District Court (Cal.) Stays TCPA Case Pending Outcome of D.C. Circuit Proceedings Challenging Propriety of FCC’s Omnibus Order

In Fontes v. Time Warner Cable, Inc., 2015 WL 9272790, at *2-4 (C.D.Cal. 2015), Judge Snyder renewed a previously entered stay in a TCPA class action, this time pending the outcome of the proceedings in the D.C. Circuit Court of Appeals challenging the propriety of the FCC’s Omnibus Order.  Judge Snyder described the FCC’s Order and the proceedings the D.C. Circuit as follows:

On July 10, 2015, the FCC issued its Declaratory Ruling responding to the Petitions. July 10, 2015 FCC Declaratory Ruling and Order. As relevant here, the FCC ruled that the TCPA’s use of the term “capacity” in the definition of “automatic telephone dialing system” does not exempt equipment that lacks the “present ability” to dial randomly or sequentially. Id. ¶ 15. “In other words, the capacity of an autodialer is not limited to its current configuration but also includes its potential functionalities.” Id. ¶ 16. The FCC also concluded that the term “called party” should be defined as “the subscriber, i.e., the consumer assigned the telephone number dialed and billed for the call, or the non-subscriber customary user of a telephone number included in a family or business calling plan.” Id. ¶ 73. In settling on this definition, the FCC rejected a suggestion made by several commentators to define “called party” as the “intended” recipient of the phone call. Id. ¶ 74. Thus, the FCC explained that, subject to one limited exception, “calls to reassigned wireless numbers violate the TCPA when a previous subscriber, not the current subscriber or customary user, provided the prior express consent on which the call is based.” Id. ¶ 73.  Finally, the FCC determined that a very limited safe harbor should apply for “callers who make calls without knowledge of reassignment and with a reasonable basis to believe they have valid consent to make the call.” Id. at ¶ 72. Such callers “should be able to initiate one call after reassignment as an additional opportunity to gain actual or constructive knowledge of the reassignment and cease future calls to the new subscriber. If this one additional call does not yield actual knowledge of reassignment, we deem the caller to have constructive knowledge of such.” Id.  The FCC was sharply divided on many of these issues. In particular, with regard to the proper definition of an autodialer the commissioners split 3-2. See id. One of the dissenting commissioners, Ajit Pai, who dissented from the entirety of the majority’s ruling wrote:  “Some lawyers go to ridiculous lengths to generate new TCPA business. They have asked family members, friends, and significant others to download calling, voicemail, and texting apps in order to sue the companies behind each app. Others have bought cheap, prepaid wireless phones so they can sue any business that calls them by accident in cases of reas[s]igned telephone numbers. … the common thread here is that in practice the TCPA has strayed far from its original purpose. And the FCC has the power to fix that. … Instead, the Order takes the opposite tack. Rather than focus on the illegal telemarketing calls that consumers really care about, the Order twists the law’s words even further to target useful communications between legitimate businesses and their customers. This Order will make abuse of the TCPA much, much easier. And the primary beneficiaries will be trial lawyers, not the American public.”  Dissenting Statement of Commissioner Ajit Pai. Specifically with regard to the FCC’s interpretation of the term “automatic telephone dialing system,” Commissioner Pai stated:  “The Order dramatically expands the TCPA’s reach. The TCPA prohibits a person from making “any call” to a mobile phone “using any automatic telephone dialing system,” except in certain defined circumstances. The statute defines an “automatic telephone dialing system” 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.” As three separate petitions explain, trial lawyers have sought to apply this prohibition to equipment that cannot store or produce telephone numbers to be called using a random or sequential number generator and that cannot dial such numbers.  That position is flatly inconsistent with the TCPA. The statute lays out two things that an automatic telephone dialing system must be able to do or, to use the statutory term, must have the “capacity” to do. If a piece of equipment cannot do those two things—if it cannot store or produce telephone numbers to be called using a random or sequential number generator and if it cannot dial such numbers—then how can it possibly meet the statutory definition? It cannot. To use an analogy, does a one-gallon bucket have the capacity to hold two gallons of water? Of course not.

Id. (some emphasis added).”  After the FCC issued its ruling, nine companies filed petitions with the United States Court of Appeals for the District of Columbia Circuit (the “Court of Appeals”) seeking review of the FCC’s Declaratory Ruling. Dkt. 44, Ex. C (docket sheet for ACA Int’l, et al. v. Fed. Commncn’s Comm., No. 15-1211 (D.C. Cir. 2015). Those petitions were subsequently consolidated into a single case, ACA International, et al. v. Federal Communications Commission. Id. All of the petitions request that the D.C. Circuit vacate the FCC’s ruling with regard to the potential liability for calls to reassigned cell phone numbers and the definition of an “automatic telephone dialing system.” See, e.g., Dkt. 44, Ex. D (ACA Int ‘I, et al. v. Fed. Commncn’s Comm., No. 15-1211, Am. Pet. for Review by ACA Int’l, Dkt. 1562251 at 4-5 (D.C. Cir. July 13, 2015)). The D.C. Circuit set a briefing schedule requiring all briefs to be filed by February 24, 2016. Dkt. 44, Ed. E (Order, No, 15-211 at 1-2 (D.C. Cir. Oct. 13, 2015). A hearing will be scheduled after all briefs are submitted. Id.  Time Warner now requests that the Court stay this case pending a decision from the Court of Appeals regarding the validity of the FCC’s Declaratory Ruling.

Judge Snyder found the stay to be appropriate.

The Court finds that under the circumstances in this case, it is prudent to stay this case pending resolution of the Court of Appeals review of the FCC’s Declaratory Ruling. When the Court previously stayed this case, it did so in the hopes that a brief stay would provide time for the FCC to issue a ruling clarifying several seemingly ambiguous and contested terms in the TCPA. The FCC has now issued its ruling. However, in light of the close divide amongst the FCC commissioners and the fact that at least one commissioner believes the FCC’s ruling is “flatly inconsistent with the TCPA,” there is a legitimate possibility that the Court of Appeals may overturn that ruling. Accordingly, the proper interpretation of the TCPA remains unclear.  At first glance, it appears that the FCC’s ruling expands the scope of liability in cases of reassigned phone numbers. The FCC accepted a definition of “called party” that includes the subscriber of a phone number, even where that person has received a reassigned number. Likewise, the FCC adopted only a limited safe harbor of one year, as opposed to a more expansive safe harbor as some petitioners had suggested. And, the FCC adopted a broader definition of “automatic telephone dialing system” that focuses on a devices potential capabilities, as opposed to a narrow definition based on a devices present capabilities. See also, July 10, 2015 FCC Declaratory Ruling and Order ¶ 84 (“we see nothing in the law or legislative history suggesting that Congress intended lesser––or no––protection for the unfortunate consumer who inherited a new number [i.e., a reassigned number]”). If the Court of Appeals were to find that the FCC had reached the wrong conclusion at to any of these issues that could potentially be dispositive of the outcome in this case. As such, Time Warner argues in its motion that “[i]f the D.C. Circuit holds that the statutory term ‘called party’ means the intended recipient of the call, that the safe harbor provision extends beyond the first call, or that the definition of autodialer should be limited to equipment with only the present capacity to generate random or sequential telephone numbers, [Time Warner] will have a complete defense to Plaintiffs’ claims.” Mot., at 11. While it is not necessary in the instant motion for the Court to reach the merits of Time Warner’s contention, at a minimum, the Court finds that it is prudent to await further guidance from the D.C. Circuit.  A decision by the Court of Appeals is likely anticipated by the end of next year. However, the Court is currently scheduled to hear argument regarding plaintiffs motion for class certification in June of next year and the deadline for the parties to file dispositive motions is currently scheduled for October of next year. Dkt. 40. If the Court of Appeals were to issue an order vacating the FCC’s ruling in significant part after these deadlines had passed it would likely render moot substantial efforts by the parties as well as many of the Court’s rulings. Accordingly, in light of the risk of wasting the resources of the Court and the parties as well as the high degree of uncertainty in this area of the law, the Court finds that a stay is appropriate in this case.