Ninth Circuit Removes “Random or Sequential” From Automatic Telephone Dialing System Definition

September 27, 2018

The U.S. Court of Appeals for the Ninth Circuit joined the ranks of courts tackling the Telephone Consumer Protection Act (TCPA) definition of an “automatic telephone dialing system,” following the D.C. Circuit’s ruling in ACA International v. Fed. Communications Commission.

In Marks v. Crunch San Diego, LLC, the Ninth Circuit on Sept. 20 found that (1) the Federal Communications Commission’s (FCC’s) prior orders regarding the interpretation of an automatic telephone dialing system (ATDS) were no longer binding; and (2) the statutory definition of an ATDS includes a device that stores numbers to be called, regardless of whether those numbers have been generated by a random or sequential number generator. Thus, although the Ninth Circuit held that all FCC orders are overruled, it still applied the FCC’s standard by writing the requirement of a “random or sequential generator” out of the statute.

Marks Decision

In Marks, the plaintiff alleged that the defendant violated the TCPA when it sent him text messages using a device called the Textmunication System, a web-based marketing platform designed to send promotional text messages to a list of stored phone numbers. The district court granted summary judgment in favor of the defendant, finding that the Textmunication System did not qualify as an ATDS because it lacked a random or sequential number generator. The plaintiff appealed to the Ninth Circuit, which vacated submission of the appeal pending the issuance of the D.C. Circuit’s decision in ACA International, wherein the FCC’s interpretation of the definition was being challenged.

In March 2018, the D.C. Circuit issued its opinion in ACA International and invalidated the FCC’s interpretation of the statutory definition of an ATDS, finding: (1) the FCC’s interpretation of “capacity” was overbroad, and (2) the FCC’s explanation of the functions of an ATDS were inadequate. (See McGuireWoods’ March 16 Password Protected blog post “D.C. Circuit Issues Long-Awaited Decision on FCC’s 2015 TCPA Order.)

Following the D.C. Circuit’s opinion, the Ninth Circuit in Marks first examined the impact of the decision on the FCC’s prior orders interpreting the definition of the ATDS. The Ninth Circuit determined that because the D.C. Circuit exercised its authority to set aside the interpretations in the orders, such orders were no longer binding. Accordingly, only the statutory definition of an ATDS, as set forth by Congress in the TCPA, remained, and the Ninth Circuit had to “begin anew” in determining whether the Textmunication System qualified as an ATDS.

The Ninth Circuit then examined the plain text of the statute and, finding the plain language to be ambiguous, examined the context and structure of the statutory scheme of the TCPA. In doing so, the court found that while Congress focused mainly on regulating the use of equipment that dialed blocks of sequential or randomly generated numbers, the language of the TCPA indicates that the law also covers equipment that makes automatic calls from lists of recipients. The court also rejected the defendant’s argument that a device cannot qualify as an ATDS unless it can operate with no human intervention. 

Accordingly, since the Textmunication System stored numbers and dialed them automatically to send text messages to a stored list of phone numbers, the Ninth Circuit found that there was a genuine issue of material fact as to whether the system constituted an ATDS.

Location Continues to Matter in Defining ATDS

The Ninth Circuit’s opinion on this issue adds to the ever-changing landscape of what constitutes an ATDS following ACA International. Notably, the Ninth Circuit’s decision stands in contrast to the Third Circuit’s decision in Dominguez ex rel. Himself v. Yahoo, Inc., which held that a system did not have the present capacity to function as an ATDS when the system sent messages only to numbers that had been individually and manually inputted into its system — rather than through random number generation. (See McGuireWoods’ June 29 Legal Alert, “ATDS in Light of ACA International — Location Matters for TCPA Claims.”) The Ninth Circuit addressed Dominguez in a footnote, noting that it was declining to follow the Third Circuit’s “unreasoned assumption” that a device must be able to generate random or sequential numbers to qualify as an ATDS. The Ninth Circuit further noted that the Third Circuit merely “avoided the interpretive questions raised by the statutory definition of ATDS,” and therefore it found the decision unpersuasive.

In addition, the Ninth Circuit weighed in on another issue of disagreement among the courts — whether the FCC’s earlier predictive dialer rulings are still in effect following ACA International.  While Marks found that the D.C. Circuit’s opinion invalidated all of the FCC’s earlier rulings on the issue, some district courts continue to apply the earlier FCC orders and find that they are still in effect.    

In Fleming v. Associated Credit Services, the U.S. District Court for the District of New Jersey reached a contrary conclusion on Sept. 21, holding that the statutory language requires the use of “a random or sequential number generator.” The court reasoned that the phrase “using a random or sequential number generator” is “best understood to describe the process by which those numbers are generated in the first place” and stored in the list, not how they are to be called from a list. The reasoning in Fleming follows that of the U.S. District Court for the Northern District of Illinois in its July 26 decision in Pinkus v. Sirius XM Radio. Courts that refer to the “plain language” of the statute maintain the requirement of a random or sequential number generator. The Ninth Circuit’s decision in Marks eschews that result by finding the statutory language ambiguous, allowing it to read that requirement out of the statute much in the way the FCC did. 

The Ninth Circuit’s decision in Marks highlights the continued uncertainty surrounding the definition of an ATDS following ACA International and shows the important role that the particular forum may play in a TCPA action.