November 4, 2015Client Alert

The Third Circuit Follows FCC’s Suit and Expands Definition of “Autodialer"

On October 23, 2015, the Third Circuit of Appeals vacated a summary judgment decision in Yahoo, Inc.’s favor based on the Federal Communications Commission’s (FCC) July 10 Order that expanded the definition of an “autodialer” under the Telephone Consumer Protection Act (TCPA). Dominguez v. Yahoo, Inc., No. 14-1751, slip op. at 9 (3d Cir. Oct. 23, 2015).

In Dominguez, the plaintiff filed a putative TCPA class action after receiving 27,809 text messages from Yahoo on his cell phone. The TCPA prevents people from making “any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system [‘autodialer’] ... to any telephone number assigned to a ... cellular telephone service,” 47 U.S.C. § 227(b)(1)(A)(iii). Under the TCPA, “autodialer” is defined 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 added).

On July 10, 2015, in a declaratory ruling and order (FCC Order), the FCC expanded the definition of “capacity.” Under the FCC Order, “capacity” is not limited to the “present ability” of equipment, but also includes its “potential functionalities.”

Prior to the FCC Order, the district court granted Yahoo summary judgment finding that Yahoo’s system did not use an automatic telephone dialing system (ATDS) as defined by the TCPA. Yahoo successfully argued that the TCPA required an “autodialer” to actually have a “random or sequential number generator,” which its text-messaging system did not have.

The Third Circuit of Appeals, however, vacated the summary judgment decision and remanded the case to the district court based on the FCC Order. First, the Third Circuit found that Yahoo’s evidence, an affidavit from its expert stating that Yahoo’s text-messaging system did not qualify as an “autodialer,” was “a legal conclusion couched as a factual assertion.” Second, the Third Circuit noted the “capacity” issue is one of “heightened importance” after the FCC Order and that “remand is appropriate to allow the [District Court] to address more fully ... whether Yahoo’s equipment meets the statutory definition [of “autodialer”].”

The Third Circuit’s ruling indicates how courts are paying special attention to the term “capacity” since the FCC Order. Dominguez proves that there is still great uncertainty in how courts will interpret the expanded ATDS definition. As such, if you are involved in TCPA litigation, you may want to consider filing a stay in any pending action before the district court. See Gensel v. Performant Technologies, Inc., No. 13-C-1196 (E.D. Wis. Oct. 20, 2015). Some courts have stayed litigation involving issues of equipment “capacity” pending review of FCC authority. However, prior to litigation, you should review your company’s TCPA compliance policy, dialing systems (and your contractor’s) and call recording policies with in-house or outside counsel.   

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