As we have been highlighting recently, the interpretation of “automatic telephone dialing system,” or “ATDS,” has been an important issue since the U.S. Court of Appeals for the District of Columbia Circuit earlier this year struck down the Commission’s expansive 2015 ATDS definition.  For example, the ATDS definition has recently been the focus of FCC comments and, as the below infographic shows, it has been a key issue in several federal district court decisions, most of which have interpreted the term differently in one way or another.  The proper scope of the ATDS definition is also garnering attention at the higher levels of the judicial branch, as we now have seen two federal appellate court rulings on the issue in just a four-day period.

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View ATDS Interpretation Continuum Infographic

We have already blogged about Dominguez v. Yahoo, Inc., a June 26 opinion issued by the U.S. Court of Appeals for the Third Circuit, in which the court narrowly interpreted the ATDS definition to only include devices that randomly or sequentially generate telephone numbers and currently have the capacity to dial those numbers (a definition which the TCPA Defense Force agrees with and supports).  As we predicted, the Third Circuit’s interpretation gained a lot of attention, so much so that, just three days later, it was cited in King v. Time Warner Cable, Inc., a ruling issued by the Second Circuit (which encompasses the federal courts in Connecticut, New York, and Vermont) that narrowed the ATDS definition to only include devices with the current—not potential— “capacity” to perform the functions of an ATDS.

Certainly, it is great to see another federal circuit narrow the ATDS definition.  But, as we explore below, the approach adopted by the Second Circuit in King may have important differences when compared with the Third Circuit’s Dominguez decision.

Background of the King Decision

The Second Circuit was invited to interpret the ATDS term after Time Warner Cable appealed a decision from the United States District Court for the Southern District of New York, which had relied upon the FCC’s now-defunct 2015 TCPA Omnibus Order to determine that Time Warner’s interactive calling device was, without a doubt, an ATDS because it had the “potential capacity” to randomly or sequentially generate and dial numbers. 

In the district court proceeding, Time Warner had advocated for a narrower interpretation of ATDS, arguing that the term “capacity” within the ATDS definition was meant to only include devices that were “capable at the time of use” of performing the functions of an autodialer, and that, in the absence of any evidence that Time Warner’s device had the present ability to perform ATDS functions, its system could not qualify as an autodialer under the TCPA.  The district court disagreed, conforming its decision to the broader understanding of the term “capacity” to include any technology that could potentially perform autodialer functions now or in the future via any change to the device adopted by the FCC in its 2015 Omnibus Order.  The court thus rejected as irrelevant Time Warner’s contention that there was no evidence that its device “actually dialed King’s number randomly or from a list,” and did not investigate whether Time Warner’s system had the current ability to perform the functions of an autodialer.  It simply concluded that Time Warner’s device met the “low bar” established by the TCPA and ruled in favor of the plaintiff.

On appeal, the Second Circuit was not persuaded that the “low bar” approach taken by the district court was what the TCPA intended the courts to apply.  Armed with the D.C. Circuit’s decision in ACA International, the Second Circuit struck down the district court’s reliance on the 2015 TCPA Omnibus Order.  But the Second Circuit was not finished.  It then went on to criticize the district court’s broad interpretation of the word “capacity,” as used in the ATDS definition. 

While criticizing the district court’s approach, the Second Circuit stopped short of entering an opinion that would require federal courts in Connecticut, New York, and Vermont to interpret the ATDS and capacity terms in the narrowest way possible (which would require the device to randomly or sequentially generateand dialphone numbers).  Instead, it concluded that an ATDS could be a device that, while in use, “performed the autodialer functions” OR a device that could, as presently configured, “perform the autodialer functions,” even though they were not performed while the device was being used:

[W]e conclude that the term “capacity” in the TCPA’s definition of a qualifying autodialer should be interpreted to refer to a device’s current functions, absent any modifications to the device’s hardware or software.  That definition does not include every smartphone or computer that might be turned into an autodialer if properly reprogrammed, but does include devices whose autodialing features can be activated … by the equivalent of “the simply flipping of a switch.”

The King Court’s Three-Point Analysis

In arriving at its decision about the intended meaning of “capacity,” the Second Circuit engaged in a three-point analysis:

  1. The “Plain Meaning” of “Capacity”: To begin, the Court looked to several dictionary definitions of the term “capacity.”  However, it quickly concluded that these sources provided multiple definitions and only made the term appear more ambiguous.  Thus, it looked to the statute itself, and in doing so concluded that “[c]ommon sense suggests that legislation, which typically targets present social problems, would be aimed at devices that have the ‘capacity,’ in that narrower sense, to cause the problem that is the subject of legislative concern, rather than addressing itself to the hazily defined universe of things that have only a theoretical potential to do so.”  From there, the Second Circuit equated “common sense” with the term’s “plain meaning,” and therefore decided that the term was to be interpreted with a “narrower definition” than the one proposed in the FCC’s 2015 Omnibus Order.
  2. The D.C. Circuit’s Opinion: The Second Circuit then looked to the D.C. Circuit’s decision regarding the ATDS/capacity issues in ACA International, noting that “the D.C. Circuit rejected the FCC’s broad interpretation of ‘capacity’ …[and drew] a distinction between a device that currently has features that enable it to perform the functions of an autodialer – whether or not those features are actually in use during the offending call – and a device that can perform those functions only if additional features are added.”  It was this distinction, the Court said, that it found “persuasive,” thereby allowing it to conclude that “the former category of devices falls within the definition of an ATDS, [while] the latter does not.”
  3. Legislative History of TPCA and “Capacity” Term:Finally, the Second Circuit looked to the legislative history of the TCPA itself, specifically focusing on discussions between the House Committee on Energy and Commerce—which presented in the first instance the bill that would become the TCPA—and industry representatives.  In analyzing those discussions, the Court noted that industry representatives expressed concern that the term “capacity” would allow the statute to reach too broadly and therefore advocated for the ATDS definition to instead focus on the “actual ‘use’ of a device.”  However, in responding to the industry’s concerns, the Second Circuit said, the House Committee rejected that option, observing that the proposed definition of an ATDS included both “equipment which is designed or intended to be used to deliver automatically dialed prerecorded messages” and “equipment which has the ‘capability’ to be used in such manner.”  Granted, the Second Circuit noted that, on several occasions, the House Committee acknowledged concerns regarding the potential breadth of the TCPA and that the bill was designed to place restrictions only on the “active ‘use’” of an ATDS, however, the Court determined that these pronouncements were not as indicative as the former.  Thus, the Second Circuit concluded that the TCPA’s legislative history “does not case doubt on the interpretation of the term we derive from the statute’s text and purpose.”  

Contrasting King with the Third Circuit’s Recent ATDS Decision

Ultimately, the Second Circuit’s three-point analysis led it to conclude that the ATDS term could not be interpreted as broadly as it had been by the district court and by the FCC in the 2015 TCPA Omnibus Order, and while its narrower interpretation is a win for callers, it is distinctly different—and less exacting—than the interpretation given by the Third Circuit. 

The difficulty in defining the exact parameters of what is and what is not an ATDS stems from the definition adopted by Congress.  That definition provides that an ATDS is: “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.”  This definition has raised three distinct issues, which the courts and the FCC have struggled to agree on.  First, the courts have disagreed on whether the term “capacity” is meant to include the present capacity of the equipment or its potential capacity after modifications (and whether the complexity of those modifications is relevant to the analysis). Second, the courts have varying perspective as to whether the equipment must be “used” to dial the telephone numbers giving rise to the TCPA complaint or whether it is sufficient that the equipment had the capacity to do so, even if the capacity was not activated at the time the offending call was a made.  Finally, the courts have disagreed on the number generation issue—i.e., whether the device had to randomly or sequentially generate the telephone number that was called or whether it is sufficient that the device “stored” the number in a database and then dialed the telephone number in an automated fashion. 

Breaking the ATDS definition down into these three components reveals that, while the Second and Third Circuits both issued opinions reversing the trial court’s expansive ATDS definitions, the different approaches taken by the two courts may have significant implications for future TCPA litigants in those circuits.

  1. The Capacity Issue: The first question a court must answer in crafting its interpretation of the ATDS term pertains to the device’s “capacity”—i.e., is one only to look at the device’s present capacity, or should one also consider the device’s potential capacity?  Here, the Second and Third Circuits diverged slightly.  The Third Circuit was clear that only the device’s present capacity was relevant.  However, the Second Circuit concluded that, while present capacity is relevant, potential capacity is also relevant in limited circumstances.  As the Court explained, to the extent that autodialing capabilities in a device could be activated through the “simple flipping of a switch,” that capacity should be taken into consideration, while the potential that a device could function as an ATDS after a “top-to-bottom reconstruction” should not be taken into consideration.  The Second Circuit thus left it up to trial courts to decide, on a case-by-case basis, where to draw the precise line.  
  2. The Use Issue: The second question the courts look to in deciding if the ATDS definition applies relates to the use of the device—i.e., in determining whether a call was made using an ATDS, does one ask whether the device’s autodialer capacity was actually being usedto make the calls at issue, or does one simply look to ensure that the device had autodialing capacity, while ignoring whether the capacity was in use?  This is where the court’s diverged.  In King, the Second Circuit determined that the ATDS definition included any “device that currently has features that enable it to perform the functions of an autodialer – whether or not those functions are actually in use during the offending call.”  In Dominguez,though, the Third Circuit seemed to be of a view that an ATDS must not only have capacity to make the offending calls, but also to have used that capacity.  Specifically, in explaining why one of the Plaintiff’s proffered expert reports was not relevant and thus not admissible in the case, the Third Circuit observed that the report “does not shed light on the key factual question actually at issue in this case—whether the [] SMS System functioned as an autodialer by randomly or sequentially generating telephone numbers, and dialing those numbers.”  Thus, in defining the “key factual question” as whether the SMS System “functioned” as an ATDS, the Third Circuit has arguably taken the position that the device must not only have the “capacity” to be an autodialer, but that the capacity must have been “in use.”
  3. The Number Generation Issue: Finally, courts must determine what significance to place on the the requirement that the device use a “random or sequential number generator”.  Here, the Second Circuit’s decision provides no clarity on the issue, simply stating repeatedly that an ATDS is a device that can perform “the functions of an autodialer,” whatever that means.  The Third Circuit, on the other hand, was clear in its approach, declaring that a device isan autodialer only if it can randomly or sequentially generate telephone numbers. Thus, under the Third Circuit’s ruling, callers have a good argument that, if it uses a device that is configured only to make calls or send text messages to consumers that have voluntarily provided their phone numbers, rather than to random telephone numbers, they are not using an ATDS.

In sum, deciding whether a device is or is not an ATDS in the Second Circuit is likely to be a more complex and costly process than for cases filed in the Third Circuit.  The Second Circuit’s approach will require a time-intensive inquiry and likely the use of expert witnesses.  Moreover, the district courts located within the Second Circuit have been provided with little guidance on the importance of the phrase “random or sequential number generator,” and thus will be left to decipher the parameters of the law on their own.

 


 

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