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In a decision announced this Monday, the U.S. Supreme Court turned back the clock five years on the federal law that protects American consumers from unwanted “robocalls.” Rather than striking down the entire law – which invariably would have exposed the American public to a significant increase in robocalls – the Court took a more conservative approach and struck down only one portion of the law, and let the rest stand. The consequences for the debt collection industry, and all robocallers, is significant.

The Telephone Consumer Protection Act (“TCPA”) was enacted in 1991 to regulate and prohibit a wide range of telephone and fax communications. Specifically, the TCPA bars most robocalls to cell phones. In 2015, Congress tinkered with one provision of the TCPA that bars robocalls to cell phones, and added an exception to expressly permit such calls if placed to collect government debt. This act of Congress therefore favored certain robocalls over others. Predictably, the law was challenged as unfair and unconstitutional by those who seek to make other kinds of robocalls, specifically a group of “political and nonprofit organizations that want to make political robocalls to cell phones.” The plaintiffs had asked the Court to strike down the entire TCPA – not just the government debt exception – arguing that the flawed provision was inseparable from the whole.

Barr v. AAPC, Inc. was closely watched by consumer groups and industry groups alike. The decision could affect not only the American public weary of robocalls to their cell phones, but also the many varied consumer-facing businesses who have been bitten by TCPA individual and class-action litigation in recent years. Those prognosticators who thought the whole TPCA would be struck down by this Supreme Court were sorely mistaken. At the same time, companies that depend on robocalls to cell phones to collect government debts now have to reimagine their business model or face legal jeopardy.

In arriving at its decision, the Court first recounted the ubiquity of robocalls, noting the 3.7 million complaints filed with the government in the last year. It then analyzed the 2015 amendment that provides an exception to the robocall rule if placed to collect debts – such as student loans or mortgages – that are “owed to or guaranteed by the Federal Government.”  While touting the virtue of the TCPA to combat robocalls, a majority of the Court agreed that the government-debt exception was unconstitutional. 

First, the Court determined that the robocall restriction, with the government-debt exception, is content based:

A robocall that says, “Please pay your government debt” is legal. A robocall that says, “Please donate to our political campaign” is illegal. That is about as content-based as it gets. Because the law favors speech made for collecting government debt over political and other speech, the law is a content-based restriction on speech.

The regulation of content-based speech is extremely disfavored, and is subject to “strict scrutiny” under prevailing First Amendment jurisprudence. Ordinarily, the Court would have gone on to analyze the factors to determine whether the restriction satisfied strict scrutiny, but the Court was able to skip that step: the Government had already conceded that it could not satisfy strict scrutiny. 

The Court was then left with one choice – can the unconstitutional provision be stricken from the TCPA, or must the whole of the TCPA be struck down?

None of the members of the Court agreed with the plaintiffs that the entire law should fall as a result. Rather, the Court chose to sever the unconstitutional provision, and leave the rest of the TCPA alone.

The Court’s severability analysis went all the way back to the Supreme Court’s 1803 decision in Marbury v. Madison, and cited to numerous cases throughout American history where “repugnant” provisions were removed but the rest of the statute was allowed to stand, concluding that “[t]he Court’s precedents reflect a decisive preference for surgical severance rather than wholesale destruction, even in the absence of a severability clause.”  Therefore, the Court will presume that a provision can be severed without “razing” the entire act of Congress:

Put in common parlance, the tail (one unconstitutional provision) does not wag the dog (the rest of the codified statute or the Act as passed by Congress). Constitutional litigation is not a game of gotcha against Congress, where litigants can ride a discrete constitutional flaw in a statute to take down the whole, otherwise constitutional statute.

The Court found that the TCPA could function fine without the severed provision regulating government debt, noting that, in fact, “the remainder of the robocall restriction did function independently and fully operate as a law for 20-plus years before the government-debt exception was added in 2015.” In other words, the Court turned back time on the robocall restriction, restoring it to pre-2015 status.

The plaintiffs argued that if the government-backed debt exception is severed, then at least the restriction on all robocalls to cell phones should go with it. The Court acknowledged that it could have gone either way on that issue, but it chose to leave in place the prohibition on robocalls to cell phones – including calls made for a political purpose – but to also prohibit (once again) robocalls to cell phones regarding government debt.

Takeways:

This decision will directly affect entities collecting government or government-guaranteed debts. Although this decision will only be applied prospectively, companies that have relied on this provision for the last several years must quickly tack away from robocalls to cell phones as a means of collecting government debt. Going forward, these organizations must obtain the debtor’s express consent to robocall the debtor’s cellular phone (whether by voice or text), and must cease such robocalls if the debtor revokes her consent.  In other words, collectors of government debt must once again play by the same rules as other debt collectors and other companies using robocalls to reach consumers. It is essential that collectors of government debt rapidly bolster their best practices for TCPA compliance now that they are on the same footing as collectors of private debt.

And what about the plaintiffs who sued to have the right to make political robocalls to cell phones? Well, their “victory” at the Supreme Court is a hollow one: as Justice Gorsuch points out in his partial dissent, “after today’s rul­ing, federal law bars the plaintiffs from using robocalls to promote political causes just as stoutly as it did before.” They must continue to abide by the complex requirements in the TCPA or face high-priced liability: placing calls or sending texts in violation of the TCPA exposes the sender to liability of $500 to $1,500 per call. Thousands of illegal calls could cost millions in potential damages.