Sorting Out the No-Call Legal Rulings

We have all read articles and opinions about the well-publicized federal court decisions involving the national do-not-call registry. The telemarketing industry, as well as 50 million consumers nationwide, is in a state of uncertainty regarding the status of the registry.

This article will summarize the recent decisions and examine the potential long-term effects on the regulatory environment in the United States. The fact that additional events affecting the registry may occur before this article goes to press indicates just how volatile the situation is.

On Sept. 23, a federal judge in the Western District of Oklahoma ruled in favor of the Direct Marketing Association and other plaintiffs against the Federal Trade Commission when he found that the FTC lacked the authority to create the registry.

However, just days after the decision, President Bush signed legislation explicitly providing the FTC with the authority to administer the registry. This ruling seems unlikely to have the effect the industry had hoped. Further, the decision applies only to the FTC and arguably has no effect on the Federal Communications Commission. Thus, the FCC appears unaffected by the decision and may be free to pursue enforcement of the registry.

More significantly, however, on Sept. 25 a federal judge in the District of Colorado ruled in favor of the American Teleservices Association and other plaintiffs against the FTC when he granted a motion for summary judgment based on a claim that the registry violated First Amendment free speech rights.

By prohibiting commercial calls and allowing certain noncommercial calls such as political and charitable solicitations, the registry “creates a burden on one type of speech based solely on its content, without a logical, coherent privacy-based or prevention-of-abuse-based reason supporting the disparate treatment of different categories of speech,” the judge said. This decision, in contrast to the Oklahoma decision, likely will have a greater effect on the registry for two reasons.

First, the Colorado decision is based on a constitutional challenge, which cannot be easily circumvented by the passing of legislation. If the decision is upheld by the 10th Circuit Court of Appeals and, possibly, the U.S. Supreme Court, it likely would be fatal to the FTC’s efforts to implement the registry.

Second, unlike the Oklahoma ruling, this decision enjoins the FTC from enforcing its rules with respect to the registry. But it is important to note that, similar to the Oklahoma ruling, this decision addresses only the FTC’s rules regarding the registry and not the FCC’s rules.

On Sept. 26, the 10th Circuit Court of Appeals refused to block the FCC’s enforcement of the registry while it considered the ATA’s separate challenge to the constitutionality of the FCC’s rules. Further, FCC chairman Michael K. Powell stated that neither decision disturbs the FCC rules and indicated that the FCC intends to administer and enforce its rules “to the fullest extent possible as the litigation proceeds.” How the FCC plans to enforce the FTC’s registry, which it does not possess and which has been found thus far to be unconstitutional, is yet to be seen.

In addition to all of this, telemarketers also must be aware that the 30-plus states that have established state-managed do-not-call lists are almost certain to continue to enforce their lists during this period of uncertainty involving the registry. Furthermore, state attorneys general have the authority under the Telephone Consumer Protection Act – the same law that gives the FCC the authority to establish the registry – to pursue civil actions in federal courts for violations of the TCPA or regulations pursuant thereto (e.g., the FCC do-not-call rules).

Therefore, even if the FCC decides not to pursue enforcement of the registry, it is possible that state attorneys general may take it upon themselves to do so. Thus, telemarketers might be subject to state enforcement of both the registry and state-managed no-call lists.

What will all this mean two weeks, two months or two years down the road? No one knows for sure, though there are interesting possibilities.

If the Colorado decision is upheld, perhaps even by the U.S. Supreme Court, then, obviously, the registry would be unconstitutional and could not be enforced by the FTC, FCC or state attorneys general. Though this would be deemed a victory by most telemarketers, it may be an even bigger one than most anticipate. If a national no-call list that differentiates between types of calls is unconstitutional, then why would a state list that does the same be constitutional?

Thus, it is likely that any state-managed no-call list providing an exemption for political or charitable solicitations would fail to survive a constitutional attack. Virtually all the state-managed lists provide such exemptions.

Further, it isn’t a stretch to speculate that state telemarketing registration, automatic dialing-announcing device and other similar laws differentiating between types of calls also would be declared unconstitutional if challenged.

However, to return to the statement above that constitutional issues cannot be easily resolved through legislation, the FTC and FCC may be able to save the registry through revisions to their rules, but it likely would mean adopting revisions that require the FTC and FCC to basically start from scratch.

The registry would have to apply to all telephone solicitations – sales calls, political calls and charitable calls. This would entail technical and functional changes to the registry as well as a delay in enforcement to allow political and charitable solicitors to challenge the law and, if necessary, comply.

Alternatively, if the Colorado decision is overturned on appeal and the registry is deemed constitutional, then it likely will be enforced diligently and vigorously by the FTC, FCC and the state attorneys, especially given that the registry has been thrust into the national media spotlight.

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