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January 11, 2019

Autodialers Under the Telephone Consumer Protection Act:  Will there be Certainty Soon? (Part I)

(First in a Series on the TCPA's ATDS Definition)

The Telephone Consumer Protection Act of 1991 ("TCPA") protects consumers from unwanted nuisance calls by limiting the use of an automatic telephone dialing system ("ATDS") or prerecorded calls. Since its enactment, courts and the FCC have been battling over the definition of an ATDS.

In March 2018, the D.C. Circuit Court in ACA Int'l v. Fed. Commc'ns Comm'n, 885 F.3d 687 (D.C. Cir. 2018) struck parts of the FCC's 2015 Declaratory Ruling and Order regarding the definition of an ATDS under the TCPA. Because of this decision, the Circuit Courts were forced to define an ATDS without any FCC guidance. Almost a year later, little clarity has emerged.

The FCC's 2015 Declaratory Order and ACA International

The TCPA defines an ATDS as "equipment which has the capacity— (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers."

The FCC's 2015 Declaratory Ruling and Order sought to clarify two questions raised by this statutory definition: "(1) when does a device have the 'capacity' to perform the two enumerated functions; and (ii) what precisely are those functions?" ACA Int'l v. Fed. Commc'ns Comm'n, 885 F.3d 687, 695 (D.C. Cir. 2018).

The FCC defined "capacity" as "functions that could be added through app downloads and software additions[.]" Id. at 697. The D.C. Circuit Court struck this definition as "an unreasonably, and impermissibly, expansive one" because it would encompass all smartphones as a potential ATDS. Id. at 697-700. The court did not stop there. In an effort to provide clarity, the court offered the following guideline: capacity "ultimately turns less on labels such as 'present' and 'potential' and more on considerations such as how much is required to enable the device to function as an autodialer[.]" Id. at 696.

Next, the FCC defined an ATDS as any device with the ability to "generate and dial random or sequential numbers" but also any device without the capacity "to generate random or sequential numbers[.]" Id. at 702. The D.C. Circuit Court also struck this definition as contradictory and unreasonable. "So which is it: does a device qualify as an ATDS only if it can generate random or sequential numbers to be dialed, or can it so qualify even if it lacks that capacity?" Id. at 702. The court did not provide an alternative interpretation. Id. at 703.

The D.C. Circuit Court concluded that the FCC's 2015 Order lacked clarity "about which functions qualify a device as an autodialer" and that this ambiguity compounded "the unreasonableness of the Commission's expansive understanding of when a device has the 'capacity' to perform the necessary functions." Id. at 703.

The Circuit Court Split

In the wake of ACA International, the Circuit Courts had to answer these two questions: (1) what does "capacity" mean, and (2) what are the functions an ATDS must perform? Thus far, three Circuit Courts have weighed in, each with their own interpretation.

Third Circuit

The Third Circuit in Dominguez v. Yahoo, Inc. narrowed the definition of an ATDS to a device with the present capacity to dial random or sequentially generated telephone numbers. 894 F.3d 116, 118-21 (3d Cir. 2018).

At issue was Yahoo's Email SMS Service, which sent a text message whenever a user received an email to his Yahoo account. Id. at 117. The Yahoo Email SMS Service "sent messages only to numbers that had been individually and manually inputted into its system by a user." Id. at 121. Because Yahoo's Email SMS Service "did not have the capacity to store or produce telephone numbers using a random or sequential number generator," it did not qualify as an ATDS. Id. at 118.

In affirming the decision, the Third Circuit implicitly answered both questions raised in the 2015 FCC Order. First, the Third Circuit found that "capacity" included the equipment's "present capacity" but not its "latent or potential capacity." Id. at 118-20. Next, it defined the functions of an ATDS as the random or sequential generation of telephone numbers to dial. Id. at 120-21.

Second Circuit

The Second Circuit in King v. Time Warner Cable Inc. took a more moderate approach to the definition of "capacity," defining it as a device's present capacity, absent any modifications. 894 F.3d 473, 481 (2d Cir. 2018). However, included within that definition were any devices that had the capacity to function as an autodialer "whether or not those functions were actually in use for the offending call," and where those functions could be activated by the equivalent of "flipping a switch." 894 F.3d 473, 477, 481 (2d Cir. 2018).

At issue was Time Warner's "interactive voice response" calling system, which contacted customers whose payments were overdue. Id. at 475. The system had the capacity to store and to dial numbers, but did not have the capacity to make random or sequentially generated calls. Id. Based on the court's revised definition of capacity, there was insufficient evidence to determine whether Time Warner's "interactive voice response" was an ATDS. Id. at 481.

In remanding the case, the Second Circuit left to the district court "those complicated questions" concerning which functions an ATDS must perform. Id. at 481-82.

Ninth Circuit

In contrast, the Ninth Circuit in Marks v. Crunch San Diego, LLC focused on the functions of an ATDS. The Ninth Circuit broadly defined those functions as the ability to dial stored numbers, or dial randomly or sequentially generated numbers, even if some level of human intervention was involved. 904 F.3d 1041, 1052-53 (9th Cir. 2018).

At issue was Crunch Fitness's Textmunication system, which sends "promotional text messages to a list of stored telephone numbers." 904 F.3d 1041, 1048 (9th Cir. 2018). To send a text message, a Crunch employee must generate the message, select the recipient phone numbers, and select a date and time for the message to be sent. Id. Because the Textmunication system stored numbers and dialed them automatically to send text messages, the court found this was sufficient for plaintiff to survive summary judgment. Id. at 1052.

The Ninth Circuit left unanswered whether the term "capacity" meant that "the device needs to have the current capacity to perform the required functions or just the potential capacity to do so." Id. at 1053 n. 9.

District Courts struggling with the recent Circuit Court opinions have been all over the map. Given the continued confusion surrounding the definition of an ATDS, it is important for lawyers to be careful how they advise their clients who make automated calls.

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