February 28, 2006

Federal Court Preempts California Fax Law For Interstate Faxes: The Implications for Associations Nationwide

5 min

February 28, 2006

Last night, in an important decision for associations and business that send faxes to or from (or within) California, a United States District Court in California issued a decision holding that California's SB 833, which was passed in response to the federal Junk Fax Prevention Act ("JFPA"), is preempted as it applies to interstate faxes. The JFPA codifies the established business relationship ("EBR") exemption to the general ban on sending faxes that contain unsolicited advertisements found in the Telephone Consumer Protection Act ("TCPA"). SB 833 purported to require express consent for all faxes sent to or from (or within) California.

Before the law took effect, the U.S. Chamber of Commerce and others sued in federal court, arguing that the Federal Communications Act and the TCPA preempted SB 833 as it applies to interstate faxes. The court issued an initial stay of the law in January. The decision last night holds that SB 833 is preempted by the TCPA for interstate faxes. The court put off a decision as to the exact nature of its remedy. That is, it will determine at a later date whether it can strike down SB 833 merely as it applies to interstate faxes, or whether it must strike down the entire law because part of it is preempted by the TCPA. This will involve fairly technical arguments about the "severability" of the law. Once it makes that decision (after further briefing by the parties), the court will issue a final order. At that time, it is probably likely that California will appeal to the Ninth Circuit Court of Appeals (it may be possible for it to do so sooner). Nonetheless, at this time, the court's order makes clear that SB 833 is preempted as to interstate faxes.

The court first rejected the argument by the Chamber that the Communications Act broadly prohibits states from regulating interstate communications at all. "Instead, the Court must narrow its focuses to whether the [TCPA] grants to the States the right to regulate the transmission of unsolicited facsimile advertisements as California purports to do through SB 833." For this, the court looked to the plain language of the TCPA's preemption clause and found that it does not allow states to impose regulations on interstate faxes. The court rejected what it considered California's "ungainly" reading of the TCPA that would have allowed the state to (1) prohibit interstate faxes and (2) impose additional restrictions on intrastate faxes. Rather, the court found that the TCPA allows states to impose more restrictive requirements on intrastate faxes, which they would not be allowed to do without this provision. At the same time, the court found that this grant of authority to the states by the TCPA prohibits them from imposing additional requirements on interstate faxes.

Overall, the court's reasoning appears to be sound, if not slightly confusing. The second part of the decision, discussing the plain meaning of the TCPA, is exactly right, in our view. It rejects the reading put forth by California in this case, and by most of the other states before the Federal Communications Commission ("FCC"), that the preemption provisions of the TCPA allow them both to ban interstate faxes (and other forms of telemarketing) and impose additional requirements on intrastate faxes. This decision is thus important to the overall effort to preempt all state laws as they apply to interstate faxing and telemarketing. The first part of the decision seems to reject the argument that the FCC has plenary jurisdiction over interstate faxes ("the Court cannot dispose of the matter before it by summarily concluding that, as a matter of law, the FCC has plenary jurisdiction to regulate interstate telecommunications thereby precluding California from doing so"). Nonetheless, the court then said that it had to determine "whether the Federal Law grants to the States the right to regulate the transmission of unsolicited advertisements." This seems to imply that the states would be prohibited from doing so by virtue of the Communications Act unless there is some specific grant of authority to do so (yet, the Court seems to have said the opposite). Thus, although styled as a preemption analysis in the second part, the Court actually appears to be saying that there is no such specific grant of authority. In the end, it probably does not matter, because the decision is clear that the TCPA governs interstate faxes. The decisions also should be helpful with the petitions for declaratory ruling before the FCC requesting that all state telemarketing laws be preempted for interstate calls (although, due to a complicated and technical decision by the U.S. Supreme Court last year, the FCC potentially is free to ignore the decision because the court did not say that the statute was not ambiguous).

In sum, based on this decision, it is safe to send faxes to or from California if you have an EBR with the recipient (and if you follow the other requirements of the JFPA, such as the opt-out notice). You cannot, however, send faxes entirely within California based merely on an EBR, because SB 833 still will apply to such faxes. We will continue to monitor this case for an additional order regarding the scope of the decision and whether it is appealed.

Finally, here is a link to a prior article of ours on the JFPA and its implications for associations.

If you have any questions or concerns or need assistance understanding or implementing the requirements of the JFPA, please contact Ronald Jacobs at 202-344-8215, rmjacobs@venable.com.