United States: Another Court Holds That Definition Of Automatic Telephone Dialing System Focuses On Present Rather Than Potential "Capacity"

Last Updated: April 8 2014
Article by Melanie M. Barnes

As we have previously discussed, two recent decisions narrowly interpreted the term automatic telephone dialing system ("ATDS"), the definition of which will determine the fate of many TCPA claims. See Hunt v. 21st Mortgage Corp., 2013 WL 5230061 (N.D. Ala. Sept. 17, 2013) and Stockwell v. Credit Management, L.P., No. 30-2012-00596110-CU-NP-CXC (Cal. Super. Ct. Oct. 3, 2013). (Our prior posts on those cases are available here and here). A district court in Washington recently followed this trend.

The court in Gragg v. Orange Cab Co., Inc., et al., No. 12-0576, U.S. Dist. LEXIS 29052 (W.D. Wash. Feb. 28, 2014) held that the definition of ATDS does not include equipment that "merely has the potential to store or produce telephone numbers using a random or sequential number generator or to dial telephone numbers from a list without human intervention." Id. at *7 (emphasis added). This holding further expands the authority on which defendants can rely when arguing that certain equipment is not an ATDS.

What qualifies as an ATDS is important because the use of an ATDS is a prima facie element of many TCPA claims. See 47 U.S.C. § 227(b)(1). The definition of ATDS has been the subject of much debate, however. The statute defines an ATDS as "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." 47 U.S.C. § 227(a)(1). The FCC stated in a 2008 ruling that this definition should also include predictive dialers that can "dial [lists of] numbers without human intervention." In the Matter of Rules & Regulations Implementing the TCPA of 1991, 23 F.C.C.R. 559, 566 ¶ 14 (Jan. 4, 2008). One of the most contested issues has been whether the phrase "has the capacity" should be interpreted broadly or narrowly. The Gragg court followed the lead of the Hunt and Stockwell courts and defined it narrowly on two separate occasions. The first was when it granted the defendants' motion for summary judgment, Gragg, No. 12-0576 (W.D. Wash. Feb. 7, 2014), and the second was when it denied the plaintiff's motion for reconsideration of that ruling, Gragg, U.S. Dist. LEXIS 29052.

In Gragg, the defendant taxicab company used a computer program, a product of the co-defendant Ridecharge, Inc., that linked together the taxi dispatch center, mobile data terminals in individual taxi cabs, and an SMS text messaging system. Gragg, No. 12-00576, slip op. at 2. When a customer ordered a taxi, the dispatcher would manually enter the customer's phone number into the program and the job information would be sent to a taxi. Id. The taxi driver would then accept the job by pressing a button on his or her mobile data terminal. Id. at 3. When that button was pressed, a text message would be sent to the customer's phone stating that a taxi had been dispatched. Id. The plaintiff filed a class action complaint alleging that the text message he received when he used the taxicab company violated the TCPA and a state statute.

The defendants moved for summary judgment of the TCPA claim, arguing that an ATDS was not used when sending the text message and therefore they could not be liable under the TCPA. The plaintiff countered that the system used was an ATDS even if it did not have the ability to perform certain functions at the time the text message was sent. The plaintiff argued that the language in the 9th Circuit's decision in Satterfield v. Simon & Schuster, Inc., 569 F.3d 946 (9th Cir. 2009) that "a system need not actually store, produce, or call randomly or sequentially generated telephone numbers, it need only have the capacity to do it" supported this conclusion. The court called that argument "absurd" and reasoned that:

"[a]dopting plaintiff's broad interpretation that any technology with the potential capacity to store or produce and call telephone numbers using a random number generator constitutes an ATDS would capture many of contemporary society's most common technological devices with the statutory definition."

Gragg, No. 12-00576, slip op. at 5 (emphasis in original). The court held that it would determine the "status [of the system] under the TCPA based on the system's present not potential capacity to store, produce, or call randomly sequentially generated telephone numbers." Id. (emphasis in original). It then granted summary judgment of the TCPA claim because the plaintiff failed to produce any evidence that the defendants' program, without modification, was able to perform the functions of an ATDS. Id. at 6.

Not satisfied, the plaintiff filed a motion for reconsideration a few weeks later and cited two newly issued district court rulings. Gragg, 2014 U.S. Dist. LEXIS 29052, *4. According to the plaintiff, the summary judgment opinions in Hunt v. 21st Mortgage Corp., 2014 U.S. Dist. LEXIS 13469 (N.D. Ala. Feb. 4, 2014) 1 and Sherman v. Yahoo! Inc., 2014 U.S. Dist. LEXIS 13286 (S.D. Cal. Feb. 3, 2014) illustrated that a plaintiff could meet its burden on summary judgment by showing that defendants could "obtain and install software that would allow their systems to act as ATDSs." Gragg, 2014 U.S. Dist. LEXIS 29052, *4. The court rejected plaintiff's argument a second time, noting that the two cases were neither binding nor particularly persuasive, and that they added an unjustified "judicial gloss" to the Satterfield case, which was decided "in a very narrow context." Id. at *5. The court reasoned that Satterfield "did not involve a situation in which it was clear that the system could not perform the functions of a predictive dialer unless it were modified or altered in some way." Id. at *7. In doing this, the court solidified its original interpretation of "capacity" as meaning "is capable of" in the present tense and noted that "[t]here is no indication that the Ninth Circuit would deem a system that has to be reprogrammed or have new software installed in order to perform the functions of an ATDS to be an ATDS. . . . Equipment that requires alteration to perform those functions may in the future be capable, but it does not currently have that capacity." Id. *7.

The Gragg decisions illustrate the common-sense conclusion that the statutory definition of an ATDS must have limits. Given the breakneck speed of technological advancements today, the boundless interpretation proposed by many plaintiffs would result in almost any device, system, smartphone, or tablet fitting the definition of ATDS—giving the statute an almost limitless scope that Congress could not have intended.

Copies of the Gragg decisions are available here and here.


1. This is the same court that issued the discovery ruling in Hunt v. 21st Mortgage Corp., 2013 WL 5230061 (N.D. Ala. Sept. 17, 2013) that we discussed previously. In denying summary judgment in the same case, the court maintained its position that the definition of ATDS must have limits because "[v]irtually every telephone in existence, given a team of sophisticated engineers working doggedly to modify it, could possibly store or produce numbers using a random or sequential number generator." Hunt v. 21st Mortgage Corp., 2014 U.S. Dist. LEXIS 13469, *14 (N.D. Ala. Feb. 4, 2014). It emphasized that a telephone system is only an ATDS if "at the time the calls at issue were made the system had the capacity, without substantial modification" to function as an ATDS. Id. (emphasis in original). The court denied summary judgment because there was a question of fact as to whether the system at issue could have functioned as an ATDS without substantial modification. Id. at *17.

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