Supreme Court’s McLaughlin Decision Creates Uncertainty for FCC Orders on the TCPA and Much More

The U.S. Supreme Court’s recent decision in McLaughlin Chiropractic Associates, Inc. v. McKesson Corp. marks a sea change for judicial review of Federal Communications Commission (FCC) orders, and creates both risks and potential opportunities for the communications industry and companies engaging in FCC-regulated activities.

By a 6-3 vote in a June 20 decision authored by Justice Kavanaugh, the Court significantly limited the preclusive effect of the Hobbs Act, a statute that gives appellate courts “exclusive jurisdiction” to “determine the validity” of certain agency orders, including those issued by the Federal Communications Commission (FCC). Previously, the Hobbs Act had generally been understood as broadly prohibiting courts from questioning the legal basis of FCC orders outside the context of direct appellate review. The Supreme Court rejected this construction of the statute, holding that while the Hobbs Act limits where pre-enforcement challenges may be brought, it does not prevent courts in subsequent enforcement actions from independently determining whether a given FCC order reflects the best meaning of the statute at issue and is otherwise valid under the Administrative Procedure Act (APA).    

This decision will likely create substantial regulatory uncertainty for the communications industry as well as companies that engage in FCC-regulated activities – such as outbound calls and messages subject to the Telephone Consumer Protection Act (TCPA). The decision may benefit regulated entities by offering additional opportunities to challenge agency interpretations that may be inconsistent with the Communications Act or the APA. At the same time, McLaughlin creates risks for companies that have relied on certain existing agency interpretations and will make it more difficult to rely on FCC interpretations moving forward.

Below, we provide a short primer on the Hobbs Act, recap the Court’s reasoning in McLaughlin, and discuss potential positive and negative implications stemming from the decision.  

Background on the Hobbs Act

Passed in 1950, the Hobbs Act creates a special statutory scheme for pre-enforcement review of some agencies’ final orders, including certain final orders issued by the FCC. These pre-enforcement challenges must go directly to a federal court of appeals, and a 60-day statute of limitations applies for these actions. Under the statute, “[t]he court of appeals . . . has exclusive jurisdiction to enjoin, set aside, suspend (in whole or in part), or to determine the validity of” the challenged order.  Prior to 2019, courts had routinely determined that the Hobbs Act’s pre-enforcement review scheme vests exclusive authority in the federal courts of appeals to directly review final FCC orders, but had also gone one step further, holding that the grant of exclusive jurisdiction in the Hobbs Act also meant that district courts could not hear collateral attacks on FCC orders. In other words, if an action was brought in a district court that involved an FCC interpretation of a statute in either claims or defenses, the court was barred from calling the FCC’s decision into question in adjudicating the case.

This robust reading of the Hobbs Act was called into doubt in 2019 in a case called PDR Network, LLC v. Carlton & Harris Chiropractic, Inc. There, the Supreme Court remanded for further proceedings, but a lengthy concurrence by Justice Kavanaugh suggested that reading the Hobbs Act as barring review of FCC orders in an enforcement context was inconsistent with the statutory text and could also raise due process concerns. While Justice Kavanaugh’s reasoning did not secure a majority, it signaled that the Court might be prepared to cut back on the Hobbs Act in a future case.

The McLaughlin Decision

McLaughlin proved to be that case. There, chiropractic practice McLaughlin brought a class action lawsuit under the TCPA, alleging that McKesson Corporation had sent unsolicited fax advertisements that McLaughlin received by a traditional fax machine and by online fax services. While the case was pending in federal district court, the FCC issued the Amerifactors Declaratory Ruling, which interpreted the term “telephone facsimile machine” in the TCPA to exclude online fax services, effectively eliminating a private litigant’s ability to sue for unsolicited fax advertisements received online.

Consistent with governing Hobbs Act precedent, the district court concluded that it lacked the authority to question the validity of the Amerifactors Declaratory Ruling. Viewing the Amerifactors Declaratory Ruling as binding, the court granted summary judgment to McKesson Corporation for the faxes McLaughlin received through online fax services. The Ninth Circuit affirmed, and the Supreme Court granted certiorari to consider whether the Hobbs Act required the district court to follow the FCC’s interpretation of the TCPA.

The Court used the opportunity presented by McLaughlin to broadly adopt the reasoning from Justice Kavanaugh’s concurrence in PDR Network. Writing for a 6-3 majority in McLaughlin, Justice Kavanaugh’s opinion held that the Hobbs Act’s pre-enforcement review scheme does not preclude district courts from determining whether an agency order reflects the best meaning of the implementing statute in a civil or criminal proceeding. The Court reasoned that there are three categories of statutes authorizing pre-enforcement review: (1) those that expressly preclude judicial review in subsequent enforcement proceedings; (2) those that expressly “authorize or contemplate” review in subsequent enforcement proceedings; and (3) those that are silent on whether review of an agency order is authorized in subsequent enforcement proceedings. The Court held that the Hobbs Act falls into the third category, for which “fundamental principles of administrative law establish the proper default rule”: a reviewing district court “must independently determine for itself whether the agency’s interpretation of the statute is correct.” The Court further concluded that this “presumption of judicial review” is codified in Section 703 of the APA, which states that “[e]xcept to the extent that prior, adequate, and exclusive opportunity for judicial review is provided by law, agency action is subject to judicial review in civil or criminal proceedings for judicial enforcement.”  

The majority directed district courts, in adjudicating enforcement proceedings involving FCC orders, to apply “ordinary principles of statutory interpretation, affording appropriate respect to the agency’s interpretation.” Notably, the Court confirmed that normal principles of vertical stare decisis and claim and issue preclusion still apply to subsequent challenges.

The dissenting opinion, which was authored by Justice Kagan and joined by Justices Sotomayor and Jackson, contended that the majority ignored the “most natural meaning” of the plain statutory grant of “exclusive jurisdiction” to the federal court of appeals in the Hobbs Act. The dissent also asserts that the Hobbs Act is precisely the type of “prior, adequate, and exclusive opportunity for judicial review” envisioned by Section 703 to preclude challenges to agency actions in judicial enforcement proceedings. The majority, meanwhile, interpreted the Hobbs Act’s grant of “exclusive jurisdiction ... to determine the validity” as referring to the authority that only the federal courts of appeals enjoy – to issue pre-enforcement declaratory judgments on agency final orders.

McLaughlin Creates Uncertainty and Risk, but Also Potential Opportunities

While McLaughlin creates a considerable amount of uncertainty for the communications industry, it may also provide new opportunities for regulated entities to challenge FCC orders and raise defenses in proceedings outside of the jurisdiction conferred by the Hobbs Act.

Broadly speaking, the holding in McLaughlin means that FCC orders previously thought to have been settled in a pre-enforcement challenge may no longer be so. This is particularly true in light of the Court’s decision last year in Loper Bright Enterprises v. Raimondo, which the McLaughlin majority leaned on for the holding. Indeed, as we explained here, Loper Bright prohibits courts from deferring to an agency interpretation “simply because a statute is ambiguous.” Instead, courts must always “exercise independent judgment” to adopt a statute’s “best reading.” Read together, Loper Bright and McLaughlin allow judges in other federal appellate circuits and district courts (consistent with stare decisis and claim preclusion) to second-guess FCC statutory interpretations, even in instances where such an interpretation was affirmed by a federal appellate court in the context of pre-enforcement Hobbs Act review. And because the Hobbs Act’s 60-day statute of limitations is inapplicable to challenges to FCC orders raised in the judicial enforcement context, future court decisions could upend well-settled interpretations that entities have long relied on to build out their operations and conduct FCC-regulated activities.

There may be benefits for regulated entities from the Court’s decision. Post-McLaughlin, regulated entities may challenge FCC orders in judicial enforcement proceedings as well on direct review. And importantly, the majority noted that the range of available challenges in enforcement proceedings is not limited to statutory interpretation but may include other standard Administrative Procedure Act (APA) challenges to agency action, writing in a footnote, “[j]udicial review in enforcement proceedings of course may also include review of whether the rule or order was arbitrary and capricious under the APA or otherwise was unlawful.” Regulated parties enmeshed in litigation, such as private TCPA suits, FCC enforcement actions, or other private actions that implicate FCC decisions, now likely enjoy a wide range of challenges to FCC final orders, which may serve as effective claims or defenses in these proceedings.

However, this decision also likely incentivizes plaintiffs to forum shop to the detriment of defendants in private lawsuits. With respect to the TCPA in particular, plaintiffs may seek to bring cases in district court based on novel theories that previously would have been foreclosed based on appellate review under Hobbs Act. For the time being, that may create greater uncertainty both for communications companies and those that engage in activities regulated by the TCPA.  

***

The Supreme Court’s McLaughlin decision offers both new opportunities and new challenges for FCC-regulated entities and those subject to FCC-administered statutes like the TCPA. Attorneys in Wiley’s Telecom, Media, and Technology and TCPA Litigation and Compliance groups are monitoring these issues and are ready to help. For more information about this dynamic area of the law, please contact one of the authors.

Ben Sutter, a Wiley 2025 Summer Associate, contributed to this blog post.