Whither California's Strict New "Junk Fax" Law?
Posted by Ronald G. London
A federal court judge in Sacramento has issued a declaratory ruling that the federal Telephone Consumer Protection Act ("TCPA") preempts a new California law, slated to take effect the first of this year, to impose stricter regulations on unsolicited advertisements via facsimile by trumping an exception for faxes sent pursuant to an established business relationship ("EBR") codified by Congress in last year's Junk Fax Prevention Act. The decision renders new Section 17538.43 of California's Business and Professions Code - which has never taken effect due to a provisional stay the court issued late last year - effectively unenforceable against interstate commercial faxes sent into California from outside the state. It also throws into doubt the law's remaining vitality with respect to intrastate faxes.
The state law - and the lawsuit - arose out of changes to the federal "junk fax" regime described here and here. In short, from the FCC's original implementation of the TCPA in 1992, and continuing until 2003, the agency's rules held the TCPA's ban on sending advertisements to facsimile machines did not reach faxes sent under an EBR since the preexisting, ongoing affiliation between sender and recipient implicitly rendered the faxes not "unsolicited." In 2003, however, the FCC reversed itself on this "EBR exemption" and held that, going forward, only prior written consent would suffice to permit fax ads under the TCPA. The backlash in the business community was as quick and vigorous as it was predictable. The FCC immediately stayed the effectiveness of its new interpretation, and repeatedly extended the stay as Congress in 2004 considered but could not pass, then in 2005 finally did pass, legislation (which the FCC now has a rulemaking pending to implement) that restored and codified the EBR exemption.
Meanwhile, California, seeing the FCC effort to eliminate the EBR exemption fail in its infancy, introduced SB 833 in 2005, which became Section 17538.43 of the Business Code, in an effort to provide the state's residents more stringent protection from unwanted faxes than the federal law affords. Once the law passed, a petition was lodged with the FCC for a declaratory ruling that the TCPA preempted the California law, and any other laws other states had, or may in the future adopt, that conflict with the TCPA and Junk Fax Prevention Act. The petition remains pending. At the same time, The Chamber of Commerce of the United States and Xpedite Systems filed suit in federal court seeking to have the new law invalidated with respect to interstate faxes.
As noted, the court granted a provisional stay to prevent the law from taking effect, and recently ruled that the TCPA preempts Section 17538.43 from applying to interstate faxes. The decision is significant because it is one of the first to adopt an interpretation of the TCPA's preemption provision, 47 U.S.C. ㋔ 227(e), that the business community has staunchly advocated and the FCC has provisionally accepted, but declined to apply except under a case-by-case framework (under which it has yet to rule on a single preemption petition). Specifically, Section 227(e) states that nothing in the TCPA preempts state laws that "impose more restrictive intrastate requirements or regulations on, or which prohibit," among other things, unsolicited fax ads (it also applies to various forms of telemarketing). States nevertheless tend to take the position that general police powers allow them to reach interstate faxes and telemarketing and/or that Section 227(e) must be read in the disjunct so that the preservation of state powers is limited to intrastate communications only with respect to "requirements and regulations" and the reservation of state power on prohibitions may apply to inter- or intrastate transmissions. The federal court ruling in Chamber of Commerce v. Lock❽yer substantially undercuts that position, however.
The decision also throws into question whether Section 17538.43 can survive in any respect and apply to intrastate faxes within California. In issuing its ruling, the court ruled only on the Chamber's and Xpedite's request for declaratory relief, and reserved for further consideration, after further proceedings, the question of whether, and to what extent, to enjoin operation of the state's law. The law does not have a severability clause which would allow any portion of it not subject to invalidation by declaratory judgment or injunction to remain viable. Accordingly, since the law has been preempted, and may yet be enjoined, it is unclear whether any intrastate application of the law can still legally be enforced.
News reports suggest the California Attorney General's office has opined it is unclear whether the state can enforce the law with respect to intrastate faxes until the court issues a final ruling. A spokesman for Attorney General Lockyer indicated they are reviewing the decision and will decide later (after the court's final ruling, this writer assumes) whether to appeal. However, the Attorney General's spokesman indicated the state will continue to argue the law is not preempted and that it retains some viability under the TCPA's preemption clause.
