R EPRIN T FINANCIER WORLDWIDE
APRIL 2015
FINANCIER
WORLDWIDE corporatefinanceintelligence
LITIGATION & DISPUTE RESOLUTION
Crunching the numbers: Courts square
off over the Telephone Consumer
Protection Act
PERRIE M. WEINER, EDWARD D. TOTINO AND MONICA D. SCOTT
DLA PIPER
T
he Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227 et seq., was
enacted in 1991 and was intended to protect consumers from aggressive
telemarketers. The TCPA regulates, among other things, businesses calling
consumers on their wireless or cellular telephones using an “automatic
telephone dialing system” (ATDS). The TCPA defines ATDS 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”. Under
the TCPA, text messages are considered calls. When Congress enacted the
TCPA, it directed the Federal Communications Commission (FCC) to prescribe
regulations implementing the TCPA’s requirements, and, most recently courts
have disagreed on how much the FCC’s authority to clarify and comment on
the definition of an ATDS binds them.
For many years, courts have been following the FCC’s 2003 commentary
interpreting the definition of ATDS broadly as “any equipment that has the
specified capacity to generate numbers and dial them without human
intervention regardless of whether the numbers called are randomly or
Perrie M. Weiner and Edward D. Totino are partners,
and Monica D. Scott is an associate, at DLA Piper.
Mr Weiner can be contacted at +1 (310) 595 3024
or by email: [email protected]. Mr Totino
can be contacted on +1 (310) 595 3025 or by
email: [email protected]. Ms Scott can
be contacted on +1 (310) 595 3011 or by email:
[email protected].
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sequentially generated or come from
calling lists”. In re Rules and Regulations
Implementing the TCPA, 27 F.C.C.R.
15391, 15392 n. 5 (2012). Notably,
the FCC’s 2003 commentary putting
forth this broad definition of ATDS
addressed the argument that all
predictive dialers, which predict when
a call centre agent will be available to
handle a call and then automatically
dial the call from a list of telephone
numbers, as a general matter did not
fall within statutory definition of ATDS
because they did not dial random or
sequential numbers. It rejected this
argument, stating that it would “lead
to an unintended result”. In re Rules and
Regulations Implementing the TCPA,
18 F.C.C.R. 14014, 14092 (2003). The
FCC did not want predictive dialers,
typically used by telemarketers, which
“can dial thousands of numbers in a
short period of time”, to have a blanket
exemption from the TCPA. See id.
Recently, in Marks vs. Crunch San
Diego, LLC, ---F. Supp. 3d ---, 2014
WL 5422976 (S.D. Cal. Oct. 23, 2014),
a federal district court held that it
did not have to consider the FCC’s
interpretation of ATDS, followed by
so many other courts, when granting
the defendant’s motion for summary
judgment because the FCC “has no
authority to modify or definitively
interpret any language in § 227(a) of
the TCPA”.
In Crunch, the plaintiff, a Crunch gym
member, alleged that he received
three unwanted promotional text
messages from Crunch on his cellular
phone in violation of the TCPA. Crunch
sent those text messages using a thirdparty web-based platform whereby
phone numbers were inputted into
the platform by one of three methods:
(i) when Crunch manually uploaded a
phone number onto the platform; (ii)
when an individual responded to a
Crunch marketing campaign via text
message; and (iii) when an individual
manually inputted the phone number
on a consent form through Crunch’s
website. Crunch would select the
desired phone numbers, generate a
message to be sent, select the date
the message would be sent, and then
the platform would send out the
text message to the specified phone
number on that date. The system had
the capability to store phone numbers
in the event Crunch wanted to send
out additional text messages to the
same numbers. Crunch moved for
summary judgment based on the fact
that its platform did not constitute
an ATDS under § 227(a) of the TCPA
because it “lacks the capacity to store
or produce telephone numbers to be
called using a random or sequential
number generator”.
The district court agreed. The
Crunch court held that “the platform
used by [Crunch] does 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. Numbers can
only enter the system through one
of the three methods listed above,
and all three methods require human
curation and intervention. None could
reasonably be termed a ‘random or
sequential number generator.’” The
Crunch court’s holding flows directly
from its literal interpretation of the
statutory definition of ATDS in the
TCPA. The Crunch court ruled that it did
not have to consider the FCC’s broader
interpretation of ATDS because the
Ninth Circuit in Satterfield vs. Simon
& Schuster, Inc., 569 F.3d 946, 951 (9th
Cir. 2009) already determined that
the definition of ATDS found in the
TCPA was “clear and unambiguous”
and that FCC therefore “does not have
the statutory authority to change the
TCPA’s definition of an ATDS”.
By contrast, the federal district
court in Johnson vs. Yahoo!, Inc.,
2014 WL 7005102 (N.D. Ill. Dec. 11,
2014) held that it was bound by the
FCC’s broad interpretation of ATDS
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when it denied Yahoo!’s request for
summary judgment on text messages
sent by similar technology as in
Crunch. Acknowledging that there
was a conflict between the FCC’s
interpretation of ATDS and the plain
language of the statute, the Yahoo!
court held that it was nevertheless
bound by the FCC’s interpretation
because of a statute called the Hobbs
Act, which provides that federal
appellate courts (as opposed to district
courts) have exclusive jurisdiction to
review and determine the validity
of FCC orders. As a district court, the
Yahoo! court decided that it could
not disregard the FCC’s definition of
ATDS without running afoul of the
Hobbs Act. Notably, the Yahoo! court
considered the implications of the
Hobbs Act, while neither the Crunch
court nor Satterfield mentioned it.
Ultimately, the Yahoo! court did not go
as far to find that Yahoo!’s technology
definitively constituted an ATDS under
the FCC’s definition, but instead only
determined that there was sufficient
evidence to raise triable issues of fact
precluding summary judgment for
Yahoo!.
It remains to be seen if moving
forward courts will, like Crunch, find
ways to either discount or disregard the
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FCC’s commentary on the TCPA when
it conflicts with the plain language of
the statute or, like Yahoo! stay faithful
to the FCC’s broad definition of ATDS.
See, e.g., Glauser vs. GroupMe, Inc., 2015
WL 475111 (N.D. Cal. 2015) (holding
that the FCC’s broad interpretation
of ATDS is binding but nevertheless
granting summary judgment in favour
of the defendant in a text messaging
case because the technology used to
send the text messages could not be
used without “human intervention”.)
One way to potentially reconcile
Crunch with the FCC’s definition
of ATDS is that the FCC’s definition
deals with predictive dialers and not
text messaging platforms, which are
a completely different technology
because there is no function predicting
agent availability. A way to view
Crunch as not running afoul of the
Hobbs Act is to narrowly interpret what
is a final order of the FCC to exclude
the related commentary, or to find that
contesting an FCC interpretation in a
civil action between private parties
is not an attempt to “enjoin, set aside
or suspend” that order as prohibited by
the Hobbs Act, unless the FCC is a party
to the action. See 28 U.S.C. § 2342.
The rapid advent of technology in
this area has caused much confusion
for businesses as to what specific
conduct is covered by the TCPA
and, in recent years has caused a
prolific rise in TCPA lawsuits, which
are up 560 percent between 2010
and 2014. In Re: Rules and Regulations
Implementing the TCPA, Dkt. No. 02278 (Feb. 2, 2015.) While originally
enacted as a well-meaning statute to
protect consumers from random or
sequentially-dialed calls, enterprising
plaintiffs’ attorneys have, at least
according to some business groups,
abused the law to rake in attorney fees
as TCPA cases are typically filed as class
actions seeking a minimum of $500
in statutory damages per violation.
Id. One can hypothesise that the
Crunch court’s decision to rely strictly
on TCPA’s definition of ATDS was an
effort to stem the tide on the tsunami
of TCPA litigation currently clogging
the courts, id., and that other courts
will likely seek to avoid unreasonable
FCC commentary on TCPA issues. In
any event, privacy lawyers on both
sides will most certainly be following
this issue closely, and it remains to be
seen if the FCC will provide further
guidance and clarification on the
definition of ATDS that encompasses
the text messaging technology at
issue in Crunch and Yahoo!
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