This post was written by Raymond Y. Kim and Jack J. Gindi.

On October 23, 2014, the U.S. District Court for the Southern District of California further clarified the federal Telephone Consumer Protection Act’s (“TCPA”) definition of “automatic telephone dialing system” (“ATDS”) and granted summary judgment for the defendant on the grounds that it did not use an ATDS to send promotional text messages. Marks v. Crunch San Diego, LLC, — F.Supp.3d –, 2014 WL 5422976 (S.D. Cal. October 23, 2014).

Here are the major takeaways from the case:

  • “Capacity” means current, not potential, capacity.
  • The FCC lacks the authority to define an ATDS as anything but “a random or sequential number generator.”
  • The defendant’s dialing equipment was not an ATDS because it “lacks a random or sequential number generator.”
  • Meyer v. Portfolio Recovery Assocs. LLC, 696 F.3d 943 (9th Cir. 2012), is not controlling because the Ninth Circuit Court of Appeals did not consider the issue of whether the FCC had authority to define an ATDS.
  • Any dialing equipment (including a predictive dialer) that does not have the capacity to generate random or sequential phone numbers is not an ATDS.

In Marks, Crunch, a gym operator, used a third-party, web-based platform to send promotional text messages to its members’ and prospective customers’ cellular telephones. The phone numbers were inputted into the platform by one of three methods: (1) when Crunch or another authorized person manually uploaded a phone number onto the platform; (2) when an individual responded to a Crunch marketing campaign via text message; and (3) when an individual manually inputted the phone number on a consent form through Crunch’s website that interfaced with the platform. Crunch selected the desired phone numbers, generated a message to be sent, and selected the date the message was to be sent, and then the platform sent the text messages to those phone numbers on that date. The plaintiff filed a class action alleging that Crunch violated the TCPA by sending promotional text messages using an ATDS without the recipients’ prior express consent. Crunch filed a summary judgment motion arguing that its dialing platform was not an ATDS because “it lacks the capacity to store or produce telephone numbers to be called using a random or sequential number generator.”

The TCPA defines an 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.” 47 U.S.C. § 227(a)(1). Based on the TCPA’s “clear and unambiguous” definition of an ATDS, the court held that Crunch’s equipment was not an ATDS because it “lacks a random or sequential number generator.” In so holding, the court rejected the FCC’s 2003 interpretation of an ATDS, finding that it “is not binding on the Court.”

In 2003, the FCC broadly interpreted the definition of ATDS to include “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 sequentially generated or come from calling lists.” In the Matter of Rules and Regulations Implementing the Tel. Consumer Prot. Act of 1991, 27 F.C.C.R. 15391, 15392 n. 5 (2012) (emphasis added). The court found that the FCC’s 2003 commentary “change[d]” and “modif[ied]” the TCPA’s definition of an ATDS, which the FCC did not have authority to do because 47 U.S.C. section 227(a) – unlike section 227(b) and section 227(c) – “does not include a provision giving the FCC rulemaking authority.”

Turning to the interpretation of “capacity,” the court applied the current capacity interpretation and found that Crunch’s equipment was not a “random or sequential number generator” because “[n]umbers only enter the system through one of the three methods listed above, and all three methods require human curation and intervention.” The court was clear that calling a list of stored phone numbers is not “random or sequential number generation”:

“Random or sequential number generator” cannot reasonably refer broadly to any list of numbers dialed in random or sequential order, as this would effectively nullify the entire clause. If the statute meant to only require that an ATDS include any list or database of numbers, it would simply define an ATDS as a system with “the capacity to store or produce numbers to be called”; “random or sequential number generator” would be rendered superfluous. . . It therefore naturally follows that “random or sequential number generator” refers to the genesis of the list of numbers, not to an interpretation that renders “number generator” synonymous with “order to be called.”

Going a step further, the court also found that the dialing platform did not have the “potential capacity” to become an ATDS because Crunch used a third-party text delivery service that controlled the technology, and its “access to the platform [wa]s limited.”

The court also addressed Meyer v. Portfolio Recovery Assocs. LLC, where the Ninth Circuit deferred to the FCC and found a predictive dialer to be an ATDS. 696 F.3d 943, 950 (9th Cir. 2012). The court concluded that Meyer was not controlling because there, the defendant had waived its right to challenge the FCC’s authority to define ATDS by failing to raise the argument at the district court level. Meyer, 707 F.3d at 1044. The court also distinguished Crunch’s platform from the “predictive dialer” at issue in Meyer. However, the court noted that, based on a current capacity interpretation of ATDS, a predictive dialer is not itself an ATDS because it is “neither the database storing the numbers nor a number generator creating an ephemeral queue of numbers.”

This opinion is particularly favorable for defendants because it holds that in order to be an ATDS, dialing equipment must have “a random or sequential number generator,” and that merely having the capacity to call a list of stored phone numbers without human intervention is not “random or sequential number generation.” Although this ruling is not binding, it adds to the body of law applying the current capacity interpretation, and further signals the judiciary’s desire to reasonably interpret and apply the TCPA according to its plain and unambiguous statutory language.