Seventh Circuit Rejects Marks and Holds a Random or Sequential Number Generator is Required for Equipment to be an ATDS

By February 21, 2020 February 24th, 2020 Financial Services

In an opinion that is sure to give you flashbacks to diagramming sentences in middle school, a unanimous Seventh Circuit (governing federal district courts in Illinois, Indiana and Wisconsin) panel held that for equipment to be an automatic telephone dialing system (ATDS) under the Telephone Consumer Protection Act (TCPA), it must store or produce numbers, using a random or sequential number generator. See Gadelhak v. AT&T Services, No. 19-1738 (Seventh Cir. Feb. 19, 2020). In other words, merely dialing from a stored list of numbers, which the Ninth Circuit in Marks v Crunch San Diego, LLC held qualifies as an ATDS, is insufficient. If you are keeping track at home, the Seventh Circuit joins the Third and Eleventh Circuits in so holding, with the Ninth Circuit being the lone dissenter for now.

Key to the Court’s reasoning and its grammar lesson is the TCPA’s definition of an ATDS: “Equipment which has the capacity with to store or produce telephone numbers to be called, using a random or sequential number generator and to dial such numbers.” (Emphasis added.) The Court dissected what it called an “awkward” definition and found that there were four potential interpretations of an ATDS. First, the phrase “using a random or sequential number generator” might modify both store and produce, which would mean that device must be capable of performing at least one of those functions using a random or sequential number generator to be an ATDS. Second, and as the district court found, it modifies the telephone numbers to be called. Third, and as advocated by Gadelhak, using a random or sequential number generator modifies produce only, meaning equipment that has the capacity to store telephone numbers to be called and dial them qualifies as an ATDS. Lastly, the Court stated it could modify how the telephone numbers are to be dialed.

The Court ultimately chose the first interpretation — the same interpretation recently adopted by the Eleventh Circuit — meaning the equipment must be capable of storing or producing telephone numbers to be called performing at least one of those functions using a random or sequential number generator to be an ATDS. Because AT&T’s equipment did not have this capacity to generate random or sequential numbers, the summary judgment ruling in favor of AT&T and dismissing the case was upheld. Crucial to the Court’s reasoning was its understanding of the dialing technology that was prevalent when the TCPA was enacted in 1991. Relying on the record in various FCC proceedings, it noted that when the TCPA was enacted, telemarketers relied primarily on systems that randomly generated telephone numbers and then dialed them and that those same systems would store numbers that were randomly or sequentially generated for lengthy periods of time and then dial them throughout the course of a telemarketing campaign. Faced with systems that performed in this manner and which Congress was trying to regulate, it made perfect sense for Congress to require a random or sequential number generator function in the definition of an ATDS and to include the word “store” in the TCPA. Lastly, it rejected the Ninth Circuit’s “ungrammatical interpretation” in part because leaving store unmodified “would create liability for every text message sent from an iPhone” because every iPhone is able to store numbers and then text or call them.

This ruling, together with the recent Eleventh Circuit ruling, allows more flexibility in various jurisdictions to send texts and place live calls using dialing equipment without the capacity to generate random or sequential numbers. These decisions, however, do not impact the liability that can be imposed for making a call without the appropriate consent of the called party using “an artificial or prerecorded voice.” An ATDS is not required in order to be liable under the TCPA for making a call using an “artificial or prerecorded voice.”

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