SOUNDBOARD ASSOCIATION v. UNITED STATES FEDERAL TRADE COMMISSION
MEMORANDUM OPINION AND ORDER denying 23 Plaintiff's Motion for Injunction Pending Appeal. See attached Memorandum Opinion and Order for additional details. Signed by Judge Amit P. Mehta on 05/10/2017. (lcapm3)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
U.S. FEDERAL TRADE COMMISSION,
Case No. 17-cv-00150 (APM)
MEMORANDUM OPINION AND ORDER
On April 24, 2017, this court rejected Plaintiff Soundboard Association’s challenge under
the Administrative Procedure Act to a letter issued by the staff of Defendant Federal Trade
Commission (“FTC”). The letter announced that the FTC staff now viewed telemarketing calls
using soundboard technology—a technology by which telemarketers use a combination of
prerecorded audio clips and live sales agents to contact and communicate with consumers—as
subject to the same restrictions placed on traditional robocalls, in which a live sales agent never
interacts with the consumer. Soundboard Ass’n v. U.S. Fed. Trade Comm’n, No. 17-cv-00150,
2017 WL 1476116, at *1 (D.D.C. Apr. 24, 2017). As pertinent here, the court held that the FTC
staff’s letter, dated November 10, 2016 (“November 2016 Letter”), was not a legislative rule
requiring notice and comment, but instead was an interpretive rule that the agency was free to
issue outside such formal process. Id. at *2.
Plaintiff believes the court got it wrong, and now seeks to enjoin the November 2016
Letter pending review on appeal. Pl.’s Mot. for Inj., ECF No. 23 [hereinafter Pl.’s Mot.]. For
the reasons explained below, the court denies Plaintiff’s Motion for an Injunction Pending
Rule 62(c) of the Federal Rules of Civil Procedure authorizes a district court to issue an
injunction pending appeal. Fed. R. Civ. P. 62(c). A motion brought under Rule 62(c) is subject
to the same four criteria as a motion for preliminary injunction. Wash. Metro. Area Transit
Comm’n v. Holiday Tours, Inc., 559 F.2d 841, 842–43 (D.C. Cir. 1977). The moving party
“must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable
harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an
injunction is in the public interest.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20
(2008); accord Cuomo v. U.S. Nuclear Regulatory Comm’n, 772 F.2d 972 (D.C. Cir. 1985) (per
curiam) (citing Holiday Tours, 559 F.2d at 843–44).
It “remains an open question” in the D.C. Circuit how trial courts are to weigh those four
factors in evaluating a motion for injunctive relief. Aamer v. Obama, 742 F.3d 1023, 1043 (D.C.
Cir. 2014). This Circuit has long adhered to the “sliding scale” approach, whereby “a strong
showing on one factor could make up for a weaker showing on another.” Sherley v. Sebelius,
644 F.3d 388, 392, 398 (D.C. Cir. 2011). In the context of a motion under Rule 62(c), that
means a party may make up for a lesser showing of a likelihood of success as long as it presents
a “substantial case” on appeal and makes a strong showing on the other three factors. Holiday
Tours, 559 F.2d at 843–44; Sherley, 644 F.3d at 392–93. Ultimately, a court asks whether all
four factors “taken together” favor a preliminary injunction. Davis v. Pension Ben. Guar. Corp.,
571 F.3d 1288, 1292 (D.C. Cir. 2009).
Some judges of the D.C. Circuit have expressed the view that the Supreme Court’s
decision in Winter supplants the “sliding scale” approach, and a movant cannot obtain an
injunction without showing “both a likelihood of success and a likelihood of irreparable harm.”
Sherley, 644 F.3d at 392. The Circuit has not, however, expressly disavowed adherence to the
sliding scale approach. Thus, the open question remains “whether the ‘likelihood of success’
factor is ‘an independent, free-standing requirement,’ or whether, in cases where the other three
factors strongly favor issuing an injunction, a plaintiff need only raise a ‘serious legal question’
on the merits.” Aamer, 742 F.3d at 1043 (quoting Sherley, 644 F.3d at 393, 398).
This court need not resolve that question here, for whether the court treats Plaintiff’s
likelihood of success as an independent, freestanding requirement or evaluates all four injunction
factors on a sliding scale, the result is the same: Plaintiff has not demonstrated that it is entitled
to an injunction pending appeal.
Plaintiff Has Not Demonstrated a Likelihood of Success on the Merits
Plaintiff advances two reasons why it has demonstrated a likelihood of success on the
merits despite the court having ruled against it. First, it contends that the court failed to address
its primary argument as to why the November 2016 Letter constituted a legislative, rather than an
interpretive, rule. Second, Plaintiff submits that the case presents a close legal question in an
ambiguous area of the law, which should cut in favor of granting injunctive relief pending
appeal. The court addresses each argument in turn.
Whether the FTC’s November 2016 Letter Substantively Amends Prior
Plaintiff asserts that it has made out a substantial case on the merits because the FTC’s
November 2016 Letter can only be properly understood as a legislative rule that worked a
substantive change in the law governing the telemarketing industry. Plaintiff contends that “this
[c]ourt did not squarely address [its] principal argument”: “Because the FTC’s prohibition on
any outbound telemarketing call that delivers ‘a prerecorded message’ (the ‘robocall
prohibition’) cannot reasonably be interpreted to prohibit soundboard calls, the November letter
cannot be justified as merely an interpretation of the robocall prohibition.” Pl.’s Mot. at 4.
Stated another way, Plaintiff argues that “the [robocall] prohibition cannot fairly be understood
to authorize the FTC to prohibit calls made using soundboard technology.” Id. at 6.
Contrary to Plaintiff’s contention, the court did not “stop short” of addressing Plaintiff’s
“principal argument.” Id. at 4, 8. The court recognized that the dividing line between legislative
and interpretive rules—albeit not a bright one—is exactly where Plaintiff would draw it in this
case. As the court wrote: “The distinguishing characteristic between the two [types of rules],
therefore, is whether the new rule effects a ‘substantive’ regulatory change to the statutory or
regulatory regime.” Soundboard Ass’n, 2017 WL 1476116, at *10 (internal quotation marks
omitted). Or, as the Circuit stated in U.S. Telecom Association v. FCC: “[F]idelity to the
rulemaking requirements of the APA bars courts from permitting agencies to avoid those
requirements by calling a substantive regulatory change an interpretative rule.” 400 F.3d 29, 35
(D.C. Cir. 2005).1 By finding the November 2016 Letter to be an interpretive rule, the court
correlatively concluded that the Letter did not effect a substantive change to the regulatory
regime. Indeed, the court expressly held that the November 2016 Letter “does not supplement or
effect a change to the statutory or regulatory scheme applicable to telemarketers.” Soundboard
Plaintiff cites various cases for the proposition that an agency rule that exceeds the scope of an existing legislative
rule is legislative. Pl.’s Mot. at 7, 9 (citing AT&T Corp. v. FCC, 841 F.3d 1047 (D.C. Cir. 2016); Natural Resources
Defense Council v. EPA, 643 F.3d 311 (D.C. Cir. 2011); and American Mining Congress v. Mine Safety & Health
Administration, 995 F.2d 1106 (D.C. Cir. 1993)). The court does not quibble with that precedent. The controlling
inquiry in deciding whether the November 2016 Letter is a legislative rule under this test nevertheless remains
whether it effected a substantive change to the regulatory regime. See U.S. Telecom Ass’n, 400 F.3d at 35.
Plaintiff cites to passages within the preamble to the FTC’s 2008 rulemaking, which led to the robocall regulation,
Ass’n, 2017 WL 1476116, at *11. Plaintiff’s repeated insistence that it did so does not change
Little, if anything, about the November 2016 Letter supports Plaintiff’s position. The
FTC did not arrogate to itself powers beyond those granted by Congress. The Telemarketing and
Consumer Fraud and Abuse Prevention Act authorized the FTC to “prescribe rules prohibiting
deceptive telemarketing acts or practices and other abusive telemarketing acts or practices” and
to enforce them. 15 U.S.C. §§ 6102(a)(1), 6105. Specifically, Congress directed the FTC to
adopt rules providing, among other things, that “telemarketers may not undertake a pattern of
unsolicited telephone calls which the reasonable consumer would consider coercive or abusive of
such consumer’s right to privacy.” Id. § 6102(a)(3)(A). The FTC staff’s issuance of the
November 2016 Letter fits comfortably within that broad statutory authority. Plaintiff does not
Nor did the Letter expand the scope of the FTC’s authority under its own regulations to
set restrictions regarding the delivery of “prerecorded messages.” The regulations declare it an
“abusive telemarketing act or practice and a violation of this Rule for a telemarketer” to
“initiat[e] any outbound telephone call that delivers a prerecorded message” without first
obtaining “an express agreement, in writing” from the consumer. 16 C.F.R. § 310.4(b)(1)(v).
The November 2016 Letter does not stray beyond the outer boundaries of that provision. The
FTC did not, for instance, declare in the Letter that it could impose the written-consent
requirement on non-telemarketing calls or that it could regulate telemarketing calls that do not
deliver prerecorded messages.
Such changes unquestionably would have constituted a
substantive change to the regulatory regime and required notice and comment to implement.
The November 2016 Letter also does not require a strained reading of the regulation’s
plain text in order to apply it to soundboard calls. Not even Plaintiff disputes that the November
2016 Letter applies the robocall regulation only to soundboard technology that is used to make
(1) “outbound” (2) “telephone call[s]” that (3) “deliver” (4) a “message.” Id.; see Pl.’s Reply,
ECF No. 25 [hereinafter Pl.’s Reply], at 2 (“Of course soundboard calls deliver messages.”).
The nub, of course, is whether a soundboard telemarketing call is “prerecorded,” as that term is
used in the regulation.
Even as to that question, however, Plaintiff does not dispute that
soundboard technology makes use of prerecorded snippets, or audio clips, to communicate with a
consumer. See Pl.’s Reply at 1–2 (stating that “soundboard uses prerecorded sounds, words,
phrases, and sentences to form messages”) (internal quotation marks and alteration omitted).
Thus, Plaintiff does not seriously contend that soundboard calls satisfy, at least facially, the
constituent elements of the robocall regulation.
Plaintiff nevertheless argues that soundboard calls “are plainly not the type of
communications the robocall prohibition was crafted to prevent” because, unlike the traditional
one-way robocall, soundboard calls involve a two-way communication. See Pl.’s Mot. at 6; see
also Reply at 2.
That argument does not, however, support Plaintiff’s position that the
November 2016 Letter effected a substantive change to the robocall regulation, making it a
legislative rule. Rather, it is a claim that the Letter is “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law,” 5 U.S.C. § 706(2)(A), and, more
specifically, that the application of the robocall regulation to soundboard technology “is ‘plainly
erroneous or inconsistent’ with the plain terms of the disputed regulations.” Everett v. United
States, 158 F.3d 1364, 1367 (D.C. Cir. 1998) (quoting Auer v. Robbins, 519 U.S. 452, 461
(1997)). Plaintiff, however, explicitly disclaimed that argument. See Pl.’s Reply, ECF No. 12, at
14 (“SBA’s point is not to persuade this Court to vacate the November 10 letter as arbitrary and
capricious.”); Oral Arg. Tr., ECF No. 24, at 4 (“We haven’t asserted an arbitrary and capricious
claim[.]”); see also Compl., ECF No. 1 [hereinafter Compl.], at ¶¶ 64–83. And, as a result, the
FTC never had a chance to fully respond to it. Plaintiff cannot obtain injunctive relief pending
appeal on a claim that it neither pleaded in its Complaint nor raised in its summary judgment
Plaintiff’s attempt to distinguish this case from Flytenow, Inc. v. FAA, 808 F.3d 882, 889
(D.C. Cir. 2016), upon which the court relied, see Soundboard Ass’n, 2017 WL 1476116, at *11,
fares no better. Plaintiff argues that “the FAA letter [in Flytenow] was within the bounds of the
regulation it purported to interpret—i.e., the term ‘common carriers,’ as used in the FAA’s
regulations, is broad enough that it could reasonably be interpreted to cover recreational pilots
like the Flytenow plaintiffs”—whereas “the term ‘prerecorded message,’ as used in the robocall
prohibition, is not so broad that it can reasonably be understood to encompass calls made using
soundboard technology.” Pl.’s Mot. at 8 n.3. Plaintiff nowhere explains, however, why the term
“prerecorded message” is so constrained that it cannot possibly encompass soundboard
technology. Plaintiff does not, for instance, point to any statutory, regulatory, or ordinary
definition of “prerecorded message” that unambiguously establishes the term’s meaning and
would squarely foreclose the FTC’s interpretation.2 Nor does Plaintiff cite any prior judicial or
FTC ruling or opinion that clearly circumscribes the outer boundaries of what constitutes a
“prerecorded message.” In the absence of such definitive guidance, the FTC did here precisely
Plaintiff cites to passages within the preamble to the FTC’s 2008 rulemaking, which led to the robocall regulation,
as evidence that the FTC intended for the term “prerecorded message” to reach only a one-way communication of
prerecorded information. See Pl.’s Reply at 2–3. Although the “preamble to a regulation is evidence of an agency’s
contemporaneous understanding of its proposed rules,” it “is not controlling over the language of the regulation
itself.” Wyo. Outdoor Council v. U.S. Forest Serv., 165 F.3d 43, 53 (D.C. Cir. 1999). In any event, because
Plaintiff expressly disavowed the claim that the November 2016 Letter was an arbitrary and capricious application
what the FAA did in Flytenow—it construed a rule it administers and applied it to the evidence
before the agency. Such an exercise of agency authority is not a legislative act. See Perez v.
Mortg. Bankers Ass’n, 575 U.S.___, ___, 135 S. Ct. 1199, 1203 (2015).
Whether the Law’s Ambiguity Warrants Entry of a Preliminary Injunction
Plaintiff also submits that the case law guiding the court’s distinction between legislative
and interpretive rules is so ambiguous as to warrant the award of an injunction pending appeal.
The court disagrees. The fact that case law addressing the legislative-interpretive distinction is
“quite difficult and confused,” Soundboard Ass’n, 2017 WL 1476116, at *10 (quoting Nat’l Min.
Ass’n v. McCarthy, 758 F.3d 243, 251 (D.C. Cir. 2014)), does not favor granting injunctive relief
in this case. Contra Pl.’s Mot. at 11–12. It is true that the Supreme Court has observed that the
distinction is hardly clear cut and is “the source of much scholarly and judicial debate.” Perez,
135 S. Ct. at 1204. Yet, the mere fact that the case law is marked by some lack of clarity cannot,
by itself, support a substantial case on the merits to warrant injunctive relief. Regardless, here,
the court found that the November 2016 Letter is a “quintessential interpretive rule” because it
“communicates to the telemarketing industry the agency’s view that an existing regulation now
applies to a particular form of telemarketing technology as currently used by the industry.”
Soundboard Ass’n, 2017 WL 1476116, at *11. Accordingly, any ambiguity in the case law does
not cut in favor of a preliminary injunction in this case.
The Other Factors Do Not Favor Granting an Injunction
The remaining factors the court must consider—irreparable harm, balancing the equities,
and consideration of the public interest—do not weigh so strongly in favor of injunctive relief
that they make up for Plaintiff’s deficient showing of a likelihood of success.
of the robocall regulation, the question of how to weigh the preamble’s language in interpreting the term
“prerecorded message” was not squarely before the court.
To show irreparable harm, plaintiff must demonstrate injury that is “both certain and
great, actual and not theoretical, beyond remediation, and of such imminence that there is a clear
and present need for equitable relief to prevent irreparable harm.” Mexichem Specialty Resins,
Inc. v. EPA, 787 F.3d 544, 555 (D.C. Cir. 2015) (emphasis and internal quotation marks
omitted). Furthermore, it is “well settled that economic loss does not, in and of itself, constitute
irreparable harm,” except “where the loss threatens the very existence of the movant’s business.”
Wis. Gas Co. v. FERC, 758 F.2d 669, 674 (D.C. Cir. 1985); accord John Doe Co. v. CFPB, 849
F.3d 1129, 1134–35 (D.C. Cir. 2017).
Plaintiff’s case for irreparable harm is uncertain, at best.
Plaintiff claims that
implementation of the November 2016 Letter will lead to the “destruction of a whole industry,”
marks “the end of soundboard in the telemarketing sales industry,” and will force its member
companies “to lay off many of their employees and, in most cases, cease soundboard-related
operations altogether.” Pl.’s Mot. at 12. The full record is more equivocal. The November 2016
Letter does not reach all uses of soundboard technology. For example, it does not cover the use
of soundboard technology to handle inbound customer service calls, which Plaintiff’s counsel
told the FTC is “the fastest growing segment for SoundBoard Technology.” Def.’s Opp’n to
Pl.’s Appl. for Prelim. Inj., ECF No. 11 [hereinafter Def.’s Opp’n], Ex. 3, ECF No. 11-3
[hereinafter Def.’s Ex. 3]. It also does not reach every kind of outbound call. Telemarketers still
can use soundboard technology for, among other things, political calls, survey calls, pure
informational calls, and certain charitable fundraising calls. See Compl., Ex. 1, ECF No. 1-2
[hereinafter Nov. 2016 Letter], at 4. These other uses are far from trivial. Plaintiff reported to
the FTC in September 2016 that, of the 20,000 world-wide call center seats that use soundboard
technology, 8,000—or less than half—are engaged in traditional telemarketing activities. Def.’s
Ex. 3. Those numbers are backed up by a perusal of Plaintiff’s member’s websites, which
advertise the use of soundboard technology for inbound calls and other types of calls that do not
fall under the robocall regulation. See Def.’s Opp’n, Ex. 4, ECF No. 11-4; Def.’s Opp’n, Ex. 5,
ECF No. 11-5. Accordingly, it is far from clear that allowing the November 2016 Letter to take
effect will, as Plaintiff claims, destroy the soundboard industry.
It is true that the Letter’s inclusion of a compliance deadline, now moved to May 19,
2017, will force Plaintiff’s members to pick among unattractive options. They will have to
decide whether to expend capital to come into compliance; invite an enforcement action and try
to convince the Commission that the staff’s interpretation of “prerecorded message” is wrong; or
abandon outbound telemarketing altogether. See Soundboard, 2017 WL 1476116, at *8.3 Such a
vexing dilemma, however, is not at all unusual. Agency decisions often give rise to tough
choices and can cause economic consequences—even substantial ones—for regulated entities.
Such costs do not, however, rise to the level of irreparable harm. As Judge Moss recently
observed: “[A] contrary conclusion would mean that, in most challenges to significant regulatory
actions, the challenging party would be entitled to an injunction pending appeal, even if the
district court had already concluded that the challenge is without merit and others would be
harmed by the requested relief. That is not the law.” See Nat’l Ass’n for Fixed Annuities v.
Perez, No. 16-cv-1035, 2016 WL 6902113, at *4 (D.D.C. Nov. 23, 2016). Therefore, Plaintiff
has not carried its burden of showing irreparable harm.
Plaintiff has a fourth choice, although one that would not necessarily ameliorate the risk of an enforcement
action—it can petition the full Commission for “issuance, amendment, or repeal of a rule.” 5 U.S.C. § 553(e).
See generally 15 U.S.C. § 57a(a)(1)(A) (authorizing the Commission to commence rulemaking to prescribe “rules
which define with specificity acts or practices which are unfair or deceptive acts or practices in or affecting
commerce”); 16 C.F.R. § 1.9 (providing that the Commission can commence a “[t]rade regulation rule proceeding”
“upon its own initiative or pursuant to written petition filed with the Secretary by any interested person stating
reasonable grounds therefor”).
The Balance of Equities and the Public Interest
Plaintiff likewise has not shown that the balancing of equities or the public interest favors
granting an injunction. The balancing of equities requires a court to weigh the harm that the
movant will incur if the injunction is denied against the harm the defendant will suffer if the
challenged action is enjoined. Pursuing Am.’s Greatness v. FEC, 831 F.3d 500, 511 (D.C. Cir.
2016). Here, the FTC’s harm and the public interest “are one and the same, because the
government’s interest is the public interest,” id., which leads the court to consider the third and
fourth factors in tandem.
At most, Plaintiff has demonstrated that the public and private interests stand in
equipoise. Plaintiff has shown that, unless the court grants injunctive relief, its members will
suffer some economic harm and some number of its members’ employees may be laid off. That
harm, however, must be counterbalanced against the harm the public would suffer if the court
were to grant the injunction. The public has an interest in not receiving unwanted calls that
disturb the tranquility of the home. See Soundboard, 2017 WL 1476116, *14. The FTC found,
after an investigation, that “a significant percentage of the total number of call center seats
utilizing soundboard technology are used to make telemarketing or lead generation calls,” which
“are indistinguishable from standard lead generation robocalls that are governed by the [robocall
regulation] and are the subject of a large volume of consumer complaints and significant
telemarketing abuse.” Nov. 2016 Letter at 3. Because granting the injunction would mean that
the public would remain susceptible to the very telemarketing complaints and abuses that the
FTC sought to address through the November 2016 Letter, the public interest weighs against
granting injunctive relief.
Accordingly, having considered all four Winter factors, the court concludes that, even
applying a sliding scale, Plaintiff is not entitled to an injunction pending appeal. Therefore, the
court denies Plaintiff’s Motion.
Dated: May 10, 2017
Amit P. Mehta
United States District Judge
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