On July 10, 2015, the Federal Communications Commission (“FCC”) issued a much-anticipated Declaratory Ruling and Order (“Order”) resolving 21 petitions concerning the Telephone Consumer Protection Act (“TCPA”). With statutory penalties of up to $1500 per violation without any showing of actual damage, the TCPA has become a favorite of plaintiffs’ attorneys seeking catastrophic class payments from companies using text messages to interact with their customers. Because Congress enacted the TCPA in 1991, however, the application of the statute to novel technologies is often unclear, and has resulted in disagreement among district courts. While the FCC’s Order may bring clarity to some aspects of the statute’s application, the Commission’s expansive interpretation of the statute’s reach will also likely draw additional challenges to the FCC’s authority and is unlikely to quell the tide of TCPA litigation.

The Order addresses a wide array of topics, but two are critically important for companies using SMS to reach their customers and users or to help users of their services to communicate with their friends by SMS. First, the FCC reaffirmed and further expanded its already broad definition of what constitutes an Automatic Telephone Dialing System, or an “ATDS” under the statute. Under this definition—which may or may not be accepted by courts—any computer with the ability to dial numbers, including modern smartphones, could be considered an ATDS. Second, the FCC attempted to provide some clarity on whether a mobile application provider that allows users to send messages to friends through use of the app “makes a call” for purposes of liability under the Act. This aspect of the Commission’s ruling should provide some protection to companies whose customers choose to send invitational text messages to their friends or contacts.

Definition of an Automatic Telephone Dialing System

When it enacted the TCPA, Congress defined the term 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.” 47 U.S.C. § 227(a)(1). The FCC’s July 10 Order attempts to bring clarity to three disputed aspects of this definition: (1) whether the equipment must have the present capacity to store or produce and dial numbers as provided by the statute; (2) the circumstances under which a predictive dialer is an ATDS; and (3) whether Internet-to-phone dialing technology qualifies as an ATDS.

Present Versus Potential Capacity

First, because the TCPA speaks in terms of a system’s “capacity,” courts have diverged on the issue of whether a system should be judged in terms of its present capacity—meaning the system’s capabilities at the time a call was placed—or the system’s potential capacity, meaning what the system could theoretically do if modified or altered. Many courts have concluded that a system must be judged in terms of its present capacity, as that is the only interpretation that would avoid bringing every modern smartphone under the statute. See, e.g., Dominguez v. Yahoo!, Inc., 8 F. Supp. 3d 637, 641 n. 4 (E.D. Pa. 2014)(“Recently, courts and commentators have observed that many modern technological devices, including smartphones, could store or produce numbers and dial such numbers without human intervention if outfitted with the requisite software. Thus, they have drawn a distinction between a system’s present capacity (as currently designed) and its potential capacity.”).

The FCC shared no such concerns in its Order, concluding that a system need not have the “present ability” to dial random or sequential numbers to qualify as an ATDS (or “autodialer”). Rather, the Commission concluded that a system qualifies as an autodialer if it has the “potential ability” to achieve the required capacity, even if doing so would require, for example, the addition of specific software not currently present. Accordingly, the fact that a system does not have the present capacity to generate or dial numbers as described in the statute will not protect defendants under the FCC’s ruling if it could be programmed or otherwise modified to dial numbers generated or stored using a random or sequential number generator. As discussed in greater detail below, because that conclusion is contrary to many courts’ interpretation of the statutory language, its viability is an open question.

Predictive Dialers

In a 2003 declaratory ruling, the FCC concluded that equipment which has the capacity to “store or produce numbers and dial those numbers at random, in sequential order, from a database of numbers” qualifies as an ATDS under the statute. 18 F.C.C.R. 14014, 14091-93 (2003). In 2012 the FCC further stated that a predictive dialer included “any equipment that has the specified capacity to generate numbers and dial them without human intervention regardless of whether the numbers called are randomly or sequentially generated or come from calling lists.” 27 F.C.C.R. at 15392 n.5 (2012). The use of this definition has also divided courts, as almost all modern smartphones are capable of dialing numbers from a contact list. To characterize such phones as qualifying as autodialers, even where they lack the ability to “store or produce telephone numbers to be called using a random or sequential number generator,” appears to run directly contrary to the statutory definition.

Nonetheless, in its Order, the Commission “reiterate[d] that predictive dialers, as previously described by the commission, satisfy the TCPA’s definition of an ‘autodialer.’” In so doing, the Commission rejected petitioners’ argument that the widespread use of smartphone technology merited any reconsideration of the expansive definition offered by prior FCC rulings. Again, that ruling brings the FCC into direct conflict with courts that have concluded that the agency lacks the authority to contradict the statutory language of the TCPA.

Internet to Phone Dialers

Citing its authority to apply TCPA protections to technologies not yet created at the time the statute was enacted, the FCC further determined in its Order that equipment used to originate Internet-to-phone text messages to wireless numbers via email or via a wireless carrier’s web portal also constitutes an ATDS. The Commission reasoned that such equipment meets the statutory definition of an autodialer because it has the capacity to store or produce numbers to be called using a random or sequential number generator, even if the system does not actually use that capacity. The Commission also found that the system has the capacity to dial such numbers, noting that although the statute itself does not define the term “dial,” the Commission would interpret that term to include the act of “addressing and sending an Internet-to-phone text message to a consumer’s wireless number.” The Order emphasized that from the perspective of consumers, the impact of Internet-to-phone texts is indistinguishable from that of phone-to-phone texts, and thus reasoned that such conduct should be equally subject to TCPA requirements.

Ramifications for Mobile Technology

Combined, these aspects of the FCC’s Order endorse a broad definition of autodialer that plaintiffs in TCPA litigation have advocated: any system that could be programmed or combined with other technology to achieve the required capacity to generate random or sequential numbers and dial them, or any system that has the capacity to dial numbers from a list, arguably qualifies as an ATDS under the FCC definition. Equally troublingly, the FCC seems to have endorsed the idea that all modern smart phones do in fact qualify, reasoning that this outcome is not troubling because “there is no evidence in the record that individual consumers have been sued based on typical use of smartphone technology.”

While this outcome is troubling to businesses seeking to reach out to customers through novel technology available on smartphones, it remains to be seen whether courts will embrace this expansive definition or reject it as beyond the scope of the FCC’s authority. At least one court has ruled that the FCC lacks the authority to define ATDS in a manner that includes predictive dialers. Marks v. Crunch San Diego, LLC, 55 F. Supp. 3d 1288, 1291 (S.D. Cal. 2014) (concluding that FCC interpretation including predictive dialers runs contrary to statute). Other courts have acknowledged the serious constitutional concerns that could arise from such definition, and the United States has in fact intervened to advocate against such a constitutionally-questionable construction. See “United States Mem. In Supp. Of The Constitutionality Of The TCPA,” No. 13-80670-CV, Dkt. 54 (S.D. Fla. Jan. 31, 2014) (arguing that “[t]he overbreadth doctrine is not available where Defendant simply argues that section 227(b)(1)(A) could conceivably apply to calls made from smartphones and computers without providing any support for such an interpretation of the statute”). One FCC commissioner dissented from the FCC’s Order, likening the FCC’s action to the Federal Aviation Authority attempting to regulate cars based on the theory that they could be extensively modified to fly. See Dissenting Statement of Commissioner O’Reilly, available here. In short, the FCC’s authority to define the ATDS as it had done, and the constitutionality of the statute if that definition is employed, is far from clear.

Making a Call

A second key piece of the Order concerns what it means to “make a call” within the meaning of the statute. Providers of mobile apps are now common targets of TCPA litigation when they offer users the opportunity to send text messages to friends inviting them to try the app. Plaintiffs pursuing these claims contend that app developers are responsible for the sending of such text messages, while the developers maintain that their users—through the decision to send such messages to their contacts and the affirmative steps required to do so—are responsible for making the call.

In resolving this dispute, the Commission considered the petition of one app provider, TextMe, which set forth evidence that when a user decided to invite friends to download the app, the user had to (1) tap a button that reads “invite your friends:” (2) choose whether to invite all friends or select friends individually; (3) actually send the invitation by hitting another button. Although the Commission expressed concern that the App developer played a role in the message creation, by providing the text of the invitation that the user could alter, it concluded that given this affirmative activity by the user, the user, and not Text Me, was responsible for making a call under the statute.

By contrast, the Commission also considered another app provider for which the app allegedly sent invitational texts to all of a user’s contacts automatically when the user signed up for the app without any affirmative steps by the user to send the messages. Under that petitioner’s system, the user did not affirmatively select an option for sending invitations to contacts or select recipients to receive the message. In that scenario, the Commission concluded that the app user was not meaningfully involved in the sending of the texts, and the app provider itself was deemed to have made or initiated the call for purposes of TCPA liability.

The takeaway from the FCC’s ruling on invitations is that an app developer will have a stronger defense to a TCPA claim where its SMS invitation system (1) requires users to take steps to select recipients who will receive the invitations; (2) requires, or at a minimum provides users the ability, to draft the invitation text, and (3) requires the user to choose to send the invitation.

The FCC’s Order provides valuable material to both plaintiffs and defendants in TCPA lawsuits. While mobile app providers have some degree of protection based on the Commission’s disposition of the TextMe petition, the FCC appears to have doubled down on a definition of autodialers so expansive that it likely encompasses all smartphones.

The complete FCC Order is available here