Opinion
05 CV 1254 (RJD).
June 29, 2006
REPORT AND RECOMMENDATION
On March 2, 2005, plaintiff Ari Weitzner, M.D. ("Dr. Weitzner") commenced this action on behalf of himself and others similarly situated, alleging that defendant Iridex Corporation ("Iridex") had violated the Telephone Consumer Protection Act, 47 U.S.C. § 227(b)(1)(c) and the regulation promulgated thereunder, 47 C.F.R. § 64.1200(a)(3) (the "TCPA"), by transmitting one or more facsimiles advertising the commercial availability of or quality of Iridex's goods and services.
By Notice of Motion dated August 23, 2005, plaintiff seeks a protective order precluding defendant from obtaining responses to certain discovery requests. Plaintiff contends that this discovery is only relevant if there is an exemption under the TCPA for unsolicited facsimile advertisements sent by an advertiser who has an "established business relationship" with the recipient. Since plaintiff takes the position that no such statutory exemption exists, plaintiff asserts that defendant has no right to obtain the requested information.
For the reasons set forth below, the Court denies plaintiff's motion for a protective order, even though this Court concludes that a showing of an established business relationship between the advertiser and the recipient of the unsolicited facsimile is not a valid defense to a claimed violation of the TCPA.
Although the motion pending before this Court is for a protective order seeking to preclude certain discovery, because the Court's determination of the applicability of the "established business relationship" exemption to the TCPA may be dispositive of certain claims and defenses, the Court has issued its ruling as a Report and Recommendation.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Dr. Weitzner is a physician, whose office is located at 7819 Bay Parkway in Brooklyn, N.Y. (Compl. ¶ 6). Defendant Iridex is a Delaware Corporation, with executive offices located at 1212 Terra Bella Avenue, Mountain View, California. (Id. ¶ 7). According to defendant's counsel, Iridex is a small company that manufactures and sells lasers primarily to dermatologists and to ophthamologists who use the lasers in the treatment of eye diseases such as macular degeneration, glaucoma, and diabetes-related eye loss. (Tr. at 15).Plaintiff alleges that on or about August 5, 2004, defendant Iridex, or a third party acting on behalf of Iridex, knowingly and willfully transmitted a facsimile to plaintiff that advertised the availability or quality of defendant's products or services. (Compl. ¶ 8). Specifically, the facsimile at issue relates to a sale on certain lasers sold by Iridex. (Tr. at 15;see Ex. C to Declaration of Todd C. Bank, Esq., dated Aug. 23, 2005 ("Bank Decl.")). Plaintiff asserts that he did not give defendant permission to transmit these facsimiles, and thus they were unsolicited (Compl. ¶ 9), and sent in violation of the TCPA, which prohibits the sending of unsolicited facsimile advertisements. See 47 U.S.C. §§ 227(a)(4), 227(b)(1)(C). Plaintiff further alleges that during the class period, which is defined as beginning four years prior to the commencement of the action until the filing of the Complaint (the "Class Period"), defendant transmitted unsolicited advertisements by facsimile to more than 10,000 recipients, in violation of 47 U.S.C. § 227(b)(1)(C) and 47 C.F.R. § 64.1200(a)(3). (Id. ¶¶ 10, 11, 13, 16). Plaintiff filed suit, seeking on behalf of the class statutory and treble damages for willful violations, pursuant to 47 U.S.C. § 227(b)(3), plus injunctive relief.
During the course of discovery, a dispute arose as to whether Iridex is entitled to discovery relating to plaintiff's prior relationship, if any, with Iridex. (Tr. at 15). Iridex takes the position that this discovery is relevant to defendant's defense that it is not in violation of the TCPA when it sends a facsimile to a party with whom Iridex has a prior "established business relationship" (the "established business relationship" or "EBR" defense). Plaintiff argues that because the statute does not provide for such a defense, the discovery sought by defendant is irrelevant, and therefore plaintiff moves for a protective order.
Although plaintiff filed his motion for a protective order in August 2005 and oral argument was held in November 2005, shortly thereafter defendant Iridex, with plaintiff's consent, requested a stay of the Court's ruling pending the appeal to the Second Circuit from the district court's holding in Gottlieb v. Carnival Corp., 367 F. Supp. 2d 301 (E.D.N.Y. 2005). (See Letter of Tonia Ouellette Klausner, Esq., dated Jan. 23, 2006).Gottlieb raised the issue of whether federal courts have diversity jurisdiction to hear private claims brought under the TCPA, in light of the Second Circuit's earlier holding inFoxhall Realty Law Offices, Inc. v. Telecommunications Premium Services, Ltd., 156 F.3d 432 (2d Cir. 1998) (holding that jurisdiction over TCPA claims resides exclusively in the state courts and that Congress intended to divest the courts of federal question jurisdiction). See Gottlieb v. Carnival Corp., 367 F. Supp. 2d at 303-09. The Second Circuit's decision inGottlieb was rendered on February 3, 2006, see Gottlieb v. Carnival Corp., 436 F.3d 335 (2d Cir. 2006), and the stay entered in the instant action was subsequently lifted on February 13, 2006. It should be noted that Gottlieb made it clear that the TCPA, by its terms, did not divest the federal courts from hearing private causes of action where there was jurisdiction based on the diversity of the parties. Gottlieb v. Carnival Corp., 436 F.3d at 336. In the instant case, where the plaintiff is a citizen of New York, and the defendant is a Delaware corporation with its principal offices located in California (Compl. ¶¶ 6, 7), this Court may exercise jurisdiction over these claims based on the diversity of the parties. See 28 U.S.C. § 1332.
DISCUSSION
A. The Established Business Relationship Defense1) The TCPA
Enacted in 1991, the TCPA prohibits the "use [of] any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine." 47 U.S.C. § 227(b)(1)(C). The statute has been described as "a remedial statute," designed in part to "redress harms to individuals who are forced to absorb the costs associated with receiving unsolicited faxes." Hooters of Augusta, Inc. v. American Global Ins. Co., 272 F. Supp. 2d 1365, 1375 (S.D. Ga. 2003), aff'd, 157 Fed. Appx. 201 (11th Cir. 2005). The statute also prohibits (1) calls by automatic telephone dialing systems or artificial or prerecorded voice to certain categories of telephone lines, see 47 U.S.C. § 227(b)(1)(A), (2) calls to residential phones using artificial or pre-recorded voice without prior express consent, see 47 U.S.C. § 227(b)(1)(B), and (3) the use of automatic dialing systems under certain circumstances.See 47 U.S.C. § 227(b)(1)(D).
The statute contains a separate definitional section which has four subcategories defining the terms "automatic telephone dialing system," 47 U.S.C. § 227(a)(1), "telephone facsimile machine," 47 U.S.C. § 227(a)(2), "telephone solicitation," 47 U.S.C. § 227(a)(3), and "unsolicited advertisement." 47 U.S.C. § 227(a)(4). The term "telephone solicitation" is defined as the "initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services. . . ." 47 U.S.C. § 227(a)(3). This subsection of the statute contains three exceptions; it provides that such term does not include a call or message (A) to any person with that person's prior express invitation or permission, (B) "to any person with whom the caller has an established business relationship," or (C) by a tax exempt nonprofit organization. 47 U.S.C. § 227(a)(3).
The term "unsolicited advertisement" is defined in a separate subsection as "any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission." 47 U.S.C. § 227(a)(4).
2) The FCC's Interpretation
Defendant contends that the definition exempting callers with "established business relationships" from the prohibition of "telephone solicitation" applies equally to exempt the use of telephone facsimile machines for solicitation purposes when the call is made to someone with whom the caller has a prior business relationship. (Def's. Mem. at 3-5). In support of this interpretation, defendant relies on the initial Rules and Regulations Implementing the Telephone Consumer Protection Act promulgated by the Federal Communications Commission ("FCC") pursuant to statute. (See id. at 3). See also 47 U.S.C. § 227(b)(2) (stating that "[t]he Commission shall prescribe regulations to implement the requirements of this subsection," including exempting, "by rule or order" certain classes or categories of calls).
The FCC has promulgated regulations defining "established business relationship" as a "prior or existing relationship formed by a voluntary two-way communication between a person or entity and a residential subscriber with or without an exchange of consideration. . . ." 47 C.F.R. 64.1200(f)(3).
Citations to "Def's. Mem." refer to Iridex's Opposition to Plaintiff's Motion for Protective Order, filed Sept. 20, 2005.
In interpreting the provisions of the TCPA, the FCC issued an interpretation which incorporated the established business relationship exception into the provision prohibiting unsolicited facsimile advertisements. The FCC observed:
In banning telephone facsimile advertisements, the TCPA leaves the Commission without discretion to create exemptions from or limit the effects of the prohibition (see § 227(b)(1)(C)); thus, such transmissions are banned in our rules as they are in the TCPA. [47 C.F.R.] § 64.1200(a)(3). We note, however, that facsimile transmission from persons or entities who have an established business relationship with the recipient can be deemed to be invited or permitted by the recipient.7 F.C.C.R. 8752, 8779 n. 87, 1992 WL 690928 (Sept. 17, 1992). In issuing this interpretation, the FCC cited the legislative history of the TCPA, concluding that "a solicitation to someone with whom a prior business relationship exists does not adversely affect subscriber privacy interests," and that the TCPA was not intended to "unduly interfere with ongoing business relationships." Id. at 8770.
3) State Court Decisions Analyzing the EBR Defense
Numerous state courts examining the statute and its legislative history questioned whether the FCC's interpretation, applying the established business relationship exemption to facsimiles, was supported by the statute. See, e.g., Sterling Reality Co. v. Klein, 2005 TCPA Rep. 1353 (N.J.Super.Ct. Mar. 21, 2005);Clean Carton Co., Inc. v. Prime TV, LLC, 2004 TCPA Rep. 1294 (Mo. Cir. Ct. July 13, 2004); Altman v. Inside Edge, Ltd., 2004 TCPA Rep. 1291 (Mo. Cir. Ct. Aug. 2, 2004); Vertex Chem. Corp. v. Asphalt Paving Equip., LLC, 2004 TCPA Rep. 1263 (Mo. Cir. Ct. Feb. 17, 2004); Jemiola v. XYZ Corp., 802 N.E.2d 745, 749 (Ohio Ct. Com. Pl. 2003); ESI Ergonomic Solutions, LLC. v. United Artist Theatre Circuit, Inc., 2003 TCPA Rep. 1086, at *2 (Ariz. Super. Ct. July 11, 2003); Coontz v. Nextel Commc'ns, Inc., 2002 TCPA Rep. 1074, at *17 (Tex. Dist. Ct. Oct. 15, 2002); Girards v. Inter-Cont'l Hotels Corp., 2002 TCPA Rep. 1059, at *4-5 (Tex. Dist. Ct. Sept. 18, 2002); Kondos v. Lincoln Prop. Co., 2001 TCPA Rep. 1036, at *4-5 (Tex. Dist. Ct. July 12, 2001).
Many of the courts rejecting the established business relationship defense found the FCC's incorporation of this defense into the unsolicited fax provision of the statute to be at odds with the plain language of the statute. See, e.g., Vertex Chem. Corp. v. Asphalt Paving Equip. LLC, 2004 TCPA Rep. 1263 (holding "[t]here is simply no 'established business relationship' exemption to the prohibition on sending fax advertisements. That exemption applies only to telemarketing calls. . . . The only exemption for sending facsimile advertisements is for faxes sent with 'prior express permission or invitation'"). In Kondos v. Lincoln Property Co., 2001 TCPA 1036, at *4 (emphasis in original), the court noted that "the FCC's interpretation of the EBR defense would act to amend the TCPA's definition of unsolicited advertisement from a fax sent without the recipient's 'prior express invitation or permission,'to a fax sent without the recipient's prior express or implied invitation or permission. That interpretation conflicts with the plain language of the statute." See also Clean Carton Co., Inc. v. Prime TV, LLC, 2004 TCPA Rep. 1294 (holding that "[d]efendant's argument about the alleged 'business relationship' defense also fails because (a) the plain language of the TCPA makes clear that the defense does not apply to unsolicited facsimile advertisements . . ."); Penzer v. MSI Mktg. Inc., 2003 TCPA Rep. 1142, at *14 (Fla.Cir.Ct. Apr. 2, 2003) (noting that the TCPA expressly provides an EBR exclusion in the subsection that deals with telephone solicitations, but does not include the same exemption with respect to unsolicited facsimile advertisements; "[t]hus, the only logical conclusion that can be drawn from this statutory interpretation is that Congress did not intend to create an [EBR] exception to the transmission of unsolicited facsimile advertisements").
A number of courts have pointed to the language in the statute that defines "unsolicited advertisement" as material transmitted "without . . . prior express invitation or permission," and concluded that the FCC's interpretation allowing one to "deem " invitation or permission where an EBR exists, see 7 F.C.C.R. at 8779 n. 87, "runs afoul of the plain meaning of the word ['express']." Chair King, Inc. v. GTE Mobilenet of Houston, Inc., 135 S.W.3d 365 (Tex.App. May 2004), overruled on other grounds, 184 S.W.3d 707 (Tex. 2006); see also Sterling Realty Co. v. Klein, 2005 TCPA Rep. 1353 (quoting Chair King, Inc. v. GTE Mobilenet of Houston, 135 S.W.3d at 394, and noting that "'deeming permission is based on an inference and, as such, seems to conflict with the TCPA[']s requirement that the invitation or permission be express'").
Other courts have cited the legislative history of the TCPA to further support their conclusion that the EBR exemption was not intended by Congress to apply to facsimiles. One court noted that although the EBR exemption was extended to fax transmissions in an earlier version of the statute initially passed by the House of Representatives, the Senate version of the bill deleted the exemption from the fax provision while allowing it to remain in the subdivision dealing with telephone solicitations. See Schumacher Fin. Servs., Inc. v. National Fed. of Indep. Bus., 2003 TCPA Rep. 1088 (Mo. Cir. Ct. July 3, 2003); see also Schumacher Fin. Servs., Inc. v. Metropark Commc'ns, Inc., 2003 TCPA Rep. 1093 (Mo. Cir. Ct. Feb. 14, 2003) (comparing 47 U.S.C. § 227 (a)(3) with (a) (4)). The exclusion of the exemption from the final version has been found to be dispositive by a number of courts. See, e.g., Schumacher Fin. Servs., Inc. v. National Fed. Of Indep. Bus., 2003 TCPA Rep. 1088. This is because of the general precept that "'[w]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.'" Rodriguez v. United States, 480 U.S. 522, 525 (1987) (internal quotation omitted).
Defendant contends that not only are the decisions relied upon by plaintiff not binding on this Court because they are, for the most part, unpublished state trial court decisions, but many of them feature little if any discussion of the deference to be accorded the FCC's interpretation of the statute. (Def's. Mem. at 10). See, e.g., Sterling Realty Co. v. Klein, 2005 TCPA Rep. 1353; Clean Carton Co., Inc. v. Prime TV, LLC, 2004 TCPA Rep. 1294; Vertex Chem. Corp. v. Asphalt Paving Equip., LLC, 2004 TCPA Rep. 1263; Jemiola v. XYZ Corp., 802 N.E.2d at 749;Coontz v. Nextel Commc'ns, Inc., 2002 TCPA Rep. 1074; ESI Ergonomic Solutions, LLC v. United Artist Theatre Circuit, Inc., 2003 TCPA Rep. 1086; Girards v. Inter-Cont'l Hotels Corp., 2002 TCPA Rep. 1059. Moreover, defendant correctly points out that plaintiff has failed to cite contrary authority which recognized the FCC regulations and found that an EBR exemption did exist. (Def's. Mem. at 10-11). See, e.g., Texas v. American Blastfax, Inc., 164 F. Supp 2d 892, 896-97 (W.D. Tex. 2001); see also Carnett's, Inc. v. Hammond, 610 S.E.2d 529, 531 (Ga. 2005); Kaufman v. ACS Systs. Inc., 110 Cal. App. 4th 886, 911 (2003).
Defendant also notes that four of the cases cited by plaintiff are from the Missouri Circuit Court and three are from the Texas District Court. (Def's. Mem. at 10 n. 5). Many have no precedential value within their own jurisdictions because they are not published opinions. See, e.g., Tex. R. App. P. 47.7; S.C.R. App. P. 220(a); Az. R. Civ. App. P. 28(c).
Finally defendant argues that many of the decisions were rendered prior to the passage of the Junk Fax Protection Act of 2005 ("JFPA"), 47 U.S.C. § 227(b)(1)(C)(i) (2005), which made it clear that the FCC's interpretation of the EBR exemption was appropriate. (Def's. Mem. at 9). Although defendant concedes that the JFPA does not apply to the current dispute, defendant argues that the FCC's interpretation of the statute should be afforded deference. (See id. at 4). Defendant argues that this is particularly so in light of the fact that the FCC's interpretation remained in effect for over ten years and was relied upon by numerous businesses throughout the United States. (Id.) (citing FCC Reminds Consumers About "Junk Fax" Prohibition, Release No. DA 01-462, 16 F.C.C.R. 4524 (Feb. 20, 2001)).
4) The JFPA
It was not until 2003 that the FCC, in response to the split in the courts over the applicability of the EBR exemption to facsimiles, announced its intention to modify its rules; it proposed at that time that a showing of an established business relationship would no longer apply to exempt unsolicited facsimiles. See Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991 ("Rules and Regs."), 68 Fed. Reg. 44144, 44167-68 (July 25, 2003). However, the FCC delayed the effective date of its rule change on several occasions, first until January 1, 2005, and then until June 30, 2005. See 70 Fed. Reg. 37705 (June 30, 2005). On June 27, 2005, while legislation to amend the TCPA was pending in Congress, the FCC again delayed the effective date of its proposed rule change until January 9, 2006. Id. On each occasion that the FCC extended the effective date of the new interpretation, it issued a statement making clear that the EBR exemption remained in effect in the interim. See, e.g., Rules and Regs., 69 Fed. Reg. at 62816 (stating, "We emphasize that our existing TCPA rules prohibiting the transmission of unsolicited advertisements to a telephone facsimile machine will remain in effect during the pendency of this extension. Under these rules, those transmitting facsimile advertisements must have an established business relationship or prior express permission from the facsimile recipient to comply with our rules"); see also Rules and Regs., 68 Fed. Reg. at 50978; Rules and Regs., 70 Fed. Reg. at 37705-06.
Twelve days after the FCC's June 27, 2005 extension Order, Congress passed the JFPA, Pub.L. No. 109-21 (July 9, 2005), 47 U.S. § 227, rendering the FCC's rule change a nullity. The JFPA explicitly amended the TCPA to make clear that the EBR exemption applied to exclude facsimile advertisements from the prohibition of the TCPA. 47 U.S.C. § 227(b)(1)(C)(i) (2005). The legislative history reflects the view of some members of Congress that "[t]he purpose of this legislation is to preserve the established business relationship exception currently recognized under the TCPA." 151 Cong. Rec. S3280 at S53280. Other comments indicated that the change in the statutory language was intended to preclude implementation of the FCC's proposed change in the rule.Id. Thus, defendant argues that while the new provision of the JFPA does not apply to the case at hand, it serves as persuasive authority to demonstrate that "Congress always intended that the established business relationship exception [should] apply to facsimiles." (Def's. Mem. at 6).
Plaintiff contends in response that not only is the JFPA not retroactive, but subsequent legislative history may not substitute for clear statutory language. (Pl's. Reply Mem. at 16-18). Finally, plaintiff contends that because the statute is clear and because the FCC's rule was promulgated in the absence of any authority to make exemptions to the ban on facsimile advertisements, no deference need be accorded to its interpretation. (Id. at 9-10).
B. Standard of Review
Under the TCPA, judicial review of the FCC's actions are to be conducted in accordance with the standards set forth in the Administrative Procedure Act ("APA"), 5 U.S.C. § 706. See Mainstream Mktg. Servs., Inc. v. Federal Trade Comm'n, 358 F.3d 1228, 1248 (10th Cir. 2004). Under this standard, an agency's determination "may be reversed only if it is arbitrary, capricious, not supported by substantial evidence or otherwise not in accordance with the law." Neiman v. Secretary of Dep't of Health Human Servs., 722 F. Supp. 954, 957 (E.D.N.Y. 1988) (citing St. Mary's Hosp. v. Blue Cross Blue Shield Ass'n, 788 F.2d 888, 890 (2d Cir. 1986); Friedman v. Heckler, 765 F.2d 383, 384 (2d Cir. 1985)). An agency's decision may be considered arbitrary and capricious if "the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise." Motor Vehicle Mfrs. Ass'n of the United States v. State Farm Mut. Automobile Ins. Co., 463 U.S. 29, 43 (1983).
In evaluating an agency's interpretation of a statute, the court first determines "'whether Congress has directly spoken to the precise question at issue,'" and if the statute is silent or ambiguous, then the court determines "'whether the agency's answer is based on a permissible construction of the statute.'"Chevron USA, Inc. v. National Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984); see also Good Samaritan Hosp. Reg'l Med. Ctr. v. Shalala, 85 F.3d 1057, 1060 (2d Cir. 1996). Under Section 706 of the APA, the construction of a statute by the agency charged with administering the statute "is entitled to substantial deference unless it is inconsistent with the terms of the statute itself." Neiman v. Secretary of Dep't of Health Human Servs., 722 F. Supp. at 957 (citing Friedman v. Heckler, 765 F.2d at 384; Grocery Mfrs. Of Am., Inc. v. Gerace, 755 F.2d 993, 1001 (2d Cir.), aff'd, 474 U.S. 801 (1985)). Thus, it is clear that if the statute is ambiguous, the court should "defer to any reasonable construction of the statute" by the agency,Good Samaritan Hosp. Reg'l Med. Ctr. v. Shalala, 85 F.3d at 1060, and "may not substitute its own judgment" for that of the agency "solely because the court might have arrived at a different decision." Brooklyn Hosp. v. Schweiker, 596 F. Supp. 326, 328 (E.D.N.Y. 1984); see also Cosgrove v. Sullivan, 999 F.2d 630, 632-33 (2d Cir. 1993) (holding that courts must give deference to the agency's interpretation of a statute "so long as it is a permissible construction of the statute"); Binghamton Gen. Hosp. v. Shalala, 856 F. Supp. 786, 792 (S.D.N.Y. 1994) (holding that "[t]his standard of review is highly deferential").
When Congress has specifically delegated authority to an agency to promulgate rules or regulations, or to engage in an adjudicative process, the Supreme Court has found this delegation to be "a very good indicator" that Chevron deference should be applied. United States v. Mead Corp., 533 U.S. 218, 229-30 (2001); see also Binghamton Gen. Hosp. v. Shalala, 856 F. Supp. at 792 (stating, "Deference is especially appropriate where Congress has delegated responsibility for a regulatory scheme as intricate as Medicare").
Plaintiff's first argument is that the FCC was not authorized to issue a rule exempting any type of fax advertisement from the prohibition of the statute. (Pl's. Reply Mem. at 2-3). Subsection 227(b)(2) of the TCPA specifically provides that the FCC "shall prescribe regulations to implement the requirements of this subsection." 47 U.S.C. § 227(b)(2). This subsection refers to the prohibitions set forth in 47 U.S.C. § 227(b)(1). Plaintiff contends that because this provision of the statute sets forth three specific things that the FCC "shall" or "may" do in implementing the requirements of subsection (b)(1), the FCC is therefore limited to prescribing rules and regulations only in these three areas. (Pl's. Reply Mem. at 2-3). Plaintiff contends that because Congress specifically authorized the FCC to make exceptions for subsections (1)(B) and (1)(A)(iii) only,see 47 U.S.C. § 227b(2)(B), (C), the absence of any reference to facsimile advertisements means that the FCC was not authorized to issue a rule exempting EBR calls. (Pl's. Reply Mem. at 3).
These include prescribing regulations to allow businesses to avoid receiving artificial or prerecorded voice calls, 47 U.S.C. § 227(b)(2)(A); exempting by rule certain categories of calls from paragraph (1)(B), which deals with artificial or prerecorded voice calls to residential lines, 47 U.S.C. § 227(b)(2)(B); and exempting by rule calls to cell phones when the calls are not charged to the party called. 47 U.S.C. § 227(b)(2)(c).
Here, the FCC interpreted the language of 47 U.S.C. § 227(b)(2) as authorizing it to make rules respecting all of subsection (1), including Section 227(1)(c), dealing with facsimile advertisements. In reviewing an agency's construction of the statute it is tasked to administer, the court's inquiry is to first determine if the statute is silent or ambiguous with respect to the FCC's authority to prescribe rules, and if so, whether the agency's interpretation of the extent of its authority is a permissible construction of the statute. See Chevron, 467 U.S. at 842-43. Here, the FCC's conclusion that the language in Section 227(b)(2) authorized it to make rules with respect to facsimile advertisements is at least a permissible construction and is entitled to Chevron deference.
The next issue to be considered is whether the FCC's interpretation allowing the EBR exemption to apply was directly contrary to Congressional intent on this issue, or if not, whether it was a permissible construction of the statute. The Court is persuaded that this statute unambiguously limits the EBR exception to "telephone solicitations" as set forth in the definitional section of the statute. The "unsolicited advertisement" definition appears in a completely separate paragraph from the "telephone solicitation" definition and tellingly omits the EBR exemption, stating instead that the only exception is a "person's prior express invitation or permission."Compare 47 U.S.C. § 227(a)(4)(B) with 47 U.S.C. § 227(a)(5). Further support for this construction lies in the explicit omission of this EBR exemption language from the ultimate version of the section of the statute dealing with facsimile advertisements, particularly when viewed in light of its inclusion in the earlier House version. Finally, this Court agrees with the reasoning set forth in Kondos v. Lincoln Property Co., and finds that allowing an exception for the implied invitation or permission that is the foundation for the EBR exemption is directly contrary to the statute's exclusive exception for express invitation or permission, when applied to facsimile advertisements. See 2001 TCPA Rep. 1036, at *4-5; 7 F.C.C.R. at 8779 n. 87; 47 U.S.C. § 227(a)(4).
Although Congress has now clarified its intention to have this exemption apply equally to fax transmissions through the passage of the JFPA, this Court has previously questioned the wisdom of relying on subsequent legislative history in discerning Congressional intent. See In re Frank Santora Equip. Corp., 231 B.R. 486, 491 (E.D.N.Y. 1999). In In re Frank Santora Equipment Corp., the court stated: "'[o]nly if the meaning of the statute is not clear on its face should the court resort to the contemporaneous legislative history in ascertaining its meaning. Subsequent legislative history undoubtedly falls even lower in the pecking order of acceptable authority.'" Id. (internal quotation omitted). See also Jones v. United States, 526 U.S. 227, 238 (1999) (noting that "'subsequent legislative history is a "hazardous basis for inferring the intent of an earlier" congress'") (internal quotations omitted).
Moreover, unlike the cases cited by defendant, this is not a situation where "'Congress revisit[ed] a statute giving rise to a longstanding administrative interpretation without pertinent change, [where] the "congressional failure to revise or repeal the agency's interpretation is persuasive evidence that the interpretation is one intended by Congress."'" (Def's. Mem. at 7 (quoting Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833, 845 (1986) (internal quotations omitted). Rather, in enacting the JFPA, Congress felt compelled to address the split in authority over the applicability of the EBR exemption to this fax provision of the TCPA. More telling, perhaps, is the FCC's own uncertainty as to its authority to promulgate this exemption, as evidenced by its reversal of gears and its proposed elimination of the rule after ten years, once the state court decisions questioning the rule started to issue.
Accordingly, for the reasons set forth above, this Court respectfully recommends that the court issue a ruling that as a matter of law, the established business exemption does not apply to facsimile advertisements under Section 227(b)(1)(C).
C. Discovery Request
Although the Court finds that the established business relationship exemption does not constitute a defense in this case, the Court nonetheless denies plaintiff's motion for a protective order, finding that defendant's request for information relating to the prior relationship between plaintiff and defendant may lead to the discovery of admissible evidence as to whether, in the course of prior dealings, plaintiff gave Iridex or a third party express permission to send faxes related to Iridex's products, pursuant to the statutory exemption of 47 U.S.C. § 227(b)(1)(C).
Any objections to this Report and Recommendation must be filed with the Clerk of the Court, with a copy to the undersigned, within ten (10) days of receipt of this Report. Failure to file objections within the specified time waives the right to appeal the District Court's Order. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(e), 72; Small v. Sec'y of Health Human Servs., 892 F.2d 15, 16 (2d Cir. 1989).
The Clerk is directed to send copies of this Order to the parties either electronically through the Electronic Case Filing (ECF) system or by mail.
SO ORDERED.