On September 20, 2018, the Ninth Circuit issued a significant ruling on the definition of an automatic telephone dialing system (ATDS) in the context of the Telephone Consumer Protection Act (TCPA). Marks v. Crunch San Diego, LLC, No. 14-56834 (9th Cir. 2018). In an opinion by Judge Ikuta, the court ruled—in direct contravention of numerous courts, including the Third Circuit—that a system can qualify as an ATDS even if it cannot call numbers produced by a "random or sequential number generator."

In relevant part, the TCPA prohibits the use of an ATDS to make "any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice." The TCPA 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." The panel summed up what courts have now been struggling with: "The question is whether, in order to be an ATDS, a device must dial numbers generated by a random or sequential number generator or if a device can be an ATDS if it merely dials numbers from a stored list."

Plaintiff Jordan Marks sued defendant Crunch San Diego for sending text messages in violation of the TCPA. Crunch did not dispute that the Textmunication system dials numbers automatically for a list of stored numbers even though humans, rather than machines, are needed to add phone numbers to the Textmunication platform. However, the district court granted summary judgment in favor of Crunch, holding that the Textmunication system did not qualify as an ATDS because it presently lacked a random or sequential number generator and did not have the potential capacity to add such a feature. Plaintiff appealed, but in the meantime the Supreme Court decided ACA Int'l v. Fed. Comm'cns Comm'n, 885 F.3d 687 (D.C. Cir. 2018).

The Ninth Circuit found that ACA International invalidated rulings of the Federal Communications Commission (FCC) going all the way back to 2003, and that those rulings were "no longer binding," on the court. Therefore, the Ninth Circuit decision began by considering "anew" the definition of ATDS under the TCPA. After finding that Congress' definition of an ATDS was ambiguous, the appeals court turned to other canons of interpretation to determine the meaning, ultimately leading to the following expansive holding: An 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." The Ninth Circuit dismissed the Third Circuit's contrary opinion in Dominguez v. Yahoo, Inc., 894 F.3d 116 (3rd. Cir. 2018), as being based on an "unreasoned assumption" and "without explanation."

The Ninth Circuit's ruling will likely embolden the plaintiff's bar and lead to even more TCPA litigation, at least in the Ninth Circuit. However, the decision has also created a circuit split that may lead to a ruling from the Supreme Court or additional guidance from the FCC. The current FCC may use this opinion to offer clarity on the definition of an ATDS, and it is likely that any such ruling would offer a narrower definition than that provided by the Ninth Circuit.

In the meanwhile, the Ninth Circuit still left a potential avenue for defense, stating that it did not need to rule whether an ATDS must have the present capacity to dial numbers from a stored list or whether it is sufficient that the calling platform could be programed or have the potential to do so. Such a question will also need to be decided in the future, either by the Supreme Court or the FCC.

For now, companies doing business within the Ninth Circuit should take a look at their devices and their communications with customers, and contact qualified counsel at Dentons to help them navigate and make decisions in this evolving landscape.

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