Special Alert: Ninth Circuit Rules on ACA International

TCPA Connect

As our regular readers know, Manatt’s TCPA compliance and class action defense team has been tracking and reporting on developments in the courts as well as in the government since the ACA International v. FCC decision earlier this year, in which the D.C. Circuit set aside the Federal Communications Commission’s (FCC) overly expansive definition of “automatic telephone dialing system” (ATDS or autodialer), among other things. As we predicted, over the past few months, the ACA decision has spurred confusion among the district courts and has led to various approaches not only to interpreting the binding effect of ACA but also to delineating the parameters of what constitutes an ATDS. On Sept. 20, 2018, the U.S. Court of Appeals, Ninth Circuit became the third appellate court to weigh in on this important discussion and issued its long-awaited opinion in Marks v. Crunch San Diego, LLC.   

As we discussed in a previous issue, the case involved plaintiff Jordan Marks, who sued Crunch San Diego after allegedly receiving three unwanted text messages, allegedly sent using an ATDS, over the course of 11 months in 2012 after he signed up for a gym membership. Moving to dismiss, Crunch argued it could not be liable under the Telephone Consumer Protection Act (TCPA) because it did not use an ATDS.  

At the time, Crunch used a third-party web-based platform called “Textmunication” to send promotional text messages, whereby phone numbers were inputted into the platform in one of three ways: when Crunch manually uploaded a phone number, when a consumer responded to a Crunch marketing campaign or when a consumer manually inputted a phone number on a consent form on the Crunch website. To send a message, Crunch had to select the desired phone numbers, generate a message and select the date, after which the platform would send the texts on the given date and store the numbers used. Significantly, a Crunch employee had to log into the system, select a recipient’s phone number, generate the message to be delivered, and set a date and time for delivery prior to the system automatically sending the text message to the preselected numbers at the preappointed time. But according to Crunch, the system lacked the capacity to store and call telephone numbers by using a random or sequential number generator as required by Section 227(a)(1) of the TCPA.

U.S. District Judge Cynthia Bashant of the Southern District of California agreed with Crunch and granted summary judgment, determining in essence that Textmunication was not an ATDS because it lacked a random or sequential number generator and did not have the potential capacity to add such a feature. 

The plaintiff appealed, but the Ninth Circuit ordered supplemental briefing to address the impact of the ACA decision on the case at bar. In that regard, the plaintiff argued that a number generator is not a storage device because a device cannot use a random number generator to store numbers; therefore, the definition of an ATDS should encompass equipment with the “capacity to store telephone numbers and then dial them.” The defendant argued that an ATDS “must store telephone numbers that have been produced using a random or sequential number generator.”

Agreeing with the plaintiff, the Ninth Circuit reversed. Writing for the panel, Circuit Judge Ikuta of the Ninth Circuit “conclude[d] that the statutory definition of ATDS includes a device that stores telephone numbers to be called, whether or not those numbers have been generated by a random or sequential number generator.” In this regard, the panel held that ACA vacated the FCC’s interpretations of what qualified as an ATDS entirely and that “only the statutory definition of ATDS … remains,” but also that the statute is not unambiguous on its face. Judge Ikuta stated, “Despite the ambiguity of the statutory definition of ATDS, reading the definition in its context and with a view to its place in the overall statutory scheme, we conclude 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.”

Additionally, with regard to human intervention, an element frequently discussed in many post-ACA cases, Judge Ikuta noted that a device can qualify as an ATDS even if it is not “fully automatic, meaning that it [does not have to] operate without any human intervention whatsoever” because “Congress made clear that it was targeting equipment that could engage in automatic dialing, rather than equipment that operated without any human oversight or control … [and c]ommon sense indicates that human intervention of some sort is required before an autodialer can begin making calls, whether turning on the machine or initiating its functions.” Therefore, Textmunication “has the automatic dialing function necessary to qualify as an ATDS, even though humans, rather than machines, are needed to add phone numbers to the Textmunication platform.” Consequently, the court vacated and remanded the matter, concluding that a genuine issue of material fact existed as to whether Crunch’s system qualifies as an ATDS. 

To read the full opinion in Marks v. Crunch San Diego, LLC, click here.

Why it matters: While the Ninth Circuit’s decision Marks is only the third appellate-level decision (joining the Second Circuit and Third Circuit) after ACA to define an ATDS, it is especially significant because the majority of the post-ACA district-level opinions have come out of the Ninth Circuit, which is a well-known hotbed of TCPA litigation—in volume, perhaps second only to, if not tied with, the Seventh Circuit, where no courts have weighed in on ACA as of this Special Alert. Marks also makes clear, at least in the Ninth Circuit, that the D.C. Circuit’s opinion in ACA vacated all of the FCC’s prior determinations on what constitutes an ATDS as opposed to just the FCC’s 2015 Order on what constitutes “capacity” to be an ATDS—an issue with which the district courts in the Ninth Circuit and elsewhere have struggled. Finally, the Marks decision not only suggests that a significant amount of human intervention may not be enough to escape an ATDS classification, but it also stands in contrast to the Third Circuit’s arguably more narrow (and thus defendant-friendly) post-ACA definition of an ATDS in Dominguez ex rel. Himself v. Yahoo, Inc., thus creating a further split among the circuits. Manatt’s TCPA compliance and class action defense team will continue to monitor and report on developments in the courts and in the FCC on ACA in upcoming TCPA Connect editions.