Quit the 'Fussin about McKess[i]n - Cert in McKesson Does Not Mean the TCPA is Dead

Being in Philly, and thus a more AmerisourceBergen type guy, I’ve nevertheless gotten a lot of questions about the Supreme Court’s recent grant of Cert in the McLaughlin Chiropractic Associates, Inc. v. McKesson Corporation case. Even the Czar himself has not personally commented on the issue or boiled it down (though I am sure it is coming). This post will easily break down the question presented in doggie-horsie language and show why it’s likely to end up actually being a win for consumers.

McKesson comes to the Supremes on a rather unique procedural posture: cross-motions for summary judgment that were cross-appealed. Cutting the gristle away from the meat, the issue boils down to whether the FCC’s AmeriFactors ruling, which was (allegedly) promulgated pursuant to Hobbs Act authority, has the force of law, thus requiring the District Court to follow it.

Long story short, the AmeriFactors ruling says that subscribers to e-fax services cannot sue for faxes under the TCPA, because an electronic fax service, which simply takes the fax and pops it into an email box, is not a “telephone facsimile machine” under the TCPA. And because there’s no way to tell an electronic fax line from a physical one, the Ninth Circuit affirmed the District Court’s holding that there was “no viable methodology for distinguishing class members who had received faxes on a stand-alone fax machine and those who had received them through an online fax service,” rendering the class unascertainable. For what it’s worth, I have my own opinions on these points, but they’re irrelevant for our purposes here.

You will recall that, this past term, the Supreme Court did away with the Chevron two-step in Loper Bright, and replaced it with only one question: what is the best reading of the statute? I already addressed the implications that Loper Bright had for the Hobbs Act and the previous PDR Network decision in my previous post. In short, the question unanswered by Loper Bright, and the question the Supreme Court will answer here, is this: ought Hobbs Act deference be treated any different than Chevron deference? In my personal opinion, the Supreme Court seems poised to overturn Hobbs Act deference as well, as the Hobbs Act two-step is just as unworkable in practice, if not more so, than the fundamentally flawed Chevron two-step.

So why does this all matter? Well, under the Hobbs Act, the circuit courts of appeal are the exclusive means that one has to challenge the FCC’s regulatory rulemaking on a question of statutory interpretation, and there are strict time limits for doing so. In other words, in light of a Hobbs Act-promulgated FCC regulation, the district court has its hands tied: it is completely barred from even conducting a statutory analysis; the only review must come from the circuit courts of appeal. Robbing district courts from the ability to conduct statutory interpretation and instead putting it in the hands of the administrative state is a recipe for disaster even worse than Chevron because it gives the administrative state the power to make effectively unreviewable law: for example, if a statute stated “a person has been aggrieved if they have suffered ‘A,’ ‘B,’ or ‘C,’” an agency like XYZ could promulgate a Hobbs Act rule stating that a plaintiff must suffer “A,” “B” and “C” to recover, even though that reading is at odds with the statutory text, and the district court would be powerless to read the statute as written by Congress.

In my view, if the Supreme Court does away with the Hobbs Act two-step in this case, it will ultimately be, on balance, a win for consumers.

Option 1: Supreme Court rules for McLaughlin and overturns Hobbs Act deference - If this happens, and I think this is the most likely outcome, the case will go back down to the District Court, which will now be permitted to apply traditional tools of statutory construction and interpretation to ask, “what is the best reading of the statute?” The District Court may ultimately conclude, using the tools outlined in Scalia and Garner, that the word “machine” in “telephone facsimile machine” applies equally to traditional fax machines and e-fax machines. If that happens, the District Court will likely re-certify the class. But the District Court may review the FCC’s reasoning in AmeriFactors, find that it comports with traditional tools of statutory construction, and again deny class certification.

Option 2: Supreme Court rules for McKesson and keeps Hobbs Act deference - If this happens, the class will remain de-certified because AmeriFactors renders it unascertainable. Nothing changes, and we are at the status quo post-Chevron with respect to Hobbs Act deference: district courts can interpret statutes unless the agency promulgates a regulation under the Hobbs Act that has the force and effect of law, in which case the Hobbs Act regs will continue to govern.

What other Hobbs Act TCPA rulings might be affected by this case? Well, the one that most immediately comes to mind is whether or not cell phones are eligible for registration on the Do Not Call Registry. Another, related one, is whether a text message is a “call” under the TCPA. And a final class of regulations that comes to mind are the panoply of FCC regs related to pre-records, ATDS, and consent including, most likely, the new one-to-one consent rule. This is not to say that any of the holdings in those rulings will go away if the Supreme Court kicks the Hobbs Act to the curb. Rather, district courts will be tasked with the traditional task of statutory interpretation. In other words, in the event that a defendant, for example, argues that a cell phone cannot be interpreted as “residential” under the TCPA, the district court will look to the statute and decide if a cell phone is “residential” or not using traditional tools of interpretation.

It remains to be seen what the Supreme Court does in this case, but I’m about 2/5 odds on the Supreme Court getting rid of the Hobbs Act two-step and putting statutory interpretation back in the hands of courts, where it belongs as an initial matter.