Case Information
*1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA _________________________________________
)
SOUNDBOARD ASSOCIATION, )
)
Plaintiff, )
) v. ) Case No. 17-cv-00150 (APM)
)
U.S. FEDERAL TRADE COMMISSION, )
)
Defendant. )
_________________________________________ )
MEMORANDUM OPINION
Almоst every American who owns a telephone has experienced it: The phone rings, you pick up, there is a distinct pause, and then an automated voice begins to make you an unsolicited sales offer. Such calls, popularly known as “robocalls,” are subject to heavy federal regulation. Generally speaking, a telemarketer cannot direct a robocall to a person unless that person first consents in writing to receipt of the call. Thus, while federal regulations do not absolutely bar robocalls, the written-consent requirement, along with other restrictions—collectively, “the robocall regulation”—render marketing via robocall prohibitively expensive.
But not all automated voices are created the same. The traditional robocall consists of a one-way telemarketing message that involves no live sales agent or other human interaction. “Soundboard” technology—the subject of this case—is different. It involves two-way communication between sаles agent and consumer, in which the sales agent plays pre-recorded audio clips in response to the consumer’s statements. Soundboard technology also allows the sales agent to break into the call and speak directly to the consumer, if needed. Say, for instance, a consumer asks for additional information about how to buy a product. A sales agent using *2 soundboard technology first attempts to answer that inquiry by playing a pre-recorded audio file. If the pre-recorded response is unsatisfactory, then the sales agent can intervene and give the consumer a direct response. So, like a traditional robocall, soundboard technology uses automated, pre-recorded messages to convey information. But, it differs markedly from the traditional robocall in that a human being is on the other end of the line, who is sometimes revealed to the consumer and sometimes not.
Until recently, the robocall regulation did not apply to calls using soundboard technology. In Seрtember 2009, the staff of Defendant Federal Trade Commission (“FTC”) issued an “informal” opinion letter, concluding that, because calls using soundboard technology enable the caller and recipient to have a two-way conversation, such calls are not subject to the robocall regulation. Seven years later, the agency changed course. Citing “widespread use of soundboard technology in a manner that does not represent a normal, continuous, two-way conversation between the call recipient and a live person,” the FTC staff issued a second opinion letter in November 2016—which the court will refer to as the “November 2016 Letter”—that reversed its earlier position. The staff’s view now was that telemarketing calls using soundboard technology are subject to the general prohibition placed on traditional robocalls. The FTC staff gave the telemarketing industry until May 12, 2017, “to make any necessary changes to bring themselves into compliance.”
Plaintiff Soundboard Association is a trade group representing companies that manufacture and use soundboard technology. It asserts that the November 2016 Letter is unlawful for two reasons. First, Plaintiff asserts that the November 2016 Letter is a “legislative rule” that the FTC failed to promulgate through notice and comment, as required under the Administrative Procedure Act (“APA”). Second, it contends that the November 2016 Letter is an unconstitutional restriction *3 on speech because the robocall regulation’s written-consent requirement does not apply to pre- recorded solicitation calls between a non-profit charitable organization and its existing donors, but it does apply to such calls with potential first-time contributors. According to Plaintiff, that distinction renders the robocall regulation a content-based regulation of speech that cannot be justified under strict scrutiny.
The court rejects both claims. First, the court finds that, although the FTC’s November 2016 Letter is a final, reviewable agency action, the Letter is not a legislative rule, but is, at most, an interpretive rulе that the FTC was not required to issue through notice and comment under the APA. Second, the court concludes that the November 2016 Letter does no more than subject soundboard calls to valid time, place, and manner restrictions. The exemption provided to pre- recorded calls on behalf of charitable organizations to existing donors, but not to charitable organizations’ calls to potential, first-time donors, is a content-neutral regulation of speech that easily satisfies the requisite intermediate scrutiny. Accordingly, the court denies Plaintiff’s Motion for Summary Judgment and grants Defendant’s Motion for Summary Judgment.
I. BACKGROUND
A. Factual Background
1. The “Robocall” Regulation In 1994, Congress enacted the Telemarketing and Consumer Fraud and Abuse Prevention Act to protect consumers from deceptive and abusive telemarketing practices. See Telemarketing and Consumer Fraud and Abuse Prevention Act, Pub. L. No. 103-297 § 2, 108 Stat. 1545 (1994). The Act charges the U.S. Federal Trade Commission (“FTC”) with prescribing rules regulating the telemarketing industry. 15 U.S.C. § 6102(a)(1). Pursuant to that authority, in 1995, the FTC promulgated the Telemarketing Sales Rule (“TSR”). Telemarkеting Sales Rule, 60 Fed. Reg. *4 43,842 (Aug. 23, 1995), codified at 16 C.F.R. pt. 310. The TSR prohibits telemarketing calls at certain times of day, allows consumers to request placement on a “do-not-call” list, and imposes other requirements on telemarketers. See id. § 310.4(b)(ii), (c).
In 2008, the FTC amended the TSR to include new regulations on robocalls. See Telemarketing Sales Rule, Final Rule Amendments, 73 Fed. Reg. 51,164, 51,184 (Aug. 29, 2008). The amendments barred telemarketers from “[i]nitiating any outbound telephone call that delivers a prerecorded message” without first obtaining “an express agreement, in writing” from the consumer. 16 C.F.R. § 310.4(b)(1)(v). The written “express agreement” must include certain elements, such as language demonstrating the consumer’s willingness to receive the robocalls, the consumer’s telephone number, and the consumer’s signature. Id . § 310.4(b)(1)(v)(A)(i)–(iv). The 2008 TSR Amendments further provide that, even when a telemarketer has an express agreement in hand, the telemarketer’s robocall must adhere to strict caller disclosure and consumer opt-out notice requirements. § 310.4(b)(1)(v)(B). This opinion refers to these restrictions collectively as “the robocall regulation.”
The written consent requirement does not apply to pre-recorded calls made on behalf of
charitable organizations to past donors or current members. Instead, the robocall regulation
specifically provides that charitable organizations may place robocalls “to induce a charitable
contribution from a member of, or previous donor to,” the organization without obtaining an
express written agreement from the member or donor.
Id
. In carving out this exception, the FTC
explained that it sought to balance the interest of non-profit organizations in seeking donations via
telephone with the privacy rights of consumers. It reasoned that prior donors had a reduced privacy
interest because, by donating to the organization previously, they are deemed to have consented to
receiving future charitable solicitation calls.
2. The FTC Applies the Robocall Regulation to Soundboard Technology As noted, the traditional robocall is a one-way, pre-recorded communication that does not involve any human interaction. Soundboard technology, on the other hand, allows for a two-way conversation between the caller and recipient. After initiating a soundboard call, a live sales agent uses pre-recorded audio clips to respond to the recipient’s statements and can, if necessary, opt to engage in a live conversation with the consumer. Thus, like a robocall, soundboard technology uses pre-recorded messages to market a good or service, but ultimately differs from a robocall because it depends on a live sales agent.
This technological distinction prompted questions within the telemarketing industry as to
whether soundboard calls would be subject to the robocall regulation. Before the new regulations
went into effect in September 2009,
see
On September 11, 2009, the FTC responded with an “informal staff opinion” signed by Lois Greisman, the FTC’s Associate Director of the Division of Marketing Practices (“September 2009 Letter”). Compl., ECF No. 1 [hereinafter Compl.], Ex. 2, ECF No. 1-3 [hereinafter Sept. 2009 Letter]. The September 2009 Letter stated that “the staff of the [FTC] has concluded that the 2008 TSR Amendments . . . do not prohibit telemarketing calls using this technology.” Id . Greisman explained that the robocall regulation “prohibit[s] calls that deliver a prerecorded message and do not allow interaction with call recipients . . . . Unlike the technology that you describe, the delivery of prerecorded messages in such calls does not involve a live agent who *6 controls the content and continuity of what is said to respond to concerns, questions, comments— or demands—of the call recipient.” Id. Quite naturally, the September 2009 Letter led telemarketers to believe that soundboard calls, unlike traditional robocalls, did not have to conform to the written-consent component of the robocall regulation. See Notice of Filing of Pl.’s Corrected Appl. for Prelim. Inj., ECF No. 4, Mem. in Supp., ECF No. 4-2 [hereinafter Pl.’s Mot.], Ex. 1, ECF No. 4-3 [hereinafter Coombs Decl.], ¶ 18 (stating that it has been “widely understood” since the September 2009 Letter that soundboard calls did not fall under the robocall regulation, and “SBA member companies relied on that assurance as we developed and grew our businesses”); Pl.’s Mot., Ex. 2, ECF No. 4-4, ¶ 6; Pl.’s Mot., Ex. 3, ECF No. 4-5, ¶ 4; Compl., Ex. 7 (PACE Soundboard Technology White Paper), ECF No. 1-8, at 7 (stating that relying on the September 2009 Letter, “the contact center industry has continued using and investing in Soundboard” and subjecting it now to the robocall regulation will “detrimentally impact[]” the soundboard industry).
The September 2009 Letter remained the FTC’s position on soundboard technology for more than seven years. Then the FTC changed its mind. According to the FTC, sometime after September 2009, it began seeing an increased number of consumer complaints, as well as press articles, about the improper use of soundboard technology. Specifically, they received complaints that consumers were not receiving appropriate responses to their questions and comments and that live operators were not intervening in calls. Def.’s Opp’n, Ex. 1, ECF No. 11-1 [hereinafter Bandy Decl.], ¶ 5. Additionally, the FTC staff received evidence that sales agents using soundboard technology were handling more than one call at a time, which made the practice more like placing robocalls and therefore undercut the FTC staff’s rationale behind the September 2009 Letter. Id. ; Compl., Ex. 1, ECF No. 1-2 [hereinafter Nov. 2016 Letter], at 2–3.
These concerns about the technology’s use prompted the FTC staff to reach out to telemarketing trade groups to hear the industry’s perspective. Id. ¶ 6. In the early part of 2016, the FTC staff had at least two meetings with the trade groups, during which industry rеpresentatives shared information about the use and operation of soundboard technology. Id. ¶¶ 7–9. The FTC staff also collected data about soundboard technology’s use. Id. ¶¶ 5, 10.
On November 10, 2016, the FTC staff announced that it now considered soundboard calls subject to the robocall regulation. Nov. 2016 Letter at 2. The November 2016 Letter explained that the FTC had changed its position on the applicability of the TSR to soundboard technology:
Given the actual language used in the TSR, the increasing volume of consumer complaints, and all the abuses we have seen since we issued the September 2009 letter, we have decided to revoke the September 2009 letter. It is now staff’s opinion that outbound telemarketing calls that utilize soundboard technology are subject to the TSR’s prerecorded call provisions because such calls do, in fact, “deliver a prerecorded message” as set forth in the plain language of the rule.
Id. at 3. The FTC staff added that the evidence it had gathered showing the misuse оf soundboard technology was “inconsistent with the principles we laid out in our September 2009 letter as well as our understanding of the technology at the time we issued the letter.” Id. at 2.
The FTC staff gave the telemarketing industry time to adjust to its new position. It announced that, “[i]n order to give industry sufficient time to make any necessary changes to bring themselves into compliance,” the September 2009 Letter’s revocation would become effective in six months, on May 12, 2017. at 4. The November 2016 Letter closed by stating that “the views expressed in this letter are those of the FTC staff” and “have not been approved or adopted by” and “are not binding upon” the Commission. Id. “However, they do reflect the views of staff members charged with enforcement of the TSR.” Id.
B. Procedural Background
The Soundboard Association (“SBA”) filed suit in this court on January 23, 2017, advancing claims under the Administrative Procedure Act (“APA”), the First Amendment, and the Declaratory Judgment Act that the November 2016 Letter does not reflect lawful agency action. Compl. ¶¶ 1, 79. Those claims are predicated on two theories. First, Plaintiff contends that the November 2016 Letter is a legislative rule that the FTC was required to promulgate through notice and comment, which it did not do. Id. ¶¶ 65–66. Second, Plaintiff claims that the November 2016 Letter unlawfully subjects telemarketers using soundboard technology to regulations that “treat[] speech tailored for first-time donors differently than speech tailored for previous donors,” id. ¶ 74, and that such a content-based regulation does not survive strict scrutiny under the First Amendment. Id. ¶¶ 70–79. Plaintiff also seeks a declaration that the FTC violated the APA in issuing the November 2016 Letter. at ¶ 83.
Plaintiff simultaneously filed a Motion for Preliminary Injunction with its Complaint,
asking the court to enjoin enforcement of the May 12, 2017, compliance deadline until the court
ruled on the merits.
See
Pl.’s Mot. at 1. The parties agreed to consolidate the hearing on the
preliminary injunction motion with the “trial” on the merits, pursuant to Rule 65(a)(2) of the
Federal Rules of Civil Procedure. Order, ECF No. 16, at 1; Fed. R. Civ. P. 65(a)(2);
Morris v.
District of Columbia
,
II. LEGAL STANDARD
Ordinarily, cross-motions fоr summary judgment are reviewed under the standard set forth
in Rule 56 of the Federal Rules of Civil Procedure. Under Rule 56, a court may grant summary
judgment when a party demonstrates that there is no genuine issue of material fact and shows it is
*9
entitled to judgment as a matter of law. However, in cases such as this one that involve review of
agency action under the APA, the Rule 56 standard does not apply.
See Stuttering Found. of Am.
v. Springer
,
III. DISCUSSION
A. Whether the November 2016 Letter is a Final Agency Action Before proceeding to the merits of Plaintiff’s APA claim, the court must address the vigorously contested threshold issue of whether the November 2016 Letter is a “final agency action,” within the meaning of the APA. See Fund for Animals, Inc. v. U.S. Bureau of Land Mgmt. , 460 F.3d 13, 18 (D.C. Cir. 2006). If it is, then the court may address the merits of Plaintiff’s claims. If it is not, then thе Letter is not reviewable, and the court’s inquiry comes to an end. See id.
The APA allows for judicial review of a “final agency action.” 5 U.S.C. § 704. For an
agency action to be final, it must possess two characteristics.
Bennett v. Spear
,
The D.C. Circuit has identified three additional factors for courts to consider in assessing
the finality of an agency action—factors it has characterized as “complementary” to the two-part
Bennett
inquiry.
CSI Aviation Servs., Inc. v. U.S. Dep’t of Transp.
,
On occasion, the D.C. Circuit has applied the three
Ciba-Geigy
factors as a proxy for the
two-part
Bennett
inquiry, particularly in cases that involve a pre-enforcement challenge to agency
action. For example, in
CSI Aviation Services v. U.S. Department of Transportation
, the court
relied primarily on the
Ciba-Geigy
factors to find that a Department of Transportation cease-and-
desist letter was a reviewable final agency action.
See
Whether this court applies either the two-part Bennett test or the three Ciba-Geigy factors, the result is the same: the November 2016 Letter constitutes a final agency action.
1. The Bennett Test
a. The First Element of the
Bennett
Test
The court finds that the November 2016 Letter represents the “consummation” of the
FTC’s decision-making process.
See
The FTC disputes that the November 2016 Letter constitutes the consummation of the
agency’s decision-making because it is “an informal, tentative assessment of the law by a
subordinate official.” Def.’s Opp’n at 17. It is merely “staff advice,” the FTC contends, issued by
a subordinate official, who “do[es] not speak for the agency,” and is not binding on the
Commission. (citing 16 C.F.R. §§ 1.26(d), 1.3(c), 2.14(a), 3.11(a)) (alteration omitted). That
argument is unavailing. The fact that a lower-level agency official issued the November 2016
Letter, rather than the Commission itself, is not dispositive. The D.C. Circuit has made clear that
legal positions announced, as here, by subordinate officials responsible for oversight can constitute
*12
final agency action.
See, e.g.
,
Her Majesty the Queen in Right of Ontario v. EPA
,
Moreover, contrary to the FTC’s positiоn, the November 2016 Letter is not a mere “ruling”
or “recommendation” from a subordinate official that is still subject to review and therefore not a
final agency action.
See, e.g.
,
Abbott Labs.
,
The Supreme Court’s decision in
FTC v. Standard Oil of California
does not, as the FTC
argues, compel a different result. Def.’s Opp’n at 18. There, the Court held that the FTC’s decision
to commence an enforcement action was not a final, reviewable action.
Though the FTC’s argument has some intuitive appeal, it is wrong as a matter of law. The
Supreme Court has taken different approaches on the question of finality as between the pre- and
post-enforcement contexts. For example, in
Frozen Food Exp. v. United States
, the Court
addressed an agency order specifying that certain commodities were not considered “agricultural”
commodities, which would make motor vehicles transporting them exempt from permitting and
certification requirements.
Though over 60 years old,
Frozen Foods
remains vibrant today. Recently, the Court in
U.S. Army Corps of Engineers v. Hawkes Co., Inc.
, relying on
Frozen Foods
, held that an Army
Corps of Engineers’ “jurisdictional determination” that subjected property to the Clean Water Act
*14
was a final reviewable action.
The Novembеr 2016 Letter at issue in this case bears all of the hallmarks of final agency
action present in
Frozen Foods
and
Hawkes
. Acting through its staff, the FTC has taken a
definitive position that telemarketing calls deployed with soundboard technology are subject to the
robocall regulation. The Letter also puts companies on notice and gives them time “to bring
themselves into compliance.” Nov. 2016 Letter at 4. The upshot of the Letter could not be clearer:
telemarketing companies either must undertake the expense of coming into compliance with the
agency’s new position or risk enforcement action. Thus, the Letter has an “immediate and practical
impact” on the telemarketing industry and “sets the standard for shaping the manner in which” it
does business.
Frozen Food
,
b. The Second Element of the
Bennett
Test
Having concluded that the November 2016 Letter has a “immediate and practical impact”
on the telemarketing industry, the Letter also then satisfies the second element of the
Bennett
test—
the agency’s action determines “rights or obligations.”
The FTC contends that the November 2016 Letter fails the second prong, arguing that, at
most, it requires telemarketers to “choose ‘between voluntary compliance’ and the ‘prospect of
having to defend [themselves]’ in FTC enforcement litigation.” Def.’s Opp’n at 19 (quoting
*15
Reliable Automatic Sprinkler Co. v. Consumer Prod. Safety Comm’n
,
Reliable Automatic Sprinkler
differs from the present case because, whereas the letter there
announced the agency’s
investigation
into whether its rule applied to the plaintiff’s product, the
November 2016 Letter reflects the FTC’s
conclusion
that soundboard technology is subject to the
robocall regulation. In
Reliable Automatic Sprinkler
, the Consumer Product Safety Commission
issued a letter to a sprinkler manufacturer communicating “the intention of the Compliance staff
to make the preliminary determination that these sprinklers present a substantial product hazard,
as defined by . . . 15 U.S.C. § 2064(a).” 324 F.3d at 730. The D.C. Circuit held that the
Commission’s letter was not a reviewable agency action because “[t]he agency’s conduct thus far
amounts to an investigation of appellant’s sprinkler heads, a statement of the agency’s intention to
make a preliminary determination that the sprinkler heads present a substantial product hazard,
and a request for voluntary corrective action.” at 731. Unlike the letter in
Reliable Automatic
Sprinkler
, the November 2016 Letter does not request mere “voluntary corrective action.” Rather,
it conclusively states that soundboard calls must comply with the robocall regulation. Indeed, the
FTC staff acknowledged that its new position effectively meant that telemarketers no longer would
be able to use soundboard calls to induce the purchase of any good or service.
See
Nov. 2016
Letter at 3. That much is clear from the FTC staff’s pointing out that
other
uses of soundboard
technology—such as for non-telemarketing calls, including political, survey, and pure
*16
informational calls, and for responding to in-bound calls—remain permissible under the TSR, as
well its observation that those other uses constitute a “significant percentage” of overall
soundboard technology use.
Id
. at 4. Thus, the Letter does not seek mere voluntary compliance;
it effectively prohibits a use of soundboard technology.
Cf. Safari Club Int’l
,
Holistic Candlers
is distinguishable for similar reasons. In
Holistic Candlers
, the
D.C. Circuit considered warning letters the FDA had issued to manufacturers of “ear candles,”
advising that the agency considered the products to be adulterated and misbranded medical
devices.
advise[d] the recipients that ‘it appears your ear candles are intended to mitigate or treat’ the listed disorders, explain[ed] where to get the ‘information you need to submit in order to obtain approval or clearance for your device,’ and state[d] that ‘FDA will evaluate the information you submit and decide whether your product may be legally marketed.’
Id. at 944. In light of this language, the D.C. Circuit found that the letters failed to reflect the consummation of the FDA’s decision-making process. Id. The court also held that the letters could not determine rights or obligations, or constitute a decision from which legal consequences flow, because they prompted only voluntary compliance with the FDA’s preliminary assessment of the ear candles; the FDA’s decision-making process plainly remained ongoing. Id. at 944–45. The same cannot be said of the November 2016 Letter. The Letter definitively finds that soundboard technology is subject to the robocall regulation, and it does not invite industry to submit additional informatiоn to inform an ongoing decision-making process. Cf. id. at 942, 946. *17 The FTC staff already has taken industry input into consideration, and the November 2016 Letter announces the staff’s final decision that the robocall regulation applies to soundboard technology. Accordingly, the warning letters at issue in Holistic Candlers are distinguishable from the November 2016 Letter, and that case does not change the court’s analysis.
2. The Ciba-Geigy Factors
A review of the three “complementary”
Ciba-Geigy
factors only bolsters the court’s
conclusion that the FTC staff’s change in position constitutes a reviewable, final agency action.
The first factor—whether the agency has stated a “definitive” position as to its statutory
authority—is satisfied because the FTC staff has taken the “definitive” legal position that
soundboard calls are subject to the robocall regulation.
See CSI Aviation
,
This case also presents a purely legal question.
See Ciba-Geigy
,
Finally, as already discussed, the November 2016 Letter imposes “an immediate and significant practical burden” on the telemarketing industry, thereby satisfying the third Ciba-Geigy factor. Id. The FTC staff’s reversal effectively bars the use of soundboard technology to place outgoing calls to promote the sale of goods or services. See id. (finding agency’s cease-and-desist letter that “effectively declared the company’s operations unlawful” to be a final agency action). Even if not an effective prohibition, at a minimum, the agency’s action “cast[s] a cloud of uncertainty” over the continued use of soundboard technology for telemarketing purposes. Id. As noted, it puts the telemarketing industry to the “painful choice” between “costly compliance and the risk of prosecution at an uncertain point in the future.” Id.
In summary, the three Ciba-Geigy factors all point to the conclusion that the November 2016 Letter is a final, reviewable agency action. The D.C. Circuit’s observation in CSI Aviation — “[h]aving thus flexed its regulatory muscle, [the agency] cannot now evade judicial review”—is equally applicable here. Id. at 413. In light of the November 2016 Letter’s conclusive determination that soundboard technology falls within the purview of the robocall regulation, which will take effect in a matter of weeks, the court concludes that the Letter constitutes final agency action subject to judicial review.
B. Whether the November 2016 Letter is a Legislative or Interpretive Rule
The court now arrives at the merits of Plaintiff’s APA claim. The narrow question
presented is whether the November 2016 Letter is a “legislative” as opposed to an “interpretive”
rule.
[1]
If it is a legislative rule, then the FTC was required to issue the Letter pursuant to notice-
*19
and-comment rulemaking under the APA; on the other hand, if it is an interpretive rule, then the
FTC’s direct issuance of the Letter to an industry representative did not run afoul of the APA.
See
5 U.S.C. § 553(b);
Perez v. Mortg. Bankers Ass’n
,
The line separating a legislative rule from an interpretive rule is not always clear, and the
task of classification is “quite difficult and confused.”
Nat’l Min. Ass’n v. McCarthy
, 758 F.3d
243, 251 (D.C. Cir. 2014). The Supreme Court has observed that the “prototypical example of an
interpretive rule issued by an agency [is one] [that] advise[s] the public of the agency’s
construction of the statutes and rules which it administers.”
Shalala v. Guernsey Mem’l Hosp.
,
514 U.S. 87, 99 (1995) (internal quotation marks omitted). More recently, acknowledging the
difficulties attendant to drawing the distinction between the two types of rules, the Court reinforced
that “it suffices to say that the critical feature of interpretive rules is that they are issued by an
agency to advise the public of the agency’s construction of the statutes and rules which it
administers.”
Perez
,
The D.C. Circuit draws the line of demarcation between the two types of rules in a similar
fashion. In
Mendoza v. Perez
, the Circuit explained that “[a] rule is legislative if it supplements a
statute, adopts a new position inconsistent with existing regulations, or otherwise effects a
substantive change in existing law or policy,” whereas an interpretive rule “describes the agency’s
view of the meaning of an existing statute or regulation.”
Applying those principles here, the November 2016 Letter is an interpretive rule. The
Letter begins with an explanation of why the FTC staff is revisiting the September 2009 Letter.
Nov. 2016 Letter at 1–2 (“[S]ince we issued the letter in 2009, staff has seen evidence of the
widespread use of soundboard technology in a manner that does not represent a normal,
continuous, two-way conversation between the call recipient and a live person.”). It then cites to
the relevant TSR provision—the robocall regulation—barring telemarketers from initiating “any
outbound telephone call that delivers a prerecorded message” without prior written consent from
consumers,
id.
at 3 (quoting 16 C.F.R. § 310.4(b)(1)(v)), and announces that, in light of newly
acquired facts about soundboard technology, “[soundboard calls] are subject to the TSR’s
prerecorded call provisions because . . . [they] ‘deliver a prerecorded message’ as set forth in the
plain language of the rule.” Nov. 2016 Letter at 3. That determination does not supplement or
effect a change to the statutory or regulatory scheme applicable to telemarketers. Rather, it
communicates to the telemarketing industry the agency’s view that an existing regulation now
applies to a particular form of telemarketing technology as currently used by the industry. That is
a “quintessential interpretive rule.”
Flytenow, Inc. v. Fed. Aviation Admin.
,
That the November 2016 Letter announced a new position—and, in so doing, took the
telemarketing industry by surprise—does not render it a legislative rule. It is beyond dispute that
agencies are free to adopt a position that reverses or substantially deviates from an earlier one.
See
Perez
,
Plaintiff advances three main arguments in opposition to this outcome. First, it asserts that
the November 2016 Letter is a legislative rule because it has a “practically binding” effect on the
telemarketing industry—it all but compels telemarketers to abandon use of soundboard technology
to initiate calls. In doing so, Plaintiff relies heavily on
Appalachian Power v. EPA
. Specifically,
Plaintiff seizes on the D.C. Cirсuit’s statement that, “if [an agency action] leads private parties or
State permitting authorities to believe that it will declare permits invalid unless they comply with
the terms of the document, then the agency’s document is for all practical purposes ‘binding.’”
Pl.’s Mot. at 16 (citing
Appalachian Power Co.
,
Plaintiff’s reliance on
Appalachian Power
, and the “‘practically binding doctrine,”
id.
, is
unavailing for two reasons. First, the above-cited quotation from
Appalachian Power
concerns
whether an agency action is “final,” not whether it is an interpretive or legislative rule.
See
208
F.3d at 1020–21. That much is made clear when, in the same section of the opinion in which the
quoted text appears, the court discusses the two
Bennett
finality factors and ultimately concludes
that the agency action at issue there “is final agency action.”
Id.
at 1022–23. Second, to the extent
post-
Appalachian Power
cases have relied on the “рractically binding” formulation, they have
done so when distinguishing, not between interpretive rules and legislative rules, but between
legislative rules and a different category of agency actions exempt from notice and comment—
policy statements.
See, e.g.
,
Elec. Privacy Info. Ctr.
,
Next, Plaintiff argues that the November 2016 Letter is a legislative rule because “[t]he FTC’s newfound position on the reach of the robocall prohibition is flatly inconsistent with that provision of the TSR.” Pl.’s Mot. at 20. Plaintiff devotes considerable energy to this argumеnt, asserting that the November 2016 Letter is premised on a misreading of the TSR and a misunderstanding of soundboard technology. at 20–30. These arguments read as if Plaintiff is *23 challenging the agency’s action on the merits, yet Plaintiff concedes that its “point is not to persuade this Court to vacate the November 10 letter as arbitrary and capricious.” Pl.’s Reply, ECF No. 12, at 14 (emphasis added). [3] Instead, Plaintiff says “it presented the counterpoint to the FTC’s position on the merits of soundboard only for the purpose of demonstrating why notice- and-comment rulemaking was required.” Id. Plaintiff, however, cites no authority for the proposition that courts must consider the degree to which an agency would benefit from the notice- and-comment process when deciding whether an agency action is a legislative rule. Indeed, it is hard to conceive how such a “benefit standard” would operate in practice. That the FTC could have derived some benefit from notice-and-comment rulemaking does not render the November 2016 Letter a legislativе rule.
Finally, Plaintiff argues that the “ruinous consequences” of the FTC’s new position on the telemarketing industry warrants treating the November 2016 Letter as a legislative rule. Pl.’s Mot. at 30; Pl.’s Reply at 15. Once more, Plaintiff cites no authority to support its position, and it is hard to conceive how such a subjective criteria would operate in practice. Agency actions unquestionably can have a profound impact on an industry’s operations. But the degree of impact does not, as a legal matter, dictate whether an agency action is legislative.
Accordingly, the court concludes that the November 2016 Letter is an interpretive rule under the APA and, thus, the FTC need not have promulgated it through notice and comment. Therefore, the court will enter judgment in favor of the FTC on Plaintiff’s APA claim.
*24 C. Whether the TSR Amendment as Applied to Soundboard Calls Violates the First Amendment
The court now turns to Plaintiff’s First Amendment claim. Plaintiff asserts that subjecting
soundboard technology to the robocall regulation violates the First Amendment because it
constitutes an impermissible content-based restriction on the speech of Plaintiff’s members who
engage in charitable fundraising. Pl.’s Mot. at 31–40; Pl.’s Reply at 16–21. Under the First
Amendment, “the government has no power to restrict expression because of its message, its ideas,
its subject matter, or its content.”
Police Dep’t of the City of Chi. v. Mosley
, 408 U.S. 92, 95
(1972). “Content-based laws—those that target speech based on its communicative content—are
presumptively unconstitutional and may be justified only if the government proves that they are
narrowly tailored to serve compelling state interests.”
Reed v. Town of Gilbert
,
Plaintiff argues that the November 2016 Letter is a content-based restriction on speech because the robocall regulation, to which soundboard calls are now subject, is itself a content- based regulation. The robocall regulation bars all pre-recorded calls whose purpose is to induce the purchase of any good or service, absent the call recipient’s prior written consent. 16 C.F.R. *25 § 310.4(b)(1)(v)(A). The written-consent requirement also applies to calls soliciting charitable donations from new donors, but does not apply to calls soliciting donations from prior donors or members of the non-profit organization on whose behalf the call is made. § 310.4(b)(1)(v)(B). Plaintiff claims that the robocall regulation’s carve-out for solicitation calls made to prior donors or members constitutes a content-based regulation of speech, bеcause the FTC must look at what is said during the call—whether the caller requests a first-time charitable donation or a repeated charitable donation—to determine if the written-consent requirement applies. Pl.’s Reply at 17– 18. The FTC responds that the restriction is content-neutral because its applicability “turns on the caller’s relationship with the consumer rather than what may be said in the calls.” Def.’s Opp’n at 29.
The FTC has the better argument. The robocall regulation’s distinction between charitable solicitations to existing donors or members and potential new donors is a content-neutral restriction. It distinguishes calls based on who the recipient is—a prior donor or a potential new donor—not on what is being said.
As the FTC correctly points out, every court that has considered one of these types of
robocall restrictions has held that a distinction based on the caller-recipient relationship does not
violate the First Amendment. Def.’s Opp’n at 29–30; s
ee Bland v. Fessler
,
Most recently, in
Patriotic Veterans v. Zoeller
, the Seventh Circuit held that exceptions to
a state robocall regulation for messages from school districts to students, parents, or employees,
or messages to subscribers with whom the caller has a current relationship, were valid time, place,
and manner restrictions, not content-based discrimination.
So it is here. The robocall regulation does not require the FTC to review a call’s content to determine whether the written-consent requirement applies to a pre-recorded charitable call. It need only determine whether the call’s recipient is either a potential first-time donor or a prior donor or member. If the recipient falls into the first category, then the written-consent requirement applies; if she falls into the second, then it does not. The distinction is plainly relationship-based and does not constitute a content-based restriction on speech.
Plaintiff relies on two cases—
Cahaly v. Larosa
,
Plaintiff’s reliance on
Reed v. Town of Gilbert
likewise is misplaced. 135 S. Ct. 2218,
2222 (2015).
Reed
does not hold, or even suggest, that a speech restriction based upon the
relationship of the speaker and the listener is a content-based restriction.
See Patriotic Veterans
,
Having concluded that the TSR’s robocall regulation is content neutral, the regulation
easily satisfies intermediate scrutiny.
See A.N.S.W.E.R. Coalition (Act Now to Stop War and End
Racism) v. Basham
, 845 F.3d 1199, 1212–13 (D.C. Cir. 2017). The TSR’s restrictions on
charitable pre-recorded messages is “narrowly tailored to serve a significant governmental
interest” and “leave[s] open ample alternative channels” of communication.
Ward v. Rock Against
Racism
, 491 U.S. 781, 791 (1989). By requiring telemarketers to obtain written consent from
potential first-time donors, the robocall regulation plainly advances the government’s recognized
*28
interest in protecting against unwarranted intrusions into a person’s home or pocket.
See Frisby
v. Schultz
,
The robocall regulation also leaves “open ample alternative channels” of communication between charities and first-time donors. Charities can use, among other things, media advertising, mailings, websites, and in-person solicitations to reach new donors. They also can use live callers instead of pre-recorded messages. Accordingly, the robocall regulation satisfies intermediate scrutiny and does not offend the First Amendment.
V. CONCLUSION
For the foregoing reasons, the court denies Plaintiff’s Motion for Summary Judgment and grants Defendant’s Motion for Summary Judgment.
A separate Order accompanies this Memorandum Opinion.
Dated: April 24, 2017 Amit P. Mehta United States District Judge
Notes
[1] The FTC also has argued that the November 2016 letter is not a “rule” as defined by the APA. Def.’s Opp’n at 21– 22. Because the court concludes the November 2016 Letter is not a legislative rule, it need not reach that issue.
[2] Accordingly, the court does not address whether, under 5 U.S.C. § 706(2)(A), the FTC staff’s decision to apply the TSR’s robocall regulation to soundboard technology-initiated calls and to disavow the September 2009 Letter was an unlawful arbitrary and capricious act. Plaintiff has not advanced that claim.
[3] Although Plaintiff’s counsel at oral argument raised the possibility of amending the Complaint to add a claim under 5 U.S.C. § 706(2)(A), which would assert that the November 2016 Letter violates the APA because it is arbitrary and capricious, Oral Arg. Tr. at 25, Plaintiff has yet to file a motion seeking leave to amend.