Manatt’s Continuing Coverage of Significant Post-ACA International Developments - August 2018

by Manatt, Phelps & Phillips, LLP
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As we have previously reported, the recent ACA International decision from the D.C. Circuit changed the face of litigation in the Telephone Consumer Protection Act (TCPA) world by striking down the Federal Communication Commission’s (FCC) 2015 automatic telephone dialing system (ATDS) guidance. As part of our continuing coverage in this area, the Manatt TCPA team has been reporting on significant developments at the FCC and on noteworthy (i.e., dispositive or class certification-related) federal district- and appellate-level decisions interpreting, applying or otherwise evaluating ACA Int’l in ways that may impact our readers.

At the judicial level, courts across the country are interpreting and applying ACA Int’l in a variety of ways. For this edition of TCPA Connect, there were five district court decisions of note: two from the Third Circuit, one from the Sixth Circuit, one from the Ninth Circuit and one from the Eleventh Circuit.

Somogyi v. Freedom Mortg. Corp., 2018 WL 3656158 (D.N.J. Aug. 2, 2018). In this putative class action, the plaintiffs alleged the defendant violated the TCPA by using an ATDS to place unsolicited telemarketing calls and leave ringless voicemails. The defendant moved to dismiss or, in the alternative, stay the case pending FCC guidance following ACA Int’l, arguing the platform was not an ATDS, that the plaintiffs were called not “randomly” but because they were customers, that prerecorded voices were not used and that the plaintiffs insufficiently alleged facts regarding their do-not-call requests. In denying the motion to dismiss and the stay, Judge Simandle found the plaintiffs had alleged not that the employee clicked a button to initiate each call, but rather, that an employee “need only press one button on a computer screen, at which point the dialing system chooses who to call, dials the number, and then ‘[t]he software, not the caller, decide[s] who [to] call next.’” The court emphasized that “the human intervention that occurred, if any, took place before the number was actually selected or dialed by operation of the algorithm.” The court also found that the plaintiffs made sufficient allegations to infer that the defendant used a system capable of random or sequential number generation, because the platform “selected the next number from among a population of hundreds of thousands of numbers belonging to existing customers.” The plaintiffs also pleaded sufficient allegations to raise inference that the defendant failed to follow the internal do-not-call list requirement under the TCPA. With respect to the requested stay, the court stated that “FCC Orders issued prior to 2015 appear to have survived whatever criticism was levied by the D.C. Circuit” (citing Dominguez v. Yahoo, Inc., 894 F.3d 116 (3d Cir. 2018)). Notably, the court stated that the FCC “seems to offer conflicting views” on the requirements of an ATDS and declined to grant a stay “[s]ince the statutory definition of an ATDS (as opposed to the FCC’s interpretation of an ATDS) was not questioned in either” ACA or Dominguez. In a footnote, the court states that discovery is necessary to determine whether the defendant actually employed systems that “lie within the literal statutory definition of an ATDS” and that “permitting discovery” is consistent with the Second Circuit’s analysis of ACA.

Sieleman v. Freedom Mortg. Corp., 2018 WL 3656159 (D.N.J. Aug. 2, 2018). In this putative class action against the same defendant as in Somogyi, also decided by Judge Simandle on the same day as Somogyi, plaintiff Sieleman alleged that the defendant used an ATDS to place marketing calls to his cellphone without prior express written consent and continued to call after he requested the calls cease. For verbatim reasons as stated in Somogyi, Judge Simandle denied the defendant’s request for a stay in light of ACA, because the statutory definition of an ATDS was not questioned in ACA Int’l or by the Third Circuit in Dominguez. Notably, the court stated that “[i]n light of [ACA Int’l], . . . this Court should focus only on the language of the TCPA, rather than any FCC guidance, to define an ATDS . . . for purposes of deciding the pending motion to dismiss.” The plaintiff adequately alleged that the defendant used an ATDS, by pointing out that there was “a noticeable pause/delay” when he answered and the call was placed for the purpose of offering refinance services. The court gave weight to the fact that other courts in this district consistently hold that allegations of “answering multiple calls with a pause or delay prior to a person speaking” are sufficient to state a claim under the TCPA. The court also denied a stay because it determined discovery as to the nature of the platform is required before any legal standard under the TCPA can be applied to the defendant’s conduct. The court ultimately followed Dominguez, which indicated that the 2003 FCC Order was not overruled by ACA Int’l, and the court should interpret the statutory definition of an autodialer as it did prior to the 2015 FCC Order.

Darcel Keyes v. Ocwen Loan Servicing, LLC, 2018 WL 3914707 (E.D. Mich. Aug. 16, 2018). The plaintiff alleged that the defendant called her nearly 3,000 times in an attempt to collect allegedly overdue payments, despite the plaintiff’s objections to the calls. The defendant’s system uses the Linux and Windows operating systems and calls numbers from a stored list—the parties agreed that the system could call only numbers stored in the database. The district court in Michigan analyzed whether the system had “capacity” to store numbers to be called, and whether it used a random or sequential number generator to generate and dial such numbers. As an initial matter, the court rejected the plaintiff’s argument that ACA Int’l has no impact on the FCC’s 2003, 2008 and 2012 guidance regarding what constitutes an ATDS because that guidance was not timely challenged in the ACA Int’l case. The court noted that this argument was already explicitly rejected when raised in ACA Int’l, and stated, “pre-2015 guidance, to the extent it was reaffirmed in the 2015 Declaratory Ruling, no longer warrants judicial deference.” The court similarly rejected the plaintiff’s argument that the D.C. Circuit ruling was not binding on courts in Michigan. ACA Int’l is binding on district courts in Michigan pursuant to the Hobbs Act “in so far as [ACA Int’l] vacated the [FCC’s] interpretations regarding the capacity and functions of an autodialer.”

Denying summary judgment for the plaintiff and granting it for the defendant, the court rejected the plaintiff’s substantive argument that the system had the potential capacity to autodial. Noting that flipping a switch to enable a system’s autodialing functions would count as “capacity” to autodial, but a “top-to-bottom reconstruction of the equipment” would not, the court explained that Ocwen’s system requires “more than a flip of a switch . . . [because] to modify the [system], [defendant] would need to alter the system’s source code, and it does not have access to that code.” The court compared the case to Herrick v. GoDaddy.com LLC, 2018 WL 2229131 (D. Ariz. May 14, 2018), where the court explained “simply press[ing] a button” would not enable the device to autodial. 

The court also rejected the plaintiff’s claim that the defendant’s system had the functions necessary to be an ATDS because the system dials from a set list, “but that is not the same as dialing numbers using a random or sequential number generator.”

Abante Rooter & Plumbing, Inc. v. Alarm.com Inc., 2018 WL 3707283 (N.D. Cal. Aug. 3, 2018). In this class action, the plaintiffs alleged the defendant, a cloud-based home automation and security services company, made telemarketing calls to cellphones using an ATDS and to numbers on the Do Not Call Registry. Both parties moved for summary judgment. In denying the defendant’s motion for summary judgment, the court found unavailing the argument that ACA Int’l invalidated the prior FCC orders upon which the plaintiffs’ experts relied in concluding that the system was an ATDS. The court stated that ACA Int’l invalidated only the 2015 FCC Order, not the 2003 or 2008 orders, and that the Ninth Circuit’s interpretation of the 2008 Order in which the court held “‘predictive dialers fall squarely within the FCC’s definition of [an ATDS]’ remains valid and binding precedent.” The court also stated that including a predictive dialer “in the definition of an ATDS is a permissible interpretation of the statutory language in the TCPA”, but that in any event, the Ninth Circuit’s interpretation of the language of the TCPA is not controlled by ACA Int’l. The court also denied the plaintiffs’ motion for summary judgment, finding that the plaintiffs failed to establish that the dialer had the capacity as defined by the Ninth Circuit precedent to qualify as an ATDS.

Tommy & Katrina Heard v. Nationstar Mortg. LLC, 2018 WL 4028116 (N.D. Ala. Aug. 23, 2018). In this action, arising out of a mortgage dispute, the plaintiffs allege the defendant made “a stream of” collection calls to a cellphone despite the plaintiffs’ requests on ten separate occasions that the defendant stop calling. In granting the plaintiff’s motion for summary judgment, the court found that the plaintiffs unilaterally revoked consent to the calls, as evidenced by various call entries in which representatives noted that the plaintiff asked not to be called. The court also analyzed ACA Int’l to resolve the parties’ dispute whether the features of the defendant’s calling system fell within the TCPA’s definition of an ATDS at all. The defendant uses the Avaya Proactive Contact system in conjunction with software called iAssist. In one type of calls, called “blasts,” calls are made by the system and contain prerecorded messages. But the analysis of predictive calls “is more complex.” The software applies algorithms to customer information “to predict when a customer is most likely to answer the phone” and “then dials numbers for collections representatives based on these predictions.” A representative must log in before the software can begin forwarding calls. The district court stated that in “the absence of agency guidance, courts must interpret and apply statutory provisions in accordance with” statutory definitions. The court ultimately rejected the defendant’s argument that the system is not an ATDS because the evidence showed that the system “could and did store customer information for at least 24 hours . . . [thus having] the capacity to ‘store’ caller information within the meaning of the TCPA.” Further, the court rejected the defendant’s “restrictive” interpretation that the dialer did not use a random or sequential number generator because, as noted in ACA Int’l, the TCPA could encompass devices that “called numbers from an external list” such as the defendant’s system. The court stated, “Although a collections representative must log in before the system begins dialing, that does not detract from the fact that the representative does not choose whom to call or dial the outgoing calls.”

To read the entire decision in Somogyi v. Freedom Mortg. Corp., please click here.

To read the entire decision in Sieleman v. Freedom Mortg. Corp., please click here.

To read the entire decision in Darcel Keyes v. Ocwen Loan Servicing, LLC, please click here.

To read the decision in Abante Rooter & Plumbing Inc. v. Alarm.com Inc., please click here.

To read the class certification decision in Abante Rooter & Plumbing Inc. v. Alarm.com Inc., please click here.

To read the entire decision in Tommy & Katrina Heard v. Nationstar Mortg. LLC, please click here.

Why these cases matter: These holdings show that district courts have differing opinions on the extent to which pre-2015 FCC orders were affected by the ACA International decision, and the extent to which ACA Int’l is even binding on courts outside the D.C. Circuit. However, courts do seem to agree that ACA Int’l did not impact the prior FCC orders to the extent they addressed issues untouched by ACA Int’l, and that ACA Int’l is binding on out-of-circuit courts, pursuant to the Hobbs Act, at least to the extent it overruled the 2015 FCC Order. Courts also seem to be uniformly looking to their own circuits’ case law prior to the 2015 FCC Order to fill in the blanks until the FCC releases further guidance. Manatt’s TCPA compliance and class action defense group continues to monitor developments in this area and will continue to report on post-ACA Int’l decisions if and until the FCC finally weighs in and gives some much-needed clarity.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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