Ex-Schwab Employee Prohibited from Using Client Information
In the case of Charles Schwab & Co., Inc. v. Roberto Ivan Ortega (Case No. 4:24−cv−04962), the United States District Court for the Southern District of Texas issued a Stipulated Preliminary Injunction Order on February 12, 2025.
Charles Schwab alleges that Roberto Ivan Ortega misappropriated its trade secrets and client information to solicit the business of former customers after joining a competitor. After Ortega refused Schwab’s requests to return its information, Schwab filed suit and moved for a preliminary injunction preventing the use or disclosure of its information.
Faced with the reality that a court would likely enter an injunction, Ortega’s counsel agreed to an injunction that prohibited Ortega from using, disclosing, or disseminating Schwab confidential information or soliciting Schwab customers. Ortega is also required to give Schwab access to his computing devices for Schwab to conduct discovery to uncover the scope of the misappropriation.
Courts continue to stress the need to maintain the status quo in cases involving the theft of information. Employers must take the necessary steps to prevent the theft of their information and in the cases where their information has been taken, prevent the use or disclosure of that information by filing a lawsuit and seeking an injunction.
GIFTED DISMISSAL: Judge Dismisses TCPA Claim Based on Argument Made by the Plaintiff
I have an interesting update regarding Mark Dobronski, an individual who has put himself on the plaintiff-end of numerous TCPA lawsuits. On a motion for summary judgment, he recently saw five out of the six claims he had made against the defendant thrown out. Dobronski v. Fortis Payment Systems, LLC, No. 23-cv-12391, 2025 WL 486667, *1 (E.D. Mich. Feb. 13, 2025) (order granting in part and denying in part motion for summary judgment). Unsurprisingly, all of the plaintiff’s claims in this case were related to telemarketing communications. Id.
For a quick procedural backdrop here, the motion for summary judgment was referred to a magistrate judge, who issued a report and recommendation. Magistrate judges are judges appointed by district court judges, to help them in certain types of cases—such as discovery disputes and dispositive motions.
After a magistrate judge issues a report and recommendation, parties generally have an opportunity to file objections to that report and recommendation before the district judge issues the final decision at the trial court level. Here, the district judge was doing just that—reviewing the parties’ objections to the magistrate judge’s report and recommendation.
In this action, the plaintiff filed four TCPA-related claims. Id. The magistrate judge recommended dismissal of two out of those four TCPA-related claims. Id. The defendant did not object to the non-dismissal of the remaining two TCPA claims. Id. Amazingly, the district judge dismissed one of those claims anyway, dismissing five out of the plaintiff’s six total claims. Id. at *3-4.
But, how did the district court decide on its own to dismiss one of those claims without an objection by the defendant?
In the plaintiff’s objection to the dismissal of one of his state law claims, the plaintiff pointed to the magistrate judge’s analysis of one of his TCPA claims and effectively said, because that TCPA count survived, the analogous state law claim should also survive the motion for summary judgment. See id at *4.
The district judge took a closer look at that TCPA Claim—for failure to honor a Do-Not-Call (“DNC”) request—and found the exact opposite. See id. Not only should the analogous state law claim still be dismissed, but the TCPA claim actually must go too—as the plaintiff failed to present any evidence that the defendant received a request not to call the plaintiff. Id.
The surviving claim on this action was for a traditional TCPA DNC violation. Id. at *2. Still, it is pretty surprising to see an extra claim thrown out by a district judge, where the defendant did not even object to the magistrate judge’s ruling on that claim.
It can seem straightforward. But in many actions such as this one, alleging multiple types of violations, plaintiffs can sometimes let required parts of their claims slip through the cracks. That is what happened here. And although defense counsel should have raised the issue of whether they received the DNC request on their own in their motion for summary judgment, the district court effectively gifted them a dismissal.
Best practice—do not rely on any court to do that for you!
Renewed Prohibition on Use of Sub-Regulatory Guidance – Key to False Claims Act Cases
It’s déjà vu all over again.”[1] Attorney General Pam Bondi has not surprisingly renewed the prior Trump administration’s prohibition on the use of sub-regulatory guidance, potentially altering the landscape for False Claims Act cases pursued during the second Trump administration.
This development is the latest in a series of efforts to allow reliance on government guidance — or not. To catch everyone up:
On February 5, 2025, Bondi issued a memorandum, titled “Reinstating the Prohibition on Improper Guidance Documents” (the “Bondi Memo”).
The Bondi Memo expressly withdrew prior Attorney General Merrick Garland’s own July 1, 2021. memorandum, titled “Issuance and Use of Guidance Documents by the Department of Justice” (the Garland Memo).
The Bondi Memo also tacitly revived prior Attorney General Jeff Sessions’ November 2017 memorandum, titled “Prohibition on Improper Guidance Documents” (the “Sessions Memo”), and a January 2018 memorandum from Associate Attorney General Rachel Brand, titled “Limiting Use of Agency Guidance Documents in Affirmative Civil Enforcement Cases” (the “Brand Memo”).[2]
In this latest Bondi Memo, the DOJ states, “[g]uidance documents” that have not undergone “the rule making process established by law yet purport to have a direct effect on the rights and obligations of private parties” are not lawful regulatory authority. This recission is to “restore the Department to the lawful use of regulatory authority” and advance DOJ’s “compliance with its mission and duty to uphold the law.” Accordingly, DOJ attorneys likely will not be permitted to rely on agency guidance to establish a violation of law or a false statement in a False Claims Act case.
DOJ’s reliance on agency guidance already was in doubt after the Supreme Court’s 2024 decision in Loper Bright, which reworked how courts should view agency guidance. The Garland Memo had asserted that DOJ attorneys “may rely on relevant guidance documents . . . including when a guidance document may be entitled to deference or otherwise carry persuasive wait with respect to the meaning of applicable legal requirements.” Loper Bright, however, made clear that agencies are not entitled to deference unless deference is expressly provided for by statute. And even prior to Loper Bright, the Supreme Court, in Kisor v. Wilkie, confirmed agency guidance “never forms the basis for an enforcement action’’ because such documents cannot “impose any legal binding requirements on private parties.” 588 U.S. 558, 584 (2019) (internal citations omitted). The Bondi Memo is yet another attack on what may be considered agency overreach.
Because the Garland Memo itself rescinded two memoranda from the previous Trump administration DOJ officials, these prior Sessions and Brand memoranda tacitly are restored by the recission of the Garland Memo. Both memoranda restricted DOJ’s use of sub-regulatory guidance and prevented DOJ from using guidance documents to “determine compliance with existing regulatory and statutory requirements.” See Sessions Memo & Brand Memo (prohibiting use of “noncompliance with guidance documents as a basis for proving violations of applicable law.”)
What presently is murky is whether DOJ still may use guidance documents to establish scienter. The Brand Memo had provided that “some guidance documents simply explain or paraphrase legal mandates from existing statutes or regulations, and the Department may use evidence that a party read such a guidance document to help prove that the party had the requisite knowledge of the mandate.” It has been a longstanding DOJ practice to use guidance documents to show scienter, and the practice was permitted under the first Trump administration and the perhaps now-restored Brand Memo. The Bondi Memo does not directly address the use of agency guidance to show scienter, nor does it announce any new policy. However, more guidance is coming: The Bondi Memo directs the associate attorney general to prepare a report within 30 days “concerning strategies and measures that can be utilized to eliminate the illegal or improper use of guidance documents.”
What to Expect
This restriction on the use of guidance documents to bring FCA and other cases — in conjunction with Loper Bright — prevents DOJ attorneys from basing claims against recipients of government funding based on potential legal violations derived from or supposedly clarified in agency guidance. However, we anticipate DOJ likely will still use guidance documents in efforts to establish scienter. The forthcoming Associate Attorney General report may shed more light on DOJ’s plans in this area.
[1] Baseball lore includes the story that Yogi Berra said this after Mickey Mantle and Roger Maris hit back-to-back homeruns in 1961, as they were chasing Babe Ruth’s homerun record.
[2] Foley’s previous analysis of the Brand Memorandum and its impact on the health care landscape is located here: DOJ Memoranda Ushering in New Era for Health Care Enforcement.
Navigating Non-Compete Agreements: Key Considerations for In-House Counsel in Franchise Businesses
In May of last year, the Federal Trade Commission (FTC) sought to ban non-compete agreements in most employment contracts. Franchise agreements were an exception. However, before the rule could take effect in September, a federal court vacated the ruling in August, asserting that the FTC lacked the authority to enforce such a regulation.
Following this setback, the FTC promptly filed a notice of appeal with the Fifth Circuit Court of Appeals, keeping the issue in legal limbo.
Franchisors should understand the implications of non-compete agreements is essential. While these clauses serve to protect franchisors’ proprietary interests, trade secrets, and system integrity, they also pose challenges for franchisees, who may perceive them as unfair restrictions on future business opportunities. Franchisees argue that post-term non-competes hinder their ability to leverage their experience and investment after exiting a franchise system, limiting market competition and personal livelihood. Conversely, franchisors maintain that such provisions are necessary to preserve brand integrity, protect franchisees who remain in the system, and safeguard proprietary business models.
NASAA’s Guidance on Franchise Non-Compete Agreements
Amid this ongoing legal and policy debate, on January 27, 2025, the Franchise and Business Opportunities Project Group—part of the North American Securities Administrators Association (NASAA)—issued guidance on post-term non-competes within franchise agreements. See https://www.nasaa.org/wp-content/uploads/2025/01/Post-Term-Non-Compete-Provisions-in-Franchise-Agreements-Should-Be-Reasonable.pdf. Their recommendations address several critical aspects of the franchisor-franchisee relationship:
1. The Uniqueness of Franchise Relationships
Unlike a traditional buyer-seller transaction, a franchise agreement grants a franchisee the right to operate a business using an established system for a defined period.
Franchisors grow their brand by leveraging franchisees’ investments rather than solely relying on their own capital.
2. Differing Expectations Between Franchisors and Franchisees
Franchisors seek to expand their system to strengthen brand value, market reach, and overall profitability.
Franchisees, as business owners, aim to maximize their autonomy, investment returns, and long-term viability.
3. End-of-Relationship Challenges
Divergent expectations often become most pronounced at the conclusion of the franchise relationship.
While franchisors enforce post-termination rights, franchisees may wish to utilize their experience and business acumen in new ventures.
4. What Constitutes a “Reasonable” Post-Term Non-Compete?
NASAA recommends that franchisors craft post-term non-compete agreements that are reasonable and clearly define legitimate business interests. Key considerations include:
Scope: Restrictions should apply only to competitive businesses directly related to the franchise system, avoiding overly broad limitations.
Duration: Non-competes should be limited to the time reasonably necessary to protect the franchisor’s business interests. While the appropriate timeframe varies across industries, agreements should avoid excessive restrictions.
Geographic Limitations: Any territorial restrictions should be as narrow as possible, potentially applying only to a specified radius around the franchise location or other branded outlets.
5. Compliance and Best Practices for Franchisors
Beyond restrictive covenants, franchisors should ensure that franchise agreements require the return of branding assets, including trademarks, trade dress, signage, and domain names, upon termination or expiration.
For in-house attorneys managing franchise agreements, these developments underscore the importance of periodically reviewing non-compete provisions to ensure compliance with evolving legal standards and industry best practices. Given the FTC’s ongoing legal battle and NASAA’s evolving stance, franchisors should consult experienced franchise counsel to assess whether modifications to existing agreements are warranted.
By staying proactive, in-house legal teams can help maintain a fair balance between protecting the franchisor’s business model and allowing former franchisees to pursue future opportunities within reasonable constraints.
DUMBEST SCHEME EVER?: FCC Proposes $4.5MM Penalty on Carrier Telnyx LLC After Bad Guys Pose as the FCC…
In In the Matter of Telnyx LLC, File No.: EB-TCD-24-00037170, NAL/Acct. No.: 202432170009, FRN: 0018998724 (Feb 4, 2025 released) the FCC stated the Commission’s “staff and their family members, among others, were targeted with calls containing artificial and prerecorded voice messages that purported to be from a fictitious FCC ‘Fraud Prevention Team’ as part of a government imposter scam aimed at fraudulently extracting payments of large amounts of money by intimidating recipients of the calls.”
So, they targeted FCC employees–the primary federal regulator of robocalls– with fake fraud prevention robocalls. I mean, the chutzpah.
Per the order, “[t]he FCC has no such “Fraud Prevention Team” and the FCC was not responsible for these calls.” But when they were answered the called party was threatened with prosecution unless they– you guessed it– bought some gift cards:
” One recipient of an Imposter Call reported that they were ultimately connected to someone who “demand[ed] that [they] pay the FCC $1000 in Google gift cards to avoid jail time for [their] crimes against the state.”
Unsurprisingly the Commission was pissed and wanted blood, or the money equivalent of blood.
Being unable to determine who the real bad guys were they took out their fury upon the carrier that apparently permitted the calls to get connected– Telnyx LLC. In the FCC’s words the company failed “to take affirmative, effective measures to prevent malicious actors from using its network to originate illegal voice traffic.”
Now what’s interesting is that Telnyx apparently signed up MarioCop on February 6, 2024, and the calls went out that same day. Telnyx then stopped the traffic immediately. But that did not save it from penalty. The FCC was pissed Telnyx let these guys on the network to begin with.
And when you dig down into this there are red flags everywhere to be seen:
The company address provided by MarioCop was the address of a Sheraton hotel in Canada.
The email address domain used by MarioCop (@mariocop123.com) is not a real domain associated with any known business.
The IP address for the MarioCop Account was from Edinburgh, Scotland and was not affiliated with the physical Toronto address; and, perhaps most tellingly:
MarioCop paid Telnyx in Bitcoin and the Bitcoin transaction ID and wallet address the MarioCop Accounts used to pay Telnyx were anonymized and could not be traced.
They paid in Bitcoin????????????????
Just unreal.
Obviously pretty serious lapses in the KYC process here. And the FCC proposes to hit Telnyx with a $4.5MM penalty as a result.
Gumble Grumble: $1.5MM Deere Credit Services TCPA Class Action Settlement Meets with Final Approval–NCLC Slated To Receive More Cash
No matter how many times I raise the issue, it seems, TCPA defense counsel are still not getting the message.
DO NOT APPOINT NCLC AS CY PRES RECIPIENT IN TCPA CLASS ACTION SETTLEMENTS.
The NCLC famously advocates before the FCC and Congress for broader and more expansive TCPA coverage–leading to TCPA lawsuits–and then accepts money from resulting TCPA settlements. Yet they tell folks they are advocating on behalf of “low income clients” never mentioning that their funded by the TCPA plaintiff’s bar.
Disgusting.
I have mentioned this issue several times on TCPAWorld and yet the latest TCPA settlement to receive approval, once again, has NCLC listed as a cy pres recipient.
In Cornelius v. Deere Credit 2025 WL 502089 (S.D. Ga Feb. 13, 2025) the court granted final approval to a $1.5MM TCPA class action settlement involving prerecorded servicing calls to wrong numbers.
The class was: “all persons throughout the United States (1) to whom Deere Credi Services, Inc. placed a call, (2) directed to a number assigned to a cellular telephone service, but not assigned to a Deere Credit Services, Inc. customer or accountholder, (3) in connection with which Deere Credit Services, Inc. used an artificial or prerecorded voice, (4) from February 2, 2020 through June 25, 2024.”
The plaintiff’s lawyers– the Wolf and Mr. Number One teamed up for this one–walked with $500k.
And the National Consumer Law Center is the cy pres designee. (That means they will get any left over money from the class if checks aren’t cashed, etc.– can often be tens or hundreds of thousands of dollars, although will likely be less in this smaller settlement.)
If you’re a TCPA class action defense counsel that uses NCLC as a cy pres recipient in a TCPA class action settlement expect to be called out BY NAME when I cover the settlement. That’s how we’re going to handle these things from now on.
And you should really be appointing R.E.A.C.H. as the cy pres in these cases folks–R.E.A.C.H. has stopped way more robocalls than NCLC and works hard to educate and advocate for compliance with the folks in the industry that causes the most preventable robocalls. No better organization than R.E.A.C.H. to receive cy pres dollars– but better to give it to ANYONE else over NCLC.
Texas Federal Court Pauses CFPB Rule Banning Medical Debt from Credit Reports
On February 6, a judge for the United District Court for the Eastern District of Texas issued a 90-day stay on the CFPB’s final rule prohibiting the inclusion of medical debt in consumer credit reports, delaying the rule’s effective date from March 17 to June 15.
The CFPB’s rule (which we previously discussed here and here) seeks to prohibit consumer reporting agencies from including these unpaid medical bills in credit reports and prohibit lenders from considering medical debt when making credit decisions. The pause follows a legal challenge (previously discussed here) from industry trade associations, contending that the rule exceeds the CFPB’s authority under the Fair Credit Reporting Act (FCRA).
Putting It Into Practice: The 90-day delay temporarily halts implementation of the CFPB’s rule, however its future remains uncertain under new CFPB leadership. The rule would have been effective 60 days after publication in the Federal Register. However, the Bureau’s first Acting Director, Scott Bessent “suspend[ed] the effective dates of all final rules that have been issued or published but that have not yet become effective. Any formal changes to the rules would require adherence to the Administrative Procedure Act (APA) through formal notice-and-comment rulemaking. The rule is also subject to a challenge under the Congressional Review Act. Consumer reporting agencies should continue to monitor these developments closely, as the litigation could lead to further delays or a potential invalidation of the rule.
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City of Baltimore Sues to Block CFPB Defunding
On February 12, the city of Baltimore filed a lawsuit against the Trump administration and CFPB Acting Director Ross Vought, alleging that efforts to defund the agency violate the Administrative Procedure Act. The lawsuit argues that unilaterally stripping the CFPB of its funding is unlawful, and is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”
As a result of the lawsuit, the city is seeking an injunction to prevent any actions that could disrupt the agency’s financial stability.
Putting It Into Practice: The lawsuit represents a notable challenge to the Trump administration’s efforts to reshape the CFPB. The outcome could have far-reaching implications for the agency’s future and its ability to carry out its consumer protection mandate. We will continue to monitor this case for new developments.
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Eleventh Circuit Denies US Citizenship Claim Based on Mother’s Naturalization
A divided Eleventh Circuit recently ruled against a Jamaican national’s claim to U.S. citizenship, holding that his mother’s naturalization before his 18th birthday did not confer derivative citizenship because his parents had remarried by the time of her naturalization.
Potential Derivative Citizenship Implications
This decision reinforces a strict interpretation of derivative citizenship under the Immigration and Nationality Act (INA), requiring that all statutory conditions, including legal separation, remain in effect at the time of naturalization. It also highlights ongoing judicial debates over statutory interpretation in immigration law, particularly regarding derivative citizenship claims.
Individuals facing similar circumstances should seek legal counsel to assess their eligibility for derivative citizenship and explore potential defenses against removal proceedings.
Sheldon Turner v. U.S. Attorney General Background
The Jamaican national entered the United States as a lawful permanent resident in 1990. He was born in Jamaica in 1981 to parents who were married at the time of his birth but divorced in 1987. Following the divorce, his mother married a U.S. citizen and later moved to the United States with her son. However, she divorced and subsequently remarried the Jamaican national’s father in 1994. In 1999, when the Jamaican national was 17, his mother became a naturalized U.S. citizen.
More than 15 years later, in an effort to avoid deportation for a criminal offense, the Jamaican national argued that he derived U.S. citizenship through his mother’s naturalization, citing an INA provision that grants automatic citizenship to a child born outside the United States to noncitizen parents when one parent naturalizes, and the parents have legally separated.
An immigration judge rejected the claim, concluding that because his parents had remarried before the applicant’s mother’s naturalization, he did not meet the statutory requirement of “legal separation.” The Board of Immigration Appeals (BIA) upheld this decision in March 2022, leading the applicant to appeal to the Eleventh Circuit. The court found that the relevant INA provision required a “continuing” legal separation at the time of naturalization. It interpreted the statute to mean that parental separation must still be in effect when the naturalization occurs, rather than simply having occurred at some point in the past. Since the applicant’s parents had remarried prior to his mother’s naturalization, he failed to meet the statutory requirement, and his appeal was denied. The court emphasized that naturalization is the “principal event” in determining derivative citizenship and that all statutory conditions—including legal separation—must be satisfied at the time of naturalization.
Twenty-Three States Support Iowa Pork Producers Association Petition for SCOTUS Review of Prop 12
Iowa and 22 states have filed a brief supporting the petition of the Iowa Pork Producers Association (IPPA) to the Supreme Court for a writ of certiorari to review the judgment of the 9th Circuit Court of Appeals in a case involving a challenge to California Proposition 12. Prop 12 is an animal welfare law which prohibits the sale of pork from swine housed in conditions inconsistent with California standards.
In National Pork Producers Council (NPPC) v. Ross, the Supreme Court, in a fractured opinion, dismissed a similar challenge to Prop 12 and held that it did not violate the dormant commerce clause.
However, IPPA argues that this case presents different questions, in part because it alleges discrimination against out-of-state pork producers. In contrast, NPCC had disavowed any discrimination-based claims in their challenge to Prop 12.
The petition for certiorari also requests that the Court address the issue of whether dissenting opinions should be considered in determining a majority opinion on a point of law. In affirming the dismissal of the IPPA challenge to Prop 12, the 9th Circuit applied its own precedent and not the Supreme Court’s precedent in NPPC v. Ross because the “majority of the Justices . . . did not agree upon a single rationale and there is no opinion that can reasonably be described as a logical subset of the other.”
A grant of writ of certiorari is up to the discretion of the Supreme Court, but the Court typically considers factors that include the importance of resolving conflicts in judicial interpretations and the significance of the issue(s).
ROSES ARE RED, THE COURT HAD ITS SAY: Online Fax Services Get No TCPA
Greetings TCPAWorld!
Happy Valentine’s Day! Whether you’re celebrating with loved ones or enjoying the discounted chocolate tomorrow, one thing’s for sure—online fax providers won’t feel the love from this latest ruling. In a significant ruling highlighting the collision between aging telecommunications laws and modern technology, a Colorado federal court dropped an important ruling on the online fax industry that needs to be on your radar. In Astro Companies, LLC v. WestFax Inc., the Court tackled a deceptively simple question: Is an online fax service the same as a traditional fax machine under the law? See ASTRO Co. v. Westfax Inc., Civil Action No. 1:23-cv-02328-SKC-CYC, 2025 U.S. Dist. LEXIS 25629 (D. Colo. Feb. 12, 2025).
Here’s the deal. Astro Companies, an online fax provider, sued WestFax and others for allegedly bombarding their system with junk faxes. Astro claimed this violated the TCPA. But, of course, there was a catch—the TCPA explicitly protects “telephone facsimile machines,” and the court had to decide if Astro’s cloud-based service qualified.
The Court’s answer? A resounding no.
Judge S. Kato Crews dove deep into the statutory language, focusing on how the TCPA defines a “telephone facsimile machine.” While the law allows faxes to be sent from various devices (including computers), it only protects faxes received by actual fax machines. The Court noted in Career Counseling, Inc. v. AmeriFactors Fin. Grp., L.L.C., 91 F.4th 202 (4th Cir. 2024) that the law was meant to protect equipment “well understood to be a traditional fax machine.”
But this wasn’t just a case of statutory interpretation—it was a complete rejection of Astro’s legal theory. The Court didn’t just rule against Astro; it dismissed the entire case with prejudice, shutting down any attempt to refile the same claims.
What makes this ruling particularly interesting is how the Court distinguished between a machine and a service. The Judge pointed out that while Astro’s servers could print faxes, it still wasn’t enough. Black’s Law Dictionary defines a machine as “a device or apparatus consisting of fixed and moving parts that work together to perform some function.” Astro’s cloud-based service, despite its printing capabilities, didn’t fit this definition.
So what’s next? Astro tried to argue that its service still counted under the TCPA because its servers “had the capacity to print.” But the Court made clear that capacity alone isn’t enough—the TCPA requires an actual telephone facsimile machine, not just a system that can eventually print a fax if someone decides to. Astro leaned heavily on Lyngaas v. Curaden AG, 992 F.3d 412 (6th Cir. 2021), but the Court saw a fundamental problem. In Lyngass, the case involved whether a computer receiving an eFax could qualify as a telephone facsimile machine. But Astro wasn’t just a recipient—it was an online fax provider acting as an intermediary. That distinction alone made Lyngaas inapplicable.
Furthermore, the Court supported the FCC’s interpretation, significantly weakening Astro’s case. In In re Amerifactors Fin. Grp., L.L.C., 34 FCC Rcd. 11950 (2019), the FCC explained that “a fax received by an online fax service as an electronic message is effectively an email.” Unlike traditional fax machines that automatically print incoming messages (using up paper and ink), online fax services allow users to manage messages like emails—blocking, deleting, or storing them indefinitely.
This distinction highlights the core reason Congress enacted the TCPA. As noted in the 1991 House Committee Report, the law was concerned with two specific problems: 1) shifting the cost of unwanted advertisements to the recipient (through wasted paper and ink), and 2) tying up fax lines, preventing businesses from receiving legitimate communications. H.R. Rep. No. 102-317, at 10 (1991). Neither of those concerns applies to online fax services, where nothing is automatically printed, and no business lines are blocked.
The takeaway? Consider this ruling a tough love letter from the court—if your service functions more like an email inbox than a fax machine, don’t expect the TCPA to be your Valentine.
As always,
Keep it legal, keep it smart, and stay ahead of the game.
Talk soon!
State Agency Rulemaking: Beyond Minimum Compliance
Go-To Guide:
Massachusetts Supreme Judicial Court invalidates agency guidelines for non-compliance with Administrative Procedures Act.
Strict adherence to state administrative procedures is crucial for enforceable regulations.
Negotiated rulemaking (“Reg-Neg”) offers potential benefits beyond minimum compliance requirements.
Agencies should consider balancing speed, compliance, and stakeholder engagement in the regulatory rulemaking process.
On Jan. 8, 2025, in Attorney General v. Town of Milton, SJC-13580, the Massachusetts Supreme Judicial Court (SJC) refused to enforce certain “guidelines” promulgated by the Massachusetts Executive Office of Housing and Livable Communities (HLC), which the MBTA Communities Act explicitly called for. According to the SJC, the guidelines were ineffective because the HLC failed to strictly follow the statutory procedures in the Massachusetts Administrative Procedures Act (MA APA) when adopting the guidelines. As a result, if the HLC wants to enforce the guidelines, they “must be repromulgated in accordance with [the MA APA].”
As the SJC explained, the MA APA establishes minimum standards of fair procedure that agencies must follow when promulgating rules that satisfy the MA APA’s definition of a “regulation” (relying on Carey v. Comm. Of Correction, 479 Mass. 367 (2018)). Although it appears HLC performed several of the activities called for in the MA APA (such as receiving comment), the SJC found that HLC did not strictly comply with all required procedures.
Following the SJC decision, HLC adopted emergency regulations substantially similar to the initial guidelines that will remain in effect for 90 days. HLC has indicated that it intends to adopt permanent regulations following a public comment period before the emergency regulations expire.
The SJC’s decisions in Town of Milton and Carey highlight that the regulatory landscape has become increasingly complex. State agencies face the challenge of creating regulations that balance multiple interests while complying with legal mandates of the MA APA and other statutes and acting with the speed policymakers expect. Although the MA APA’s minimum requirements must be followed, under certain circumstances state agencies may want to consider doing more than the minimum to build public trust and diminish the likelihood of their rulemaking being challenged. This is particularly true in the case of complex, industry-specific regulations where the insights of experts and knowledgeable stakeholders add value to the regulatory rulemaking process.
One effective method to achieve those goals is through “negotiated rulemaking” (known as “Reg-Neg” and outlined in the federal Negotiated Rulemaking Act of 1996, 5 U.S.C. § 561-570a). Through a Reg Neg process, an agency works with an independent “convener” who helps the agency decide whether a negotiated rulemaking process may feasibly result in a consensus agreement on the contemplated regulatory language. To do so, the convener works with the agency first to identify all relevant stakeholders or stakeholder groups that may be affected or have an interest in the regulations. Then, the convener works with the agency and stakeholders to understand joint and competing interests, concerns, and needs underlying the proposed regulations. Also, the convener identifies industry experts needed for the proposed rulemaking negotiation. After the initial investigation and analysis, the convener then prepares a comprehensive convening assessment report, which determines whether achieving consensus through a negotiated rulemaking process is feasible.
If feasible and if the agency and stakeholders agree to pursue a Reg Neg process, the convener meets with the agency and stakeholders to help the parties select a Reg Neg Committee, which consists of appointed agency personnel and stakeholder representatives. The Reg Neg Committee then retains a facilitator (which often is the convener) to establish and oversee the Reg Neg process. Importantly, the facilitator is independent and focused on making sure the Reg Neg Committee reaches consensus on the proposed regulations within the proper timeframe required by governing law, as well as satisfies all relevant interests. In Massachusetts, like other states, the MA APA permits such a Reg Neg process, so long as it also satisfies the MA APA’s minimum requirements.
If the Reg Neg Committee follows an appropriate Reg Neg process, the hallmark of which is transparency and collaboration, the proposed regulations generally are easier to implement and less likely to be challenged administratively or through litigation (see Administrative Conference of the United States “Negotiated Rulemaking and Other Options for Public Engagement”). That is because, based on the convening assessment, the facilitator is generally better able to prevent impasse and help the parties reach consensus in a collaborate way. Bringing together diverse stakeholders, giving them a seat at the table, and including them in the regulation drafting and approval process helps create ownership among the agency’s constituents and helps build public trust. In essence, stakeholders who help draft regulations may be more likely to accept and follow those regulations, while regulations that stakeholders believe are foisted upon them over their public comments and objections may find new forums to continue those objections. By involving agreed-to industry experts, enacted regulations themselves are generally of greater quality. Finally, doing more than the minimum may result in a more efficient rulemaking process, may reduce costs due to avoiding regulatory starts and stops and may preemptively avoid disputes and unnecessary litigation costs.