D.C. Circuit’s Rejection of FCC’s 2015 “Autodialer” Definition is Welcome News for Businesses in TCPA Class Actions

On March 16, 2018, the D.C. Circuit Court of Appeals issued a long awaited decision in its review of the Federal Communications Commission’s (FCC) 2015 Declaratory Ruling and Order, which among other things, had sought to clarify various aspects of the Telephone Consumer Protection Act’s (TCPA) general bar against using automated dialing devices (ATDS) to make uninvited calls or texts messages. The FCC’s 2015 Order was largely viewed by businesses as having greatly expanded the scope of the TCPA, opening the floodgates of class action litigation against businesses utilizing virtually any type of text messaging to communicate ads to customers.

In ACA International v. FCC, the D.C. Circuit, among other things, struck down the Commission’s broad definition of autodialer. The TCPA generally makes it unlawful to call a cell phone using an ATDS, i.e., “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.” Id. § 227(a)(1). The FCC’s 2015 Order declined to define a device’s “capacity” in a manner confined to its “present capacity,” but rather, construed a device’s “capacity” to encompass its “potential functionalities” with modifications such as software changes. Thus, under the Commission’s 2015 interpretation, calls or texts made with a device having the capacity to function as an autodialer can violate the statute even if autodialer features are not used to make the call, making virtually every smartphone an “autodialer.” The D.C. Circuit struck down this interpretation as arbitrary and capricious, explaining that it was “beyond the zone of delegated authority” and “utterly unreasonable in the breadth of regulatory inclusion.”

The Circuit Court also set aside the FCC’s 2015 ruling regarding which functions qualify a device as an autodialer. Under the statutory definition, a device constitutes an ATDS if it has the capacity to perform both of two enumerated functions: “to store or produce telephone numbers to be called, using a random or sequential number generator”; and “to dial such numbers.” 47 U.S.C. § 227(a)(1)(A)-(B). The role of the phrase “using a random or sequential number generator” has raised significant questions over the years, including whether a device must itself have the ability to generate random or sequential telephone numbers to be dialed, or is it enough if the device can call from a database of telephone numbers generated elsewhere. The Circuit Court found that the 2015 Order gave no clear answer and improperly suggested that both competing interpretations might be permissible.

In addition, the Court found that the FCC’s 2015 ruling was also unclear about whether certain other referenced capabilities are necessary for a dialer to qualify as an ATDS, for example, whether a “basic function” of an autodialer is the ability to “dial numbers without human intervention.” Although the Court seemed to agree that an autodialer envisioned dialing without human intervention, and that an autodialer envisioned generating random or sequential numbers rather than calling from a set list of numbers, the Court did not further define ATDS.

In the Court’s view, the FCC’s 2015 ruling left affected parties “in a significant fog of uncertainty about how to determine if a device is an ATDS so as to bring into play the restrictions on unconsented calls.”

The autodialer controversy will no doubt continue. Further clarification from the FCC should be expected soon. Litigants will also have to monitor lower court opinions further interpreting the D.C. Circuit’s decision.

Michael R. McDonald is a Director in the Gibbons Commercial & Criminal Litigation Department.