Autodialers: Ninth Circuit (Again) Opens Class Action Floodgates

Businesses who market by text or telemarketing beware.  On September 20, 2018, the Ninth Circuit adopted the most radical and expansive definition of what constitute autodialers for purposes of liability in the Telephone Consumer Protection Act (“TCPA”).  This startling interpretation of the TCPA, which could make even smartphones autodialers, is a potent reminder that, in the eyes of some courts, statutes don’t always mean what the say.

AUTODIALERS:  AN INITIAL WIN

In Marks v. Crunch San Diego, LLC, the U.S. Court of Appeals for the Ninth Circuit was asked to review a federal District Court court decision granting summary judgment in favor of a gym operator, Crunch, which sent promotional text messages to customers’ and prospective customers’ cell phones.  In all instances, Crunch input telephone numbers into its dialing database manually via its employees or as a result of consumer initiated action (by responding to a text message or inputting the number on a consent form).  None of the numbers called were randomly or sequentially generated.

Under the TCPA, an autodialer is expressly defined as a system that “has the capacity (A) to store or produce numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” TCPA, § 227(a)(1).  Because Crunch’s system did not have the “present capacity to store or produce numbers to be called, using a random or sequential number generator, and to dial those numbers,” the District Court found that the definition of autodialers had not be satisfied.  It rejected the plaintiff’s argument that the mere future “potential capacity” to engage in such activity was enough to meet the statutory requirements for an ATDS, further finding that even if this “potential capacity” test applied, it was not satisfied given the anti-spam functionality incorporated into Crunch’s message-sending platform.

The plaintiff, it would seem, had little place to go on appeal as a result of this sensible decision, but he appealed nonetheless.

THE  NINTH CIRCUIT DECISION

Claiming to engage purely in statutory analysis, the Ninth Circuit reversed the decision of the District Court.  The case raised two questions, the Ninth Circuit wrote.  First, when does a device have the “capacity” to “(A) store and produce telephone numbers to be called, using a random or sequential number generator”; and “(B) to dial such numbers.” Second, “what precisely are those functions?”

Finding the statute “ambiguous on its face,” the Ninth Circuit engaged in an unbridled examination of the “context and structure of the statutory scheme” — based on which it found that the definition of auto-dialers “is not limited to devices with the capacity to call numbers produced by a ‘random or sequential number generator,’ but also includes even devices with nothing more than the capacity to dial stored numbers automatically.”

In other words, the Ninth Circuit read entirely out of the statute the seemingly clear language that stored numbers must be randomly or sequentially generated by the device.  It did so based on the location of a comma, which it argued resulted in an ambiguity.  How?  Because, according to the Ninth Circuit, random or sequential number generators can “produce” numbers, but (it surmised) not “store” them.  It offered no support for this supposition, other than its own tortured linguistic analysis coupled with a deep dive into congressional intent.

Thus, under the Ninth Circuit’s view, any system that has the capacity “to store numbers to be called” and “to dial such numbers automatically (even if the system must be turned on and triggered by a person)” qualifies as an autodialer.

The Ninth Circuit summarily dismissed in a footnote the Third Circuit’s directly contrary decision in Dominguez ex rel. Himself v. Yahoo, Inc., 894 F.3d 116, 120 (3d Cir. 2018), as based on an “unreasoned assumption.”  It’s basis?  The Third Circuit decision ignored the alleged “linguistic problem” with the statute (caused by a comma) because it required “random or sequential number generators” not only to produce numbers, but to “store” them.  We now have a tie between two U.S. courts of appeal.

AUTODIALERS:  WHAT’S NEXT?

Crunch has indicated that it intends to seek en banc review of its decision by a larger panel of the Ninth Circuit, but such requests are rarely granted.  Because there is now a diametric split in the federal courts of appeal, the odds of Supreme Court review are enhanced, although the odds of review by the nation’s highest court are always low. For now, if you are using a system that calls stored numbers (or texts to them), even without such numbers being generated randomly or sequentially, you could find yourself on the receiving end of a class action based on the Ninth Circuit’s expansive construction of the definition of autodialers.  Be forewarned, and consult your attorneys.