Ninth Circuit Opinion Creates Additional Uncertainty

In the wake of ACA Int’l, courts consider three primary issues to determine whether a device qualifies as an ATDS.

10/10/2018 8:00 AM

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Ninth Circuit Opinion Creates Additional Uncertainty

By Nick Whisler

Partner, Mac Murray and Shuster LLP

It’s been almost seven months since the D.C. Circuit’s decision in ACA Int’l v. FCC, yet the definition of automatic telephone dialing system (ATDS) remains unclear. In the wake of ACA Int’l, courts consider three primary issues to determine whether a device qualifies as an ATDS.  This blog addresses those issues in turn.

What does “capacity” mean?

ACA Int’l invalidated the FCC’s interpretation that a device’s capacity includes its potential abilities (e.g., functionality that would become available by downloading additional software). In dicta, however, the court noted that “virtually any understanding of ‘capacity’…contemplates some future functioning state, along with some modifying act to bring that state about.” The court explained that the issue of capacity hinges less on labels such as “present” or “potential” and more on how much effort is required to turn the device into an ATDS.

The D.C. Circuit’s dicta was cause for concern because a “how much effort is required to turn the device into an ATDS” test is no clearer than the FCC’s “potential abilities” test. Since ACA Int’l, however, most courts have adopted something close to a “present capacity” test (looking only at the functions the device was capable of performing at the time of the call).

For example, in King v. Time Warner Cable Inc., the Second Circuit held that “capacity” refers to a device’s current functions, absent any modification to the device’s hardware or software. The definition does not include every smartphone or computer that might be turned into an ATDS if reprogrammed but it does include equipment that can achieve autodialing capabilities by flipping a switch (e.g., switching from one dialing mode to another dialing mode). Similarly, in Dominguez v. Yahoo, Inc., the Third Circuit applied a present capacity standard and noted that the plaintiff “can no longer rely on his argument that the Email SMS Service had the latent or potential capacity to function as an auto dialer.”

The totality of case law supports the argument that a device’s capacity is limited to the functions it is capable of performing at the time the call is made but not necessarily the functionality used to make the call (i.e., “present capacity” but not “actual use”).

Did ACA Int’l set aside all FCC guidance related to the definition of ATDS?

In April and May, we analyzed whether ACA Int’l set aside only the FCC’s 2015 Order or if it set aside all FCC interpretations related to the definition of ATDS, including its 2003 and 2008 predictive dialer rulings. Federal courts are split on this issue.

The Ninth Circuit (Marks v. Crunch San Diego, LLC), Northern District of Illinois (Pinkus v. Sirius XM Radio, Inc), Eastern District of Michigan (Keyes v. Ocwen Loan Servicing, LLC), Middle District of Florida (Gonzales v. Ocwen Loan Servicing), and Northern District of Georgia (Sessions v. Barclays Bank Del.) held that ACA Int’l invalidated all relevant FCC interpretations. The Third Circuit did not directly address this issue in Dominguez but its analysis supports the conclusion that the older FCC rulings are no longer valid.

By contrast, the Middle District of Tennessee (Ammons v. Ally Fin.), Southern District of Florida (Reyes v. BCA Fin. Servs.), and Northern District of Alabama (Swaney v. Regions Bank) held that the FCC’s prior orders remain valid and binding. According to those courts, a predictive dialer is an ATDS because it can dial telephone numbers without human intervention. Several district courts in the Ninth Circuit reached similar conclusions; however, the Marks decision means those opinions are no longer relevant.

Does the statutory definition of ATDS cover equipment that dials from a list?

Even if a court finds that the FCC’s ATDS rulings are no longer valid, it must determine whether the device used to make calls or send texts meets the statutory definition. Plaintiffs argue that a device is an ATDS if it can store and automatically dial telephone numbers. Defendants argue that a device is an ATDS only if it can generate random or sequential telephone numbers and then automatically dial those numbers. ACA Int’l did not address this issue. The court simply stated that the FCC cannot adopt both of these conflicting interpretations in the same order.

In the wake of ACA Int’l, courts are split on the functions a device must be capable of performing to be an ATDS. The Third Circuit’s Dominguez opinion contains little analysis but the court applied a random or sequential number generator test. Several district courts addressed the issue more directly and concluded, as did the Third Circuit, that a device is not an ATDS unless it can generate random or sequential telephone numbers. See PinkusGonzales and Keyes, among others.

In Marks, the Ninth Circuit reached the opposite conclusion. The court held that the statutory definition is ambiguous; therefore, it looked to the structure and context of the TCPA to conclude that Congress intended to regulate all devices that make automatic calls. According to the court, the express consent and government debt collection exemptions don’t make sense if an ATDS is limited to devices that generate random or sequential numbers because the calls that qualify for those exemptions must be dialed from a list. It also noted that Congress amended the TCPA in 2015 yet did nothing to correct the then-current interpretation that an ATDS includes equipment that automatically dials numbers from a list. In the court’s opinion, Congress validated the existing interpretation when it failed to amend the statutory definition.

As previously discussed, the FCC plans to issue updated TCPA interpretations, including further guidance on what qualifies as an ATDS. It wasted little time before requesting additional comments on how, if at all, the Marks opinion should impact its analysis. In the meantime, callers should continue to take a conservative approach to calling and texting cell phones.

* Ali Najaf contributed to this post.

Editor’s note: This content  is published with permission from Mac Murray and Shuster LLP. This article is provided for informational purposes and is not intended nor should it be taken as legal advice. The views and opinions expressed in this article are those of the author in [his][her] individual capacity and do not reflect the official policy or position of their partners, entities, or clients they represent. If you are interested in sharing articles and analysis on legal cases for possible publication with ACA International, email our Communications Department at comm@acainternational.org.

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