While spam calls and texts are becoming more sophisticated, courts have disagreed about what types of “automatic telephone dialing system[s]” are limited by the Telephone Consumer Protection Act of 1991 (“TCPA”). On September 20, 2018, the Ninth Circuit adopted a surprisingly broad interpretation of autodialer: a device can be considered an autodialer even in the absence of the statutorily specified “random or sequential number generator.” Marks v. Crunch San Diego, No. 14-56834 (D.C. Cir. Sept. 20, 2018). Earlier this year, the D.C. Circuit considered and rejected a similar interpretation because it “would appear to subject ordinary calls from any conventional smartphone to the Act’s coverage, an unreasonably expansive interpretation of the statute.” ACA Int’l v. FCC, 885 F.3d 696 (D.C. Cir. 2018). Such a broad interpretation and the apparent circuit split may set up a Ninth Circuit rehearing en banc or a Supreme Court showdown. At a minimum, the disagreement will create uncertainty for companies engaged in electronic customer outreach.

Background

As this blog has previously covered, the TCPA was enacted in 1991 and limits the use of automatic dialing systems, prerecorded messages, text messages, and fax machines for commercial advertisements. See generally 47 U.S.C. § 227 et seq. Specifically, the TCPA prohibits the use in certain circumstances of “automatic telephone dialing system[s]”:

[E]quipment 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.

Id. at 227(a). The circuit split results from the statutory language “has the capacity.” Does “has the capacity” require the device to actually use “a random or sequential number generator” or is simply possessing the ability to dial numbers automatically sufficient? In a 2015 declaratory order, the Federal Communications Commission (“FCC”) chose the latter and more-expansive interpretation.

In ACA Int’l, the D.C. Circuit invalidated the FCC’s interpretation in relevant part because the FCC’s definition of “capacity” was overbroad: “[i]t cannot be the case that every uninvited communication from a smartphone infringes federal law, and that nearly every American is a TCPA-violator-in-waiting, if not a violator-in-fact.” ACA Int’l, 885 F.3d at 698. FCC Chairman Ajit Pai issued a press release supporting the D.C. Circuit’s decision: “Instead of sweeping into a regulatory dragnet the hundreds of millions of American consumers who place calls or send text messages from smartphones, the FCC should be targeting bad actors who bombard Americans with unlawful robocalls.”

On September 20, 2018, the Ninth Circuit then reached the opposite conclusion while interpreting the text of the TCPA (the autodialer definition was the same as that in the FCC’s 2015 order). After the FCC issued its 2015 order, Congress amended the TCPA to exempt debt collectors but left the expansive interpretation of autodialer in place, presumably accepting the FCC’s broad interpretation. In light of this amendment and the overall statutory scheme, the Ninth Circuit concluded Congress had intended the TCPA to apply to devices with the capacity to dial stored numbers automatically, even if not produced by a random or sequential number generator. Marks, No. 14-56834, at 23.

Violations of the TCPA, which the Ninth Circuit deemed can occur even in the absence of a random or sequential number generator, are subject to statutory damages of $500 per violation, subject to trebling for willful and knowing violations. Given that penalties are assessed per violation, total alleged damages in class action lawsuits frequently total in the millions of dollars, sometimes creating bet-the-company size lawsuits. As a result, TCPA litigation has become something of a cottage industry, with many plaintiffs’ firms specializing in multi-million-dollar lawsuits over technical violations of the TCPA.

Implications

Following Marks, the matter is not necessarily closed. Uncertainty about the scope of the TCPA’s autodialer definition will remain as defendants consider whether to seek rehearing en banc or petition the U.S. Supreme Court for certiorari. Predictably, plaintiffs’ firms will be emboldened to continue their pursuit of TCPA litigation, even in light of the uncertainty.

In the longer term, the FCC will likely promulgate a new rule defining and interpreting “automatic telephone dialing system.” The FCC recently held a public comment period to solicit input on a new autodialer definition but it is unclear what effect, if any, Marks may have on that process. In the meantime, companies involved in electronic customer outreach would be well-advised to consult with counsel to stay abreast of FCC actions and best practices in this important and potentially changing realm of liability.