Tricky Preemption Issue Re: Established Business Relationship Under TCPA and Do Not Call Registry
By Jason Hicks
In 2003, the Federal Trade Commission and the Federal Communications Commission jointly established a national do-not-call registry pursuant to the Telephone Consumer Protection Act (TCPA). Even when a number is listed on the do-not-call registry, solicitation calls can be placed to persons with whom the caller has an "established business relationship."
Several states have enacted their own do-not-call laws, and some of these state laws are more restrictive than the federal do-not-call rules. For example, some states do not recognize the "established business relationship" exception.
What is a business to do when faced with these differing state and federal regulations?
The answer (if there is one) lies in the Supremacy Clause of the United States Constitution. State law is preempted by federal law when: (1) Congress explicitly says so; (2) state law regulates a field that Congress intended the federal government to exclusively occupy; or (3) state law actually conflicts with federal law. See generally English v. General Electric Co., 496 U.S. 72, 110 S.Ct. 2270 (1990); Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 121 S.Ct. 2404 (2001).
Section 227(e)(1) of the TCPA contains a “savings clause” in which Congress specifically stated that the TCPA does not preempt any state law that imposes more restrictive intrastate requirements or regulations. The savings clause, however, does not address whether the TCPA preempts states from imposing more restrictive regulations on interstate calls. One can argue that the negative implication of Congress’ statement that regulation of intrastate calls are not preempted is that regulation of interstate calls may be preempted. If state law regulating interstate laws is preempted, however, then telemarketers could avoid the state regulations simply by moving their call center to a state that did not have more restrictive regulations; thus all calls made to states that had more restrictive laws would be interstate calls.
In its July 2003 Order revising the do-not-call rules, the FCC recognized the ambiguity in the TCPA’s savings clause, but nevertheless ruled 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 preempted." See In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, FCC 03-153, paragraph 84 (June 26, 2003).
Since then, several courts have addressed this issue and have come to differing and conflicting conclusions:
Utah Division of Consumer Protection v. Flagship Capital, 125 P.3d 894 (Utah 2005) (more restrictive state laws not preempted because telemarketer can comply with both).
Stenehjem v. FreeEats.Com, Inc., 712 N.W.2d 828 (N.D. 2006) (North Dakota law that prohibited calls using an automatic dialing device not preempted even though federal law contained an exception for non-commercial (political) calls), cert. denied by FreeEats.com, Inc. v. North Dakota, 127 S.Ct. 383 (2006).
FreeEats.Com, Inc. v. State of Indiana, 2006 WL 3025810 (S.D. Ind. 2006) (same with respect to Indiana law), reversed on other grounds, 502 F.3d 590 (7th Cir. 2007).
TSA Stores, Inc. v. Department of Agriculture & Consumer Services, 957 So.2d 25 (Fla. App. 2007) (TCPA did not completely preempt cause of action under Florida do-not-call statute).
Chamber of Commerce of the United States of America v. Lockyer, 2006 WL 462482 (E.D. Calif. 2006) (California law banning unsolicited faxes was preempted because it did not contain an exception for general business relationships).
Charvat v. Teleytics, LLC, 2006 WL 2574019 (Ohio App. 2006) (TCPA preempted Ohio law that prohibited calls without providing an exception for non-commercial calls and which required telemarketers to state the purpose of the call and register with the Ohio Secretary of State -- none of which was prohibited by TCPA).
Although these courts applied the same preemption analysis, they reached different conclusions and had different opinions about the interpretation of the TCPA's savings clause and the deference to be given the FCC's interpretation. It will be interesting to see how this issue is resolved. It is very possible that there will be a conflict among several state supreme courts or federal courts of appeals, in which case the issue may have to be resolved by Congress or the United States Supreme Court.
Several states have enacted their own do-not-call laws, and some of these state laws are more restrictive than the federal do-not-call rules. For example, some states do not recognize the "established business relationship" exception.
What is a business to do when faced with these differing state and federal regulations?
The answer (if there is one) lies in the Supremacy Clause of the United States Constitution. State law is preempted by federal law when: (1) Congress explicitly says so; (2) state law regulates a field that Congress intended the federal government to exclusively occupy; or (3) state law actually conflicts with federal law. See generally English v. General Electric Co., 496 U.S. 72, 110 S.Ct. 2270 (1990); Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 121 S.Ct. 2404 (2001).
Section 227(e)(1) of the TCPA contains a “savings clause” in which Congress specifically stated that the TCPA does not preempt any state law that imposes more restrictive intrastate requirements or regulations. The savings clause, however, does not address whether the TCPA preempts states from imposing more restrictive regulations on interstate calls. One can argue that the negative implication of Congress’ statement that regulation of intrastate calls are not preempted is that regulation of interstate calls may be preempted. If state law regulating interstate laws is preempted, however, then telemarketers could avoid the state regulations simply by moving their call center to a state that did not have more restrictive regulations; thus all calls made to states that had more restrictive laws would be interstate calls.
In its July 2003 Order revising the do-not-call rules, the FCC recognized the ambiguity in the TCPA’s savings clause, but nevertheless ruled 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 preempted." See In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, FCC 03-153, paragraph 84 (June 26, 2003).
Since then, several courts have addressed this issue and have come to differing and conflicting conclusions:
Utah Division of Consumer Protection v. Flagship Capital, 125 P.3d 894 (Utah 2005) (more restrictive state laws not preempted because telemarketer can comply with both).
Stenehjem v. FreeEats.Com, Inc., 712 N.W.2d 828 (N.D. 2006) (North Dakota law that prohibited calls using an automatic dialing device not preempted even though federal law contained an exception for non-commercial (political) calls), cert. denied by FreeEats.com, Inc. v. North Dakota, 127 S.Ct. 383 (2006).
FreeEats.Com, Inc. v. State of Indiana, 2006 WL 3025810 (S.D. Ind. 2006) (same with respect to Indiana law), reversed on other grounds, 502 F.3d 590 (7th Cir. 2007).
TSA Stores, Inc. v. Department of Agriculture & Consumer Services, 957 So.2d 25 (Fla. App. 2007) (TCPA did not completely preempt cause of action under Florida do-not-call statute).
Chamber of Commerce of the United States of America v. Lockyer, 2006 WL 462482 (E.D. Calif. 2006) (California law banning unsolicited faxes was preempted because it did not contain an exception for general business relationships).
Charvat v. Teleytics, LLC, 2006 WL 2574019 (Ohio App. 2006) (TCPA preempted Ohio law that prohibited calls without providing an exception for non-commercial calls and which required telemarketers to state the purpose of the call and register with the Ohio Secretary of State -- none of which was prohibited by TCPA).
Although these courts applied the same preemption analysis, they reached different conclusions and had different opinions about the interpretation of the TCPA's savings clause and the deference to be given the FCC's interpretation. It will be interesting to see how this issue is resolved. It is very possible that there will be a conflict among several state supreme courts or federal courts of appeals, in which case the issue may have to be resolved by Congress or the United States Supreme Court.
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