District Court (Cal.) Says FCC Exceeded its Jurisdiction in Defining ATDS under TCPA; Grants MSJ to Defendant on the Basis that its Dialer Was Not an ATDS

In Marks v. Crunch San Diego, LLC, — F.Supp.3d —-, 2014 WL 5422976 (S.D.Cal. 2014), Judge Bashant found that defendants’ text message system was not an ATDS within the meaning of the TCPA.

Defendant Crunch San Diego, LLC (“Crunch”) operates gyms in San Diego, California, as well as in several other states. Compl. ¶ 3, ECF 1. Plaintiff Jordan Marks entered into a contractual relationship with Crunch sometime before November 20, 2012. Id. Crunch uses a third-party web-based platform administrated by Textmunication to send promotional text messages to its members’ and prospective customers’ cell phones. Def.’s Mot. Summ. J. 2:12–14, ECF 8. The phone numbers are inputted into the platform by one of three methods: (1) when Crunch or another authorized person manually uploads a phone number onto the platform; (2) when an individual responds to a Crunch marketing campaign via text message (a “call to action”); and (3) when an individual manually inputs the phone number on a consent form through Crunch’s website that interfaces with Textmunication’s platform. Aesefi Decl. ¶¶ 3–7, ECF 8–3. Users of the platform, including Crunch, select the desired phone numbers, generate a message to be sent, select the date the message will be sent, and then the platform sends the text messages to those phone numbers on that date. Mot. Summ. J. 2:22–25. The system then stores these numbers in case the user wants to notify the prospective customer or member of a later offer. Aesefi Dep. 34:22–25, June 26, 2014, ECF 24–3. On the specified date the platform sends the message to a Short Messaging Service (“SMS”) gateway aggregator that then transmits the message directly to the cell phone carrier.FN1 Ex. 4, Pl.’s Opp’n. ¶ 3, ECF 24–6. Marks alleges he received three unwanted text messages from Crunch between November 20, 2012, and October 18, 2013. Pl.’s Opp’n. 3:22–23, ECF 24. This Motion for Summary Judgment turns upon the issue of whether or not the platform used by Crunch may be classified as an Automated Telephone Dialing System (“ATDS”).

The District Court found that the FCC exceeded its authority in how it defined an “ATDS” and found, therefore, that the Defendants’ system was not an ATDS within the meaning of the TCPA.

The Federal Communications Commission (“FCC”) does not have the statutory authority to change the TCPA’s definition of an ATDS. The statute defines an ATDS in § 227(a)(1). Section 227(a), in contrast to § 227(b) and (c), does not include a provision giving the FCC rulemaking authority. Compare id. with §§ 227(b)(2) and (c)(2). Furthermore, § 227(b) and (c) expressly limit the aforementioned rulemaking authority to only those subsections.FN4 It is therefore undeniable that any FCC attempt to modify the statutory language of § 227(a) is impermissible. The FCC itself adheres to this, using the statutory definition of ATDS in their regulations. See, e.g., 47 C.F.R. § 64.1200(f)(2).   Even so, the FCC has issued 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 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 in original). However, this interpretation does not bind the courts. In Satterfield v. Simon & Schuster, Inc., the Ninth Circuit found the definition of an “ATDS” “clear and unambiguous.” 569 F.3d 946, 951 (9th Cir.2009). Because it is “clear and unambiguous,” the FCC’s 2003 statutory interpretation of an ATDS is not binding on the Court. Id.; See Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837(1984). Further, the FCC’s definition is not predicated on the plain language of the statute, but is instead based on policy considerations.FN5 [FN5. Even if the interpretation was binding or convincing, the FCC’s interpretation dealt with predictive dialers and not third-party text messaging platforms like the one at issue here. See In the Matter of Rules and Regulations Implementing the Tel. Consumer Prot. Act of 1991, 18 F.C.C.R. 14014, 14092 (2003). The portions of the FCC’s decisions in 2008 and 2012 that Plaintiff cites to both refer back to the 2003 FCC sections regarding predictive dialers. E.g., In the Matter of Rules and Regulations Implementing the Tel. Consumer Prot. Act of 1991 23 F.C.C.R. 559, 566 (2008); 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).]  Courts have defined “capacity” in the context of an ATDS as “the system’s present, not potential, capacity to store, produce, or call randomly or sequentially generated telephone numbers.” Gragg v. Orange Cab Co., 995 F.Supp.2d 1189, 1193 (W.D.Wash.2014) (emphasis in original). The Gragg court expressed concerns that focusing on potential capacity would encompass many modern devices and potentially subject all smartphone and computer users to the TCPA, which would be an “absurd result.” Id. Because these modern-day devices are easily programmable, anyone who uses a computer or smartphone would be subject to the TCPA. Id.FN6 It seems unlikely that Congress intended to subject such a wide swath of the population to a law designed to combat unwanted and excessive telemarketing. Additionally, Gragg clarified that “sequentially generated telephone numbers” are those that are numerically sequential, such as (111) 111–1111, (111) 111–1112, and so forth. Id.  [FN6. It is even more concerning that under the FCC’s interpretation, any phone featuring a built-in phonebook could have the present capacity to qualify as an ATDS. Any device permitting a person to initiate an SMS or voice call from a database without actually dialing the number itself arguably has the “capacity to store or produce numbers and dial those numbers [ … ] from a database of numbers.” 18 F.C.C.R. 14014, 14091 (2003).]    “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. This phrase’s inclusion requires it to have some limiting effect. When a court construes a statute it should, if possible, do so as to prevent any clause, sentence, or word, from being superfluous or insignificant. Alaska Dep’t of Envtl. Conservation v. Envtl. Prot. Agency, 540 U.S. 461, 468 n. 13 (2008); Cooper Indus., Inc ., v. Aviall Services Inc., 543 U.S. 157, 166 (2004) (courts are “loathe” to render part of a statute 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.”   The platform used by Defendant 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 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 .” Mot. Summ. J. 2:25–26. Thus, because the Textmunication platform lacks a random or sequential number generator, it is not currently an ATDS.   Undisputed facts show that the system also fails to have the potential capacity to become an ATDS. In Sherman v. Yahoo! Inc., the court found a similar SMS system to be an ATDS because Yahoo! could potentially write new software code adding a sequential or number generator to the system. 997 F.Supp.2d 1129, 1136 (S.D.Cal.2014). In contrast, here Defendant uses a third-party platform that audits its user’s accounts pursuant to an “Anti–Spam Policy.” Aesefi Dep. 60:7–21. Textmunication explicitly bans inputting numbers into its system without either a response to a call to action or “written consent.” Aesefi Dep. 31:16–5. Therefore the undisputed material facts show that even if potential or future capacity is fairly included in the definition of ATDS, Defendant’s contractual obligations preclude such a finding in this case. Because Defendant’s access to the platform is limited, it similarly lacks the future or potential capacity to become an ATDS.   The Ninth Circuit, in Meyer v. Portfolio Recovery Assocs. LLC., deferred to the FCC and found a predictive dialer to be an ATDS because it has “ ‘the capacity to dial numbers without human intervention.’ “ 696 F.3d 943, 950 (9th Cir.2012) (quoting 18 F.C.C.R. 14014, 14092 (2003)) (emphasis in original). The court noted that a predictive dialer “ ‘is equipment that dials numbers and, when certain computer software is attached, also assists telemarketers in predicting when a sales agent will be available to take calls. The hardware, when paired with certain software, has the capacity to store or produce numbers and dial those numbers at random, in sequential order, or from a database of numbers.’ “ FN7 Meyer, 696 F.3d 943 at 950 (quoting 18 F.C.C.R. 14014, 14091 (2003)).   [FN7. The 2003 FCC Report & Order describes predictive dialers. In most cases, telemarketers program the numbers to be called into the equipment, and the dialer calls them at a rate to ensure that when a consumer answers the phone, a sales person is available to take the call. The principal feature of predictive dialing software is a timing function, not number storage or generation. These machines are not conceptually different from dialing machines without the predictive computer program attached. 18 F.C.C.R. 14014, 14092 (2003).]  In Meyer, challenges to the FCC’s authority to interpret the statute were waived because they were not raised at the district court level. Meyer, 707 F.3d at 1044. Here, the Court is able to address the argument and has addressed its merits. The Court finds that the FCC has no authority to modify or definitively interpret any language in § 227(a) of the TCPA.  Even though this Court finds the FCC’s unauthorized interpretation of an ATDS overly broad, the system present here is factually distinct from the system described in the FCC comment.FN8 Predictive dialers use an algorithm to “predict” when a telemarketer will become available to take a call, effectively queueing callers for the telemarketer. They are neither the database storing the numbers nor a number generator creating an ephemeral queue of numbers. However, database or number generator software is frequently attached to automatic dialers, thereby creating the “potential capacity” to become an ATDS. Here, there is no potential that the system could be modified to include a random or sequential number generator, and it therefore does not qualify under Meyer.