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Courts Answer Call to Interpret TCPA's Autodialer Provision

Onika K. Williams

Summary

  • Seventh Circuit adds to split over "automatic telephone dialing system" meaning.
  • The appellate court weighs in on (1) standing to sue under the TCPA and (2) what equipment qualifies as an “automatic telephone dialing system,” or autodialer, in violation of the TCPA.
Courts Answer Call to Interpret TCPA's Autodialer Provision
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Receiving unwanted automated text messages can constitute a concrete injury for standing to sue under the Telephone Consumer Protection Act (TCPA), but a violation does not occur unless the equipment that sends the text messages actually violates the statute, according to the U.S. Court of Appeals for the Seventh Circuit. In Gadelhak v. AT&T Services, Inc., the Seventh Circuit is another appellate court to weigh in on (1) standing to sue under the TCPA and (2) what equipment qualifies as an “automatic telephone dialing system,” or autodialer, in violation of the TCPA. Gadelhak adds to existing circuit splits regarding standing and autodialer interpretation under the TCPA. ABA Section of Litigation leaders suggest that the TCPA standing and interpretation issues are now ripe for U.S. Supreme Court review.

Five Unwanted Text Messages Lead to Class Action

The conflict in Gadelhak began when Ali Gadelhak received five text messages from AT&T asking him to complete survey questions in Spanish. AT&T uses a device called “Customer Rules Feedback Tool” to send surveys to customers who have interacted with its customer service representatives. Gadelhak was not an AT&T customer and did not speak Spanish. Annoyed by the text messages, Gadelhak filed a putative class action suit against AT&T for violating the TCPA, which Congress enacted in 1991 to restrict, with some exceptions, telemarketing calls, use of an “automatic telephone dialing system,” and artificial or prerecorded voice messages.

Under the TCPA, an “automatic telephone dialing system” is “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.” The defendants may have to pay damages of $500 for each negligent violation and $1,500 for each willful violation. The U.S. District Court for the Northern District of Illinois granted summary judgment in favor of AT&T, ruling that its system is not an autodialer under the TCPA because it lacks the capacity to generate random or sequential numbers.

Gadelhak and the class of consumers appealed to the Seventh Circuit, which affirmed the district court’s judgment. Although it adopted a different interpretation of the statute, the Seventh Circuit agreed that the ability to generate random or sequential numbers is necessary for a system to be classified as an autodialer under the TCPA.

Circuit Courts Split over TCPA Standing

When the TCPA was passed, telemarketers mainly used systems that randomly generated numbers and dialed them. These systems are prohibited under the TCPA. However, AT&T’s system does not randomly generate numbers. Instead, like others used today, it dials numbers from an existing database of customer information. AT&T contended that Gadelhak received messages because of a typographical error. Determining whether AT&T’s system and others like it are prohibited under the TCPA has forced courts to grapple with the language of the statute. Specifically, courts must decide what the phrase “using a random or sequential number generator” modifies, and the interpretations of this provision have split the circuits.

Before analyzing the language of the statute, the Seventh Circuit examined Gadelhak’s standing to bring suit under the TCPA. Article III, section 2 of the U.S. Constitution limits federal judicial power to “Cases” and “Controversies.” To bring suit in federal court, a plaintiff must have Article III standing. In Spokeo, Inc. v. Robins, the U.S. Supreme Court stated that “Article III standing requires a concrete injury even in the context of a statutory violation.” The Court explained that a “concrete” injury is “real” and not “abstract”; in other words, “it must actually exist.”

This question of standing under the TCPA has brought division among the federal appellate courts. For instance, in Salcedo v. Hanna, the U.S. Court of Appeals for the Eleventh Circuit held that the receipt of an unwanted automated text message is not a “concrete” injury. On the other hand, the U.S. Court of Appeals for the Second Circuit in Melito v. Experian Marketing Solutions, Inc., and the U.S. Court of Appeals for the Ninth Circuit in Van Patten v. Vertical Fitness Group, LLC, determined that receipt of unsolicited text messages is sufficient to demonstrate Article III standing.

The Gadelhak panel explained that it looked to history and Congress’s judgment to determine whether AT&T’s texts to Gadelhak caused concrete harm. The Seventh Circuit wrote that common law has long considered invading the privacy of another to be a tort of “intrusion upon seclusion.” While the Salcedo court suggested the tort of intrusion upon seclusion pertained to acts like eavesdropping and spying, the Seventh Circuit disagreed. The Gadelhak court concluded that irritating intrusions, such as repeated and frequent telephone calls from a defendant to a plaintiff, would also qualify and that the harm caused by unwanted text messages is analogous to this type of invasion of privacy.

As to Congress’s judgment, the Gadelhak court explained that it followed Spokeo and looked for a close relationship in kind, and not degree, to analogize harms recognized by common law. The Salcedo court treated the receipt of unwanted text messages as abstract because common law courts generally require a greater imposition on privacy, such as receiving many calls, to find liability for an intrusion upon seclusion. The Gadelhak panel disagreed and concluded that while several unwanted automated text messages may not be intrusive enough to be actionable under common law, unwanted text messages pose the same kind of harm recognized by common law courts, and Congress has chosen to make such harm actionable.

Definition of “Autodialer” Unclear

After determining Gadelhak had standing to bring suit under the TCPA, the Seventh Circuit turned to the merits of the case. That court had previously addressed the definition of “autodialer” in Blow v. Bijora. At that time, however, a 2015 order by the Federal Communications Commission (FCC) was in effect and provided interpretative guidance on several aspects of the TCPA, including a determination that equipment with the capacity to store or produce, and dial random or sequential numbers, met the TCPA’s definition of an “autodialer.” As a result, the Blow court was required to adopt the FCC’s interpretation of an autodialer. 

The FCC’s 2015 order that Blow deferred to was later appealed to the U.S. Court of Appeals for the District of Columbia. In ACA International v. FCC, the D.C. Circuit ruled that the FCC’s interpretation of an autodialer was too broad, as all smartphones could qualify as autodialers if certain mobile applications were downloaded. Because the D.C. Circuit struck down the FCC’s interpretation of an autodialer, the Gadelhak court was not constrained by Blow and was able to interpret the TCPA’s text.

The Gadelhak panel identified four ways to interpret the meaning of “automatic telephone dialing system,” depending on what word or words the reader believed the phrase “using a random or sequential number generator” modified. Under the first interpretation, “using a random or sequential number generator” modified both “store” and “produce,” which would mean a system must be able to store or produce telephone numbers using a random or sequential number generator to qualify as an autodialer.

This is the interpretation that AT&T advocated. This interpretation excluded AT&T’s system because it is unable to store or produce telephone numbers using a number generator. AT&T’s system only dials telephone numbers from its customer database. This interpretation of “using a random or sequential number generator” was also adopted by the U.S. Court of Appeals for the Third Circuit in Dominguez v. Yahoo, Inc., and the Eleventh Circuit in Glasser v. Hilton Grand Vacations Co.

The Gadelhak court explained that when the conjoined verbs “to store or produce” share the direct object “telephone numbers to be called,” the modifier that follows said object, “using a random or sequential number generator,” modifies both of the verbs. The court thought this interpretation made sense because of the provision’s sentence structure. The comma before “using a random or sequential number generator” suggested the modifier applies to the preceding clause—“to store or produce telephone numbers to be called.”

However, the Gadelhak court also pointed out that this interpretation had some problems. Most notable was the question of how a number generator stores telephone numbers. AT&T argued that a device that generates random numbers to dial does store numbers for a short period of time before those numbers are called. The court pointed out that, at the time of the TCPA’s enactment, devices with the capacity to generate random numbers stored them in files for a significant period before dialing. The capacity to store numbers was more central to that type of device.

Under the second interpretation, “using a random or sequential number generator” modified the “telephone numbers” dialed. This is the interpretation the district court in Gadelhak had adopted. Under this interpretation, “using a random or sequential number generator” described the way telephone numbers are generated. Because AT&T’s system cannot generate random numbers, but rather dials existing customer numbers, the district court held that the system was not an autodialer.

The Seventh Circuit noted that this interpretation also had structural problems. The phrase “using a random or sequential number generator” described how something should be done and cannot modify a noun in this context. To decide upon this interpretation, the court concluded that the district court had read the word “generated” into the phrase “[generated] using a random or sequential number generator.” The Gadelhak panel explained that while this interpretation is tempting, it is not the court’s task to add words to the written statute; therefore, this interpretation was not a viable option.

The third interpretation of “using a random or sequential number generator” was that it modified only the verb “produce.” Gadelhak himself advocated for this interpretation, which was also adopted by the Ninth Circuit in Marks v. Crunch San Diego. Under this construction, equipment that can randomly or sequentially produce telephone numbers qualifies as an autodialer, but so would any equipment that had the capacity to store and dial numbers. The Gadelhak court explained that this interpretation does not have the problems that the first interpretation has with the word “store,” and it also does not add words to the statute like the second interpretation.

However, this interpretation has several of its own issues. Among them, it required an unnatural reading of the text to apply “telephone numbers to be called” to both “store” and “produce” but only apply “using a random or sequential number generator” to “produce” when the provision says “to store or produce.” Additionally, the court observed, this interpretation was so broad and far-reaching, “it would create liability for every text message sent from an iPhone.” The court concluded this interpretation was too expansive.

Under the fourth interpretation, “using a random or sequential number generator” modified how the numbers are “to be called.” The court explained that under this interpretation, devices that can store or produce telephone numbers that will be dialed by a random or sequential number generator is an autodialer. No party in Gadelhak advanced this interpretation, and no courts have accepted it. The court concluded that this interpretation is problematic for several reasons, including omitting the comma between “to be called” and “using a random or sequential number generator” when the comma indicates “using a random or sequential number generator” should “apply to all of the antecedents instead of only to the immediately preceding one.”

After exploring all the options, the Seventh Circuit concluded that the first interpretation, while flawed, lacked the more serious problems of the other three and was the best reading of this seemingly confusing provision.

Supreme Court Review of TCPA Is Inevitable

Section of Litigation leaders agree that Supreme Court review of these issues appears to be inevitable. “It is rather amazing that four federal appellate courts—the second highest courts in the federal system—have all had to explain the statutory definition of an ‘automatic telephone dialing system,’” observes Bradford S. Babbitt, Hartford, CT, cochair of the Section’s Commercial & Business Litigation Committee. In fact, the Second Circuit recently entered the autodialer discussion with its ruling in Duran v. La Boom Disco, Inc., declining to follow Gadelhak and instead agreeing with the Ninth Circuit’s interpretation in Marks.

“Given the twin circuit splits on the standing and TCPA interpretation questions, these issues are ripe for Supreme Court review. The Court may, however, let the issues percolate in the circuit courts a bit longer before taking up either of these issues,” predicts Mary-Christine “M.C.” Sungaila, Costa Mesa, CA, cochair of the Section’s Appellate Practice Committee.

Because standing and the definition of “autodialer” under the TCPA are current issues splitting the circuits, Section leaders suggest that practitioners examine standing in their cases and be familiar with the various circuit court rulings on these issues. “Since the Supreme Court’s Spokeo decision, standing has become a ‘hot issue’ that all practitioners need to examine when faced with a claim involving a statutory violation,” advises Sungaila. “In the context of claims arising under the TCPA’s automatic telephone dialing system, for example, practitioners in the Eleventh Circuit can defend actions based on standing and the more limited reading of the TCPA. Practitioners in the Ninth Circuit, on the other hand, are bound by the Ninth Circuit’s broader interpretations of both Article III standing and the scope of the TCPA’s automatic telephone dialing system provision,” concludes Sungaila.

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