Ninth Circuit Expands Definition of ATDS under TCPA to Include Devices that Merely Dial Numbers from a Stored List

The appellate court’s decision creates a circuit split over ATDS definition that cries out for Supreme Court review.

9/21/2018 5:00 AM

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Ninth Circuit Expands Definition of ATDS under TCPA to Include Devices that Merely Dial Numbers from a Stored List

The Ninth Circuit Court of Appeals in Marks v. Crunch San Diego, LLC reignited on Thursday a consumer’s Telephone Consumer Protection Act class action suit, finding that the web-based platform a gym operator used to send promotional text messages to its members’ and prospective customers’ cellular telephones may be subject to the TCPA’s autodialer restrictions because it “stores numbers and dials them automatically to send text messages to a stored list of phone numbers.” In issuing its precedential decision, the three-judge Ninth Circuit panel ruled unanimously that “the statutory definition of 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 appellate court noted that its decision in Marks did not address the question of “whether the device needs to have the current capacity to perform the required functions or just the potential capacity to do so.”  Instead, the appellate court sent the Marks case back to the district court for further proceedings to determine whether the system the gym operator used qualifies as an ATDS based on the Ninth Circuit’s definition of ATDS.   

The ongoing confusion over the meaning of automatic telephone dialing systems, and with it the broader issue of the scope of the TCPA, has for years created uncertainty and compliance burdens on ACA International’s members.  Therefore, as part of ACA’s long-term integrated three-pronged advocacy initiative to reform the TCPA to help its members succeed, in 2015 ACA submitted an amicus curiae (“friend of the court”) brief in the Marks case to provide assistance and insight to the Ninth Circuit with respect to the public policy and due process implications of how the TCPA is interpreted and applied by the accounts receivable management industry.  A year later, the Ninth Circuit paused the Marks case pending the U.S. Court of Appeals for the D.C. Circuit’s decision in the landmark case, ACA International v. Federal Communications Commission.  

Although the D.C. Circuit Court in ACA Int’l ultimately eviscerated the FCC’s expansive definition of ATDS, it did not answer the “basic question raised by the statutory definition [about] whether a device must itself have the ability to generate random or sequential telephone numbers to be dialed,” or whether it would be “enough if the device can call from a database of telephone numbers generated elsewhere.”  Instead, the D.C. Circuit Court explained that the FCC could “adopt either interpretation,” but not both.   As a result, courts around the country, including the Ninth Circuit Court of Appeals, have been left to interpret the TCPA to define an ATDS until the FCC acts and uses its rulemaking authority. 

Therefore, ACA seized the opportunity to file a supplemental amicus brief in Marks to help explain to the Ninth Circuit the effect of the ACA Int’l decision on the issue of defining an ATDS under the TCPA.  A pair of consumer advocates, the National Consumer Law Center and the National Association of Consumer Advocates, likewise filed an amicus brief with the Ninth Circuit in support of the consumer, arguing that the FCC’s autodialer rules in the case are applicable and the gym operator’s conduct is prohibited by the TCPA.

In Marks, a gym operator used a third-party, web-based platform to send text messages to a stored list of cellphone numbers as part of scheduled promotional campaigns.  The cellphone numbers were inputted into the platform by one of three methods; (1) when the gym operator or another authorized person manually uploaded a phone number onto the platform; (2) when an individual responded to one of the gym operator’s marketing campaigns via text message; and (3) when an individual manually inputted a phone number on a consent form through the gym operator’s website that interfaced with the platform.  The gym operator selected the desired phone numbers, generated a message to be sent; and selected the date the message was to be sent, and then the platform sent the text messages to those phone numbers on that date.  A consumer filed a class action lawsuit alleging that the gym operator violated the TCPA by sending promotional text messages using an ATDS without the recipients’ prior express consent.  The gym operator filed a summary judgment motion, arguing that its dialing platform was not an ATDS because “it lacks the capacity to store or produce telephone numbers to be called using a random or sequential number generator.” 

The district court ruled that based on the TCPA’s “clear and unambiguous” definition of an ATDS, the gym operator’s equipment is not an ATDS because it “lacks a random or sequential number generator.” With respect to the interpretation of “capacity,” the district court applied the current capacity interpretation and found that the gym operator’s equipment was not a “random or sequential number generator” because “[n]umbers only enter the system through one of the three methods . . . ., and all three methods require human curation and intervention.”  The district court was clear that calling a list of stored phone numbers is not “random or sequential number generation.”  The district court also found that the dialing platform did not have the “potential capacity” to become an ATDS because the gym operator used a third-party text delivery service that controlled the technology, and its “access to the platform [wa]s  limited.” 

The district court’s decision in Marks was particularly favorable for defendants, including those in the accounts receivables management industry, because it held that in order to be an ATDS, dialing equipment must have “a random or sequential number generator,” and that merely having the capacity to call a list of stored phone numbers without human intervention is not “random or sequential number generation.” 

On appeal, the Ninth Circuit vacated the district court’s decision rendering it null and void.  In doing so, the Ninth Circuit held  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.” 

Determining that the statutory text defining ATDS “is ambiguous on its face,” the appellate court looked to the “structure and context of the TCPA” and concluded that “Congress intended to regulate devices that make automatic calls,” including devices that make “automatic calls from lists of recipients.”  As evidence of Congress’ intent for the definition of ATDS to encompass “dial[ing] a curated list,” the Ninth Circuit pointed to exceptions in the “TCPA allowing an ATDS to call selected numbers.”  The Ninth Circuit explained that the TCPA exceptions allowing the use of an ATDS to either make calls:  (1) “with the prior express consent of the called party,” or (2) to collect debt owed to the United States “demonstrates that equipment that dials from a list of individuals” who consented to such calls or “who owe a debt to the United States is still an ATDS but is” excused from the TCPA’s restrictions.  The Ninth Circuit went on to add that Congress tacitly approved of the FCC’s interpretation of ATDS to include equipment that merely dials telephone numbers from a stored list when in 2015 Congress created the government debt collection exception but chose not to amend the statutory definition of ATDS. 

In adopting an overly broad interpretation of ATDS, the Ninth Circuit also ruled that the TCPA includes all equipment that “engages in automatic dialing,” not just “equipment that operate[s] without any human oversight or control.”  The Ninth Circuit reasoned that “[c]ommon 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.”  Therefore, the appellate court held that the gym operator’s equipment, which dials numbers automatically, “qualifies as an ATDS, even though humans, rather than machines, are needed to add phone numbers.”      

The Ninth Circuit’s decision in Marks creates a circuit split with decisions by two other sister circuit courts of appeals – the Second and Third Circuits, which also considered the issue of interpreting the legal definition of an autodialer and reached the opposite conclusion.  In June, both the Second Circuit in King v. Time Warner Cable, Inc. and the Third Circuit in Dominguez v. Yahoo, Inc. (a case in which ACA also provided amicus support) held that a device is not considered an ATDS under the TCPA unless it currently has the capability to dial randomly generated or sequential phone numbers.   

The direct conflict between the circuits now puts the issue of what constitutes an ATDS on the path for a possible rehearing en banc by the entire slate of Ninth Circuit Court judges and, ultimately, consideration by the U.S. Supreme Court. 

If the Marks decision is unsuccessfully appealed, it will become precedential, authoritative law in the Ninth Circuit upon which lower federal courts subject to the Ninth Circuit’s jurisdiction (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington) must follow. 

“Although ACA is disappointed the Ninth Circuit chose not to affirm the district court’s well-reasoned decision in Marks,” said Karen Scheibe Eliason, ACA’s Vice President and Senior Counsel, “reform of the antiquated TCPA remains among the highest priorities for ACA members.”

 While enacted to address concerns regarding telephone marketing calls, the TCPA has created significant negative consequences for the public and private sectors seeking to reach consumers for informational, non-telemarketing calls.  Without reform, consumers will be unable to receive updates about time-sensitive information about adverse financial actions involving foreclosures, negative credit reporting, or litigation. Additionally, the TCPA continues to fuel a wildfire of lawsuits by opportunistic consumer attorneys that are overburdening the courts, and the accounts receivables management industry, while providing nominal relief to consumers.  Limiting the definition of ATDS under the TCPA will help ensure that legitimate, non-telemarketing debt collection calls (and their resulting positive economic impact on the public and private sectors) are not unfairly impeded. 

Scheibe Eliason said that “ACA will continue to be the voice for the industry and a leader in educating the FCC and federal courts around the country on the challenges surrounding the perilous TCPA landscape, as well as in actively advocating for common-sense TCPA reforms that allow legitimate businesses to communicate with consumers about important matters.” 

One last thing:  It is important to keep in mind that the TCPA is complex legislation that remains subjective until the U.S. Supreme Court or the FCC provides some future clarification.  With new cases passing through litigation every day, including the Marks case, ACA encourages you to stay informed at all times by staying connected with ACA to help you monitor TCPA litigation developments and FCC rulings for new significant decisions. 

For now, remember the Ninth Circuit’s decision in Marks is not final or binding until the entire appeals process is completed.  In the meantime, consider being conservative on TCPA compliance by following this non-exhaustive list of compliance guidance:

  1. Obtain and confirm consent.  Consent is golden!  If you have consent, you don’t need to focus on an autodialer assessment.
  2. Keep dialing systems separate.  Manual dial mobile phones or phones where you do not have or you do know if you have consent.  Conversely, predictively dial landline phones. 
  3. Document clear policies and procedures.  Create clear policies and guidelines outlining TCPA compliance measures and educate employees on those procedures.  Also, layout and define your dialing system.  Spend the time upfront to document why your system is not an ATDS. 
  4. Continue education, training and compliance monitoring. 

ACA International’s efforts to proactively support the accounts receivable management industry are part of the association’s Industry Advancement Program, and are made possible by funding through ACA’s Industry Advancement Fund. 

If you missed any of the articles previously published in ACA Daily that provided more detailed information about Industry Advancement Program supported cases, you can always see the archived articles on the Industry Advancement Program website. Watch for updates when decisions are issued in these cases and learn more about new cases supported by the Industry Advancement Program in the future by reading ACA Daily and logging onto the Industry Advancement Program website throughout the year.  The association's TCPA Resource Center, also features related news, ACA SearchPoint documents, legal and regulatory materials, compliance guidelines and more.

This article is part of ACA International’s periodic publication and is intended to notify recipients of new developments in the law.  The information contained in this article is not to be construed as legal advice. Legal advice must be tailored to the specific circumstances of each case. Every effort has been made to assure that the information in this article is up-to-date as of the date of publication. It is not intended to be a full and exhaustive explanation of the law in any area. The information contained in this article is not intended as legal advice and may not be used as legal advice. It should not be used to replace the advice of your own legal counsel.

Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn  group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org.  Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse. Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training website to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

Ninth Circuit Expands Definition of ATDS under TCPA to Include Devices that Merely Dial Numbers from a Stored List

The Ninth Circuit Court of Appeals in Marks v. Crunch San Diego, LLC reignited on Thursday a consumer’s Telephone Consumer Protection Act class action suit, finding that the web-based platform a gym operator used to send promotional text messages to its members’ and prospective customers’ cellular telephones may be subject to the TCPA’s autodialer restrictions because it “stores numbers and dials them automatically to send text messages to a stored list of phone numbers.” In issuing its precedential decision, the three-judge Ninth Circuit panel ruled unanimously that “the statutory definition of 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 appellate court noted that its decision in Marks did not address the question of “whether the device needs to have the current capacity to perform the required functions or just the potential capacity to do so.”  Instead, the appellate court sent the Marks case back to the district court for further proceedings to determine whether the system the gym operator used qualifies as an ATDS based on the Ninth Circuit’s definition of ATDS.   

The ongoing confusion over the meaning of automatic telephone dialing systems, and with it the broader issue of the scope of the TCPA, has for years created uncertainty and compliance burdens on ACA International’s members.  Therefore, as part of ACA’s long-term integrated three-pronged advocacy initiative to reform the TCPA to help its members succeed, in 2015 ACA submitted an amicus curiae (“friend of the court”) brief in the Marks case to provide assistance and insight to the Ninth Circuit with respect to the public policy and due process implications of how the TCPA is interpreted and applied by the accounts receivable management industry.  A year later, the Ninth Circuit paused the Marks case pending the U.S. Court of Appeals for the D.C. Circuit’s decision in the landmark case, ACA International v. Federal Communications Commission.  

Although the D.C. Circuit Court in ACA Int’l ultimately eviscerated the FCC’s expansive definition of ATDS, it did not answer the “basic question raised by the statutory definition [about] whether a device must itself have the ability to generate random or sequential telephone numbers to be dialed,” or whether it would be “enough if the device can call from a database of telephone numbers generated elsewhere.”  Instead, the D.C. Circuit Court explained that the FCC could “adopt either interpretation,” but not both.   As a result, courts around the country, including the Ninth Circuit Court of Appeals, have been left to interpret the TCPA to define an ATDS until the FCC acts and uses its rulemaking authority. 

Therefore, ACA seized the opportunity to file a supplemental amicus brief in Marks to help explain to the Ninth Circuit the effect of the ACA Int’l decision on the issue of defining an ATDS under the TCPA.  A pair of consumer advocates, the National Consumer Law Center and the National Association of Consumer Advocates, likewise filed an amicus brief with the Ninth Circuit in support of the consumer, arguing that the FCC’s autodialer rules in the case are applicable and the gym operator’s conduct is prohibited by the TCPA.

In Marks, a gym operator used a third-party, web-based platform to send text messages to a stored list of cellphone numbers as part of scheduled promotional campaigns.  The cellphone numbers were inputted into the platform by one of three methods; (1) when the gym operator or another authorized person manually uploaded a phone number onto the platform; (2) when an individual responded to one of the gym operator’s marketing campaigns via text message; and (3) when an individual manually inputted a phone number on a consent form through the gym operator’s website that interfaced with the platform.  The gym operator selected the desired phone numbers, generated a message to be sent; and selected the date the message was to be sent, and then the platform sent the text messages to those phone numbers on that date.  A consumer filed a class action lawsuit alleging that the gym operator violated the TCPA by sending promotional text messages using an ATDS without the recipients’ prior express consent.  The gym operator filed a summary judgment motion, arguing that its dialing platform was not an ATDS because “it lacks the capacity to store or produce telephone numbers to be called using a random or sequential number generator.” 

The district court ruled that based on the TCPA’s “clear and unambiguous” definition of an ATDS, the gym operator’s equipment is not an ATDS because it “lacks a random or sequential number generator.” With respect to the interpretation of “capacity,” the district court applied the current capacity interpretation and found that the gym operator’s equipment was not a “random or sequential number generator” because “[n]umbers only enter the system through one of the three methods . . . ., and all three methods require human curation and intervention.”  The district court was clear that calling a list of stored phone numbers is not “random or sequential number generation.”  The district court also found that the dialing platform did not have the “potential capacity” to become an ATDS because the gym operator used a third-party text delivery service that controlled the technology, and its “access to the platform [wa]s  limited.” 

The district court’s decision in Marks was particularly favorable for defendants, including those in the accounts receivables management industry, because it held that in order to be an ATDS, dialing equipment must have “a random or sequential number generator,” and that merely having the capacity to call a list of stored phone numbers without human intervention is not “random or sequential number generation.” 

On appeal, the Ninth Circuit vacated the district court’s decision rendering it null and void.  In doing so, the Ninth Circuit held  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.” 

Determining that the statutory text defining ATDS “is ambiguous on its face,” the appellate court looked to the “structure and context of the TCPA” and concluded that “Congress intended to regulate devices that make automatic calls,” including devices that make “automatic calls from lists of recipients.”  As evidence of Congress’ intent for the definition of ATDS to encompass “dial[ing] a curated list,” the Ninth Circuit pointed to exceptions in the “TCPA allowing an ATDS to call selected numbers.”  The Ninth Circuit explained that the TCPA exceptions allowing the use of an ATDS to either make calls:  (1) “with the prior express consent of the called party,” or (2) to collect debt owed to the United States “demonstrates that equipment that dials from a list of individuals” who consented to such calls or “who owe a debt to the United States is still an ATDS but is” excused from the TCPA’s restrictions.  The Ninth Circuit went on to add that Congress tacitly approved of the FCC’s interpretation of ATDS to include equipment that merely dials telephone numbers from a stored list when in 2015 Congress created the government debt collection exception but chose not to amend the statutory definition of ATDS. 

In adopting an overly broad interpretation of ATDS, the Ninth Circuit also ruled that the TCPA includes all equipment that “engages in automatic dialing,” not just “equipment that operate[s] without any human oversight or control.”  The Ninth Circuit reasoned that “[c]ommon 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.”  Therefore, the appellate court held that the gym operator’s equipment, which dials numbers automatically, “qualifies as an ATDS, even though humans, rather than machines, are needed to add phone numbers.”      

The Ninth Circuit’s decision in Marks creates a circuit split with decisions by two other sister circuit courts of appeals – the Second and Third Circuits, which also considered the issue of interpreting the legal definition of an autodialer and reached the opposite conclusion.  In June, both the Second Circuit in King v. Time Warner Cable, Inc. and the Third Circuit in Dominguez v. Yahoo, Inc. (a case in which ACA also provided amicus support) held that a device is not considered an ATDS under the TCPA unless it currently has the capability to dial randomly generated or sequential phone numbers.   

The direct conflict between the circuits now puts the issue of what constitutes an ATDS on the path for a possible rehearing en banc by the entire slate of Ninth Circuit Court judges and, ultimately, consideration by the U.S. Supreme Court. 

If the Marks decision is unsuccessfully appealed, it will become precedential, authoritative law in the Ninth Circuit upon which lower federal courts subject to the Ninth Circuit’s jurisdiction (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington) must follow. 

“Although ACA is disappointed the Ninth Circuit chose not to affirm the district court’s well-reasoned decision in Marks,” said Karen Scheibe Eliason, ACA’s Vice President and Senior Counsel, “reform of the antiquated TCPA remains among the highest priorities for ACA members.”

 While enacted to address concerns regarding telephone marketing calls, the TCPA has created significant negative consequences for the public and private sectors seeking to reach consumers for informational, non-telemarketing calls.  Without reform, consumers will be unable to receive updates about time-sensitive information about adverse financial actions involving foreclosures, negative credit reporting, or litigation. Additionally, the TCPA continues to fuel a wildfire of lawsuits by opportunistic consumer attorneys that are overburdening the courts, and the accounts receivables management industry, while providing nominal relief to consumers.  Limiting the definition of ATDS under the TCPA will help ensure that legitimate, non-telemarketing debt collection calls (and their resulting positive economic impact on the public and private sectors) are not unfairly impeded. 

Scheibe Eliason said that “ACA will continue to be the voice for the industry and a leader in educating the FCC and federal courts around the country on the challenges surrounding the perilous TCPA landscape, as well as in actively advocating for common-sense TCPA reforms that allow legitimate businesses to communicate with consumers about important matters.” 

One last thing:  It is important to keep in mind that the TCPA is complex legislation that remains subjective until the U.S. Supreme Court or the FCC provides some future clarification.  With new cases passing through litigation every day, including the Marks case, ACA encourages you to stay informed at all times by staying connected with ACA to help you monitor TCPA litigation developments and FCC rulings for new significant decisions. 

For now, remember the Ninth Circuit’s decision in Marks is not final or binding until the entire appeals process is completed.  In the meantime, consider being conservative on TCPA compliance by following this non-exhaustive list of compliance guidance:

  1. Obtain and confirm consent.  Consent is golden!  If you have consent, you don’t need to focus on an autodialer assessment.
  2. Keep dialing systems separate.  Manual dial mobile phones or phones where you do not have or you do know if you have consent.  Conversely, predictively dial landline phones. 
  3. Document clear policies and procedures.  Create clear policies and guidelines outlining TCPA compliance measures and educate employees on those procedures.  Also, layout and define your dialing system.  Spend the time upfront to document why your system is not an ATDS. 
  4. Continue education, training and compliance monitoring. 

ACA International’s efforts to proactively support the accounts receivable management industry are part of the association’s Industry Advancement Program, and are made possible by funding through ACA’s Industry Advancement Fund. 

If you missed any of the articles previously published in ACA Daily that provided more detailed information about Industry Advancement Program supported cases, you can always see the archived articles on the Industry Advancement Program website. Watch for updates when decisions are issued in these cases and learn more about new cases supported by the Industry Advancement Program in the future by reading ACA Daily and logging onto the Industry Advancement Program website throughout the year.  The association's TCPA Resource Center, also features related news, ACA SearchPoint documents, legal and regulatory materials, compliance guidelines and more.

This article is part of ACA International’s periodic publication and is intended to notify recipients of new developments in the law.  The information contained in this article is not to be construed as legal advice. Legal advice must be tailored to the specific circumstances of each case. Every effort has been made to assure that the information in this article is up-to-date as of the date of publication. It is not intended to be a full and exhaustive explanation of the law in any area. The information contained in this article is not intended as legal advice and may not be used as legal advice. It should not be used to replace the advice of your own legal counsel.

Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn  group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org.  Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse. Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training website to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

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