Is a Predictive Dialer an ATDS?

Now that the D.C. Circuit, in ACA Int’l v. FCC, set aside the portion of the FCC’s 2015 TCPA Order pertaining to the definition of an automatic telephone dialing system (ATDS), callers want an answer to a seemingly simple question: Is a predictive dialer an ATDS? The issue is more complex than it seems but for the first time in almost 15 years, there is reason to believe that a predictive dialer is not necessarily an ATDS. The ACA opinion, its underlying rationale and the first relevant post-ACA opinion (Marshall v. CBE Group, Inc.) provide strong support for this argument. Even so, risk averse callers may want to take a “wait and see” approach.

To fully understand the impact of ACA, we must first consider the statutory definition and the series of FCC and court interpretations that preceded the D.C. Circuit’s opinion.

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.”

Callers have long cited the statutory definition to argue that a predictive dialer is an ATDS only if it has the ability to randomly or sequentially generate telephone numbers and dial such numbers without human intervention. The FCC rejected this interpretation in a 2003 Order, finding that a predictive dialer qualifies as an ATDS because: (1) the definition contemplates equipment that has the capacity to store or produce numbers; (2) Congress gave the FCC the authority to consider changes in technology; and (3) the basic function of an ATDS is “the capacity to dial numbers without human intervention.” The Order relied heavily on public policy arguments—including concerns that modern phone systems no longer rely on random or sequential number generators and the fact that autodialers can dial thousands of numbers in a short period of time—but was light on reasoned analysis. For example, the FCC provided little rationale for reading the “random or sequential number generator” language out of the definition.

The FCC reaffirmed its predictive dialer ruling in a 2008 Declaratory Ruling and again in the 2015 Order. The 2015 Order expanded the definition of ATDS even further by holding that a device’s “capacity” is not limited to the functions it is capable of performing at the time a call is made. Instead, a device’s capacity includes its “potential functionalities” after factoring in possible modifications such as software changes.

FCC rulings are particularly significant because federal district courts must defer to them pursuant to the Administrative Orders Review Act (generally referred to as the “Hobbs Act”). The only way to challenge an FCC ruling is to file a petition for review directly with a circuit court within the time frame allowed by federal law. Several organizations did so in response to the 2015 Order, challenging the FCC’s virtually limitless interpretation of capacity and its description of the precise functions a device must be capable of performing to qualify as an ATDS.

In ACA, the D.C. Circuit concluded that the FCC’s interpretation of capacity swept too broadly because a smartphone would qualify as an ATDS. It also set aside the FCC’s guidance related to the functions a device must be capable of performing, finding that the FCC failed to provide clarity or satisfy the requirement of reasoned decision-making. For example, the court determined that the 2003 and 2008 rulings (“Predictive Dialer Rulings”), which were incorporated into the 2015 Order by reference, left “significant uncertainty about the precise functions an [ATDS] must have the capacity to perform.” Additionally, the court noted that the FCC adopted multiple, conflicting views on the issue. Under one view, a device must have the ability to generate random or sequential numbers to be dialed. Under the other, a device may be an ATDS even if it lacks such ability. The FCC’s commentary on human intervention faired no better. The court criticized the FCC for ruling that the basic function of an ATDS is to dial numbers without human intervention while simultaneously denying a petition asking the FCC to clarify that a device must be capable of, among other things, dialing without human intervention to be an ATDS. Similarly, it criticized the FCC for a lack of clarity surrounding its pronouncement that another “basic function” of an ATDS is to “dial thousands of numbers in a short period of time.”

ACA clearly set aside the portion of the 2015 Order “clarifying” the definition of ATDS. The more difficult issue is determining its impact on the Predictive Dialer Rulings. Plaintiffs will argue that the D.C. Circuit could not (and did not) overturn those rulings because they were not challenged within the applicable time period. Defendants can, however, attack this interpretation. For example, the court expressly rejected the argument that petitioners’ failure to appeal the Predictive Dialer Rulings deprived it of jurisdiction to entertain their challenge concerning the functions a device must be able to perform. According to the court, the Predictive Dialer Rulings left significant uncertainty regarding this particular issue. The FCC’s failure to resolve the uncertainty in the 2015 Order played a significant role in the court’s decision to set aside the FCC’s treatment of ATDSs. Moreover, the 2015 Order expressly reaffirmed the Predictive Dialer Rulings and their underlying rationales. When viewed most favorably to defendants, ACA expressly invalidates the Predictive Dialer Rulings because they were incorporated into 2015 Order by reference. Without binding guidance from the FCC, courts must determine whether a predictive dialer meets the statutory definition. Indeed, the District of Nevada adopted this view in Marshall. Even if a court determines that the D.C. Circuit did not expressly invalidate the Predictive Dialer Rulings, defendants can argue that the primary rationale for invalidating the 2015 Order—a lack of clarity concerning the functions a device must be able to perform—similarly dooms the older rulings. This may be enough to overcome a plaintiff’s argument that the Predictive Dialer Rulings are binding on courts pursuant to the Hobbs Act.

The above analysis notwithstanding, callers should consider a “wait and see” approach before using a predictive dialer to call cell phones without valid consent. While the statement of law outlined in Marshall is promising, its application may be limited. The defendant in that case used a “click-to-dial” system to make calls; therefore, the court was able to conclude that the system is not an ATDS even if ACA did not invalidate the Predictive Dialer Rulings. Furthermore, it’s unclear whether other courts will take a similarly broad interpretation of ACA and/or hold that predictive dialers—or certain types predictive dialers—meet the statutory definition of ATDS. A single unfavorable ruling in the context of a class action lawsuit can result in millions (or even billions) of dollars in liability. A more pragmatic approach is to wait for a consensus to develop among the courts and/or the FCC to adopt a new interpretation of ATDS. Remember, Chairman Pai and Commissioner O’Rielly issued strongly worded dissents in connection with the 2015 Order. Their new colleague, Commissioner Carr, publicly applauded the result in ACA. Collectively, these commissioners make up the majority of the FCC. As a result, a new interpretation from the FCC is likely to be favorable for legitimate businesses. In such case, the Hobbs Act will work in businesses’ favor for a change!