the Bureau’s acting deputy director. Johnson was Mulvaney’s first advisor hire at the Bureau, and he currently serves as a principal policy director. Prior to joining the Bureau, Johnson was a senior counsel at the House Financial Services Committee.
D.C. Circuit rejects challenge to FTC’s 2016 staff letter on soundboard technology
On April 27, the U.S. Court of Appeals for the D.C. Circuit dismissed a challenge to a November 2016 FTC staff letter, which announced the FTC would treat calls using soundboard technology as robocalls. According to the D.C. Circuit opinion, the FTC’s 2016 staff letter rescinded a 2009 staff letter, which reached the conclusion that soundboard technology was not subject to robocall regulation. The Soundboard Association filed suit, seeking to enjoin the rescission of the 2009 letter, arguing that the 2016 staff letter violated the Administrative Procedures Act (APA) by issuing a legislative rule without notice and comment and that it unconstitutionally restricted speech in violation of the First Amendment. The lower court granted summary judgment for the FTC holding that the 2016 letter did not violate the First Amendment and that the letter was an interpretive rule and therefore not subject to the notice and comment requirements of the APA. Upon appeal, the D.C. Circuit vacated the lower court’s decision and dismissed the action in its entirety, holding that the 2016 letter was not a “final agency action” and therefore, the plaintiffs failed to state a cause of action under the APA.
FCC seeks comments on interpretation of autodialer under TCPA
On May 14, the FCC’s Consumer and Governmental Affairs Bureau released a notice seeking comment on the interpretation of the Telephone Consumer Protection Act (TCPA) in light of the recent D.C. Circuit decision in ACA International v. FCC. (Covered by a Buckley Sandler Special Alert.) The notice requests, among other things, comment on what constitutes an “automatic telephone dialing system” (autodialer) due to the court setting aside the FCC’s 2015 interpretation of an autodialer as “unreasonably expansive.” Specifically, the FCC requests comment on how to interpret the term “capacity” under the TCPA’s definition of an autodialer (“equipment which has the capacity—(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers”) and requests comment on the functions a device must be able to perform to qualify as an autodialer, including how “automatic” the dialing mechanism must be. Additionally, the notice seeks comment on (i) how to treat reassigned wireless numbers under the TCPA; (ii) how a party may revoke prior express consent to receive robocalls; and (iii) three pending petitions for reconsideration, including the 2016 Broadnet Declaratory Ruling and the 2016 Federal Debt Collection Rules. Comments are due by June 13 and reply comments are due by June 28.
On May 3, the U.S. Chamber of Commerce, the American Bankers Association, and over a dozen more trade associations petitioned the FCC seeking a declaratory ruling on the definition of an autodialer under the TCPA, previously covered by InfoBytes here.
PHH will not challenge CFPB’s constitutionality with Supreme Court
PHH will not seek to appeal the January 31 decision by the U.S. Court of Appeals for the D.C. Circuit, which upheld the CFPB’s constitutionality in a 7-3 decision. (Covered by a Buckley Sandler Special Alert.) The Supreme Court requires petitions for writ of certiorari to be filed within 90 days of the decision, which would have put PHH’s deadline around May 1. According to reports, a PHH spokesperson confirmed the company did not file the petition but declined to provide further comment.
As previously covered by InfoBytes, the U.S. Court of Appeals for the 5th Circuit recently agreed to hear a similar challenge to the constitutionality of the CFPB’s single-director structure by two Mississippi-based payday loan and check cashing companies.