PDR Network, LLC v. Carlton & Harris Chiropractic Inc.

Issues 

Does the Hobbs Act compel district courts to defer to an agency’s interpretation of a statute?

Oral argument: 
March 25, 2019

This case asks the Supreme Court to determine whether 28 U.S.C. § 2342, commonly known as the Hobbs Act, required a federal district court to adhere to the Federal Communication Commission’s (“FCC”) interpretation of the Telephone Consumer Protection Act (“TCPA”). In 2016, Carlton & Harris Chiropractic sued PDA Network, after the latter sent an unsolicited facsimile announcing a free eBook edition of The Physician’s Desk Reference. Carlton & Harris argued that the fax constituted an advertisement for the purposes of the TCPA, which prohibits unsolicited advertisements. The United States District Court for the Southern District of West Virginia held that the fax was not an advertisement. The United States Court of Appeals for the Fourth Circuit reversed, holding that, under the Hobbs Act, the district court had failed to properly defer to the FCC’s interpretation of the TCPA. PDR Network contends that the Hobbs Act does not undermine district courts’ ability to interpret the TCPA in civil suits between private litigants, and that the Hobbs Act should be construed narrowly, to facilitate judicial review and preserve separation of powers. Carlton & Harris argue that the Hobbs Act required the district court to defer to the FCC’s legal interpretation of the TCPA, maintaining that in agency actions such as this one, Congress has explicitly reserved interpretive powers to appellate courts. The outcome of this case will affect judicial decision-making, agency determinations and the corresponding deference, and the scope of the Hobbs Act.

Questions as Framed for the Court by the Parties 

Whether the Hobbs Act required the district court in this case to accept the Federal Communication Commission’s legal interpretation of the Telephone Consumer Protection Act.

Facts 

Carlton & Harris Chiropractic (“Carlton & Harris”) is a West Virginia chiropractic office; PDR Network (“PDR”) sells healthcare products to doctors and other healthcare providers. PDR publishes the Physicians’ Desk Reference, a popular almanac containing prescription drug information. In December 2013, PDR sent Carlton & Harris a fax, which detailed how the chiropractors could access a free copy of the 2014 Physicians’ Desk Reference eBook. In 2016, Carlton & Harris sued PDR in federal court in the Southern District of West Virginia for violating the Telephone Consumer Protection Act (“TCPA”), which prohibits “unsolicited advertisements” sent to fax machines. In response, PDR moved to dismiss the complaint, arguing that the fax did not constitute an “advertisement” as a matter of law since it did not offer a product or service for sale. The TCPA defines “unsolicited advertisement,” in part, as any “material advertising the commercial availability or quality of any property, goods, or service to any person without that person’s express…permission.” The district court determined that the fax was not an advertisement because PDR, in offering the eBook for free, lacked a “commercial aim.” Carlton & Harris protested, arguing that under the Hobbs Act, the district court must adopt the 2006 Order issued by the FCC, which offered interpretative guidance of the TCPA that would make “advertisements” encompass announcements of free products. The district court, following the Chevron framework for deferring to administrative agencies, refused to defer to the Federal Communication Commission’s (“FCC”) interpretation of the TCPA, since the TCPA’s definition of “unsolicited advertising” was, according to the court, straightforward and unambiguous. While the Hobbs Act, the district court conceded, grants federal courts of appeals “exclusive jurisdiction” over challenges “to the validity of all final orders of the [FCC],” the court determined that neither party was challenging the validity of the FCC order, so the district court retained its jurisdiction. Ultimately, the district court found that while the plain meaning of the TCPA prohibits unsolicited faxes with a commercial purpose, it allows for the distribution of information regarding free goods or services. The district court thus granted PDR’s motion to dismiss.

In 2017, Carlton & Harris appealed. Carlton & Harris again argued that the Hobbs Act required the district court to defer to the FCC’s interpretation of the TCPA, and that the court had erred when it held that a fax must contain a commercial aim in order to be considered an “advertisement” for the purposes of the TCPA. Under the Hobbs Act, Carlton & Harris contended, federal courts of appeals have exclusive jurisdiction over the validity of agency orders. As a result, the United States Court of Appeals for the Fourth Circuit held, the Hobbs Act limits district courts’ jurisdiction and bars them from interpreting agency orders. Specifically, the Fourth Circuit held that the district court should have deferred to the FCC’s interpretation of the TCPA. As a result, the Fourth Circuit reversed the district court.

The Fourth Circuit denied PDR Network’s request for further review. The United States Supreme Court granted PDR Network’s petition for a writ of certiorari on November 13, 2018.

Analysis 

THE SCOPE OF THE HOBBS ACT’S “EXCLUSIVE JURISDICTION” CLAUSE

According to PDR Network, the relevant provision of the Hobbs Act does not prevent a district court from interpreting certain provisions of the TCPA. While PDR acknowledges that the Hobbs Act limits district courts’ jurisdiction in certain circumstances, it contends that the Act “speaks only to jurisdiction over a specific type of proceeding: one for direct review of agency action, in which the petitioner seeks declaratory or injunctive relief against the government.” PDR claims that the Fourth Circuit erred when it read the Hobbs Act to strip district courts of their ability to review the FCC’s interpretations of the TCPA. To the extent that the Hobbs Act limits district courts’ jurisdiction, PDR continues, it does so only with respect to jurisdiction over determinations of the “final validity” of agency actions. . The Hobbs Act does not, in PDR’s view, undermine district courts’ power to decide particular issues relating to the TCPA—it only bars them from enforcing certain equitable remedies after determining an agency order’s validity. PDR also posits that the Hobbs Act does not reserve jurisdiction to the federal courts of appeals over “private TCPA class action suit for monetary damages,” such as the one Carlton & Harris brought against PDR. In PDR’s view, the Fourth Circuit failed to analyze the text of the Hobbs Act properly, since that correctly interpreting the words at issue—“determine the validity of”—would mean reading them alongside the surrounding statutory text, and with an eye toward Hobbs Act’s underlying policy goals. The Fourth Circuit erred, according to PDR, when it took an expansive view of the phrase “exclusive jurisdiction” and failed to properly consider that phrase’s “neighboring provisions,” which, in totality, suggest that courts of appeals only retain exclusive jurisdiction over a narrow subset of proceedings. To further support this position, PDR points to 47 U.S.C. § 402(a) (“the Communications Act”), which the Hobbs Act references, and which similarly alludes to “non-monetary relief against the FCC,” while remaining silent on exclusive jurisdiction in private, two-party litigation.

Carlton & Harris counter that when the district court failed to defer to a final ruling of the FCC, it did so in violation of the Hobbs Act. Carlton & Harris contend that in case after case, the federal courts of appeals have held that the district courts must defer to final orders of the FCC. By requesting that the district court ignore the FCC Order and apply its own interpretation of the TCPA under the Chevron framework, Carlton & Harris stress, PDR effectively asked the district court to determine the Order’s final validity—and thus asked it to impede on the exclusive jurisdiction of the court of appeals. Going further, Carlton & Harris claim that the Hobbs Act’s limitations on district court jurisdiction are not limited to suits brought against the federal government. Carlton & Harris argue that the Hobbs Act does not refer to a particular type of proceeding, but instead affects a particular type of court—the courts of appeals. To support this argument, Carlton & Harris claim that PDR misreads §§ 2342 and 2349 of the Hobbs Act to limit federal courts of appeals’ exclusive jurisdiction to certain kinds of “proceedings.” , But the word “proceeding,” Carlton & Harris point out, does not appear in either of those sections. As a result, Carlton & Harris conclude, courts of appeals retain exclusive jurisdiction over all challenges to FCC orders, whether they arise in a private dispute over the TCPA, or in an action against the government directly attacking the rule. Carlton & Harris also address PDR’s invocation of § 402(a) of the Communications Act, arguing that its passing reference to the Hobbs Act in no way undermines a broad reading of the courts of appeals’ “exclusive jurisdiction” Finally, Calvin & Harris invoke Chicago & N.W. Transp. Co. v. Kalo Brick & Tile Co., a Supreme Court decision applying the Hobbs Act to a private dispute between two parties, for the proposition that the Hobbs Act does not apply solely to actions against the government.  

THE ADMINISTRATIVE PROCEDURE ACT

PDR asserts that the Administrative Procedure Act (“APA”), including 5 U.S.C. § 703, confirms that parties may challenge agency actions in the course of private, two-party litigation at the district court level. The only exception to this right to judicial review, PDR claims, is in the event that a party had access to “prior, adequate, and exclusive opportunity for judicial review” of the agency rule. PDR claims that because it lacked such an opportunity to be heard, the APA entitled it to seek review of the 2006 FCC Order as part of its defense in the initial suit brought by Carlton & Harris. Finally, PDR argues that pursuing a separate claim against the FCC to challenge or clarify its 2006 Order would be cumbersome to the point of being prohibitive.

Carlton & Harris respond that the Supreme Court should not hear PDR’s argument about the APA because PDR failed to raise the argument at previous stages in the litigation. Furthermore, Carlton & Harris charge, PDR’s broader claims about the inadequacy of the Hobbs Act’s procedural review mechanisms are not ripe, since PDR never petitioned the FCC to modify its interpretation of the TCPA.   Carlton & Harris also note that, in 2018, PDR had a chance to gain standing to file a Hobbs Act appeal by commenting on an FCC Public Notice, but the company failed to do. According to Carlton & Harris, PDR’s claim that filing a separate grievance against the FCC would have been prohibitively complicated is hypothetical and beside the point since PDR never actually did file such a grievance. The Supreme Court, Carlton & Harris conclude, should refuse to address these “hypothetical” concerns.

SEPARATION OF POWERS AND DUE PROCESS

PDR fears that the Fourth Circuit’s broad reading of “exclusive jurisdiction” would raise serious due process issues and implicate separation of powers concerns. According to PDR, such a reading would effectively bar a TCPA defendant from litigating important TCPA issues that were never decided in previous proceedings. Since PDR was not a party to any agency proceedings associated with the 2006 FCC Order, the company argues that it is now being improperly estopped from raising these issues. Additionally, PDR claims that one upshot of the Fourth Circuit’s holding is to vest the power to interpret the law in the Executive Branch, a move that violates existing Supreme Court precedent, which has preserved that right for the judiciary. PDR worries that the Hobbs Act undermines separation of powers because it allows agencies, rather than the judiciary, to “say what the law is.”

Carlton & Harris reject PDR’s constitutional arguments, characterizing them as hyperbolic. The chiropractors claim that the Hobbs Act does not bar PDR from raising issues regarding the FCC’s interpretation of the TCPA; it only requires that they do so in a court with proper jurisdiction over the claims—that is, a court of appeals. According to Carlton & Harris, PDR’s insistence that it is estopped from arguing against the FCC’s interpretation of the TCPA is misplaced since, prior to the appeal, PDR failed to make this argument before, even when it had the chance to do so in a court with proper jurisdiction. Ultimately, Carlton & Harris contend, the Hobbs Act does not strip Article III courts of their ability to say “what the law is,” but simply allows federal courts of appeals to invalidate certain agency orders.

Discussion 

JUDICIAL UNIFORMITY AND THE SCOPE OF AGENCY REVIEW

Various state and local government associations (“the Associations”), writing in support of PDR Network, agree with PDR that the Hobbs Act grants federal courts of appeals exclusive jurisdiction only to determine the validity of agency orders. According to the Associations, Congress granted the courts of appeals such “direct review” power in order to facilitate agency efficiency. The Associations explain that this case, however, does not concern an application for direct review of the validity of an order, but rather a private, civil dispute between PDR and Carlton & Harris. The Associations therefore conclude that preventing PDR from arguing against the FCC interpretation of the statute, would serve none of the Hobbs Act’s efficiency interests. The Fourth Circuit’s broad interpretation of the Hobbs Act, the Associations continue, effectively transfers legislative power from Congress to agencies, while at the same time severely restricting judicial power. Finally, the Associations argue that state governments lack the resources to keep track of newly issued agency orders, which causes judicial inefficiencies when these governments appeal. In the event that such a government wants to challenge an order of which it only just learned, the Associations contend, the Fourth Circuit’s holding would foreclose its ability to do so through a civil suit, since the holding prohibits district courts from adjudicating agency orders.

The United States, writing in support of Carlton & Harris, maintains that the Hobbs Act grants exclusive jurisdiction to the federal courts of appeals to resolve agency actions. Such exclusive jurisdiction, according to the United States, must be preserved in order to promote uniformity among the courts and maintain standardized interpretations of agency orders. The United States points to additional courts of appeals decisions to support its claim that the Hobbs Act’s “jurisdiction-channeling provision” prohibits parties from collaterally attacking agency orders in private, two-party civil suits. The United States warns that allowing private litigants to collaterally attack agency orders in a civil suit, rather than by proceeding according to the 60-day judicial review period for which the Hobbs Act provides, would lead to excessive litigation and create administrative difficulties for organizations who rely on clear, uniform agency orders. To yield to PDR’s limited reading of the courts of appeals’ “exclusive jurisdiction,” the United States implies, would be for the judiciary to overreach and intrude on the legislative branch.

POTENTIAL IMPACT OF JUDICIAL DEFERENCE TO AGENCY ORDERS

Oklahoma and five other states (“States”), writing in support of PDR Network, maintain that the Hobbs Act improperly forces district courts to defer to the FCC’s interpretation of agency orders. Such reflexive deference, the States argue, would help enable an unchecked administrative state.  Additionally, the States contend, the Fourth Circuit’s holding endangers state courts’ abilities to interpret federal statutes such as the TCPA. State courts have “concurrent jurisdiction over private suits under the TCPA,” and the States argue that the Fourth Circuit’s holding threatens to cripple these state enforcement powers. Finally, the States point out that the deference mandated by the Fourth Circuit’s holding is inconsistent with jurisdictional issues in other agency contexts, citing to a line of cases in which the Supreme Court determined that courts were not bound to defer to agencies other than the FCC.

The American Bankers Association (“the Bankers”), writing in support of Carlton & Harris, argue that the Hobbs Act does not mandate blind judicial deference to agency orders, as the States contend, but merely provides for streamlined review of agency orders by courts of appeals, which in turn results in “regulatory stability.” For example, the Bankers explain, to prevent fraud, banks rely on systems of identity verification via phone calls to their customers. Since these calls are regulated by the TCPA, bank customers benefit from a uniform system of agency order review, which the Fourth Circuit’s holding properly preserves, according to the Bankers.   More broadly, the Bankers argue, customers depend on systems of automated notifications from their banks, and the stability of these regulated systems would be upended in the event that “conflicting district court decisions” undermined agencies’ interpretations of federal statutes like the TCPA. The Electronic Privacy Information Center (“EPIC”), writing in support of Carlton & Harris, adds that since the FCC order was promulgated with the input of the public, permitting district courts to ignore the order could discourage citizens’ participation in agency rulemaking.

Edited by 

Acknowledgments 

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