Nov 02

Third Circuit Remands TCPA Class Action to take Account of July 2015 FCC Ruling on What Qualifies as an ATDS

The debate continues over what constitutes an “automatic telephone dialing system,” or ATDS, under the Telephone Consumer Protection Act (TCPA), as the Third Circuit vacates, for consideration under recent FCC guidance, an order granting summary judgment in favor of Yahoo in a case where the plaintiff alleged he received 27,809 unwanted text messages over 17 months. Dominguez v. Yahoo, Inc., No. 14-1751, ___ F. App’x ___, 2015 WL 6405811 (3d Cir. Oct. 23, 2015) (slip opinion here).

Plaintiff Bill Dominguez alleged that Yahoo sent him a text message every time it thought he received a new email at Yahoo. Problem was, the emails weren’t sent to him; instead, they were for the prior owner of his cellphone number, who had set up the text notifications before the plaintiff acquired the number. The plaintiff alleged that Yahoo did not stop sending the texts, even after he asked Yahoo to do so, had a conversation with Yahoo in which an FCC representative participated, and filed complaints with the FCC and FTC. His class action followed. 2015 WL 6405811, at *1.

As is not unknown in TCPA litigation, the exposure is large: the Third Circuit noted potential statutory damages for violation of the TCPA, at $500 per text message, could be $13,904,500 for the named plaintiff alone (and these could be three times higher if the alleged violation were to be found “willful,” raising damages to potentially $1500 per text). The District Court, however, granted summary judgment for Yahoo, on grounds that there was no evidence that the texts were sent by an ATDS. The District Court’s decision rested on the TCPA’s requirement that an ATDS have “a random or sequential number generator,” 47 U.S.C. § 227(a)(1)(A) & (B), and ruled that this meant the numbers themselves must be random or sequential – not simply, as the plaintiff contended, numbers that could be on a list of non-random, and non-sequential, numbers, but nevertheless dialed (or in this case, texted to) “sequentially,” i.e., one after the other. The District Court found no evidence that Yahoo’s equipment had a random or sequential number generator, and granted summary judgment. Dominguez v. Yahoo, Inc., 8 F. Supp. 3d 637, 643-44 (E.D. Pa. 2014).

The Third Circuit vacated and remanded for further consideration by the District Court. It agreed that a “random or sequential number generator” means a device that can generate random or sequential numbers, not merely one that can sequentially dial off a list. But it disagreed that the record before the District Court established that Yahoo did not use an ATDS. It found Yahoo’s evidence it did not use an ATDS to be a “conclusory” affidavit of an employee-expert that merely parroted the TCPA’s ATDS definition. The Third Circuit quoted the affidavit, which stated that Yahoo’s equipment “did not have the capacity to store or produce numbers to be called, using a random or sequential number generator, and to call those numbers,” and compared it with the statutory definition, which was nearly identical. 2015 WL 6405811, at *3. That was “nothing more than a legal conclusion” and not evidence of the equipment’s characteristics.

In particular, the affidavit, by simply repeating the statutory language, failed to address whether the equipment met the key criterion that an ATDS have the “capacity” to generate the numbers. The TCPA’s “capacity” requirement has been vexing courts for years, and have differed on whether a device, in order to be an ATDS, must be currently capable of generating random or sequential numbers, or whether a wide range of devices that could in theory be configured to generate such numbers (even smartphones and PCs might qualify) would qualify.

As was widely noted, in July 2015 the FCC issued a Declaratory Ruling that, in the Third Circuit’s view, took a “middle-of-the-road view” on the ATDS question. The FCC, in line with the District Court (and the Third Circuit) in Dominguez, ruled that the numbers that an ATDS generates must be random or sequential. “Sequential” dialing of a list would thus not qualify. But on the other issue – “capacity” – the FCC declared that capacity means the ability to generate random or sequential numbers, “even if [the ATDS is] not presently used for that purpose.” 2015 WL 6405811, at *2 (quoting In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 2015 WL 4387780, at *5 (F.C.C. July 10, 2015) (“2015 FCC Ruling”) (emphasis added). The FCC did not limit the definition of an ATDS to devices with the current capacity to dial or text to random or sequential numbers, and declined to set an outer limit on what kinds of devices might qualify; notably, while it observed that it is unaware that smartphone owners have been sued under the TCPA over unwanted calls or texts, it declined to rule out the possibility of TCPA lawsuits based on what it viewed as “atypical uses of smartphones.” 2015 WL 4387780, at *9.

The Third Circuit saw “capacity” as “an issue of heightened importance in light of the 2015 FCC Ruling.” Further, the Ruling was not available to the District Court when it granted summary judgment in 2014. The Third Circuit therefore found it appropriate to remand to the District Court, so that with the benefit of the FCC’s guidance, it could “address more fully in the first instance whether Yahoo’s equipment meets the statutory definition.” 2015 WL 6405811, at *3. Perhaps because it was leaving open the future disposition of the case, the Third Circuit designated its opinion as non-precedential.

Dominguez points up the importance of the 2015 FCC Ruling in clarifying that “capacity” to generate random or sequential numbers does not equate to a device’s current operating condition, and makes clear the importance of developing a technically informed record when litigating the ATDS issue. At the same time, the 2015 FCC Ruling leaves lingering uncertainty as to range of devices that may be found to have the capacity to generate random or sequential numbers. The Third Circuit’s ruling in Dominguez may portend continued litigation in district courts on the question of just how expansively the ATDS net may be flung.

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