The Ninth Circuit’s expansive definition of an ATDS:

The Ninth Circuit concluded that because the D.C. Circuit in ACA Int’l vacated the FCC’s interpretation of what sort of devices qualify as an ATDS, only the statutory definition of an ATDS as set forth by Congress in 1991 remains.  The Ninth Circuit thus held that the FCC’s prior orders on this issue are “no longer binding on us” and determined that it must “begin anew” to consider the definition of an ATDS under the TCPA.

The Court limited its analysis to whether a device must dial numbers generated by a random or sequential number generator in order to qualify as an ATDS, or if a device can be an ATDS merely because it dials numbers from a stored list.

Finding the statutory text ambiguous on its face, the Ninth Circuit looked to the intent of Congress and concluded that the TCPA was originally enacted to regulate devices that make automatic calls, including equipment that calls from lists of recipients.

In support of this conclusion, the Court reasoned that because the TCPA provides enumerated exceptions for calls “made with the prior express consent of the called party” and calls placed to debtors to the United States, Congress must have intended to regulate devices that dial from a list of stored numbers, because these exceptions would not apply to random or sequential dialing.

Additionally, the Ninth Circuit seized upon the fact that Congress left the definition of ATDS untouched when it amended the statute in 2015.  The Court inferred that because Congress was aware of the FCC’s expansive definition of ATDS in 2015 and chose not to amend the definition to correct the FCC’s interpretation, Congress therefore tacitly approved of this expansive definition.

The Ninth Circuit concluded that the statutory definition of ATDS is not limited to devices with the capacity to call numbers produced by a “random or sequential number generator,” but also includes devices with the capacity to dial stored numbers automatically. Specifically, the Court reads § 227(a)(1) to provide that the term automatic telephone dialing system means equipment which has the capacity—(1) to store numbers to be called or (2) to produce numbers to be called, using a random or sequential number generator—and to dial such numbers.

The Ninth Circuit distinguished Dominguez v. Yahoo as unpersuasive:

The Third Circuit Court of Appeals in Dominguez ex rel. Himself v. Yahoo, Inc., 894 F.3d 116, 120 (3d. Cir. 2018) held that a device must be able to generate random or sequential numbers in order to qualify as an ATDS.

The Ninth Circuit declined to follow Dominguez as unpersuasive, stating that the Third Circuit had failed to resolve, and chose to ignore, an analysis into the contradictory statutory language of how a number can be stored as opposed to produced using a random or sequential number generator.

Some degree of human intervention does not disqualify a device as an ATDS:

The Ninth Circuit also found that some degree of human intervention does not disqualify a device as an ATDS.  While not providing clear and conclusive guidelines, the Court cited examples of the sort of human intervention that would not disqualify a device as an ATDS, such as loading phone numbers into a device.

The Court rejected defendant’s argument that a device cannot qualify as an ATDS unless it is fully automatic, meaning that it must operate without any human intervention whatsoever.

Looking forward:

Because the Ninth Circuit’s expansive definition covers any device that can store telephone numbers for automatic dialing, conventional cell phones are now arguably subject to the TCPA to the extent such devices can automatically call stored numbers.

The effect of the Ninth Circuit’s ruling may not be longstanding.  The FCC has solicited comment on the definition of ATDS in light of ACA Int’l and is expected to issue new rulemaking soon.  And because the FCC’s current chairman, Ajit Pai, has historically taken a narrow view of the definition of ATDS, it is likely that the FCC’s rulemaking will undermine the Ninth Circuit’s interpretation.  Moreover, depending on when and how the FCC responds, the Supreme Court may also decide to resolve the current Circuit split, which could also undermine the Ninth Circuit’s interpretation.

In the meantime, defendants outside of the Ninth Circuit will likely focus on the many problems with the Ninth Circuit’s interpretation that render the ruling unpersuasive.
First, the Ninth Circuit’s expansive definition defies common sense, as it potentially makes all cell phone users (and really anyone using any phone that stores numbers and can dial numbers) TCPA violators.  Indeed, this is the very result the D.C. Circuit determined was unacceptable when it struck down the FCC’s definition of capacity.  Those defending the Ninth Circuit’s decision will likely respond by pointing out that a device must still be able to call stored numbers automatically, which narrows the scope of applicable devices.

Second, the fact that Congress left the statutory definition of ATDS untouched when it otherwise amended the statute in 2015 does not show that Congress tacitly approved the FCC’s interpretation of the statute to include telephone systems that merely call from a database of numbers.  The focus of the 2015 amendments were to ensure collection of debts to the government would not be hindered by the TCPA, regardless of the method or device used.  Further, as the D.C. Circuit pointed out in ACA Int’l, the FCC also set forth the contradictory position that a telephone system must have capacity to randomly or sequentially dial in order to qualify as an ATDS.  It is therefore equally plausible to interpret Congress’ decision not to amend the definition of ATDS as a tacit approval of this portion of the FCC’s ruling.  At a minimum, it is impossible to determine what portion of the FCC’s ruling Congress “tacitly” approved by not amending the statutory definition of ATDS, even assuming Congress was paying attention.

Third, the legislative history makes clear that lawmakers were aware of the distinction between random and sequential dialing on the one hand and dialing from a prepared list on the other, and that Congress specifically intended to target random and sequential dialing.  

Fourth, the exceptions for calls made with the consent of the called party and calls to collect government debts, do not require the Ninth Circuit’s expansive interpretation in order to be effective.  The TCPA prohibits “mak[ing] any call (other than a call ... made with the prior express consent of the called party) using any [ATDS] or an artificial or prerecorded voice” to certain lines.  47 U.S.C. § 227(b)(1)(A) (emph. Added).  While it may be difficult to secure consent for random or sequential calls, it is easy (and common) to secure consent for artificial or prerecorded voice calls.

Companies are left with significant uncertainty on how to respond to the Ninth Circuit’s ruling.  While the ruling is sweepingly broad and could increase potential liability, the rules may change in the very near future.

Client Alert 2018-193