In a ruling that increases liability for companies that use text messaging for marketing or communicating with customers, the U.S. Court of Appeals for the Ninth Circuit adopted an expansive definition of what constitutes an automatic telephone dialing system—or ATDS—under the Telephone Consumer Protection Act. In Marks v. Crunch San Diego, the court held that any equipment that has the capacity to dial numbers from a stored list, such as a database of numbers, is an ATDS under the TCPA. The Sept. 20 ruling creates a split among the Courts of Appeals as to the scope of the TCPA that could lead to resolution by the Supreme Court.

The Telephone Consumer Protection Act

The TCPA prohibits unsolicited calls advertising “property, goods, or services” using an ATDS and prerecorded messages to residential and cellular phones. The Federal Communications Commission has interpreted the TCPA’s restriction to apply to both “voice calls and text calls to wireless numbers,” including text messages. The TCPA defines an ATDS as “equipment which has the capacity (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.”

FCC Orders and theACA Ruling

Over the course of a series of rulings that spanned 12 years, the FCC determined that predictive dialers and new technology can qualify as ATDS even if they do not generate or store random or sequential numbers.

Most recently, in its 2015 TCPA Omnibus Declaratory Ruling and Order, the FCC expanded the definition of an ATDS as any system with the “potential ability” to have the capacity to generate or dial random or sequential numbers. This expansive definition appeared to encompass all modern smartphones or any equipment that could be programmed in the future to sequentially or randomly generate and dial numbers.

Then, earlier this year, the D.C. Circuit’s long-anticipated ruling in ACA International v. Federal Communications Commission invalidated key aspects of the FCC’s Omnibus Ruling. One critical aspect of the D.C. Circuit’s ACA ruling was its rejection of the FCC’s broad interpretation of what constitutes an ATDS. The court concluded that the FCC’s interpretation of ATDS was “unreasonably and impermissibly expansive.”

However, in rejecting the expansive definition embraced by the FCC, the ACA court did not establish an alternative definition for ATDS and confirmed only that no definition that encompassed all modern smartphones would suffice. The court suggested that focusing on a system’s present versus potential capacity was not a helpful framework and that the focus should be more on the question of “how much is required to enable the device to function as an autodialer.”

Background on the Crunch Fitness Case

Jordan Marks sued Crunch Fitness in the Southern District of California alleging the company had violated the TCPA by sending him three text messages over the course of nearly a year after he joined the gym. Crunch had sent the text messages using a Textmunication system, a web-based interface that sends text messages to a list of stored numbers. Textmunication users can program the system to send messages to the stored phone numbers at a time scheduled by the client.

In 2014, the district court granted summary judgment for Crunch on the grounds that the Textmunication system did not qualify as an ATDS, because it lacked a random or sequential number generator as used by Crunch and did not have the capacity to add such a feature. Because the court defined an ATDS as necessarily including a random or sequential number generator, the court did not consider Mark’s expert, who stated that the Textmunication system called numbers from a stored list.

The Recent Ninth Circuit Reversal

The Ninth Circuit recently reversed the decision of the district court, ruling that the question of whether the Textmunication constituted an ATDS is for a jury to decide. In its reasoning, the court held that because the D.C. Circuit vacated the FCC’s interpretation of what sort of device qualifies as an ATDS, only the statutory definition of ATDS remains.

In its analysis, the Ninth Circuit noted that the definition of ATDS raises two questions: (1) when does a device have the “capacity” to perform the two enumerated functions; and (2) what precisely are those functions. The court determined that a proper definition should convey whether, in order to be an ATDS, a device must dial numbers generated by a random or sequential number generator or whether a device can be an ATDS if it merely dials numbers from a stored list. The court further reasoned that an adequate definition must determine to what extent the device needs to be able to function without human intervention in order to qualify as an ATDS.

After finding the statutory definition ambiguous, the court examined the context and structure of the statutory scheme. Based on its examination, the court held that the definition of ATDS means equipment that 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. The court further held that an ATDS is not required to be fully automatic. It stated, “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 function.”

Because Crunch’s Textmunication system stores numbers and dials them automatically to send text messages as part of a campaign, the Ninth Circuit ruled the district court’s order granting summary judgment should be reversed.

Takeaways

The Ninth Circuit’s adoption of this expansive definition of ATDS is at odds with the D.C. Circuit’s ACA decision, because it arguably expands the definition to include all modern dialing technologies, including smartphones, which the D.C. Circuit found “unreasonably and impermissibly expansive.” The decision also conflicts with the narrower definition adopted by the U.S. Court of Appeals for the Third Circuit earlier this year in Dominguez v. Yahoo, where the court held that an ATDS must have the present capacity to randomly or sequentially generate numbers.

This circuit split will likely be resolved by a clarifying ruling from the FCC by the end of the year. In the meantime, the court’s ruling is expected to invite more lawsuits alleging TCPA violations in the Ninth Circuit.