Locke Lord QuickStudy: Third Circuit Limits ATDS Definition under the TCPA to Random Number Dialers

Locke Lord LLP
June 28, 2018

In the most significant case to interpret what constitutes an “automatic telephone dialing system” (ATDS or autodialer) under the Telephone Consumer Protection Act (TCPA) in the wake of the D.C. Circuit’s decision in ACA Int’l v. FCC, the Third Circuit dealt a major blow to TCPA plaintiffs. See Dominguez v. Yahoo, Inc., 2018 WL 3118056 (3d Cir. June 26, 2018). The Third Circuit affirmed summary judgment in favor of Yahoo on Dominguez’s claim that Yahoo sent him an eye-popping 27,800 text messages in violation of the TCPA. The narrow issue before the appellate court was whether the equipment used by Yahoo to send the text messages qualifies as an ATDS, which is a required element of a TCPA claim.

Answering in the negative, the Third Circuit applied the plain language of the TCPA to hold that dialing equipment must have “present capacity to function as an autodialer by generating random or sequential telephone numbers” when it is used to send text messages.

Background and Procedural History

Dominguez purchased a cell phone that came with a reassigned telephone number. The prior owner of the number used a Yahoo e-mail account and signed up for Yahoo’s “Email SMS Service” that provided a text message notification each time an e-mail was received by the user’s e-mail account. Unfortunately for Dominguez, the prior owner of the number never canceled the notification service, so Dominguez received a text message every time someone else received an e-mail. Despite Dominguez making repeated attempts to have the notification service canceled, Dominguez ultimately received approximately 27,800 text messages in a 17-month span.

Dominguez filed a putative class action alleging that Yahoo violated the TCPA by sending him text messages using an ATDS without his prior express consent. After the district court initially granted summary judgment in favor of Yahoo, Dominguez appealed. During the pendency of this initial appeal, the Federal Communications Commission (FCC) issued a declaratory ruling and order interpreting the word “capacity” in the definition of an ATDS to “include any latent or potential capacity” (2015 Order), causing the Third Circuit to vacate the judgment and remand the case. On remand, the district court again granted summary judgment in favor of Yahoo, and Dominguez again appealed. During this second appeal, the D.C. Circuit issued its much-anticipated opinion in ACA Int’l

The Third Circuit’s Decision

The Third Circuit began its analysis by noting that the ACA Int’l decision narrowed the scope of Dominguez’s appeal. Without providing any real insight into its rationale, the Third Circuit then concisely stated that it would “interpret the statutory definition of an autodialer as we did prior to the issuance of” the FCC’s 2015 Order. That interpretation meant that Dominguez would have to provide sufficient evidence to create a genuine issue that Yahoo’s dialer had the present capacity to generate random or sequential telephone numbers at the time the disputed messages were sent.

After reviewing several expert reports, the Third Circuit held that Dominguez “cannot point to any evidence that creates a genuine dispute as to whether the Email SPS Service had the present capacity to function as an autodialer by generating random or sequential telephone numbers and dialing those numbers.” To the contrary, the court noted that the evidence indicates that the dialer utilized by Yahoo only sent text messages to telephone numbers that had been individually and manually entered into its system. While the Third Circuit acknowledged that Dominguez likely “suffered great annoyance,” it affirmed summary judgment in favor of Yahoo because it did not utilize an ATDS to send those messages—“those messages were sent precisely because the prior owner of Dominguez’s telephone number had affirmatively opted to receive them, not because of random number generation.”

Going Forward

Corporate defendants and telemarketers should take advantage of the Dominguez decision to try to eliminate lawsuit based on dialing systems that cannot generate random or sequential numbers. They should do so before the FCC or Congress have an opportunity to expand the definition of an ATDS. A new definition of an ATDS is expected from the FCC in a matter of months. Democrats in Congress have introduced the “Stopping Bad Robocalls Act” that would expand the definition of an ATDS to specifically include equipment that makes a series of calls to stored telephone numbers, including telephone numbers stored on a list. While there is no way to tell for sure how an ATDS will be defined six months or a year from now, it is hard to imagine that the definition will be any narrower than the Third Circuit’s interpretation in Dominguez.