BREAKING NEWS: Ninth Circuit Refuses To Rehear Case Expanding Definition of ATDS under TCPA

The federal appellate court denied a health club’s request to reconsider its erroneous precedential decision that the term ATDS includes equipment that merely has the capacity to automatically dial stored numbers.

The Ninth Circuit Court of Appeals denied, without comment, today a Petition for Rehearing En Banc filed by a health club and fitness center in Marks v. Crunch San Diego, LLC, No. 14-56834, 2018 WL ——- (9th Cir. Oct 30, 2018). In its Petition, Crunch San Diego, LLC had asked the full slate of judges on the federal appeals court for the Ninth Circuit to revisit the unanimous appellate decision issued in the Marks case by a three-judge panel last month. The issue in Marks turns on the definition of an “automatic telephone dialing system” under the Telephone Consumer Protection Act and whether it extends to equipment capable of dialing stored numbers automatically, regardless of whether those numbers have been randomly or sequentially generated.

As ACA International reported previously, the appeal in Marks stems from a consumer class action lawsuit alleging that Crunch violated the TCPA by sending promotional text messages using an ATDS without the recipients’ prior express consent. Finding in favor of Crunch, the lower court ruled that based on the TCPA’s “clear and unambiguous” definition of an ATDS, Crunch’s equipment is not an ATDS because it “lacks a random or sequential number generator.” The lower court was clear that calling a list of stored phone numbers is not “random or sequential number generation.”

The consumer appealed to the Ninth Circuit. On September 20, 2018, a three-judge panel of the appellate court vacated the lower court’s decision rendering it null and void. In doing so, the Ninth Circuit panel held that “the statutory definition of ATDS is not limited to devices with the capacity to call numbers produced by a ‘random or sequential number generator,’ but also includes devices with the capacity to dial stored numbers automatically.”

Earlier this month, ACA filed a “friend of the court” (amicus) brief with the Ninth Circuit to share with the appellate court its unique and direct perspective why ACA believes the only defensible interpretation of the TCPA requires that equipment must have the capacity to generate random or sequential numbers to qualify as an ATDS. In its amicus brief, ACA argued that “[t]he statute’s text and context confirm that ‘using a random or sequential number generator’ is an integral, not an optional or alternative, part of the definition” of an ATDS. In addition, ACA maintained that the Ninth Circuit panel not only misread the statute but it also manufactured ambiguity, which collides with the court’s own precedent and contradicts the Third Circuit Court of Appeals. As a result, the “Panel misreads the Telephone Consumer Protection Act in a way that materially changes it is meaning, and manufactures liability where Congress did not.”

Despite the strength of Crunch’s arguments in its Petition that the Ninth Circuit panel erred in issuing its decision in Marks, the Ninth Circuit summarily denied the Petition.

“The Ninth Circuit’s misreading of an outdated statute that was built for a world that no longer exists has now significantly perpetuated a chilling effect on businesses’ from communicating information to consumers that they want, need or expect to receive,” said ACA International’s Vice President and Senior Counsel, Karen Scheibe Eliason.

Now, Crunch has 90 days to decide whether it should file a petition for writ of certiorari to the United States Supreme Court (a formal request for the Supreme Court to hear and review a case). In the event Crunch files a petition for cert, the Supreme Court’s decision to hear a case is discretionary, so the Supreme Court can elect to accept or deny review of the Marks case. The Supreme Court does not take many cases each year. However, the cases which have been accepted and reviewed often include those which involve constitutional law questions, compelling interests or strong social issues. If the Marks case does not proceed to U.S. Supreme Court review on the merits, the Marks decision would remain as binding precedent in the Ninth Circuit.

Practical Considerations: The best practice for debt collectors in the wake of the Ninth Circuit’s Marks decision may be to assume that any dialer that automatically calls from a list constitutes an ATDS. Debt collectors should continue to work with their creditor clients and use available technology to identify wireless numbers and ensure prior express consent exists before calling wireless devices with a dialer.

ACA International’s efforts to proactively support the accounts receivable management industry are part of the association’s Industry Advancement Program, and are made possible by funding through ACA’s Industry Advancement Fund.

ACA will continue to follow the Marks case and will keep its members posted on any new developments.

The association’s TCPA Resource Center, also features related news, ACA SearchPoint documents, legal and regulatory materials, compliance guidelines and more.

Posted in Debt Collection.