Courts Dial Back Autodialer Definition Following 'ACA International'
Enacted in 1991, the Telephone Consumer Protection Act (TCPA) was designed to prohibit certain telemarketing calls made via an “automatic telephone dialing system” or ATDS. The TCPA was passed to strike a balance between protecting the privacy of individuals, while still permitting legitimate telemarketing practices. In modern times, however, the TCPA has been expanded well beyond its intended purpose and scope.
The TCPA defines an ATDS as any device with the “capacity to store or produce telephone numbers to be called, using a random or sequential number generator; and to dial such numbers,” 47 U.S.C. Section 227(a)(1)(A)-(B). In an attempt to clarify this definition, the Federal Communications Commission (FCC), the agency to which Congress delegated regulatory authority, issued a declaratory ruling and order in 2015 rejecting the argument that a device’s capacity be measured solely by reference to its present capacity without any modification (2015 declaratory ruling). Instead, the FCC expanded the definition to include any device with the theoretical or potential capacity to store and generate random calls—irrespective of whether the device’s current configuration actually could do so. Much to the relief of businesses, however, two recent appellate court decisions have narrowed the definition of capacity under the TCPA.
An Autodialer by Any Other Name
Earlier this year, the U.S. Court of Appeals for the District of Columbia in ACA International v. FCC, 885 F.3d 687 (D.C. Cir. 2018), reviewed the FCC’s definition of the term “capacity” as part of a Hobbs Act challenge, and ruled the FCC’s broad interpretation exceeded the FCC’s authority. In setting aside portions of the 2015 declaratory ruling, the D.C. Circuit held the expansive interpretation as including future “capacity” was inconsistent with the legislative purposes of the TCPA, and could extend the law to reach virtually all smartphones. Although the D.C. Circuit did not endorse one interpretation over the other, it noted the definition is guided by “considerations such as how much is required to enable the device to function as an autodialer: does it require the simple flipping of a switch, or does it require essentially a top-to-bottom reconstruction of the equipment?” Summarizing its decision, the D.C. Circuit concluded “the FCC’s ruling, in describing the functions a device must perform to qualify as an autodialer, fails to satisfy the requirement of reasoned decision-making.” And went on to opine that “the order’s lack of clarity about which functions qualify a device as an autodialer compounds the unreasonableness of the FCC’s expansive understanding of when a device has the capacity to perform the necessary functions. We must therefore set aside the FCC’s treatment of those matters.”
Recently, on June 26 and June 29, 2018, respectively, the U.S. Courts of Appeal for the Second and Third Circuits applied ACA International to scale back the definition of an ATDS.
First, in Dominguez v. Yahoo, 2018 WL 3118056 (3d Cir. June 26, 2018), the plaintiff claimed to have received 27,800 unwanted texts. The plaintiff further alleged Yahoo’s Email SMS Service—through which a user would receive a text each time an email was sent to their Yahoo email account—had the potential capacity to place autodialed calls. In support of this claim, the plaintiff produced four expert reports which either hypothesized how the Email SMS Service could be “modified to generate random or sequential numbers” after several months of work, or provided generalized and conclusory assertions as to how such a function was “inherent” in all common computer operating systems, and therefore, had the present capacity to function as an ATDS.
In light of ACA International, the U.S. Court of Appeals for the Third Circuit struck the plaintiff’s proffered expert reports as they failed to offer evidence of the Email SMS Service’s present capacity to function as an autodialer. As a result, the court held plaintiff could not “rely on the argument that the Email SMS Service had the latent or potential capacity to function as an autodialer.” In so doing, the Third Circuit narrowed the definition of an ATDS to devices that, in their current configuration, have “the present capacity to function as an autodialer by randomly or sequentially generating telephone numbers, and dialing those numbers …” And since Yahoo’s “Email SMS Service sent messages only to numbers that had been individually and manually inputted into its system by a user,” the Third Circuit, in affirming the grant of summary judgment in favor of Yahoo, determined those messages were sent because the prior owner of plaintiff’s phone number had opted to receive them—“not because of random number generation.”
Relatedly, in King v. Time Warner Cable, 2018 WL 3188716 (2d Cir. June 29, 2018), the plaintiff alleged Time Warner violated the TCPA by placing 163 calls to her cellphone using an ATDS. According to the opinion, Time Warner used an “interactive voice response” calling system to contact customers with overdue accounts that would automatically reference billing records to determine which customers are more than 30 days late, and then dial the number associated with those accounts.
Notably, Time Warner admitted its system has “the capacity to store numbers” and dial them, but contended the system was not an ATDS because it “does not have the [present] capacity to make random or sequentially generated calls.” The district court, in relying on the FCC’s 2015 declaratory ruling, rejected this argument and granted summary judgment to the plaintiff. The Second Circuit disagreed, vacated the district court’s order, and remanded. After evaluating: the plain meaning of the term “capacity”; the ACA International ruling; and the legislative history underpinning the term “capacity” in the TCPA, the Second Circuit held the term “capacity in the TCPA’s definition of a qualifying autodialer should be interpreted to refer to a device’s current functions, absent any modifications to the device’s hardware or software.”
But unlike the Third Circuit in King, the Second Circuit contemplated a limited scenario where a communication system’s potential functions could be considered in determining whether a device qualifies as an ATDS. Specifically, the Second Circuit acknowledged “the definition does not include every smartphone or computer that might be turned into an autodialer if properly reprogrammed, but does include devices whose autodialing features can be activated, as the D.C. Circuit suggested [in ACA International], by the equivalent of ‘the simple flipping of a switch.’” The Second Circuit noted that “within those bounds … courts may need to investigate, on a case-by-case basis, how much is needed to activate a device’s autodialing potential in order to determine whether in violates the TCPA.” Thus, according to the Second Circuit, the determination of whether a calling device is an ATDS depends on whether autodialer capabilities can be turned on by “a simple switch,” or whether the equipment would require a “top-to-bottom reconstruction.”
Implications: For Whom the Autodialer Tolls
Exactly what qualifies as an ATDS will likely continue to be litigated, despite ACA International. As indicated by recent case law, while ACA International narrowed the definition of an ATDS, it did not provide a bright-line rule as to how much “capacity” is sufficient. The trend, however, may be that courts will apply the “plain language” of the TCPA—consistent with the legislative purpose of striking a balance between protecting privacy and permitting legitimate telemarketing practices.
What is more, the definition of an ATDS may soon be readdressed directly by the FCC. Following ACA International, the FCC issued a Public Notice seeking comments on, inter alia, “what constitutes an ATDS.” And on June 26, 14 Democratic U.S. senators issued a written response to the public notice—urging the FCC to “establish a comprehensive definition of the term auto dialer, and use the FCC’s exemption authority to carve out ordinary devices like smartphones that are not being ordinarily used to auto dial consumer en masse.” Notably, FCC Chairman Ajit Pai has gone on record as saying capacity should be limited to present capacity.
Absent additional clarification, companies utilizing nontraditional or computerized calling devices (and those that hire third-parties to do so) should look to the level of human intervention and present capacity to dial automatically from generated and compiled lists of phone numbers. And, as always, should contact experienced defense counsel to help navigate these shifting sands.
“Courts Dial Back Autodialer Definition Following 'ACA International',” by Ana Tagvoryan, Jeffrey N. Rosenthal, Alen H. Hsu, and Matthew P. Rubba was published in The Legal Intelligencer on July 23, 2018. To read the article online, please click here.
Reprinted with permission from the July 23, 2018, edition of The Legal Intelligencer © 2018 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.