ATDS in Light of ACA International — Location Matters for TCPA Claims

June 29, 2018

A few short months after the decision by the U.S. Court of Appeals for the District of Columbia in ACA International v. Fed. Communications Commission, district courts and circuit courts continue to grapple with the pivotal issue of what constitutes an automatic telephone dialing system (ATDS) under the Telephone Consumer Protection Act (TCPA). The first step in considering what constitutes an ATDS, however, is what law should apply in making such a determination, including what Federal Communication Commission (FCC) declaratory rulings. The Third U.S. Circuit Court of Appeals and the U.S. District Court for the Northern District of Georgia provide two examples of how ACA International is shaping the TCPA litigation landscape on this issue.

First, the Third Circuit’s June 26 decision in Dominguez v. Yahoo, Inc., provides a clear depiction of how TCPA litigation has changed over time — before the 2015 FCC declaratory ruling, after the 2015 FCC declaratory ruling but before ACA International , and after ACA International. In Dominguez, the 3rd Circuit determined that the lower court correctly dismissed a TCPA text messaging class action on summary judgment. The case initially reached the Third Circuit after the lower court determined that Yahoo’s text messaging system did not have the capacity to store or produce telephone numbers using a random or sequential number generator. After that decision, but before the 3rd Circuit decided the case on appeal, the FCC issued the 2015 declaratory ruling interpreting the TCPA’s definition of ATDS to include “potential functionalities.” The Third Circuit accordingly remanded for the lower court to reconsider its ruling.

The lower court again found in favor of Yahoo on summary judgment, this time finding that Dominguez had failed to provide evidence that the system at issue was presently or potentially capable of generating random and sequential numbers and dialing those numbers. Dominguez again appealed, and while the case was pending, the D.C. Circuit determined in ACA International that the 2015 declaratory ruling must be set aside because of the overly broad interpretation the FCC had taken of the definition of an ATDS. Given that decision, the Third Circuit found that it only needed to determine whether, based on the evidence presented by Dominguez, Yahoo’s system had the present capacity to function as an ATDS. The court found in the negative, noting, “The record indicates that the Email SMS Service sent messages only to numbers that had been individually and manually inputted into its system by a user,” and accordingly did not presently function as an ATDS. Dominguez’s claims failed where the messages “were sent precisely because the prior owner of Dominguez’s telephone number had affirmatively opted to receive them, not because of random number generation.”

Highlighting the different approaches, the Northern District of Georgia, in its June 25 decision in Sessions v. Barclays Bank Delaware, took on a different “what law applies” issue. In Sessions, the court found that “the D.C. Circuit clearly … invalidated all of the FCC’s pronouncements as to the definition of ‘capacity’ as well as its descriptions of the statutory functions necessary to be an ATDS.” The court found that, not only was the 2015 declaratory ruling at issue in ACA International, but so were the 2003 and 2008 declaratory rulings, because the FCC specifically challenged the D.C. Circuit’s jurisdiction to review those earlier rulings. Because of that challenge, the court found that the D.C. Circuit “‘set aside the [FCC’s] treatment of those matters’ without qualification.” The court thus aligned itself with two other U.S. District Courts (District of Arizona and District of Nevada), while creating a further split in authority with its own court and a sister U.S. District Court (Northern District of Georgia and Southern District of Florida).

As the legal landscape demonstrates, although the ACA International decision cleared many hurdles for companies defending TCPA lawsuits, many questions remain unanswered and litigants may argue that courts are not providing any type of uniform guidance as to what constitutes an ATDS. As a result, venue may ultimately be the determinative factor as to whether a court will find a dialing system constitutes an ATDS.