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ALERT for Ninth Circuit and TCPA: A System That Has the Capacity to Automatically Dial Stored Numbers is an ATDS

09.21.18

Executive Summary

  • On September 20, 2018, the Ninth Circuit in Marks v. Crunch San Diego, LLC (Case: 14-56834), overturned a lower court’s ruling that a text messaging system was not an automatic telephone dialing system (ATDS) under the Telephone Consumer Protection Act (TCPA), holding instead that the statutory definition of an ATDS includes a device that stores telephone numbers to be called, whether or not those numbers have been generated by a random or sequential number generator.

  • The Court found that because the language of the TCPA was ambiguous, it used canons of construction, legislative history, and the statute’s overall purpose in determining that a system only needs to store numbers and then dial them automatically to qualify as an ATDS.

  • The Court declined to follow the Third Circuit’s opinion in Dominguez v. Yahoo, Inc., noting the decision unpersuasive as it contained an “unreasoned assumption that a device must be able to generate random or sequential numbers in order to qualify as an ATDS” and “merely avoided the interpretive questions raised by the statutory definition of ATDS.”

  • Many anxiously await the Federal Communication Commission’s (FCC) updated ruling on the definition of an ATDS because its omnibus overhaul will certainly be guided by the analytical framework set forth in the D.C. Circuit’s opinion, and the new Chairman has questioned many of the FCC’s interpretations that have led to the proliferation of TCPA lawsuits.

Background

The system at issue is called the Textmunication system, which is a web-based marketing platform designed to send promotional text messages to a list of stored telephone numbers. Phone numbers can be input manually or automatically. Crunch Fitness communicates with its prospective and current gym members by sending text messages through the Textmunication system, which, after a Crunch Fitness employee logs in, selects the phone numbers, and generates the content, automatically sends the text messages to the selected phone numbers.

Marks signed up for a gym membership with Crunch Fitness in 2012. Over an eleven- month period, he received three text messages. In 2014, Marks filed a putative class action against Crunch Fitness, alleging violations of the TCPA.

The district court granted summary judgment in favor of Crunch Fitness on the ground that the system at issue did not qualify as an ATDS because it did not have the capacity to randomly or sequentially generate numbers and then dial those numbers.

Analysis

After spending significant ink discussing the intent and purpose behind the creation of the TCPA, noting that much of what was written in 1991 related to the technology at the time, the Court discussed ACA International and its effect on the statute itself. The Court noted that because the D.C. Circuit vacated the FCC’s interpretation of what device qualified as an ATDS, “only the statutory definition of ATDS … remains.” (Op., p. 17-18.) Essentially, we have a blank slate. The next issue was whether the statutory text was “plain and unambiguous” or “ambiguous.”

The Court in an almost conclusory fashion found that the statutory text was confusing and thus ambiguous, as evidenced by: (1) Marks and Crunch Fitness offering competing interpretations of the language, and (2) the D.C. Circuit’s opinion finding that “‘[i]t might be permissible’ for the FCC to adopt an interpretation that a device had to generate random or sequential numbers in order to be an ATDS, or that a device could be an ATDS if it was limited to dialing numbers from a stored list.” (Op., p. 20.) The Court then looked to the context and structure of the statutory scheme as well as the statute’s overall purpose for clarification.

“Although Congress focused on regulating the use of equipment that dialed blocks of sequential or randomly generated numbers – a common technology at that time – language in the statute indicates that equipment that made automatic calls from lists of recipients was also covered by the TCPA.” In short, the Ninth Circuit held that Congress intended to regulate devices that make automatic calls. Specifically, as support for this statement, the Court noted:

  • Provisions in the TCPA allow an ATDS to call selected numbers (i.e., those who have provided prior express consent); and

  • Provisions in the TCPA permit exceptions to the statute, which allows a system that qualifies as an ATDS to automatically call specific numbers from a set list.

The Court held, therefore, that “the statutory definition of ATDS is not limited to devices with the capacity to call numbers produced by a ‘random or sequential number generator’, but also includes devices with the capacity to dial stored numbers automatically.” In short, the definition of an ATDS means “equipment which has the capacity – (1) to store numbers to be called or (2) to produce numbers to be called, using a random or sequential number generator – and to dial such numbers.” (Op., p. 23.)

Practical Implications

There are a few key points that must be noted:

  1. Definition of an ATDS: A severe definition of an ATDS now controls in the Ninth Circuit – absent a successful further appeal.

    What does this mean? Plaintiffs in the Ninth Circuit will likely argue that “anything qualifies as an ATDS.”

  2. Human Intervention: Many have argued (and some courts have agreed) that a system is not truly automatic when human intervention is involved. The Court here essentially found that if human intervention is minor, such as when a person “turn[s] on” or “triggers” a system to dial numbers, the system still qualifies as an ATDS. The Court noted that Congress was targeting equipment that could “engage in automatic dialing, rather than equipment that operated without any human oversight or control.” Thus, merely “flip[ping] the switch on an ATDS,” does not qualify as human intervention, nor does human intervention occur when a human adds phone numbers to a dialing platform.

    What does this mean? Companies should still argue aggressively that human intervention is a necessary part of their telephone or texting system; however, systems that require minimal human intervention may satisfy the Marks definition of an ATDS within the Ninth Circuit.

  3. Capacity: One of the hot button issues is whether capacity means “present” or “potential.” The Dominguez court (among others) found that it meant present. However, the Court here declined to “reach the question whether the device needs to have the current capacity to perform the required functions or just the potential capacity to do so.”

    What does this mean? We continue to live in a world of uncertainty and doubt (at least in the Ninth Circuit), but we take it as a good sign that the Court did not speak to this issue. The trend has been present capacity and we are hopeful that the FCC will cement that in the future.

  4. Possible FCC action: The FCC is currently considering new interpretations of the TCPA in light of ACA International. If nothing else, Marks has raised the stakes of FCC action even higher. All eyes are on the FCC; many are expecting the FCC to issue its new interpretation after the mid-terms, perhaps by the end of the year.

Overall, the Court’s opinion in Marks is a reminder that the TCPA is alive and well. Plaintiff’s lawyers will continue to file litigation and companies will need to continue their strong efforts of TCPA compliance.

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