Regulation Gone Wild: NFIB Takes Another Swing at FCC’s Solicited Fax Regulation

Date: November 20, 2015

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In 2013 the NFIB Small Business Legal Center filed a brief asking the
U.S. Supreme Court to take-up a case in which a small Midwestern
publisher, Douglas Walburg, was being sued for 48 million dollars. He
has been hit with a ruinous class action suit because he failed to
include boilerplate language that the Federal Communications Commission
(“FCC”) insists should appear on all commercial faxes. At the time, we
published this editorial piece explaining his case and the greater
problem of over-regulation.

In Walburg v. Nack, we asked the
high court to take Mr. Walburg’s case because he had been denied the
opportunity to raise a constitutional defense. Specifically, he wanted
the opportunity to argue that this FCC regulation, under which he was
being sued, was illegally promulgated. And he raised a good argument:
Under the Telephone Consumer Protection Act and the Junk Fax Protection
Act, the FCC only has authority to regulate unsolicited faxes.

Nonetheless,
FCC construes the Act as authorizing it to impose a rule requiring
boiler-plate language informing consumers of how they may opt out of
receiving future faxes (“Solicited Fax Rule”), even if they have
consented to receive the fax in question. So Mr. Walburg was being sued
because he had sent a fax to someone who had consented to receiving the
fax—all because he didn’t realize he needed to include that opt-out
language. He was hit with a class action lawsuit from an attorney
seeking $500 for each fax Mr. Walburg’s company had sent out—and $1,500
for each alleged knowing violation of the FCC regulation.

Remarkably,
the Eighth Circuit Federal Court of Appeals ruled that Mr. Walburg
lacked standing to raise his constitutional defense because of the
Hobbes Act. The Court ruled that if Mr. Walburg wanted to challenge the
validity of an FCC regulation, the Hobbes Act required that he needed to
petition FCC to reconsider the rule, and that he must then proceed with
a lawsuit against FCC, in the federal Court of Appeal for the District
of Columbia, if the petition should be denied. The decision was
outrageous for a few reasons. First, the requirement for standing
applies only to the litigant seeking to invoke the Court’s
jurisdiction—not the defendant who has been dragged into court against
his will. But, more importantly, individuals should be entitled to raise
all valid defenses—especially constitutional defenses—when dragged into
to court. Unfortunately, the Supreme Court declined to take this case
and Mr. Walburg was left in an unenviable position—either admit defeat,
negotiate a settlement, or spend thousands and thousands more on legal
expenses in an effort to bring a lawsuit against the FCC to invalidate
the regulation under which he had been sued.

Fast-forward to
2015, and we are once more asking the Supreme Court to take up a case
concerning FCC’s contested Solicited Fax Rule. This case, Bais Yaakov of
Spring Valley v Federal Communications Commission and the United States
of America
, challenges the Solicited Fax Rule on First Amendment
grounds. And there is no standing problem because the lawsuit was
brought in the D.C. Circuit, as the Eighth Circuit insists any challenge
to the regulation must be. (We still believe the Eighth Circuit’s rule
to be constitutionally infirm.) But in any event, the D.C. Circuit
rejected their First Amendment claims, and we’re now hoping the Supreme
Court will take the case to further refine its compelled speech
doctrine—which prohibits government from forcing private actors to speak
when they do not wish to engage in expressive conduct. Simply put, the
First Amendment protects your right to not to speak, just as much as it
protects your right to speak.

Unfortunately, in recent years,
the D.C. Circuit has issued inconsistent decisions in compelled speech
cases—at least when the regulations have been targeted at commercial
actors. Notably, the D.C. Circuit struck down the “Notice Poster Rule,” a
few years ago when NFIB challenged the requirement that employers must
post information about “labor rights” in the workplace. In the decision,
the D.C. Circuit emphasized that the Notice Poster Rule also violated
the compelled speech doctrine because it forced business owners to speak
on a subject against their will. But since then the D.C. Circuit has
backed away from this strict enforcement of the compelled speech
doctrine—and has limited its applicability in the commercial context.

Of
course, we’ve been arguing, for years, that commercial speech should be
entitled to greater constitutional protections than they are currently
afforded. It’s simply not right that government should condition the
right to engage in economic conduct on a requirement to waive
constitutional rights. But until the Supreme Court takes another
commercial speech case, it is plain that the lower courts will continue
to treat First Amendment rights as less important when invoked by
commercial actors.

On a separate note, NFIB will be waiting anxiously for the Supreme Court’s decision in Spokeo v. Robins
this term. That case asks whether a plaintiff may establish standing
without proving an injury simply by virtue of the fact that he can
demonstrate that the defendant violated a statute, and that Congress has
conferred upon this individual a “right” to sue. Of course, we maintain
that there must be a real injury in order to satisfy the requirements
for Article III standing for a litigant invoking the Court’s
jurisdiction. And Congress cannot simply confer standing upon
individuals. Indeed, that would not only undermine Article III’s “case
or controversy” requirement, but it would result in a serious breakdown
in the Separation of Powers. 

If the Supreme Court agrees with us in Spokeo,
that should also close the door on these Solicited Fax Rule lawsuits.
After all, can an individual really claim an injury when they have
received a fax—which they consented to—simply because the sender omitted
FCC’s boilerplate language?  We think not. And it is outrageous to
think that small business owners should face ruinous lawsuits for
conduct that doesn’t really hurt anyone. That’s why we’ve called this
Solicited Fax Rule a prime example of regulation gone wild.

 

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