Ninth Circuit Takes Extreme Position, Holds That All Dialers That Call Automatically From Lists Are Subject to the TCPA

We broke the news this morning that the Ninth Circuit has published its opinion in Marks v. Crunch San Diego, LLC, No. 14-56834, 2018 WL 4495553 (9th Cir. Sept. 20, 2018). We now have a new definition of an ATDS in the Ninth Circuit. It is:

[T]he term “automatic telephone dialing system” means equipment which has the capacity—(1) to store numbers to be called or (2) to produce numbers to be called, using a random or sequential number generator—and to dial such numbers automatically (even if the system must be turned on or triggered by a person).

In other words, all dialers that call automatically from a list are - at least within the Ninth Circuit - subject to the TCPA.  How did the court get there? It took three steps (leaps?):

First, the court found that in ACA Int’l v. FCC, the D.C. Circuit invalidated the FCC’s predictive dialing rulings going all the way back to 2003, and that those rulings were therefore “no longer binding,” on the court.

Blank slate, check.

Second, the court found that Congress’s definition of ATDS is “ambiguous” and the court therefore needed to “use canons of construction, legislative history, and the statute’s overall purpose to illuminate Congress’s intent.”

Wide latitude to interpret the TCPA, check.

Third, after undertaking this examination, the court held that the statutory definition of an ATDS “includes a device that stores telephone numbers to be called, whether or not those numbers have been generated by a random or sequential number generator.”

New extreme and expansive definition of an ATDS, check.

Let’s break each piece down.

Prior FCC Rulings Invalidated

The court fist examined the impact of ACA Int’l on the validity of the FCC’s predictive dialer rulings going all the way back to 2003. It found that in the 2015 Omnibus Order, the FCC had “reopen[ed] consideration of [its] prior rulemaking,” because “[a]n agency’s reconsideration of a rule in a new rulemaking constitutes a reopening when the original rule is ‘reinstated’ so as to have renewed effect.” The Ninth Circuit therefore held:

Because the D.C. Circuit exercised its authority to set aside the FCC’s interpretation of the definition of an ATDS in the 2015 order, and any prior FCC rules that were reinstated by the 2015 order, we conclude that the FCC’s prior orders on that issue are no longer binding on us.

Due to the invalidity of all prior FCC orders on ATDS functionality, the court found it had a blank slate and would “begin anew to consider the definition of ATDS under the TCPA.”

The Definition of an ATDS is Ambiguous

The court started its analysis with “plain language” of the statute. Refreshing ourselves quickly, the TCPA defines an ATDS 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.

Based on the language of the statute, the Ninth Circuit framed the issues before it thusly:

The question is whether, in order to be an ATDS, a device must dial numbers generated by a random or sequential number generator or if a device can be an ATDS if it merely dials numbers from a stored list. We must also determine to what extent the device must function without human intervention in order to qualify as an ATDS.

But the court wasn’t persuaded by either party’s position on the issues, finding that their “competing interpretations . . . fail[ed] to make sense of the statutory language without reading additional words into the statute.” Even putting the parties’ own interpretations aside (because they didn’t seem to matter), the court noted that it had itself “struggle[ed] with the statutory language,” and found it was “not susceptible to a straightforward interpretation based on the plain language alone,” and “ambiguous on its face.”

So let’s pause here for a moment. The court’s finding gave it significant latitude to enshrine its own interpretation of what functions equipment must perform to be considered an ATDS. This is because a finding of ambiguity opens the door to the court’s consideration of all sorts of things that are extrinsic to the plain language of the statute like “canons of construction, legislative history, and the statute’s overall purpose to illuminate Congress’s intent.”

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But this is seemingly inconsistent with the Ninth Circuit’s prior position in Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 951 (9th Cir. 2009) “that the statutory text is clear and unambiguous.” The court addressed this in a footnote, however, and disclaimed any inconsistency because this statement in Satterfield was limited only to “one aspect of the text,” concerning “whether a device had the ‘capacity’ to store or produce telephone numbers.”

And just like that, the court cleared the way for itself to formulate its own interpretation of what Congress meant when it defined an ATDS as a device which has the capacity “to store or produce telephone numbers to be called, using a random or sequential number generator.”

An ATDS “Includes a Device That Stores Telephone Numbers to be Called, Whether or not Those Numbers Have Been Generated by a Random or Sequential Number Generator”

Based on its finding that the definition of ATDS was ambiguous, the Ninth Circuit went on to examine the “context and the structure” of the TCPA. Based on this examination, the court found that “Congress intended to regulate devices that make automatic calls,” and that the “language in the statute indicates that equipment that made automatic calls from lists of recipients was also covered by the TCPA.”

The court’s conclusion was based on just two aspects of the TCPA.

First it focused on the exceptions to the TCPA. The court reasoned that because Congress had allowed for the use of an ATDS for calls made with prior express consent, a caller would need to “dial from a list of phone numbers of persons who had consented to such calls, rather than merely dialing a block of random or sequential numbers,” in order to take advantage of this permitted use.

Second, the court looked at Congress’s 2015 amendment to the TCPA in which it exempted the use of an ATDS for debt owed to or guaranteed by the U.S. Government. As with prior express consent, this amendment showed the court that “equipment that dials from a list of individuals who owe a debt to the United States is still an ATDS but is exempted from the TCPA’s strictures.” The court also found the inaction by Congress in passing this amendment – leaving the definition of ATDS “untouched” and not “overruling” the FCC’s interpretation of the term – suggested that Congress gave the FCC’s interpretation its “tacit approval”.

So now we’re interpreting statutes based on “inferences” and “suggestions” drawn from what Congress “tacitly” did by not doing something.

Based on what essentially came down to the fact that the TCPA provides exceptions, the Ninth Circuit held that within the “overall statutory scheme”:

[T]he statutory definition of ATDS is not limited to devices with capacity to call numbers produced by a “random or sequential number generator,” but also includes devices with the capacity to dial stored numbers automatically. Accordingly, we read § 227(a)(1) to provide that the term automatic telephone dialing system means equipment which has the capacity – (1) to store numbers to be called or (2) to produce numbers to be called, using a random or sequential number generator – and to dial such numbers (even if the system must be turned on or triggered by a person).

Notably, the Ninth Circuit’s conclusion here is at odds with the Third Circuit’s opinion in Dominguez v. Yahoo, Inc., 894 F.3d 116 (3rd. Cir. 2018), in which the court held that equipment must have the capacity to generate random or sequential telephone numbers, and dial those numbers. But in a footnote, the Ninth Circuit blasted the holding in Dominguez as “unreasoned assumption” that was reached “without explanation,” and without addressing “the interpretive questions raised by the statutory definition of ATDS.”

Human Intervention

The court noted in its definition that even if a person must "turn on" or "trigger" a system to dial numbers, the system still qualifies as an ATDS.  The court noted that Congress was targeting equipment that could “engage in automatic dialing, rather than equipment that operated without any human oversight or control.” Thus, merely “flip[ping] the switch on an ATDS,” does not qualify as human intervention, nor does human intervention occur when a human adds phone numbers to a dialing platform.

Capacity

As mentioned above, the Ninth Circuit originally addressed the issue of “capacity” in Satterfield. However, this issue begs the question – particularly after ACA Int’l – of whether the term means “present” or “potential” capacity. But, alas, the Ninth Circuit found that given the basis of its reversal, it would decline to “reach the question whether the device needs to have the current capacity to perform the required functions or just the potential capacity to do so.”  So it's left to be seen if a device must have the present capacity to automatically call numbers from a list, or if it qualifies as an ATDS merely if it has the "potential" capacity to perform those functions.

What Now?

As we continue to digest the Marks opinion we’ll follow up with additional pieces diving deeper on its potential impact in TCPAland. For now, the key takeaway here is that we have a new, extreme definition of an ATDS in the Ninth Circuit that encompasses any dialer that automatically calls from a list.

And if there’s one thing that’s clear right now, it’s that the Ninth Circuit just made its mark on TCPAland with Marks.

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insideARM Perspective

Just yesterday, insideARM published an article about Federal Communications Commission (FCC) Chairman Ajit Pai's responses to three Members of Congress regarding the FCC's actions on the TCPA. In his responses, Chairman Pai stated that the FCC was reviewing the comments it received on the issue, but he did not provide any specifics about how and when the FCC will provide TCPA clarification.

This new Ninth Circuit decision highlights the need for the FCC to take quick action on clarifying, at the very least, the definition of an ATDS. The Ninth Circuit is now squarely at odds with the Third Circuit, which ruled in Dominguez v. Yahoo, Inc, No. 17-1243, 2018 U.S.App.Lexis 17350 (3rd. Cir June 26, 2018) that this type of a device does not fall within the definition of an ATDS. With the circuit split, companies -- many of whom conduct business nationwide -- are left with conflicting guidance and uncertainty. The FCC is uniquely positioned to provide clarification on this issue, otherwise we very likely will see this issue on the front doorsteps of the U.S. Supreme Court.

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