Saturday, November 22, 2014

FYI: SD Cal Rejects FCC's Interpretation of ATDS Under TCPA, Enters Summary Judgment in Favor of Defendant in TCPA Putative Class Action

The U.S. District Court for the Southern District of California recently ruled that a company’s promotional text message platform did not constitute an automated telephone dialing system (“ATDS”) as defined by the federal Telephone Consumer Protection Act, 47 U.S.C. § 227(a)  (“TCPA”).  The Court also held that the FCC has no authority to modify or definitively interpret § 227(a) of the TCPA, in which the term ATDS is defined.

A copy of the opinion is available at:  Link to Opinion

The defendant company (Vendor) operated a gym which used a third-party web-based platform to send promotional text messages to its members and prospective customers’ cell phones. 

The phone numbers were inputted into the platform by one of three methods: (1) when vendor or another authorized person manually uploaded a phone number onto the platform; (2) when an individual responded to vendor’s marketing campaigns via text message (a “call to action”); and (3) when an individual manually inputted the phone number on a consent form through vendor’s website which interfaced with the platform. 

The plaintiff consumer (Consumer) joined Vendor’s gym sometime before November 20, 2012.  He alleged that he received three unwanted text messages from Vendor between November 20, 2012 and October 18, 2013.  He filed a putative class action alleging violation of the TCPA.

As you may recall, an ATDS is equipment that “has the capacity (A) to store or produce numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.”  See 47 U.S.C. § 227(a)(1).

The Court granted Vendor’s motion for summary judgment.

First, the Court rejected Consumer’s efforts to rely on FCC commentary in support of his position.  Section 227(a)(1) defines an ATDS.  In contrast to § 227(b) and (c), section 227(a) does not include a provision giving the FCC rulemaking authority.  Further, § 227(b) and (c) expressly limited rulemaking authority to those subsections.  Thus, the Court held that any attempt by the FCC to modify the statutory language of § 227(a) was impermissible.

The Court acknowledged that FCC commentary broadly interpreted the definition of ATDS as “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.” See In the Matter of Rules and Regulations Implementing the Tel. Consumer Prot. Act of 1991, 27 F.C.C.R. 15391, 15392, n. 5 (2012). 

However, the Court noted that because the definition of ATDS was clear and unambiguous, the FCC’s statutory interpretation of an ATDS was not binding on the court.  See Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).

Next, the Court noted that other courts have defined “capacity” in the context of the definition of an ATDS as “the system’s present, not potential, capacity to store, produce or call randomly or sequentially generated telephone numbers.”  See Gragg v. Orange Cab Co., 995 F.Supp.2d 1189, 1193 (W.D. Wash. 2014). 

The Court also noted that the words “random or sequential number generator” in the definition of ATDS could not be construed to refer to a list of numbers dialed in random or sequential order.  According to the Court, this interpretation would effectively render the TCPA’s “random or sequential number generator” requirement superfluous.  Rather, the Court held, the term referred to the genesis of the list of numbers, not to an interpretation that rendered “number generator” synonymous with “order to be called.”

Applying these principles, the Court held that the platform at issue did not have the present capacity to store or produce numbers using a random or sequential number generator.  In the platform at issue, numbers only entered the system through three methods, all of which required human curation and intervention.  None could be termed a “random or sequential number generator.” 

Next, the Court concluded that even if potential or future capacity to randomly or sequentially autodial numbers were fairly included in the definition of ATDS, Vendor’s contractual obligations precluded such a finding in this case.  The Vendor used a third-party platform that audited users’ accounts pursuant to an “Anti-Spam Policy,” and it was contractually banned from inputting numbers into the system without either a response to a call for action or written consent.

Finally, the Court distinguished the case from a prior ruling from the Ninth Circuit in which a predictive dialer at issue in that case was treated as an ATDS because it had the “capacity to dial numbers without human intervention.” See Meyer v. Portfolio Recovery Assocs. LLC, 696 F.3d 943, 950 (9th Cir. 2012) (quoting 18 F.C.C.R. 14014, 14092 (2003)).  The Court noted that the Meyer opinion was inapplicable because challenges to the FCC’s authority regarding the definition of an ATDS had been waived at the district court level, and therefore were not at issue in the appeal.

Accordingly, the Court granted Vendor’s motion for summary judgment.

Eric Tsai
McGinnis Wutscher Beiramee LLP
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