The DNC Challenge and State Lists

The question on everyone’s mind is surely the implementation and enforceability of the national do-not-call list. Will the list or the Lopez-Affleck nuptials have more “on-again, off-again” reverses?

I will not review these tea leaves. Instead, I’ll look at the effect that the national list, and accompanying court orders, has on the state no-call lists already in place. Though the answer to this question depends on whom you ask, the recent Colorado federal court decision holding the national list to be unconstitutional clearly casts grave doubts as to the constitutionality of every state no-call list.

I will try to answer two questions: What happens to the state lists if the national list is struck down, and what happens to the state lists if the national list in upheld and implemented?

My own state’s attorney general, Jay Nixon, said the Denver court’s decision “does not affect Missouri,” and technically, he’s right.

Judge Edward Nottingham issued his ruling because the federal no-call list did not apply to political or charitable fundraising and because the FTC did not produce evidence that these exemptions were legitimate. In context of the First Amendment, the list is “underinclusive.”

Nottingham asked if the “ring” of the telephone is what intrudes on privacy, and if all calls “ring” the same, how can some be exempt and others be banned? His conclusion is that the FTC improperly is regulating not the “ring” but the “content” of the call. The First Amendment bans “content-based” laws in almost all circumstances. Nottingham made this ruling even though commercial speech, like selling goods or services by telephone, generally can be regulated consistently with the First Amendment more than the “fully protected” speech of political parties or charities.

Nixon is technically correct because Nottingham lacks jurisdiction over Missouri. Nottingham’s opinion would have to be appealed all the way to the Supreme Court before it would directly control Missouri, or any other state outside of the 10th federal appellate circuit of Midwestern and Mountain states.

But Nixon is wrong if he reads the arguments in Nottingham’s opinion and applies them to the Missouri no-call list. Missouri’s list exempts not only political parties and charities, but also any person calling from his or her home, any business licensed by the state of Missouri calling to set an appointment, and any federally licensed entity required by federal law to maintain a no-call list. The last exemption applies to any federally licensed telecommunications company, for example, which maintains an internal no-call list pursuant to the Telephone Consumer Protection Act.

Missouri’s list is not alone in the group of states exempting many types of commercial calling, as well as “fully protected” speech, from its list. Every state list is at least as “underinclusive” as the national list, and in many cases more so. Nottingham’s opinion would not control challenges to any state list other than Colorado’s, but you can be sure that the arguments and logic will be argued if any state tries to enforce its underinclusive list, or if the list is otherwise challenged in court.

If Nottingham’s opinion is upheld by the 10th Circuit Court of Appeals, states should consider less-restrictive means to balance speech and privacy.

If the 10th Circuit overturns Nottingham, however, state lists remain of questionable applicability to interstate calls.

Many states have eschewed the expense and difficulty of administering state lists and voluntarily incorporated their state list into the federal list, or never implemented a duplicative state law in the first place with the advent of the federal law.

This action makes some sense as it provides businesses and consumers “one-stop” shopping to register a do-not-call request, and to access such a DNC request for compliance purposes. Even if a state does not voluntarily merge its list into the federal list, however, the existence of a federal list may legally preclude application of state lists to interstate calls.

This is because Congress generally has delegated authority to regulate interstate commerce and interstate telecommunications to the FTC and FCC, respectively. When Congress claims federal law applies to a given matter to the exclusion of state law, it is said to “pre-empt” state law. Despite the claims of some states, many sources support federal pre-emption of state no-call list law, at least as applied to interstate calls.

The FCC reviewed these sources when it issued its rules to implement the national list and concluded that consumers’ interests in a “one-stop” place to add their names to a list and business’s interest in uniform regulation supported pre-emption.

In its Report and Order containing new TCPA regulations issued in July, the FCC noted that “inconsistent interstate rules frustrate the federal objective of creating uniform national rules, to avoid burdensome compliance costs for telemarketers and potential consumer confusion. … We therefore believe that any state regulation of interstate telemarketing calls that differs from our rules almost certainly would conflict with and frustrate the federal scheme and almost certainly would be pre-empted.” The FCC has set an 18-month period for states to incorporate their lists into the national list.

This statement is consistent with the TCPA’s legislative history: Sen. Ernest Hollings noted in the Congressional Record that: “[p]ursuant to the general pre-emptive effect of the Communications Act of 1934, state regulation of interstate communications, including interstate communications initiated for telemarketing purposes, is pre-empted.”

Though many states have chosen to incorporate their lists into the federal list, some have not. This decision, made for whatever motive, is likely not the best one for consumers in those states, who will be forced to sign on to more than one list and wonder who has authority to protect them in the event of an alleged violation. Businesses will face the same problem of duplicative expenses with little consumer benefit to show for the duplicate list fees.

I expect that this issue will reach the Supreme Court. My law firm filed facial challenges to two state lists (Indiana and North Dakota) prior to implementation of the federal list and the Colorado court decision. The Indiana list has already been upheld in state court in the face of a constitutional challenge by a commercial telemarketer. The Supreme Court usually tries to resolve conflicts between varying laws and courts, and given that conflicting decisions already exist, the press coverage of this issue, and that the issue affects more than two federal laws and about 40 state laws, national judicial resolution is likely.

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