On October 19, 2016, a panel of the U.S. Court of Appeals for the D.C. Circuit heard oral argument in ACA International v. FCC, the closely followed consolidated appeal of the Federal Communication Commission’s (FCC’s) 2015 Omnibus Declaratory Ruling interpreting the Telephone Consumer Protection Act (TCPA). Although the argument was set to last for 40 minutes, the in-depth questioning of Judges Srinivasan, Pillard and Edwards extended the session to over two and a half hours.

The judges’ questioning foreshadows an outcome even the parties to the case did not foresee, but which some courts and many businesses impacted by the TCPA have long believed would be judicious: The D.C. Circuit could potentially rule that the TCPA does not apply to manually dialed calls and text messages, even when placed by equipment that could be used to autodial.

While ACA International involves the appeal of four issues resolved by the FCC’s 2015 Omnibus Declaratory Ruling, the issue with perhaps the broadest impact — and which also dominated the oral argument — relates to the definition of “automatic telephone dialing system” (ATDS). Among other things, the TCPA prohibits calls and text messages to cell phones made using an ATDS without the recipient’s prior express consent. The statutory definition of ATDS, however, is not the model of clarity. It defines 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.”

Since the TCPA was passed in 1991, dialing technology using random or sequential number generators has become obsolete. The TCPA has not reached a similar fate, however. The FCC breathed new life into the statute through a series of orders in 2003 and 2008 determining that the definition of ATDS included predictive dialing technology. The FCC reasoned that predictive dialers have the same basic functions as the equipment originally targeted by the TCPA — the capacity to dial numbers without human intervention.

Taking their cue from the FCC, some courts and parties embroiled in TCPA litigation similarly focused on the capacity of the system used to place the calls rather than how the calls were actually dialed. Thus, for example, if a business owned equipment that could operate either as a predictive dialer or could be switched to “manual” mode — i.e., where a person must manually place the call — plaintiffs argued that both types of calls violated the TCPA because regardless of whether the calls were dialed automatically or manually, the calls were placed by equipment that had the capacity to function as an ATDS.

The FCC’s 2015 Omnibus Declaratory Ruling arguably expanded the term ATDS even further. The FCC ruled that the TCPA’s definition of ATDS encompasses not only the equipment’s present capacity, but also what it could potentially be modified to do in the future. The FCC stated, for example, that equipment can be considered an ATDS even if the equipment “requires the addition of software to actually perform the functions described in the definition.” Businesses argued that this broad definition rendered an ordinary smartphone an ATDS because it can be modified to autodial simply by downloading an app or other software. Because of the FCC’s expansive interpretation of the term ATDS, the 2015 Omnibus Declaratory Ruling further emboldened plaintiffs to pursue TCPA lawsuits based on manually dialed calls simply because the equipment used for such calls could potentially be modified to autodial.

In the consolidated appeals of the FCC’s 2015 Omnibus Declaratory Ruling, the petitioner challenged the FCC’s broad interpretation of “capacity,” among other issues. At the October 19 oral argument, the parties were poised to argue whether “capacity” should be understood to mean the equipment’s present functionalities or also what it could be modified to do in the future. Instead, the parties faced a barrage of questions regarding the TCPA’s application to manually dialed calls.

Judge Edwards was the first to suggest that manually dialed calls should not be subject to the TCPA. He asked Shay Dvoretzky, arguing on behalf of the petitioner, whether it would violate the statute to use a device that could autodial to place a “non-robocall.” In other words, Judge Edwards wanted to know whether it would be a violation to place a call from a device that qualifies as an ATDS if the caller did not use the autodialing functionality to place that call. Dvoretzky responded that such a call would be a violation. He referred back to an earlier hypothetical from Judge Srinivasan regarding whether a smart phone with a downloaded app that would spit out randomly or sequentially generated numbers would satisfy the capacity test. In response to that earlier questioning, Dvoretzky had responded that the smart phone would be an ATDS because it had the present ability to perform the functions that constitute an ATDS.

Judge Edwards countered, “[t]hat’s not what the statute says” and stated that Dvoretzky was “conceding away what I thought was the strongest part” of the petitioner’s case. Judge Edwards explained, “You all are fighting so much over the definition, you forget to go back and look at what the prohibition is.” According to Judge Edwards, the TCPA prohibits using an automatic telephone dialing system, not merely having equipment that could be used for automatic dialing. Dvoretzky quickly corrected that he did not want to concede this issue away if the court was inclined to rule on this ground.

Judge Srinivasan clarified the issue with another hypothetical. “Suppose an ATDS has two capacities. It has the capacity to make automatic calls, and it has the capacity for a person to actually sit there and dial a number. Even if the person is sitting there and dialing the number[,] … I thought your reading of the statute was that the call is being made using an ATDS[.]” Dvoretzky agreed that this was his position. Judge Edwards once again expressed shock by this response. “Good heavens,” he said. “That makes no sense.” He reiterated that the way the parties were reading the statute was “not what the statute says.”

Judge Srinivasan questioned whether in the process leading up to the FCC’s 2015 Omnibus Declaratory Ruling anybody had argued for Judge Edwards’ interpretation of the statute. Judge Pillard jumped in quickly to clarify that “many people ha[d] argued that it’s overbroad and unreasonable to have the capacity be dormant and … nonetheless be subject to penalty[.]” But the judges and Dvoretzky were uncertain as to whether Judge Edwards’ specific argument that “use means using that capacity” was in the record.

Scott Noveck, arguing for the FCC, faced similar questions. As Noveck was contending that there are two analytically distinct questions about autodialers — what does it mean to have the capacity to operate as an autodialer and what are the underlying elements of an autodialer — Judge Edwards interjected, “There’s a third question that I’m still struggling with,” which is “what’s prohibited?” Judge Edwards then answered the question himself. “What’s prohibited is using an automatic dialing system, to make a call using that system. That’s all it’s prohibiting. No matter what the thing might otherwise do with existing software or software that can be added later, the statute only prohibits making any call using an automatic telephone dialing system. Using it.”

Noveck responded that the parties’ understanding of the definition of ATDS had “been a universal understanding of everyone in this space” for “the last quarter century,” but Judge Edwards rejected that argument as well. He said, “I don’t think Congress had a clue that we would be facing the kinds of issues that we face here. There’s no universal understanding[.]”

Judge Pillard was confused by the FCC’s position on this point, but expressed similar concerns as Judge Edwards once the FCC’s position had been clarified. Judge Pillard said to Noveck, “I took you to be largely agreeing with Judge Edwards’ reading of the statute that using [is] the only thing for which a caller is liable.” Noveck clarified, “No,” and explained that “[i]t was the general understanding of everyone as the premise for this order” that the statute “applies when you are using a device which is an autodialer, whether or not at that time the device is configured as an autodialer or whether it’s being used that way.” Judge Pillared challenged Noveck, “Why would this be your position?” and questioned what interest Congress or the FCC would have “in subjecting me to strict liability for using my smartphone on Sunday to call my parents when I’m plugging it into an ATDS the rest of the week” for autodialing?

Judge Srinivasan raised the counterpoint that “even the dissenting Commissioners read the statute” to mean that “making a manual call with equipment that has the capacity to do automated dialing is enough to bring the statute into play,” just as the parties had done in the appeal.

But Judge Pillard continued: “As I had read the order until being … corrected today, I thought that the Commission was saying, ‘What we’re really concerned with is the use of autodialers to autodial, and we’re not concerned with the use of machinery that has the capacity to autodial to call Mom,’ and you’re saying, ‘Well, no. If it really does have the capacity to autodial, then when you’re using it to call someone and you don’t have their consent, surprise! My high school buddy who I haven’t talked to in forever, no consent, then I might be liable.’ And you’re saying to the latter hypothetical, ‘yep.’”

Noveck responded that while the FCC’s concern is with the use of autodialers to autodial, “we understand the statute to require us at some level to sweep … more broadly.” Judge Edwards responded, “There’s no reason to go more broadly. That’s what I don’t get.”

Thus, while the parties approached the October 19 oral argument assuming that manually dialed calls and text messages can violate the TCPA if placed by equipment that has the capacity to operate as an autodialer — even if that capacity is not used to place the call — certain of the judges hearing the argument disagreed. Judge Edwards clearly believed that a call should not violate the TCPA unless the call is placed “using” automated technology — i.e., unless the call is actually automatically dialed by equipment that qualifies as an ATDS. Judge Pillard also expressed concern that the FCC’s interpretation was overbroad. While Judge Srinivasan’s position was not apparent, he may question whether either party explicitly raised this argument. At the very least, it does not appear that the D.C. Circuit will adopt the FCC’s expansive view of “capacity” set forth in the 2015 Omnibus Declaratory Ruling. What’s more, the court’s questioning foreshadows that the D.C. Circuit may hold that TCPA liability attaches only to calls that are in fact automatically dialed.

Note: The quoted material in this legal alert was taken from the audio recording of the oral argument, which is available on the court’s website.