East Coast-West Coast: 9th Circuit Reinvigorates FCC’s Broad Autodialer Definition, Creates Circuit Split on When TCPA Liability Can Attach for Using a Dialer

On September 20, 2018, in Marks v. Crunch San Diego, the 9th Circuit became the latest federal appeals court to weigh in after the D.C. Circuit’s decision last March invalidating the Federal Communications Commission’s (FCC) expansive definition of automatic telephone dialing systems (ATDS or “autodialer”) under the Telephone Consumer Protection Act (TCPA). The 9th Circuit decision effectively reinvigorates much of what the FCC had captured in its approach to autodialers under the TCPA in its July 2015 Omnibus Ruling, and creates confusion given courts on the other side of the country that have taken a much narrower view of what’s left after the D.C. Circuit’s invalidating relevant portions of that ruling. Marks now also creates a circuit split of the kind that greatly increases the chances that, if petitioned, the Supreme Court will review the issue.

From a practical perspective, the 9th Circuit makes its position very clear on two key issues when determining whether a device is an ATDS – that a device with the ability to store numbers, even if the numbers are not randomly or sequentially dialed, is an ATDS, and that relying on human intervention with respect to picking numbers to call, loading them in for dialing, crafting and uploading the message, and scheduling transmission is a not an absolute shield when defending a TCPA claim.

As explained in our advisory on the D.C. Circuit’s ACA International v. FCC ruling, the scope of the TCPA ATDS definition has significant consequences for companies seeking to contact consumers via their mobile phone. Under the TCPA, it is unlawful to autodial cell phones (and other sensitive numbers, like health-care facilities and elderly home, emergency numbers, etc.) without prior express consent regardless of the content, though marketing content requires an elevated form of “prior express written consent.” This prohibition applies equally to both voice calls and texts. And because the TCPA provides a private cause of action for violations, the last decade has seen an explosion of TCPA litigation—much of it stemming from alleged ATDS use without consent—with exposure and settlements reaching the tens, or even hundreds of millions.

In its 2015 Omnibus Ruling, the FCC, seeking to resolve a number of divergent declaratory ruling requests, expounded on its view of how to construe the TCPA’s autodialer definition of equipment that has the “capacity” to “store or produce telephone numbers to be called, using a sequential or number generator, and to dial such numbers.” The Omnibus Ruling was a culmination of FCC decisions over the preceding decade during which the ATDS definition steadily expanded to encompass more than just devices that dial seven (or ten) random digits hoping to make connections, or that dial one number after another in successive order (e.g., xxx-xxx-0001, xxx-xxx-0002, and so on). In 2003, the FCC had ruled that devices that, rather than dialing “randomly” or “successively” from, e.g., a curated preprogrammed list of numbers, could still be autodialers. Later, its approach came to focus on the degree of “human intervention” in use of a device.  And as TCPA litigation heated up and a key issue in ATDS cases came to focus on what it meant for a device to have the “capacity” to dial random/successive stored/generated numbers, the Omnibus Order held a device is an autodialer if it has the “potential” capacity to store or produce numbers and dial them—even if that capacity is not used to place a particular challenged call/text—and even if triggering that capacity requires addition of software or hardware, so long as there is “more than a theoretical potential” to perform the FCC-identified autodialing functions.

In March 2018, the D.C. Circuit in ACA International invalidated the FCC’s expansive ATDS definition. The court held the FCC’s approach cannot be sustained, at least given the FCC’s earlier ruling (which was not before the D.C. Circuit) that a call made with a device having the capacity to function as an autodialer can violate the statute even if autodialer features are not used to transmit the call/text. The court spoke at length about how the FCC’s position makes even smartphones autodialers, and how Congress never intended to turn devices that the vast majority of the public uses on a daily basis into equipment that could create liability for statutory damages. The court viewed this vast disconnect as indicating the FCC strayed far beyond its statutory authority, rendering its ruling arbitrary and capricious, though the court left unclear not only what is required to enable capacity to function as an autodialer, but also the extent to which dialing from a list, as opposed to numbers the device generates, factors into the analysis. Despite rejecting the FCC’s approach, the D.C. Circuit thus did not decide what the autodialer definition encompasses (or excludes), and refused to answer whether human intervention (in dialing) is dispositive, and if not, to what degree it must be present, while also holding (based on “potential capacity”) that a device can still be an autodialer even with some human intervention. 

After ACA International, courts have split on whether the D.C. Circuit invalidated just the final step of the FCC’s expansive ATDS definition in the Omnibus Order, or reached back further to its holdings that devices dialing from pre-programmed lists, predictive dialers, and other, similar devices are autodialers. Courts also have wrestled with the significance of human intervention, and where in the process it must occur to avoid being an autodialer, sometimes with divergent results. Recently, the 3rd Circuit recently held in Dominguez v. Yahoo, following a reading of ACA International that more greatly retrenches the FCC approach, that a device must be able to generate random or sequential numbers in order to qualify as an ATDS. And the 2nd Circuit held in King v. Time Warner Cable that an ATDS must have current ability to randomly or sequentially generate numbers without modifications to the device's hardware or software.

In Marks, Crunch San Diego defended its use of the Textmunication platform to contact its gym members as not involving an ATDS because it required the human interaction of a Crunch employee logging into Textmunication, selecting recipient cell numbers, generating the message content, and selecting the date(s) and time(s) for delivery of the text, only after which the system sends the messages as programmed. The district court granted summary judgment in favor of Crunch on grounds that the Textmunication system was not an ATDS because it presently lacked a random or sequential number generator, and did not have potential capacity to add such a feature.

The 9th Circuit started from the premise that the D.C. Circuit’s ACA International decision wiped clear prior FCC rulings defining autodialers, leaving courts to return to the original text of the TCPA, using all the general rules of statutory interpretation. It then undertook a painstaking review of the TCPA’s underlying purpose as indicated at its 1991 passage, and the legislative history underlying the statute. It also carefully stepped through the FCC’s interpretations of the statute’s autodialer definition over the years, culminating in analysis of the ACA International ruling. Applying its own take on statutory interpretation of the TCPA anew, the 9th Circuit first held the ATDS definition is ambiguous.

Using the tools of underling Congressional intent, legislative history, and assessing how various parts of the Act fit and work together, the 9th Circuit held the TCPA’s structure and context as originally enacted indicated Congress intended to regulate devices that generally make automatic calls. Based on this, it held that “[a]lthough Congress focused on regulating … 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.” The 9th Circuit went on to reject Crunch’s argument that a device cannot qualify as an ATDS unless it is fully automatic, meaning that it must operate without any human intervention whatsoever, because “common sense” “indicates that human intervention of some sort is required before an autodialer can begin making calls, whether turning on the machine or initiating its functions.”

Because Crunch did not dispute that the Textmunication system dials numbers automatically, and thus it has automatic dialing functions necessary to be an ATDS, even though humans, rather than machines, are needed to add phone numbers, the 9th Circuit held the platform is an autodialer, and reversed the trial court decision. It held that the term “automatic telephone dialing system” 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 automatically, even if the system must be turned on or triggered by a person. The court punted, however, on the question whether the device needs to have the current capacity to perform the required functions, or just the potential capacity to do so. Nor does its decision say much about the significance of human intervention in dialing numbers, as opposed to just, e.g., turning the equipment on, loading numbers into the device, and/or crafting the message or designating when it gets sent.

The 9th Circuit’s decision thus leaves considerable confusion about what steps are necessary to bring a dialing device outside the TCPA’s ATDS definition as to avoid its consent requirements —and to thus hope to avoid the potential exposure that seems to follow autodialer use. The schism between the 9th Circuit’s approach and that taken by the D.C., Second and 3rd Circuits back east also presents operational quandaries for companies that rely on nationwide telephone/texting outreach. As noted, this split makes the issue ripe for a petition for Supreme Court review, and only time will tell if a litigant makes that request, and if the high Court accepts it. But first, Crunch San Diego has petitioned the 9th Circuit to rehear the case en banc. Meanwhile, companies using text- and voice-delivery platforms will have to carefully parse the equipment they, or their vendors, plan to use, and, it seems, engage both lawyers and engineers to try to develop and implement workable compliance strategies.