Supreme Court Narrows Meaning of TCPA Autodialer Definition

Yesterday, the Supreme Court issued its decision in Facebook v. Duguid, adopting a narrow interpretation of a key definitional term in the Telephone Consumer Protection Act (TCPA) and resolving the circuit split we previously described here and here.

In effect, the Supreme Court’s opinion means that to qualify as an “automatic telephone dialing system” (ATDS) under the TCPA, a device must use a random or sequential number generator; a device that calls a prescribed set of telephone numbers without using such a number generator would stand outside that definition and thus not be regulated by the TCPA.

By way of background, the TCPA imposes a consent requirement on calls or text messages that are placed using an ATDS.  The TCPA defines an ATDS as equipment that has the capacity “to store or produce telephone numbers to be called, using a random or sequential number generator,” and to dial such numbers.  The federal appeals courts were split on how to interpret this definition—specifically whether the clause “using a random or sequential number generator” modifies both “store” and “produce,” or whether the clause modifies only “produce.”  The practical difference is that the former approach excludes devices that have the capacity to dial only a prescribed set of telephone numbers.  The latter approach, which the Supreme Court rejected in Duguid, is more expansive, sweeping in any and all equipment that has the capacity to store telephone numbers to be called and to dial those numbers.

In a 9-0 decision authored by Justice Sotomayor, the Court adopted the narrow interpretation.  The Court held that to qualify as an ATDS—and therefore fall within the ambit of the TCPA—a device must have the capacity to store or produce a telephone number using a random or sequential number generator.  The Court reached this conclusion applying a careful analysis of the statutory text, noting that the narrow interpretation is the “most natural reading” of the statute and that it comports with “conventional rules of grammar.”  The Court also found that this interpretation aligns with the TCPA’s “statutory context,” which suggests that Congress was particularly focused on harms produced by random or sequential number dialing.  Finally, the Court noted that a contrary reading of the statute would render “almost all modern cell phones as autodialers,” an outcome the Court appeared eager to avoid.

Duguid is a significant ruling that places important guardrails on the scope of the TCPA, which has generated substantial and costly class-action litigation in recent years.

Use of FEC Data – The Vice Chair Says the FEC Has Taken “A Wrong Turn”

There are few things as seductive in politics today as good data, and few things as challenging for commercial firms as the statutory bar on the use of FEC data for commercial purposes.  That came to a head yesterday, when the FEC was unable to reach a decision on an advisory opinion request on use of the FEC’s donor data to, among other things, confirm the identity and score potential donors in a client’s existing database.  The case highlights the gap between the regulated community and where a majority of FEC Commissioners may soon take the law.

Aluminate, a commercial vendor that helps clients – often colleges and universities – refine their donor data to more accurately identify and target fundraising and outreach programs, asked the FEC for permission to use the FEC’s donor data when screening their clients’ databases.  The company did not want to use the FEC data to build contact information or to convey to clients specific information about particular individual’s donor history.  Instead, it intended to use the FEC data to better identify the interests of those in the database and score those more likely to respond to particular ‘asks’ the client might have. AO Request.

The initial draft opinion concluded that this was in conflict with the statute’s prohibition on data submitted to the agency being “sold or used by any person for the purpose of soliciting contributions or for commercial purposes…”  52 U.S.C. 30111(a)(4).  FEC AO 2021-01 Draft A This conclusion was met with a fervent cry from Perkins Coie’s political law group – writing as practitioners rather than for any particular client – that such practices were already common and are consistent with the FEC’s precedent on the use of its data.  Perkins Comments.  This was shortly followed by a competing draft response that concluded the request was entirely permissible.  FEC AO 2021-01 Draft B.

Some of what followed was entirely predictable to those who have followed the FEC over the past decade.  The three Commissioners associated with the Democratic Party (Chair Broussard and Commissioners Walther and Weintraub) voted for the original draft prohibiting the conduct.  Two Commissioners associated with the Republican Party (Commissioners Cooksey and Trainor) voted for the draft permitting the conduct.  The most noteworthy feature of the day was the decision of Vice Chair Dickerson to abstain.

In comments at the hearing, Vice Chair Dickerson said that he had concluded that the Commission’s prior decisions on this question had been overly permissive, and had drifted away from a fair reading of Congress’ intent in passing the law.  He emphasized that this data – reflecting citizens’ association with political candidates and causes – brought with it a significant privacy interest that prior FEC decisions had failed to accurately weigh.  His concern with fair notice and the regulated community’s reasonable reliance on prior decisions prevented him from voting to roll back those decisions in this case, but he was unwilling to proceed down a path of legal analysis that he thought was “a wrong turn.”  Consequently, he abstained and the matter failed 3-2.

This matter is important for those who would like to use FEC data in modeling for a commercial purpose or as a tool for solicitations.  The law did not change yesterday, but certainly a flag was raised that this is an area in which practitioners should not assume that precedent teaches them where the FEC will land in future cases.  This particular matter is only partially instructive, for it also highlighted the advantage of using experienced FEC counsel: the facts were at times obscured in a way that increased Commissioners’ suspicions, arguments were raised that were certain to fall on deaf ears, and helpful precedent was ignored.  But that said, Vice Chair Dickerson is a student of this area of law, and if he has concerns that prior decisions are misguided in an area of constitutional importance, everyone interested in how FEC data can be used should be alert to that concern and any statements he may issue later on this issue.

California Recall Contribution Limits Would Vary for Newsom and Replacement Candidates

It appears increasingly likely that California Governor Gavin Newsom will face a recall election, leading to questions about how to support or oppose his removal.  The “recall” will actually consist of two ballots, voted at the same election—a vote on whether to recall Newsom and a vote for his replacement if the recall passes.  Potential contributors may be surprised to learn that the state’s contribution limits apply differently to groups supporting or opposing the recall vote than to candidates seeking to replace Newsom.

Groups that are supporting or opposing the recall vote—that is, groups that are organized around whether to vote “Yes” or “No” on whether to recall Gov. Newsom—are not subject to any contribution limits.  Gov. Newsom himself is allowed to control such a committee, and he has already set one up into which he can raise unlimited contributions to defeat the recall; recall supporters have done the same.

Candidates running to replace the governor, however, are subject to contribution limits.  Those candidates will be subject to standard California limits for gubernatorial candidates, which were recently raised to $32,400 per election from an individual, business entity, or committee/PAC.  Thus, replacement candidates will be subject to limits, while Gov. Newsom can raise unlimited amounts from supporters to keep his current office.

The California Fair Political Practice Commission (“FPPC”) has published additional information on how the campaign finance laws apply to recall elections here.

Note that California has some of the country’s most complex campaign finance laws.  The amount and permissibility of contributions in the state may be affected by factors other than the limits above, including contributions by individuals and entities affiliated with the contributor; the contributor’s lobbying activity; and the contributor’s state or local contracting and permitting activity.  Additionally, the federal prohibition on contributions from foreign nationals applies to state races as well.  California also has a variety of disclosure requirements for contributors and lobbyists that should be reviewed and considered before making a contribution, including required disclosure of large pre-election contributions and periodic disclosure by “Major Donors,” among others.

Employees Running for Public Office: Political Law Compliance Considerations

Even corporations with careful political law compliance practices can be caught off guard when they learn that an employee is running for public office. The corporation may have a good understanding of what the corporation’s obligations and restrictions are in the political arena, but not fully know how to handle the compliance issues stemming from an employee’s personal candidacy. This alert describes three practical steps that corporations should take to ensure they are complying with the relevant campaign finance and ethics rules.

Understanding H.R. 1 (Part 4): Conflict-of-Interest and Revolving-Door Issues

With a growing chorus of support across the progressive landscape, the For the People Act of 2021 has emerged as a key legislative priority for congressional Democrats in the 117th Congress.  Envisioned as a “transformational anti-corruption and clean elections reform package,” the bill would enact sweeping changes to federal election laws along with important changes to federal campaign finance, lobbying, and government ethics laws.  Taken together, these changes would have significant implications for private parties engaged in all manner of political activity.

After House Democrats relied on their slim majority to pass the For the People Act, the bill now faces more uncertain prospects in the evenly divided Senate.  Nonetheless, Democratic leaders are sure to continue to press aggressively to move the bill through the upper chamber.  Likewise, even absent passage of the entire package, Democrats may look for opportunities to pass key elements of the broader bill on a bipartisan basis.

To assist clients in understanding how the For the People Act would affect their existing activity and compliance obligations, this alert is the fourth of several that will provide insights into key elements of the bill and what they mean for our clients.  This alert addresses the bill’s proposed changes to the federal conflict-of-interest and revolving-door provisions.

Understanding H.R. 1 (Part 3): Political Activity on the Internet

With a growing chorus of support across the progressive landscape, the For the People Act of 2021 has emerged as a key legislative priority for congressional Democrats in the 117th Congress.  Envisioned as a “transformational anti-corruption and clean elections reform package,” the bill would enact sweeping changes to federal election laws along with important changes to federal campaign finance, lobbying, and government ethics laws.  Taken together, these changes would have significant implications for private parties engaged in all manner of political activity.

After House Democrats relied on their slim majority to pass the For the People Act, the bill now faces more uncertain prospects in the evenly divided Senate.  Nonetheless, Democratic leaders are sure to continue to press aggressively to move the bill through the upper chamber.  Likewise, even absent passage of the entire package, Democrats may look for opportunities to pass key elements of the broader bill on a bipartisan basis.

To assist clients in understanding how the For the People Act would affect their existing activity and compliance obligations, this alert is the third of several that will provide insights into key elements of the bill and what they mean for our clients.  This alert addresses the bill’s proposed changes to the federal rules governing political advertising and other activity on the internet.

Understanding H.R. 1 (Part 2): Changes to the Lobbying Disclosure Act and Foreign Agents Registration Act

With a growing chorus of support across the progressive landscape, the For the People Act of 2021 has emerged as a key legislative priority for congressional Democrats in the 117th Congress. Envisioned as a “transformational anti-corruption and clean elections reform package,” the bill would enact sweeping changes to federal election laws along with important changes to federal campaign finance, lobbying, and government ethics laws. Taken together, these changes would have significant implications for private parties engaged in all manner of political activity.

After House Democrats relied on their slim majority to pass the For the People Act, the bill now faces more uncertain prospects in the evenly divided Senate. Nonetheless, Democratic leaders are sure to continue to press aggressively to move the bill through the upper chamber. Likewise, even absent passage of the entire package, Democrats may look for opportunities to pass key elements of the broader bill on a bipartisan basis.

To assist clients in understanding how the For the People Act would affect their existing activity and compliance obligations, this alert is the second of several that will provide insights into key elements of the bill and what they mean for our clients. This alert addresses the bill’s proposed changes to the Lobbying Disclosure Act (“LDA”), the main federal law regulating lobbyists, and to the Foreign Agents Registration Act (“FARA”), a statute that requires the “agent” of a foreign “principal” to register and disclose certain political, lobbying and public relations activities.

LDA’s Registration Threshold Increases By $1,000

Under the federal Lobbying Disclosure Act (“LDA”), an organization or lobbying firm must register if it employs an individual who meets the definition of a “lobbyist” and if its total expenses or income for lobbying activities meet certain monetary thresholds.  The two non-monetary thresholds determining when an individual becomes a “lobbyist,” discussed below, are usually the main factors driving when an organization or lobbying firm must register.  However, the monetary thresholds, one of which was recently increased from $13,000 to $14,000, may affect the registration obligations of entities engaged in only a de minimis amount of lobbying.

Under the LDA, the test for determining if an employee of an organization or lobbying firm qualifies as a lobbyist is two-pronged:

  1. Has the individual made two or more federal lobbying contacts on behalf of the organization (for in-house employees) or a firm client (for lobbying firms) at any time? and
  1. Has that individual spent 20% or more of his or her work time for the organization (for in-house employees) or that particular client (for lobbying firms) engaged in federal lobbying activities during any three-month period?

If both prongs of the test are satisfied, the individual qualifies as a “lobbyist” for LDA purposes and the organization or lobbying firm likely must register under the LDA, listing that lobbyist and the organization/client on its registration and disclosure reports.

Although employing a lobbyist usually leads to registration by the employer, the LDA provides an exemption from registration for organizations employing in-house lobbyists that spend no more than $14,000 (recently increased from $13,000) on lobbying activities in a quarterly period.  For lobbying firms, this threshold is $3,000 (unchanged from previous levels) in income from a client for lobbying activities in a quarterly period.  These thresholds are indexed for inflation every four years and rounded to the nearest $500.  The new $14,000 threshold for organizations is effective as of January 1, 2021.

Because these monetary thresholds are low, compensation associated with employees who meet the relatively high threshold of becoming a “lobbyist” will almost always cross these thresholds.  But for certain smaller organizations or non-profits, this threshold may be a factor in the LDA registration decision, as it may be for lobbying firms with a de minimis amount of activity on behalf of a particular client.  In addition, it is these monetary thresholds that exempt lobbying firms from triggering registration on behalf of certain pro bono clients.

The application of the LDA’s registration thresholds and triggers involves a detailed analysis of the activities of an organization or a firm, which must consider the broad and multi-factored definition of a “lobbying contact,” and the even broader definition of “lobbying activities.”  Covington has advised numerous clients on LDA registration requirements as applied to those clients’ activities.  If you have any questions on whether your organization is required to register under the LDA, please reach out to a member of our Election and Political Law Group.

Understanding H.R. 1 (Part 1): Corporate & Trade Association Campaign Activity

With a growing chorus of support across the progressive landscape, the For the People Act of 2021 has emerged as a key legislative priority for congressional Democrats in the 117th Congress. Envisioned as a “transformational anti-corruption and clean elections reform package,” the bill would enact sweeping changes to federal election laws along with important changes to federal campaign finance, lobbying, and government ethics laws. Taken together, these changes would have significant implications for private parties engaged in all manner of political activity.

After House Democrats relied on their slim majority to pass the For the People Act, the bill now faces more uncertain prospects in the evenly divided Senate. Nonetheless, Democratic leaders are sure to continue to press aggressively to move the bill through the upper chamber. Likewise, even absent passage of the entire package, Democrats may look for opportunities to pass key elements of the broader bill on a bipartisan basis.

To assist our clients in understanding how the For the People Act would affect their existing activity and compliance obligations, this alert is the first of several that will provide insights into key elements of the bill and what they mean. This alert addresses the bill’s proposed changes to the campaign finance rules, the greatest impact of which is new disclosure obligations for politically active corporations (including non-profit entities and for-profit companies) and trade associations. As discussed in this alert, the bill makes what should be only minor changes to the operation of most PACs, primarily in clarifying the bar on the participation of foreign nationals.

 

FEC Provides Short Webinar Training for Candidate Committees

The Federal Election Commission (“FEC”) is offering a 90-minute online training session on Wednesday, April 7th, for campaign committees that use FECFile to file their disclosure reports.  The purpose of this training is to address common filing problems and to provide answers to questions committees may have prior to their quarterly FEC filing.  FEC staff will demonstrate the FEC’s free electronic filing software and will be available to answer questions.  The cost to register is $30 and you can find our more and register here.  Registration is offered on a first-come, first-served basis.  These short trainings are valuable opportunities for candidates, and their staff, to stay up-to-date on FEC compliance related matters.

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