Telemarketers are all too aware that automatic telephone dialing systems (“autodialers”) are a hot topic in the litigation world. The Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, and the Federal Communications Commission’s (“FCC”) implementing rules, 47 C.F.R. § 64.1200, prohibit making any autodialed call or text message to cell phones without the called party’s prior express consent (with express written consent required for marketing calls). However, as we have noted previously, no one seems to know the full extent of devices that are properly classified as autodialers under the TCPA. As a result, parties have been fighting over the proper meaning of autodialer in the courts, and numerous petitions have been submitted to the FCC requesting clarification. As our TCPA Alert highlights, the lawsuits continue to pour in, while the FCC prepares clarifications and guidance that could remove some of the uncertainty.

Statutory and FCC Definition of Autodialer

The TCPA defines an autodialer 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.” When the FCC issued its revised TCPA rules in 2003, it concluded that in order to be considered an autodialer, the equipment need only have the “‘capacity’ to store or produce numbers . . ..” As such, the FCC found that “predictive dialers,” which dial numbers and use certain computer software to assist telemarketers in predicting when a sales agent will be available to take calls, are autodialers under the TCPA. The Ninth Circuit, in Meyer v. Portfolio Recovery Assocs. LLC (9th Cir. 2012), has deferred to the FCC in finding that a predictive dialer is an autodialer under the TCPA. The FCC added that the “basic function” of autodialers is the “capacity to dial numbers without human intervention.”

Court Interpretations of Autodialer

The statute and FCC’s guidance have left open the question of what “capacity” means – specifically, whether it broadly means the ability to store or produce numbers and dial the numbers randomly, or more narrowly means present capacity to function as an autodialer. The courts have taken differing views on this question, with some courts favoring a broader interpretation. In the oft-cited Satterfield v. Simon & Schuster (9th Cir. 2009), the court stated that the focus of the inquiry must be whether the equipment has the capacity to store or produce numbers to be called using a random or sequential number generator rather than whether the equipment actually did perform that function. In Sherman v. Yahoo! Inc.(S.D. Cal. 2014), the court found an SMS system could be an autodialer because Yahoo! could write new software and code adding a sequential or number generator to the system.

The broad definition has, at least in one instance, led to the classification of a “preview dialing” system as an autodialer. Preview dialing relies on a human to click on a number on a computer screen and the system dials it. In Nelson v. Santander Consumer USA (W.D. Wis. 2013), the court disregarded the human intervention element in again finding that “the question is not how the defendant made a particular call, but whether the system it used had the ‘capacity’ to make automated calls.”

However, not all courts have interpreted the word “capacity” broadly. In Hunt v. 21st Century Mortgage Corp. (N.D. Ala. 2013), the court concluded that since the defendant’s telephone system in its present state was incapable of automatic dialing, the system was not an autodialer. Several other cases have found that “capacity” means “present, not potential capacity” to produce and dial numbers, including Gragg v. Orange Cab Co. Inc. (W.D. Wash. 2014). Courts taking this position have pointed to the potentially unlimited scope of autodialers if not narrowed. In De Los Santos v. Millward Brown Inc. (S.D. 2014), the court found that a broad definition would have no “outer limit,” as “virtually every telephone in existence, given a team of sophisticated engineers working doggedly to modify it, could possibly store or produce numbers using a random or sequential number generator.”

Two additional cases in 2014 have interpreted autodialer narrowly in the context of text or SMS messages. First, in Dominguez v. Yahoo!, Inc. (E.D. Pennsylvania 2014), the court granted the defendants’ motion for summary judgment after analyzing competing declarations about the nature of the SMS system used by Yahoo!. The SMS system in question automatically converted emails into a truncated format and sent the text message to the customer’s mobile device. The court sided with Yahoo!, finding that the plaintiff failed to offer evidence that the system had the capacity to randomly or sequentially generate telephone numbers, as opposed to simply storing telephone numbers. This case is a positive outcome for telemarketers, but it is important to note that the case was decided, in part, on the court finding the plaintiff’s declaration was unreliable because it failed to discuss the necessary inquiry.

On October 23, 2014, in Marks v. Crunch San Diego (S.D. Cal. 2014), another court rejected a broad definition of autodialer. In this case, the defendant (“Crunch”) used a third-party platform to send promotional texts to its members’ and prospective customers’ cell phones. The numbers were inputted into the system by one of three methods: “(1) when Crunch or another authorized person manually uploads a phone number onto the platform; (2) when an individual responds to a Crunch marketing campaign via text message (a “call to action”); and (3) when an individual manually inputs the phone number on a consent form through Crunch’s website.” Users of the system selected the desired phone numbers, generated messages, selected the dates for messages to be sent, and then the system sent the text messages to those phone numbers on the specified date. The numbers were stored on the system for later offers. The court found that the system was not an autodialer, as it did not have the present capacity to store or produce numbers to be called, using a random or sequential number, and to dial such numbers. The court noted that numbers entered the system only through methods which “require human curation and intervention,” none of which could reasonably be termed a “random or sequential number generator.” In its analysis, the court relied on the TCPA’s statutory definition and emphasized that the FCC’s guidance is not binding on courts. It explicitly rejected the FCC’s interpretation, holding that the FCC had no authority to expand the statutory definition of autodialer.

Petitions to the FCC

With the outcome of autodialer actions often depending on a court’s definition of “capacity,” telemarketers are understandably wary of the lack of consistency across jurisdictions. Thus, many organizations have filed petitions with the FCC advocating for a more narrow definition or specific exemptions. In particular, the Professional Association for Customer Engagement (“PACE”), filed a petition in October 2013 requesting that the FCC clarify that a “system is not an automatic telephone dialing system unless it has the capacity to, inter alia, dial numbers without human intervention and a system’s ‘capacity’ is limited to what it is capable of doing, without further modification, at the time the call is placed.” This petition, and numerous others, are currently pending with the FCC.

What’s Next?

Clarity on this issue could be forthcoming. As we described in a previous post, the FCC recently issued a ruling on junk faxes under the TCPA and Junk Fax Prevention Act, requiring that fax ads sent with the recipient’s prior express permission include an opt-out notice. This order likely signaled the start of more FCC guidance on TCPA matters, as we are hearing from the FCC that additional petitions will be addressed in upcoming months, including any potential clarification on the meaning of autodialer. However, the outcome of the FCC’s deliberation is uncertain and even if the FCC were to modify its stance, it is far from clear that a modification would resolve the issue as it relates to text messages where “preview dialing” is not feasible. Until any new developments, telemarketer defendants will have to keep fighting the good fight to persuade courts that the narrow definition of autodialer is the best interpretation.