Another Court Holds That Definition Of Automatic Telephone Dialing System Focuses On Present Rather Than Potential 'Capacity'

As we have previously discussed, two recent decisions narrowly interpreted the term automatic telephone dialing system ("ATDS"), the definition of which will determine the fate of many TCPA claims. See Hunt v. 21st Mortgage Corp., 2013 WL 5230061 (N.D. Ala. Sept. 17, 2013) and Stockwell v. Credit Management, L.P., No. 30-2012-00596110-CU-NP-CXC (Cal. Super. Ct. Oct. 3, 2013). (Our prior posts on those cases are available here and here). A district court in Washington recently followed this trend.

The court in Gragg v. Orange Cab Co., Inc., et al., No. 12-0576, U.S. Dist. LEXIS 29052 (W.D. Wash. Feb. 28, 2014) held that the definition of ATDS does not include equipment that "merely has the potential to store or produce telephone numbers using a random or sequential number generator or to dial telephone numbers from a list without human intervention." Id. at *7 (emphasis added). This holding further expands the authority on which defendants can rely when arguing that certain equipment is not an ATDS.

What qualifies as an ATDS is important because the use of an ATDS is a prima facie element of many TCPA claims. See 47 U.S.C. § 227(b)(1). The definition of ATDS has been the subject of much debate, however. The statute defines an ATDS as "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." 47 U.S.C. § 227(a)(1). The FCC stated in a 2008 ruling that this definition should also include predictive dialers that can "dial [lists of] numbers without human intervention." In the Matter of Rules & Regulations Implementing the TCPA of 1991, 23 F.C.C.R. 559, 566 ¶ 14 (Jan. 4, 2008). One of the most contested issues has been whether the phrase "has the capacity" should be interpreted broadly or narrowly. The Gragg court followed the lead of the Hunt and Stockwell courts and defined it narrowly on two separate occasions. The first was when it granted the defendants' motion for summary judgment, Gragg, No. 12-0576 (W.D. Wash. Feb. 7, 2014), and the second was when it denied the plaintiff's motion for reconsideration of that ruling, Gragg, U.S. Dist. LEXIS 29052.

In Gragg, the defendant taxicab company used a computer program, a product of the co-defendant Ridecharge, Inc., that linked together the taxi dispatch center, mobile data terminals in individual taxi cabs, and an SMS text messaging system. Gragg, No. 12-00576, slip op. at 2. When a...