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Clueless in Seattle: Court Struggles with ATDS Definition in Absence of FCC Guidance

By Alexander R. Green, Joann Needleman / Oct 09, 2019

Federal courts continue to struggle with defining an “automatic telephone dialing system” (ATDS) under the federal Telephone Consumer Protection Act (TCPA). This has led to inconsistency not only among different judges and courts, but sometimes within a judge’s own rulings in the same case. This was an unfortunate reality for the parties to one particular class action lawsuit, Pine v. A Place For Mom, Inc, pending in the U.S. District Court for the Western District of Washington.

Background: What Is an ATDS?

Defining an ATDS has been a difficult task since the enactment of the TCPA. However this exercise has intensified over the past several years. The TCPA defines an ATDS as “equipment which has the capacity to store or produce telephone numbers to be called, using a random or sequential number generator; and dial such numbers.” 47 U.S.C. § 227(a)(1). The operative word in that definition is “capacity.” Federal Communications Commission (FCC) Declaratory Orders in 2003 and 2008 failed to adequately interpret the scope of the term “capacity.” However the FCC’s  2015 Declaratory Ruling & Order (2015 Order) defined an ATDS as including not only devices with the “present capacity” to store and dial telephone numbers, but also devices with the “potential functionalities” to store and dial telephone numbers with modifications such as software changes, thus expanding the ATDS definition to encompass almost any mobile device.

In ACA Int’l v. FCC, 885 F.3d 687 (D.C. Cir. 2018), the U.S. Circuit Court for the D.C. Circuit invalidated part of the FCC’s 2015 Order, holding that the FCC’s interpretation of an ATDS was arbitrary and capricious. According to the D.C. Circuit, the FCC’s interpretation was “an unreasonably, and impermissibly, expansive one” as it would result in “all smartphones qualify[ing] as autodialers.”

A few months later, however, in Marks v. Crunch San Diego, LLC, 904 F.3d 1041 (9th Cir. 2018), the U.S. Circuit Court for the Ninth Circuit not only departed sharply from the logic in ACA Int’l but provided yet another interpretation of an ATDS under the TCPA. Specifically, the Ninth Circuit held that an ATDS included equipment that automatically dials phone numbers stored in a list, rather than just phone numbers that the equipment randomly or sequentially generates.

In light of both ACA and Marks, the FCC issued two sets of public comments with regard to defining an ATDS. The first public notice came in May 2018 and sought comment as to “what constitutes an [ATDS],” and whether the statutory prohibition applies “[i]f a caller does not use equipment as an automatic telephone dialing system.” Consumer and Governmental Affairs Bureau Seeks Comment on Interpretation of the Telephone Consumer Protection Act in Light of the D.C. Circuit’s ACA International Decision, Public Notice, DA 18-493 (“May FCC Notice”) at 1, 3 (rel. May 14, 2018). Then, in October 2018, the FCC issued a second public notice seeking supplemental comment on how it should interpret ATDS in light of Marks. See Consumer and Governmental Affairs Bureau Seeks Further Comment on Interpretation of the Telephone Consumer Protect Act in Light of the Ninth Circuit’s Marks v. Crunch San Diego, LLC Decision, Public Notice, DA 18-1014 (rel. Oct. 14, 2018).

Although the comment period has long since ended, the FCC has yet to issue any further guidance on what constitutes an ATDS under the TCPA.

The Struggle In Pine v. A Place for Mom

In Pine v. A Place For Mom, Inc., Case No. 2:17-01826 (W.D. Wash.), the plaintiff asserted individual and class claims under the TCPA against a company that provided senior housing referral services.  Specifically, the Plaintiff’s alleged that the defendant used an ATDS to place calls to individuals that requested information about their senior living needs.

The Defendant sought to stay the case pending the final rules from the FCC.  Despite the FCC’s pending guidance, the Court denied the stay. Citing extensively to the Ninth Circuit’s opinion in Marks, the Court concluded that “the question of what constitutes an ATDS is no longer one of first impression and does not involve technical or policy considerations that are particularly within the FCC’s expertise or discretion.”

Thereafter the parties reached a class settlement and sought preliminary approval from the Court. However, the same court that refused to grant the Defendant’s request for stay denied the unopposed motion to approve the class settlement that would have resolved the TCPA claims for $6 million. The Court explained that it could not accept a class definition that references an ATDS because that term is a “disputed term of art” and therefore lacks “clarity.”

Now, in the absence of guidance from the FCC, the parties in Pine find themselves in a puzzling situation: proceeding forth with litigation that neither party wants and a Court that seems unable to reconcile a preposterous outcome.

Takeaway

The Court’s approach in Pine v. A Place For Mom highlights the need for a stay of all cases where the definition of an ATDS is at issue until the FCC provides further guidance. Only then can courts across the country begin to apply a uniform approach to determining what devices are and are not subject to the restrictions of the TCPA. When and until the FCC acts, parties like the ones in the Pine case will be left not only sleepless but clueless in Seattle as to how to proceed.

Clark Hill’s Financial Services Regulatory and Compliance Practice Group can help you navigate this rapidly evolving regulatory environment by providing effective representation, technical guidance, policy advice, and strategic outreach to relevant stakeholders as well as governmental agencies who oversee the financial services industry. Our exceptional team of lawyers and government and regulatory advisors has extensive experience in - and an in-depth understanding of - the laws and regulations governing financial products and services. For more information please contact Joann Needleman (jneedleman@clarkhill.com) and Alex Green (agreen@clarkhill.com).