Time Warner TCPA Litigation Stayed Pending Appeal on FCC Rulemaking

A U.S. District Judge in California ordered a break in the action on a TCPA suit against Time Warner Cable. Inc. (Time Warner). The order, by the Honorable Christina A. Snyder, was issued on Thursday, December 17, 2015 in the case of Fontes v. Time Warner Cable Inc., CV14-2060-CAS(CWx), Central District of California.

Plaintiffs John Fontes, Damon Byrd, and Gregory Montegna filed putative class action cases against Time Warner in 2014 and 2015. The suits alleged Time Warner committed both negligent and knowing violations of the TCPA.  The Court permitted plaintiffs to consolidate their claims in a single action on October 30, 2015.

On November 20, 2015, Time Warner filed a motion to stay this case.  On November 30, 2015, plaintiffs filed an opposition to that motion.

Plaintiffs allege that they repeatedly received pre-recorded phone calls from Time Warner. Plaintiffs further allege that, in violation of the TCPA, these phone calls were made using an “automatic telephone dialing system (ATDS)” and that Time Warner did not obtain plaintiffs’ prior express consent to receive unsolicited telephone calls.

Time Warner contends that its conduct did not violate the TCPA. More specifically, Time Warner contends that, when making the calls in question, it was attempting to reach one of its customers regarding a past due account. Those customers had provided Time Warner with their prior express consent. Time Warner asserts that it inadvertently reached plaintiffs, instead of its customers, because the customer’s numbers had been reassigned to plaintiffs without Time Warner’s knowledge.

Time Warner also contends that the device it used to make the phone calls cannot be considered an ATDS because it does not have the present capacity to generate random or sequential telephone numbers.

Judge Snyder outlined the history of the relevant TCPA provisions:

On July 10, 2015, the FCC issued a Declaratory Ruling responding to various petitions to clarify the TCPA. In that July 15 order, the FCC ruled that the TCPA’s use of the term “capacity” in the definition of an ATDS does not exempt equipment that lacks the “present ability” to dial randomly or sequentially. “In other words, the capacity of an autodialer is not limited to its current configuration but also includes its potential functionalities.”

In that same order the FCC also concluded that the term “called party” should be defined as “the subscriber, i.e., the consumer assigned the telephone number dialed and billed for the call, or the non-subscriber customary user of a telephone number included in a family or business calling plan.” In settling on this definition, the FCC rejected a suggestion made by several commentators to define “called party” as the “intended” recipient of the phone call. Id. Thus, the FCC explained that, subject to one limited exception, “calls to reassigned wireless numbers violate the TCPA when a previous subscriber, not the current subscriber or customary user, provided the prior express consent on which the call is based.”

Finally, the FCC determined that a very limited safe harbor should apply for “callers who make calls without knowledge of reassignment and with a reasonable basis to believe they have valid consent to make the call.” Such callers “should be able to initiate one call after reassignment as an additional opportunity to gain actual or constructive knowledge of the reassignment and cease future calls to the new subscriber. If this one additional call does not yield actual knowledge of reassignment, we deem the caller to have constructive knowledge of such.”

After the FCC issued its ruling, nine companies filed petitions with the United States Court of Appeals for the District of Columbia Circuit (the “Court of Appeals”) seeking review of the FCC’s Declaratory Ruling. Those petitions were consolidated into a single case, ACA International, et al. v. Federal Communications Commission. All of the petitions request that the D.C. Circuit vacate the FCC’s ruling with regard to the potential liability for calls to reassigned cell phone numbers and the definition of an “automatic telephone dialing system.” The D.C. Circuit set a briefing schedule requiring all briefs to be filed by February 24, 2016. A hearing will be scheduled after all briefs are submitted.

Judge Snyder notes the FCC was sharply divided on many of these issues, recognizing the commission’s 3-2 split in the matter.  In her order she cited the following language from dissenting commissioner Ajit Pai’s dissenting opinion:

“Some lawyers go to ridiculous lengths to generate new TCPA business. They have asked family members, friends, and significant others to download calling, voicemail, and texting apps in order to sue the companies behind each app. Others have bought cheap, prepaid wireless phones so they can sue any business that calls them by accident in cases of reas[s]igned telephone numbers. . . . the common thread here is that in practice the TCPA has strayed far from its original purpose. And the FCC has the power to fix that. . . . Instead, the July 15, 2015 Order takes the opposite tack. Rather than focus on the illegal telemarketing calls that consumers really care about, the Order twists the law’s words even further to target useful communications between legitimate businesses and their customers. This Order will make abuse of the TCPA much, much easier. And the primary beneficiaries will be trial lawyers, not the American public.

The Order dramatically expands the TCPA’s reach. The TCPA prohibits a person from making “any call” to a mobile phone “using any automatic telephone dialing system,” except in certain defined circumstances. The statute defines an “automatic telephone dialing system” 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 numbers.” As three separate petitions explain, trial lawyers have sought to apply this prohibition to equipment that cannot store or produce telephone numbers to be called using a random or sequential number generator and that cannot dial such numbers.

That position is flatly inconsistent with the TCPA. The statute lays out two things that an ATDS must be able to do or, to use the statutory term, must have the “capacity” to do. If a piece of equipment cannot do those two things—if it cannot store or produce telephone numbers to be called using a random or sequential number generator and if it cannot dial such numbers—then how can it possibly meet the statutory definition? It cannot. To use an analogy, does a one-gallon bucket have the capacity to hold two gallons of water? Of course not.”

In ordering the stay of proceeding Judge Snyder wrote: “The Court finds that under the circumstances in this case, it is prudent to stay this case pending resolution of the Court of Appeals review of the FCC’s Declaratory Ruling… in light of the close divide amongst the FCC commissioners and the fact that at least one commissioner believes the FCC’s ruling is “flatly inconsistent with the TCPA,” there is a legitimate possibility that the Court of Appeals may overturn that ruling. Accordingly, the proper interpretation of the TCPA remains unclear… in light of the risk of wasting the resources of the Court and the parties as well as the high degree of uncertainty in this area of the law, the Court finds that a stay is appropriate in this case.

insideARM Perspective

It is somewhat surprising that this order comes out of a California court.  California is one of the hotbeds of TCPA litigation. insideARM finds the order well-reasoned and appropriate.  Hopefully other courts will follow this logic. It seems to be a practical solution to stay these cases pending a ruling in the Court of Appeals.