Facebook Wins Battle of the Canons in Supreme Court Autodialer Case

In a hotly anticipated decision that should have significant impact on litigation under the Telephone Consumer Protection Act of 1991 (TCPA), the Supreme Court held, 9-0, that the TCPA’s definition of an “autodialer” does not include equipment that merely stores telephone numbers to be dialed automatically, unless the equipment does so using a random or sequential number generator.  Facebook, Inc. v. Duguid, No. 19-511 (U.S., April 1, 2021).

Stopping unwanted or harmful telemarketing calls has long been a consumer-protection priority.  Toward that end, the TCPA prohibits certain communications made with an “automatic telephone dialing system,” or “autodialer.”  47 U.S.C. § 227(b)(1).  The TCPA defines “autodialers” as equipment with the capacity “to store and produce telephone numbers to be called, using a random or sequential number generator,” and to dial those numbers.  47 U.S.C. § 227(a)(1).  There was no dispute that the last clause (“using a random or sequential number generator”) qualifies the last verb in the preceding clause (“produce”).  The exam-worthy question before the Court, however, was whether that last clause also qualifies the first verb in the preceding clause, “store.”  Put another way, does the TCPA’s definition of autodialer apply to all equipment that “store[s] … telephone numbers to be called,” even if the equipment does not do so “using a random or sequential number generator?”  (The facts of the case play no real role here, but, for context, Facebook used equipment that stored numbers to be dialed automatically, but did not use a random or sequential number generator, so the question was whether Facebook’s equipment fell with the TCPA definition of autodialer).

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CLECs Challenge FCC’s 2019 Access Stimulation Rules

Briefing is now complete at the D.C. Circuit in the latest appeal involving the FCC’s rules on access stimulation schemes.  Access stimulation (or traffic pumping) refers to a practice in which a local telephone company partners with entities that generate large amounts of terminating long-distance traffic, such as “free” conference calling providers and chat lines.  This allows the local telephone company to generate large revenues from the access charges that long-distance carriers must pay to terminate the calls through the local telephone company.  The revenues are then shared with the conferencing or chat line entities, which allows the services to be “free” to the end users.

In 2011, the FCC declared access stimulation a “wasteful arbitrage scheme” and adopted rules to curb the practice, primarily through requiring companies engaged in traffic pumping to reduce their rates to those of the large, urban carriers.  Connect America Fund, 26 FCC Rcd 17663, ¶¶ 656-201 (2011), aff’d, In re FCC 11-161, 753 F.3d 1015 (10th Cir. 2014).  However, those rules did not reduce the practice as much as hoped.  For instance, some traffic pumpers  adjusted their schemes by including intermediate carriers (tandem and transport providers) in the call flow, which increased the overall charges.

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Deliveroo IPO raises questions around worker rights and dual class share structures

Summary

Several fund managers have elected not to participate in Deliveroo Holdings plc’s (Deliveroo) impending initial public offering (IPO), with concerns over the company’s treatment of workers and the dual class share structure. The roster includes Legal and General Investment Management, which is the UK’s largest fund manager with £1.3tn of assets under management.  Similarly, M&G, Aberdeen Standard Investments and Aviva Investors have told the Financial Times that they too will “shun” the listing (“Legal and General joins investors shunning Deliveroo IPO”, Financial Times, 25 March 2020).

Background

Deliveroo is a popular online food delivery company founded in London.  Customers use an app or website to order food from grocers, local restaurants or ‘ghost kitchens’ and the food is delivered by self-employed bicycle or motorcycle couriers.  Revenue is generated by charging fees to both restaurants and customers.

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J5 Countries (Including the U.S. and UK) Are Laser-Focused on FINtech Companies

By Hope Krebs, Partner, Duane Morris LLP

This week the Joint Chiefs of Global Tax Enforcement (J5) brought together investigators, cryptocurrency experts and data scientists in a coordinated push to track down individuals and organizations perpetrating tax crimes around the world.  The J5 (which is comprised of the Australian Taxation Office (ATO), the Canada Revenue Agency (CRA), the Dutch Fiscal Information and Investigation Service (FIOD), Her Majesty’s Revenue and Customs (HMRC) from the United Kingdom and the U.S. Internal Revenue Service Criminal Investigation Division (IRS-CI)) has been working together since 2018 to gather information, share intelligence and conduct coordinated operations in each country’s fight against transnational tax crime.

The annual meeting (referred to by the J5 as “The Challenge”) was focused this year on Financial Technology (FINtech) companies. In its press release issued March 25 (IR-2021-64), the IRS acknowledged that many FINtech companies have adopted compliance regulations and are partnering with governments and law enforcement in prohibiting financial crime.  However, the IRS cautioned that due to the online nature of the products, the novelty and the lack of regulation and compliance in some areas, the FINtech industry can be used by tax avoiders and money launderers to commit crimes.

This year the J5 Challenge was held virtually and split into multiple phases. In the first phase of the Challenge, legal experts from the five countries discussed the fiscal, compliance and criminal options that each country had regarding FINtech companies. During the second phase, the five countries developed a list of specific companies where leads suggested criminal behavior.  By the conclusion of the Challenge, the IRS press release stated that each country identified specific companies that will be a part of their investigations.

The IRS press release also touted two successes this month resulting from J5 collaboration – the early-March indictments of the CEO and an associate of Sky Global on charges that they participated in a criminal enterprise that facilitated the transnational importation and distribution of narcotics through the sale and service of encrypted communications devices, followed by the ten-count indictment earlier this week charging Jason Peltz with securities fraud, money laundering, tax evasion and a variety of other offenses.

This appears to be just the beginning of the J5’s coordinated efforts to clamp down on the use of the FINTech  industry by those seeking to evade taxes and committing financial crimes. For more on the J5, visit the IRS website.

Tenth Circuit Holds There is No Limitations Period for FCC Debt Collections

In a decision issued this week, the Tenth Circuit held that when the FCC acts to collect debts to the United States, rather than impose a fine or punishment, its actions are governed by the Debt Collection Improvements Act (DCIA), 31 U.S.C. §§ 3711-17, which means there is no limitations period.  Blanca Tel. Co. v. FCC, Nos. 20-9510 and 20-9524 (10th Cir Mar. 15, 2021).

The Universal Service Fund (USF) provides subsidies to telephone companies to promote universal availability of telephone service.  The FCC administers and enforces the rules governing the distribution of USF support to carriers.  During the relevant period (2005-2010) the FCC’s rules required incumbent local exchange carriers (incumbent LECs) to use accounting that allocated costs between regulated and unregulated activities, because those carriers could not receive USF support for unregulated activities or for service outside their designated “study area.”  Cellular service is an unregulated service for USF purposes (except for “basic” cellular service).  Blanca Telephone Co. was an incumbent LEC but did not separate its costs for regulated and unregulated service (such as cellular service), which resulted in Blanca receiving more than $6 million in USF support for non-basic cellular service and service outside its study area.

The FCC sought to recover that money in 2016 and eventually issued an order requiring repayment.  Blanca challenged the order, arguing the FCC was time-barred under either 47 U.S.C. § 503(b)(6) (one-year limitations period) or 28 U.S.C. § 2462 (five years). The FCC, however, said it acted under the DCIA, which expressly provides there is no limitations period.  31 U.S.C. §§ 3716(e)(1).  In deciding which statute applied, the first key issue was whether the FCC was imposing a penalty (and thus governed by one of the statutes Blanca cited) or engaged in debt collection.  The court held that even though Blanca violated a public law and the public was being protected by the FCC’s actions, including by deterrence of others, the action was best treated as debt collection because the FCC’s core purpose was to recover its overpayment of USF support to Blanca. The second key issue was whether the collection was of funds “owed to the United States” per 31 U.S.C. § 3701(b)(1).  The court held it was, as the FCC was collecting amounts “disallowed by audits performed by the Inspector General of the agency administering the program,” as allowed by 31 U.S.C. § 3701(b)(1)(c).  The decision is notable because, although it is tied to the specific facts of the case, it allows FCC recovery for potentially very old regulatory violations if they involve a true debt to the government.

If you have any questions regarding this post or other telecommunications issues, please contact Ty Covey (jtcovey@duanemorris.com) or Brian McAleenan (bamcaleenan@duanemorris.com).

Potential FTC Priorities Under the Biden Administration

On February 10, 2021, Acting FTC Chairwoman Slaughter delivered her keynote address “Protecting Consumer Privacy” at the Future of Privacy Forum. Chairwoman Slaughter emphasized the importance of transparent notice to consumer surrounding privacy practices, noting that it allows consumers the “dignity of knowing what is happening.”

Chairwoman Slaughter outlined the following areas of focus for FTC enforcement in 2021:

  1. Protecting privacy during the pandemic, especially in the ed-tech world, where Slaughter  emphasized the importance of children’s privacy, and health applications , including tele-health and contact tracing apps, where she discussed the importance of application of the Health Breach Notification Rule to FTC enforcement actions;
  2. Conducting a follow up study on broad band service providers’ privacy practices, continuing the work the FTC began in 2019; and
  3. Racial Equity, and the targeting of vulnerable populations by digital services, facial recognition technologies, location data, and algorithmic discrimination.

Chairwoman Slaughter also noted the importance of the FTC pursuing all methods of relief at its disposal in its enforcement actions, including disgorgement of not only monetary gains, but other benefits (like algorithms developed) from “ill gotten data.”

Read Chairwoman Slaughter’s full remarks here: https://www.ftc.gov/system/files/documents/public_statements/1587283/fpf_opening_remarks_210_.pdf

Court Declines to Apply Filed Rate Doctrine to Rates Dictated By Statute

The filed rate doctrine (also called the filed tariff doctrine) is a century-old cornerstone of regulated-industries law that, generally speaking, bars claims where the effect would be to allow a customer to receive service, or the carrier to provide service, on rates, terms, or conditions that differ from the carrier’s tariff filed with the relevant regulatory agency.  Central Office Tel., Inc. v. AT&T Corp., 524 U.S. 214, 222-23 (1998).  The rule is strict and, where it applies, unyielding.  Id.  The recent district court decision in Smith v. FirstEnergy Corp., No. 2:20-cv-03755 et al., 2021 WL 496415 (S.D. Ohio, Feb. 10, 2021), however, declined to apply the filed rate doctrine where the rates at issue were set directly by legislation.

In the summer of 2020, former Speaker of the Ohio House of Representatives Larry Householder and his political associates were indicted for an alleged $60 million-dollar federal racketing conspiracy. The criminal complaint asserted that Householder and others, in exchange for large bribes from FirstEnergy Corp., collaborated to pass House Bill 6 (HB 6), a near billion-dollar nuclear power plant bailout that would benefit FirstEnergy.  HB 6 required that a monthly surcharge be added to ratepayers’ bills (capped at 85 cents for residential customers and $2,400 for commercial customers), along with other adjustments that would increase rates.  Ratepayers sued FirstEnergy on behalf of a proposed class, asserting federal claims under RICO and other statutes and a state-law claim under the Ohio Corrupt Practices Act.  The alleged injury was having to pay costs and fees set forth in HB 6, and the plaintiffs sought both prospective relief (to stop enforcement of HB 6) and retroactive relief for charges already paid as a result of HB 6.

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UK National Security & Investment Bill

Over the past decade, the UK has seen foreign direct investment worth three-quarters of a trillion dollars. One of the key elements of the UK government’s strategy for 2021 and beyond must inevitably be to maintain and enhance the UK’s attractiveness as a place to invest and conduct business.

To read the full text of this Duane Morris Alert, please visit the firm website.

We also direct your attention to another Alert discussing the issue of foreign direct investment in Europe in a broader context influenced by the COVID-19 pandemic.