LAWYERS QUESTION DO-NOT-CALL'S FATE IN APPEALS COURT

U.S. Dist. Judge Edward Nottingham ruled late Thurs. that the FTC’s DNC plan was unconstitutional on freedom of speech grounds because it would have allowed telemarketers for charitable organizations to continue to call numbers on the list, while commercial companies would be barred from doing so. “There is no doubt that unwanted calls seeking charitable contributions are as invasive to the privacy of someone sitting down to dinner at home as unwanted calls from commercial telemarketers,” Nottingham said. By exempting charitable solicitations, he said, the FTC “has imposed a content-based limitation on what the consumer may ban from his home… thereby entangling the government in deciding what speech consumers should hear.” He said “the FTC’s do- not-call registry does not materially advance its interest in protecting privacy or curbing abusive telemarketing practices.”

It wasn’t clear whether the appeals court would act in favor of the FTC, several lawyers said. “It’s a tough constitutional question. The [Colo. Dist.] court made a thorough review” of the registry and concluded that it was unconstitutional, attorney John Kamp said: “It’s not clear whether [the court] will act one way or another.” Another attorney, Robert Jackson, agreed: “It’s a well-reasoned opinion and within a moving stream of the law.” He speculated that the govt. could move to ask the court to consolidate the 2 cases. He said the case could be “ultimately decided in the Supreme Court,” as he expected “whoever loses” in the appeals court to seek to move it to the High Court. Jackson said the 10th Circuit probably would put the case on its expedited calendar, and it would take at least 6 months to announce a decision. He also said it could take an additional 12-18 months before the Supreme Court acted.

However, Consumers Union policy analyst Adam Goldberg said he expected the appeals court would overturn the order: “There is a good ground for the order to be overturned… The consumer is the one who makes a decision” to block a phone number from telemarketing calls, “not the FTC.” NARUC Gen. Counsel Bradford Ramsay said the FTC probably would notify the Appeals Court that it would be filing an emergency stay request in advance of the Oct. 1 deadline. The Dist. Court probably will deny the request, just as the Okla. Dist Court did, he said. However, Ramsay said, there’s a “good chance” that the appeals court will grant stay shortly because the “constitutional argument [of the order] is weak. I have a hard time thinking that despite 50 million people” signed up on the list, the court will say that “to protect the Constitution, they should continue to receive those calls. The judge that says that should go back to law school.” Ramsay said he hoped the Appeals Court would “take into account the uniqueness of the situation” and would overturn or stay the order because “whatever else it is, it’s a bad public policy.”

Ramsay said Congress couldn’t override the order. Unlike in the Okla. case (CD Sept 25 p2), when Congress quickly passed a bill to give the FTC authority to establish the list, “Congress can do nothing to fix” a constitutional problem in the rule. He also said the FTC probably would have to “wait out the process.”

However, Kamp said Congress could fix the problem “by changing the law. The question is, will it,” because it would affect calls by politicians seeking contributions. “I don’t think Congress will quickly act to limit its own fund- raising calls,” he said. Jackson said Congress “could amend the act and say it applies to charitable organizations as well, but there are some constitutional issues” that are “appropriate to be decided in the court.” Goldberg said Congress could help in several ways: (1) It could create a DNC list that wouldn’t exempt charitable organizations. (2) It could create 2 separate lists, with one of them for those who don’t calls from commercial companies and the other one from charitable organizations. (3) It could create a “check- off” list that would allow consumers to check off the types of organizations whose telemarketing calls they didn’t want to receive.

House Commerce Committee Chmn. Tauzin (R-La.) and Commerce Committee ranking Democrat Dingell (Mich.), who sponsored the Do-Not-Call Implementation Act and the Sept. 25 legislation giving the FTC DNC list authorization, objected to the Denver court ruling. “The do-not-call registry does not restrict a salesman’s right to speak, rather it empowers American consumers who choose not to listen,” they said in a joint statement: “Putting your name on the do-not-call list is no different than hanging a ‘no solicitation’ sign on your front door. This issue is not about speech, it is about American citizens deciding who they let into the privacy of their homes.” They said they would “examine the judge’s opinion closely and will take whatever steps we can to ensure that the do-not-call registry is open for business as scheduled.”

Jackson said he expected the FCC would proceed with enforcement of its DNC registry Oct. 1: “The statute provides that only a court of appeals has statutory authority over the FCC, and the Colorado decision has no impact on the FCC’s rules.” FCC Chmn. Powell said the FCC would join the FTC in “taking every appropriate legal measure to ensure the will of the people is vindicated.” He called the decision “fundamentally flawed. We strongly believe the do-not-call list withstands constitutional scrutiny.” Jackson said the FCC also could be sued if it decided to enforce the list starting Oct. 1: “It’s a soap opera.” Alternatively, he said the 2 agencies could postpone the effective date. The FTC also could “take a position that [the order] applies only in Denver, but I don’t think it will,” he said. Kamp said that theoretically the order was limited to Colo. only, as the Dist. Court’s jurisdiction was limited to that state. However, he said, “practically, it affects the whole country, because the First Amendment affects the whole country.”

FTC Chmn. Timothy Muris said the order “if adopted elsewhere would effectively cripple virtually every do-not- call registry in the United States, whether state or federal.” Ramsay said NARUC was “leaning to being involved” in the case, saying that if the federal list were invalidated, it would draw many lawsuits against state do- not-call lists. However, he said “NARUC hasn’t made a final decision.” Said Muris: “I do not believe that our Constitution dictates such an illogical result. To the contrary, our Constitution allows consumers to choose not to receive commercial telemarketing calls.” Muris said the FTC would “seek every recourse to give American consumers a choice to stop unwanted telemarketing.”

However, DMA Pres. Robert Wientzen said “the fundamental issues raised by the federal courts… are of no small consequence and must be resolved to clear up the mass consumer and industry confusion created by the FTC’s efforts to implement a national do-not-call list.” He said the creation and implementation of a national or state DNC registry was “not the proper role of government, but rather should be left to the private sector. The 2 recent court rulings validate our belief that a private-sector alternative strikes a better balance between the rights of constitutionally protected commercial speech and consumers’ desires for privacy.” The DMA said it was committed to “vigorously pursue and resolve with Congress, the [FTC], the [FCC], the Administration and the courts the serious constitutional and statutory issues raised by” the court rulings.

“It’s very possible that the do-not-call list will not go into effect October 1, which is a big shame,” Goldberg said. Ramsay said the “key question” was whether the district or appeals court would stay the order: “If they don’t, the list won’t go into effect October 1 as scheduled.” Jackson said the Denver court probably could deny the FTC’s stay request, as the Okla. court had. He said a request for a stay could be pending “for some time, but under these circumstances” the court probably would act fast.

Meanwhile, the FTC said telemarketers wouldn’t be required to comply with the registry until it was enforced. An FTC spokeswoman said the current Telemarketing Sales Rules, already in place, prohibit telemarketers from using the current registry -- now 50.6 million strong -- as a “megalist” from which to make calls. The spokeswoman said the rules carried an $11,000 fine for each number called in violation. Kamp said telemarketers legally wouldn’t be able to misuse the list by using it as a target list because “the FTC has specifically forbidden [them] from using the list for other reasons.” The Direct Mktg. Assn. has urged the telemarketing industry to “respect the wishes of consumers who have registered for the [FTC’s national DNC] registry.” Wientzen said although it was “uncertain” what would happen Oct. 1 when the no-call system was supposed to take effect, “the DMA remains committed to respecting consumer trust and the wishes of all consumers no matter how those wishes have been expressed. Consumers must come first.”