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From Antitrust Law Daily, June 29, 2018

Narrow definition of 'capacity' for TCPA autodialers adopted by Second Circuit

By Wendy Biddle, J.D.

Under the Telephone Consumer Protection Act (TCPA), the term "capacity" in relation to the Act’s requirement that, to qualify as an autodialer under the statute, a device must have the "capacity" to dial random and sequential numbers, is best understood as referring to the functions a device is currently able to perform, whether or not those functions were actually in use for the offending call, rather than to devices that would have that ability only after modifications, the U.S. Court of Appeals in New York City has decided. Therefore, in a dispute between Time Warner Cable and its customer Araceli King over the company’s repeated calls to her cell phone, a lower court erred when it based its ruling on a broader interpretation of the term "capacity" that took into account potential modifications such as software changes. Thus, the federal district court’s ruling in favor of the customer was vacated and the case remanded for further proceedings (King v. Time Warner Cable, Inc., June 29, 2018, Lynch, G.).

The consumer had signed up for Time Warner services and was required to agree to the terms of service, which included granting Time Warner permission to call any number the customer provides. The terms included an opt-out provision for marketing calls. The terms also included a provision stating that Time Warner may use artificial or recorded voices to call and may use an automated dialer. In July 2013, the consumer began getting Time Warner collection calls intended for another customer. After receiving ten calls the consumer requested Time Warner stop calling her regarding another customer’s account, but the calls continued until August 2014, totaling 163 calls. The consumer filed suit against Time Warner claiming their practices violated the TCPA.

The core issue in the case revolved around the definition of "capacity" in relation to an autodialer in the TCPA. The district court, using a 2015 FCC Order, concluded that an autodialer was any technology that had the capacity to dial random numbers, and further concluded that Time Warner’s system met that "low bar" despite the fact that there was no evidence presented that the Time Warner’s system actually had the ability to perform the functions of an autodialer. The district court also ruled that the consumer had effectively withdrew her consent to be contacted the first time she called and asked Time Warner to stop calling about another consumer’s account. The district court granted the consumer’s motion for summary judgment. Time Warner appealed.

ACA International. While the appeal was pending, the D.C. Circuit, in ACA International, invalidated a 2015 Federal Communications Commission order that defined capacity as including a device’s potential functionalities which would broaden the statute much more than Congress intended. ACA Int’l v. FCC, 885 F.3d 687, 699 (D.C. Cir. 2018). The Second Circuit noted that it was not bound by the D.C. Circuit’s interpretation that "capacity" is referring to functions that a device is currently able to perform, but it found the D.C. Circuit’s reasoning persuasive. The FCC’s broad interpretation of "capacity" in the 2015 order cited by the district court was inconsistent with the legislative purposes behind the TCPA and a narrower definition would be more appropriate, the Second Circuit opined.

The Second Circuit observed that the D.C. Circuit correctly drew a distinction between a device that currently has features that enable it to perform the functions of an autodialer—whether or not those features are actually in use during the offending call—and a device that can perform those functions only if additional features are added. Accordingly, the Second Circuit concluded that the former category of devices falls within the definition of an ATDS, and the latter does not.

Legislative history. The legislative history of the TCPA confirmed what the language of the statute makes clear in any event: that the TCPA applies to calls from a device that can perform the functions of an autodialer, regardless of whether it has actually done so in a particular case, the appellate court held. The history was less clear, however, about the issue here: whether a device should be regarded as having the capacity to perform such functions only if it has the present ability to do so, or should be so regarded if the device could gain that ability if it were modified, such as by changes to its software.

"Capacity’s meaning. After finding the legislative history ultimately unhelpful on the issue squarely before it, the Second Circuit held that the term "capacity" in the TCPA’s definition of a qualifying autodialer should be interpreted to refer to a device’s current functions, absent any modifications to the device’s hardware or software. That definition does not include every smartphone or computer that might be turned into an autodialer if properly reprogrammed, but does include devices whose autodialing features can be activated, as the D.C. Circuit suggested, by the equivalent of "the simple flipping of a switch." ACA Int’l, 885 F.3d at 696.

Applying that definition, the district court erred in granting partial summary judgment to the customer, but, the record on appeal did not allow the court to conclude that Time Warner’s system has the requisite "capacity," as the court now understood it, to meet the definition of an autodialer regulated by the TCPA, the Second Circuit explained. Nor did it permit the opposite conclusion. Remand was necessary to explore the details of the functionality of Time Warner’s system.

This case is No. 15-2474.

Attorneys: Sergei Lemberg (Lemberg & Associates LLC) for Araceli King. Matthew A. Brill (Latham & Watkins LLP) for Time Warner Cable, Inc.

Companies: Time Warner Cable, Inc.

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