United States: Pushback From Third Circuit Court Of Appeals On Expanding Definition Of "Autodialer," Exposing Businesses To TCPA Liability

On October 23, 2015, the Court of Appeals for the Third Circuit offered some pushback against autodialer regulations under the Telephone Consumer Protection Act (“TCPA”). See Dominguez v. Yahoo, Inc., 2015 U.S. App. LEXIS 18460 (3d Cir. Pa. Oct. 23, 2015), available here. Although non-precedential, the recent decision demonstrates that courts may look to limit the scope of the FCC’s authority to regulate certain technologies under the TCPA in light of the FCC’s recent declaratory ruling.

The TCPA was first enacted in 1991 with the primary purpose of prohibiting unwanted telemarketing calls. As technology changed over the years, a patchwork of regulation developed, expanding the reach of the original statute to cover technology like cellular phones and text messages. On July 10, 2015, the FCC issued a declaratory ruling which expanded the definition of an autodialer under the TCPA (equipment with the capacity to store, generate, and call random or sequential numbers). See FCC Order 15-72, available here. The FCC’s guidance, however, left several questions about the scope of the TCPA’s regulations. In particular, the FCC’s ruling expanded the definition of an autodialer without providing guidance as to what types of technologies constitute autodialing—a central issue in Dominguez.

In Dominguez, the plaintiff alleged that he purchased a cell phone with a reassigned phone number in December 2011. Shortly thereafter, he began receiving unwanted text messages from Yahoo. The reassigned number’s previous owner had subscribed to Yahoo’s email SMS service, where Yahoo sends a user a text for every email received; unfortunately, the number’s previous owner failed to unsubscribe to this service when the number was reassigned, resulting in the plaintiff receiving a text message each time the number’s old owner received an email. The plaintiff alleged that over 17 months, he received a total of 27,809 texts, amounting to $13,904,500 in potential fines under the TCPA. 

The district court found in favor of Yahoo on summary judgment, holding that Yahoo did not make autodialed calls under the TCPA. See Dominguez v. Yahoo, Inc., 8 F. Supp. 3d 637 (E.D. Pa. 2014), available here. In doing so, the district court determined that Yahoo’s texting service did not meet the definition of an autodialer because the system did not generate random or sequential numbers. Id. at 643-4. The district court held that the TCPA required an autodialer to have the capacity to dial a random or sequential number, and that the TCPA’s definition of an autodialer did not include the mere dialing of numbers in a sequential manner.  Id. Because Yahoo did not generating random or sequential numbers and only dialed numbers sequentially with its technology, Yahoo’s texts did not fall under the TCPA. Id. 

The Third Circuit upheld the district court’s ruling that Yahoo’s technology did not constitute an autodialer. The Court acknowledged that “although hardly a model of clarity,” the recent FCC ruling and previous rulings required autodialers to store and produce numbers that are themselves randomly or sequentially generated. See Dominguez, 2015 U.S. App. LEXIS 18460, at *6-7. Even the latest FCC order expanding the definition of an autodialer did not fundamentally change the statutory definition that an autodialer must store and produce random or sequential numbers. 

However, the Court nonetheless held that the underlying record did not support summary judgment in favor of Yahoo. Yahoo only attached one employee affidavit in support of its position that Yahoo’s email SMS service lacked the capacity to store and produce numbers which were randomly or sequentially generated. Id. at *8. The Court noted that the affidavit did not specify why Yahoo’s technology lacked the “capacity” to generate and dial such numbers, and so therefore summary judgment should have been denied. Id. at 8-9. 

This decision offers some encouragement for businesses who fear the latest FCC ruling and that courts may read the latest FCC order expansively as to what constitutes an autodialer. The ultimate end result of the Court’s decision also highlights the importance of providing adequate support as to how a business’s technology operates outside of the definition of an autodialer, and thus the TCPA’s scope. Dykema will continue to monitor judicial decisions related to the TCPA in light of the recent FCC ruling.

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