November 2018
Telephone Consumer Protection Act (“TCPA”) litigation is on the rise.  Given the TCPA’s significant penalties of $500-$1500 per call, text or facsimile, the potential for firm-changing liability is a real threat. One of the recent issues facing litigants and regulators is what constitutes an automatic dialer, which is a key element of a TCPA claim. A split of legal authority exists and it is anticipated that the Federal Communications Commission (“FCC”) will address the issue in the coming months.
In its recent decision in Marks v. Crunch San Diego, LLC, 3:14-cv-00348, 14-56834, 2018 WL 4495553 (9th Cir. Sept. 20, 2018), the Ninth Circuit vacated the district court’s grant of summary judgment in favor of the defendant on a claim brought under the TCPA, which generally prohibits calls or texts to cell phones made using an automated telephone dialing system without the express consent of the called party. Through its opinion, the Ninth Circuit expanded the definition of an automated telephone dialing system (“ATDS”), potentially making it more difficult to get TCPA claims dismissed.  Under the TCPA, an ATDS is defined as equipment that has the capacity to: (i) store or produce telephone numbers to be called, using a random or sequential number generator; and (ii) dial such numbers.
In 2015, the FCC weighed in and issued a Declaratory Ruling (“2015 Declaratory Ruling”) that a device can be considered an ATDS even if it has no present capacity itself to generate random or sequential numbers (and instead can only dial from an externally supplied set of numbers), i.e., a predictive dialer. This arguably brought virtually any software-enabled dialing device under the TCPA’s reach. In earlier FCC Declaratory Rulings on the topic in 2003 and 2008, the FCC noted that while some predictive dialers cannot be programmed to generate random or sequential phone numbers, they still may satisfy the statutory definition of an ATDS if they do not require human intervention to make calls. 
In March 2018, the D.C. Circuit in ACA Int’l v. Fed. Communications Comm’n, 885 F.3d 687 (D.C. Cir. 2018) struck down the FCC’s 2015 Declaratory Ruling’s broad interpretation of an ATDS.  In ACA Int’l., the D.C. Circuit held that the TCPA unambiguously foreclosed an interpretation of an ATDS that would subject ordinary calls requiring human intervention from devices such as smartphones to the statute’s authority. The ACA Int’l Court opined that the 2015 Declaratory Ruling’s interpretation of “functional capacity” was unreasonable because it included “features that can be added…through software changes or updates…[so] a piece of equipment can possess the requisite ‘capacity’ to satisfy the statutory definition of an ‘autodialer’ even if, for example, it requires the addition of software to actually perform the functions described in the definition.” Rejecting this interpretation, the ACA Int’l Court relied on the TCPA’s simpler interpretation of an ATDS, and emphasized that only the equipment’s present capacity was relevant.
In Marks, the Ninth Circuit expanded the definition of an ATDS to include devices that have the potential to store numbers and dial stored numbers, automatically, regardless of random or sequential number generation. This expanded definition of an ATDS also could potentially subject devices such as smartphones to penalties under the TCPA. This renewed conflict raises questions for the FCC and other courts as to how to apply and interpret the TCPA regarding what can be considered an ATDS. To that end, on October 3, 2018, the FCC sought comment on how to address the holdings of ACA Int’l and Marks in applying the TCPA going forward.  The FCC solicited input to address questions such as “does the interpretation of the Marks court mean that any device with the capacity to dial stored numbers automatically is an [ATDS]?” and commentary on any other issues from Marks that ought to be considered in issuing yet another Declaratory Ruling interpreting what constitutes an ATDS. Interested parties were requested to file comments before October 24, 2018, using the FCC’s Electronic Comment Filing System at https://www.fcc.gov/ecfs/. The FCC’s next Declaratory Ruling is expected sometime this month.
To add further intrigue, the United States Supreme Court announced on November 13, 2018 that the justices had decided to take up the PDR Network LLC v. Carlton Harris Chiropractic Inc.  petition and address the question of how much deference courts should give to the FCC’s Declaratory Rulings on TCPA issues. Specifically, the issue is being considered in the context of a junk fax suit filed against PDR Network LLC, which petitioned the high court to review the Fourth Circuit's February ruling that the lower court was wrong to go against the FCC's interpretation of a disputed TCPA provision.
Attorneys in this space are watching with much anticipation to see: (i) whether the FCC issues a more narrow or broader definition of ATDS that will conflict with the Ninth Circuit; and (ii) whether the Supreme Court rules in favor of adhering strictly to FCC guidance or rules that the FCC interpretation of legal terms is not binding. Either way, the law on what constitutes an ATDS is far from settled.