In a ruling that creates confusion for businesses that call or text consumers, the U.S. Court of Appeals for the Ninth Circuit has adopted an expansive definition of what constitutes an “automatic telephone dialing system” or ATDS under the Telephone Consumer Protection Act.
The decision – from one of the nation’s largest and most influential appellate courts – is squarely at odds with recent decisions from other federal courts of appeals and sets up a clash that could ultimately end up in the U.S. Supreme Court.
The September 20, 2018, decision in Marks v. Crunch San Diego LLC adopted a broad reading of the TCPA and held that the definition of ATDS can cover any equipment that has the capacity to store random numbers and dial them – even if the equipment cannot also generate the numbers randomly or sequentially.
The TCPA generally prohibits calls or texts to a cell phone made without prior express consent of the called party and using either an ATDS or an artificial or prerecorded voice. The TCPA subjects an offender to virtually unlimited liability ranging from $500 to $1,500 per call or text.
One of the most heavily litigated issues in recent years has been whether a defendant accused of violating the TCPA placed calls or texts using an ATDS, which the TCPA defines 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 calls.”
In March of this year, the D.C. Circuit issued its long-awaited decision in ACA Int’l v. Fed. Commc’n Comm’n, 885 F.3d 687 (D.C. Cir. 2018), which, among other things, invalidated a 2015 FCC rule defining an ATDS to include any equipment with the “potential” rather than just actual capacity to function as an ATDS, a rule that critics contended had converted every smartphone into an ATDS. The court left it up to the FCC to promulgate new rules, which the FCC is in the process of doing.
In the wake of the ACA Int’l decision, the Third Circuit Court of Appeals ruled in Dominguez v. Yahoo, Inc., 894 F.3d 116 (3d Cir. 2018) that a dialer is not an ATDS unless it has the present ability to randomly or sequentially generate numbers and to dial them.
In Marks, however, the Ninth Circuit found that a system designed to send promotional text messages to a list of stored telephone numbers was an ATDS, even though the system could not generate the numbers itself. Absent any controlling FCC rules, which were invalidated by ACA Int’l, the court undertook its own review of the language and legislative history of the TCPA, concluding that the definition of an ATDS is not limited only to devices with the capacity to call numbers produced through a “random or sequential number generator,” but also devices with the capacity to dial stored numbers automatically. Moreover, the court found that a device can be an ATDS even if it requires some human intervention to operate so long as the dialing itself is automatic. The Marks court rejected the Third Circuit’s Dominguez ruling as “unpersuasive” since it flowed from the “unreasoned assumption that a device must be able to generate random or sequential numbers in order to qualify as an ATDS.”
The Marks decision marks a reversal in the recent trend of courts to rein in the vast scope of potential liability under the TCPA and promises to continue the confusion and uncertainty businesses face in communicating with actual and prospective customers. Until either the FCC enacts new rules defining what is and is not an ATDS or the U.S. Supreme Court steps in to resolve the question, businesses must continue to proceed with extreme caution. The threat of runaway TCPA liability remains a very clear and present danger.
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