3d Cir. Revives TCPA Class Action Against Yahoo! on Whether Its Texts Were Sent by an ATDS after the 2015 FCC Ruling

In Dominguez v. Yahoo, Inc., 2015 WL 6405811, at *2-3 (C.A.3 (Pa.),2015), the Court of Appeals for the Third Circuit revived a TCPA class action against lawsuit, where Yahoo! had prevailed in the lower court on the basis that it did not have an ATDS.

The only issue on appeal is whether a reasonable trier of fact could find Yahoo’s system qualifies as an “automatic telephone dialing system” (the term “ATDS” or “autodialer” for short). We start with the statute itself. The TCPA defines an “autodialer” 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). The statute’s reference to a “random or sequential number generator” reflects that, when the statute was enacted in 1992, telemarketers typically used autodialing equipment that either called numbers in large sequential blocks or dialed random 10–digit strings. Thus, the FCC initially interpreted the statute as specifically targeting equipment that placed a high volume of calls by randomly or sequentially generating the numbers to be dialed.  That interpretation changed as telemarketers’ dialing technology evolved. Around the turn of this century, the FCC took note that “the evolution of the teleservices industry ha[d] progressed to the point where … [it was] far more cost effective” to dial from stored databases of numbers rather than generate them randomly or sequentially. 2003 FCC Ruling, 18 FCC Rcd. at 14,093. In light of these advancements, the FCC sought comment on whether to update its interpretation. In re Rules & Regulations Implementing the Telephone Consumer Protection Act of 1991, 17 FCC Rcd. 17,459, 17,474 (2002). The reaction was mixed. While some commenters argued that the statutory text plainly defined an autodialer by its capacity to generate random or sequential numbers, others contended that limiting the statute to antiquated technology would gut the statute and eviscerate its protections.  In a series of declaratory rulings—the most recent being the one referred to above in July 2015, see 2015 FCC Ruling, 2015 WL 4387780, at *5–*6—the FCC appeared to take a middle-of-the road view. Although hardly a model of clarity, its orders (as we interpret them) hold that an autodialer must be able to store or produce numbers that themselves are randomly or sequentially generated “even if [the autodialer is] not presently used for that purpose.” Id. at *5. But importantly, in the most recent ruling the FCC also clarified that neither “present ability” nor the use of a single piece of equipment is required. Thus, so long as the equipment is part of a “system” that has the latent “capacity” to place autodialed calls, the statutory definition is satisfied.   Turning to our case, we apply the normal burden-shifting framework applicable at the summary-judgment stage of litigation. . . . Although we agree with the District Court’s definition of “random or sequential” number generation (i.e., the phrase refers to the numbers themselves rather than the manner in which they are dialed)¹ and its holding that the statutory definition does in fact include such a requirement,² we disagree that the record supports the entry of summary judgment in Yahoo’s favor. The only evidence Yahoo can point to that is probative of whether its equipment has the requisite capacity is the conclusory affidavit of its expert Ajay Gopalkrishna, who states that “[t]he servers and systems affiliated with the Email SMS Service did not have the capacity to store or produce numbers to be called, using a random or sequential number generator, and to call those numbers.” Not only does this restating of the statutory definition amount to nothing more than a legal conclusion couched as a factual assertion, compare with 47 U.S.C. § 227(a)(1) (“The term ‘automatic telephone dialing system’ means 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.”), it begs the question of what is meant by the word “capacity.” Because this is an issue of heightened importance in light of the 2015 FCC Ruling, and the District Court did not previously have the benefit of the FCC’s ruling in addressing the issue,³ remand is appropriate to allow that Court to address more fully in the first instance whether Yahoo’s equipment meets the statutory definition.