First Ruling by Circuit Court After FCC Clarification Suggests TCPA Autodialer Litigation May Get Bogged Down on Factual Issues

The U.S. Court of Appeals for the Third Circuit recently became the first federal appellate court to apply the Federal Communications Commission’s declaratory ruling that expanded the notion of what constitutes an “autodialer” under the Telephone Consumer Protection Act (TCPA). In that mid-summer omnibus ruling resolving nearly two dozen declaratory ruling petitions on a range of TCPA issues, the FCC revisited the issue of what qualifies as an “automatic telephone dialing system,” which the statute defines as those with a “capacity to store or produce telephone numbers to be called, using a random or sequential number generator and to dial such numbers.” The FCC held that equipment need not have the “present capacity” to store or produce numbers and to dial them at the time a call or text alleged to violate the TCPA is delivered, but rather the inquiry must be on the device’s “potential capacity” of the equipment.

In Dominguez v. Yahoo, Inc., the Third Circuit revived a plaintiff’s action where he had alleged Yahoo! used autodialing technologies to send text messages to his mobile phone without consent in violation of the TCPA. The trial court had earlier granted summary judgment for Yahoo! and dismissed the action, finding there was “no evidence that Yahoo’s [text messaging] system could generate random or sequential numbers.” In reversing, the Third Circuit observed that summary judgment had entered before the FCC’s ruling, and thus the court below erred in concluding no reasonable juror could find Yahoo’s text-messaging system qualifies as an autodialer as a matter of law. The Third Circuit noted that Yahoo!’s only evidence on this point was a declaration that largely recited the statutory definition. It thus remanded to allow the court below to address more fully in the first instance whether Yahoo’s equipment meets the statutory definition as clarified by the FCC.

The Third Circuit’s ruling is important not only because it ultimately endorses the FCC’s view of the statutory autodialer definition, but also because its decision suggests that on remand the issue of whether Yahoo!’s equipment qualifies could become a question of fact that would have to go to a jury (or the judge, sitting as factfinder). If that is the natural consequence of the ruling on appeal, TCPA defendants accused of improper autodialer use face that much more of a difficult task extracting themselves sooner, rather than later, in TCPA cases.

It is also notable that the Third Circuit was not prepared to accept the fact that both Dominguez and Yahoo! had agreed, pre-FCC ruling, that it is the “present capacity” of equipment at time texts are sent that controls.  Given what the court viewed as “significant clarification on the meaning of ‘capacity’ provided by the FCC,” it deemed remand appropriate to review whether Dominguez preserved the “potential capacity” argument. This will present another line of attack for plaintiff to keep the case alive. The answer to that question, and the possibility that more probing fact-finding will be necessary, make this case one to watch on remand.