Court Finds That System Is Not An ATDS Unless It Can Generate (As Opposed To Merely Dial) Numbers On A Random or Sequential Basis

Judge Baylson of the Eastern District of Pennsylvania recently granted Yahoo! summary judgment in a case challenging Yahoo’s automatic email to text alert system because it did not use an automatic telephone dialing system (“ATDS”) when it forwarded emails as text messages.  In doing so, he applied the plain meaning of the statutory definition of ATDS, rejected an FCC opinion that had purported to broaden it, and disagreed with Judge Curiel in the Southern District of California, who denied a similar motion by Yahoo! just weeks ago.  See Dominguez v. Yahoo!, Inc., No. 13-1887, slip op. (E.D. Pa. Mar. 20, 2014); Sherman v, Yahoo!, Inc., No. 13-0041, slip op. (S.D. Cal. Feb. 3, 2014).  The decision is important because it limits the definition of ATDS to those systems that can generate (as opposed to merely dial) a list of numbers on a “random or sequential” basis.

Plaintiff Bill Dominguez alleged that Yahoo! used an ATDS to send thousands of unsolicited text messages (nearly 50 to 60 per day for many months) to his cell phone.  The text messages were part of a Yahoo! service that allowed account holders to have incoming email messages automatically converted into a truncated format and forwarded to cell phones as text messages.  One such account holder was Jose Gonzalez, who neglected to disable or update the service after his cell phone number was reassigned to Mr. Dominguez.  Uninterested in Mr. Gonzalez’s emails, Mr. Dominguez contacted Yahoo!, which told him that the service could only be stopped if the Yahoo! account holder (Mr. Gonzalez) disabled it himself.  Mr. Dominguez then filed suit.  (Whether he or Yahoo! ever tried to contact Mr. Gonzalez is not clear from the court’s opinion.)

Yahoo! moved for summary judgment and argued that the text messages: (1) were not sent using an ATDS and, even if they had been, (2) were not the sort of unsolicited telemarketing that the TCPA was meant to prohibit in the first place.

The parties assumed that text messages constitute “calls” under the TCPA,[1] and agreed that the challenged service “automatically converted email messages into a truncated format, accessed the appropriate user’s telephone number from a stored list, and automatically sent the text message to the customer’s mobile device.”  Dominguez, slip op.  at 7-8.  They disagreed, however, about whether the service used an ATDS.  See 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.”).

Yahoo! argued that its system was not an ATDS as defined by the statute because it did not use a “random or sequential number generator” to “store or produce telephone numbers to be called.”   Dominguez, slip op. at 7 (internal quotation marks omitted).  Rather, its system “only sent messages to a user that had authorized them and only when that user received an email.”  Id. at 10.  The court agreed, finding that the plaintiff had “not offered any evidence to show that Yahoo’s system had the capacity to randomly or sequentially generate telephone numbers (as opposed to simply storing telephone numbers), as required by the statutory definition of ATDS.”  Id. at 11.

The plaintiff argued that the definition of an ATDS captured not only systems that can generate numbers randomly or sequentially, but also systems that can dial numbers randomly or sequentially from a stored list.  The court rejected that reading of the statute, finding that it improperly “focuse[d] on the manner in which text messages are sent, not the way in which the numbers are generated.”  Id. at 10 (emphasis added) (citing Gragg v. Orange Cab Co.,  No. 12-0576, 2014 WL 494862, at *3 (W.D. Wash. Feb. 7, 2014)).  As Judge Lasnik had explained in Gragg, “‘random number generation’ means random sequences of 10 digits, and ‘sequential number generation’ means (for example) (111) 111-1111, (111) 111-1112, and so on.”  Gragg, 2014 WL 494862, at *3.  Judge Baylson was not persuaded by the plaintiff’s expert witness, calling his testimony “misleading” because it “reflect[ed] a misunderstanding of the statutory requirements, which require more than simply that the system store telephone numbers and send message to those numbers without human intervention.”  Dominguez, slip op. at 10 n.6.  The court reasoned that the statute must require more than that because, as the plaintiff’s expert admitted, “every text message system currently in existence sends messages sequentially.”  Id. at 4.

The plaintiff also relied on In the Matter of Rules & Regulations Implementing the TCPA of 1991, 23 F.C.C.R. 559 (Jan. 14, 2008), which purported to expand the definition of an ATDS to include predictive dialers that can dial stored numbers without human intervention.  See id. at 566 ¶ 12 (“[W]e affirm that a predictive dialer constitutes an automatic telephone dialing system and is subject to the TCPA’s restrictions on the use of autodialers.”); id. (rejecting position that “a predictive dialer meets the definition of [an ATDS] only when it randomly or sequentially generates telephone numbers, not when it dials numbers from customer telephone lists”).  The court rejected this argument, finding that the FCC’s statements were not entitled to Chevron deference because the statutory definition is “clear and unambiguous.”  Dominguez, slip op. at 10-11 n.6 (Swallows Holding, Ltd. v. C.I.R., 515 F.3d 162, 170 (3d Cir. 2008)).  In any event, the plaintiff had not argued that the Yahoo! system was a “predictive dialer” and, if he had, “the level of human agency involved” may well have qualified as “human intervention” such that the system would not qualify as a predictive dialer.  See, e.g., Gragg, 2014 WL 494862, at *3 (“[T]he level of human agency involved in transmitting the text dispatch notifications is sufficient to qualify as ‘human intervention.’  The system is able to dial and transmit the dispatch notification only after the driver has physically pressed ‘accept’: human intervention is essential.”).

Yahoo! had also argued that its service constituted the sort of “unsolicited telemarketing” that the TCPA was meant to prohibit in the first place.  It explained that “messages sent through the Email SMS Service were not sent randomly, in bulk or to sequential numbers—but instead only to specific phone numbers, affirmatively selected by individual Yahoo! users, when email messages were received.”  Having found that the Yahoo! service did not use an ATDS, the court did not reach this issue.

Dominguez is worthy of careful review because it casts doubt on all cases involving systems that merely call numbers on a stored list, as opposed to systems that generate lists on a “random or sequential” basis.  The implication for businesses that only call current or prospective customers, lists of which are unlikely to have been generated on a purely “random or sequential” basis, is potentially enormous.  If followed, Dominquez could limit TCPA exposure to those entities that are engaged in indiscriminate telemarketing activity, and could leave current and even prospective customer contacts to be regulated by do-not-call requirements.  It would thus bring a level of sanity to the regulation of telemarketing, and pop the balloon of robocall litigation currently clogging the courts.

Plaintiffs very recently filed a notice of appeal.  We will monitor the appeal, whether other courts follow Judge Baylson’s lead, and how the FCC responds to this straightforward reading of the statute in its forthcoming review of various petitions seeking clarity on the definition of ATDS.

[1]   Dominguez, slip op. at 6 n.3 (citing Gager v. Dell Fin. Servs., LLC, 727 F.3d 265, 268 (3d Cir. 2013)).  Notably, however, one FCC Commissioner recently signaled that text messages should not be treated as “calls” for purposes of the TCPA.  (See our post on the issue here.)

Michael P. Daly

About the Author: Michael P. Daly

Mike Daly has spent two decades defending, counseling and championing clients that interact with consumers. His practice focuses on defending class actions, handling critical motions and appeals, and maximizing the defensibility of marketing and enforceability of contracts. Clients large and small have trusted him to protect their businesses, budgets and brands in complex cases across the country.

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