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Third Circuit Addresses Definition of Autodialer under the TCPA

January 14, 2016 by Martha Kohlstrand, Associate
In a recent ruling, the Third Circuit Court of Appeals addressed the question of what is meant by an Automated Telephone Dialing System (“ATDS”) under the TCPA. While the opinion, Dominguez et al. v. Yahoo, Inc., is not precedential, it offers valuable insight on how courts might interpret the term “ATDS” for businesses that use dialers to reach their customers.

In 2011, Bill Dominguez purchased a new cellular phone, which came with a telephone number that had been reassigned from another user’s account. The former user, Jose Gonzalez, had subscribed to Yahoo’s text message alert service, which sent a text message every time there was a new email in the user’s email account. Dominguez began receiving unsolicited text messages from Yahoo each time a new message appeared in Gonzalez’s inbox. Although Dominguez contacted Yahoo, the FCC, and the FTC to try to stop the messages, the texts continued, eventually numbering 27,809 messages over seventeen months. Dominguez then filed suit against Yahoo for violations of the TCPA – with individual statutory damages totaling close to $41 million – and also sought to certify a class. 

Yahoo moved for summary judgment, arguing it had not used an ATDS, defined in the TCPA as “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.” 47 U.S.C. § 227(a)(1) (emphasis supplied). The plaintiff’s interpretation of the statute focused merely on the way in which calls were “dial[ed]” (either randomly or sequentially from a stored list), rather than how the numbers were “store[d] or produce[d].” The District Court agreed with Yahoo that an ATDS needed to have capacity both to store or produce numbers randomly or sequentially, and to dial numbers randomly or sequentially from a stored list. Therefore, the court ruled, the text message alert system used by Yahoo was not an ATDS. Dominguez appealed.

The Third Circuit vacated the District Court’s entry of summary judgment and remanded the case to the District Court to “address more fully in the first instance whether Yahoo’s equipment meets the statutory definition [of an ATDS].” In doing so the Third Circuit limited the definition of an ATDS, holding that such equipment must have the capacity to “store or produce” numbers either randomly or sequentially, not merely the capacity to “dial” numbers from a stored list either randomly or sequentially. 

However, the Court did not address whether the term “capacity” refers to the equipment’s present or future potential capacity. Instead, it instructed the District Court to consider that issue “in the first instance.” This is a critical question, with implications for both plaintiffs and defendants, as the issue concerns whether “capacity” encompasses what the equipment could potentially be capable of doing if it were reconfigured at some point in the future through software updates, new or improved software, or other means; or whether the term merely refers to what the equipment is capable of doing in its present configuration. Look to future decisions to further clarify what is meant by an ATDS, and what is meant by the term “capacity.”

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