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Third Circuit Rules That Caller Must Use An “Automatic Telephone Dialing System’s” Ability To Produce Or Store Telephone Numbers Through Random Or Sequential Number Generation To Trigger Potential Liability Under The TCPA’s ATDS Provision – Telecoms, Mobile & Cable Communications



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On June 14, 2022, the Third Circuit Court of Appeals (Third
Circuit) issued a significant decision regarding the TCPA’s
restrictions in Section 227(b)(1)(A)(iii) on using an automatic
telephone dialing system (ATDS) definition to make calls or texts
to cellphones without prior express consent. In Panzarella v. Navient
Solutions, Inc
, No. 20-2371 (3d Cir. June 14, 2022)
(Panzarella), a divided panel of the Third Circuit held
that merely using a system with the capacity to be an ATDS to send
the challenged text or message is not enough to establish a Section
227(b)(1)(A)(iii) violation. Instead, the court ruled that a
Section 227(b)(1)(A)(iii) plaintiff must prove, among other things,
that the challenged call or text “employ[ed] either an
ATDS’s capacity to use a random or sequential number generator
to produce” the telephone number dialed “or its capacity
to use a random or sequential number generator” to store the
telephone number dialed.

The TCPA prohibits individuals from using an ATDS to make
non-emergency calls without the prior express consent of the called
party to “any telephone number assigned to a paging service,
cellular telephone service, or any service for which the called
party is charged for the call.” TCPA § 227(b)(1)(A)(iii).
The statute defines an ATDS as “equipment which has the
capacity (A) to store or produce telephone numbers to be called,
suing a random or sequential number generator; and (B) to dial such
numbers.” TCPA § 227(a)(1).

In Panzarella, Plaintiffs brought a putative class
action against student loan servicer, alleging the loan servicer
violated the TCPA by using an ATDS to call theirs and others’
cellphones without prior express consent. The loan servicer moved
for summary judgment, contending that it did not call Plaintiffs
using an ATDS because their dialing system did not have the ability
to generate and then call random or sequential telephone numbers.
The United States District Court for the Eastern District of
Pennsylvania agreed. And a divided panel of the Third Circuit
affirmed on alternative grounds. In so doing, the Court reach three
main conclusions.

First, the Third Circuit concluded that the TCPA requires courts
to consider whether all the devices employed together by the
defendant to conduct dialing campaigns constitute an ATDS.
Disagreeing with the district court, the Third Circuit held that to
determine whether “equipment” is an ATDS, one must look
at all the devices, technology, hardware and software employed to
make the call and determine whether they collectively or
individually have the current capacity to (1) store or produce
telephone numbers using a random or sequential number generator and
to (2) dial those numbers.

Second, the Third Circuit concluded that Supreme Court’s
recent ATDS decision in Facebook, Inc. v. Duguid, 141 S.
Ct. 1163 (2021), does not stand for the proposition that a dialing
system will constitute an ATDS only if it actually uses a random or
sequential number generator. Instead, the majority held that
whether equipment “qualifies as an ATDS turns on that
equipment’s ‘capacity’ to employ a random or sequential
number generator to store or produce telephone numbers, not its
actual use of such a generator.”

Third, construing 227(b)(1)(A)’s requirement that challenged
calls or text be made “using” an ATDS, the Court
concluded that the relevant inquiry turns not on whether the
dialing equipment is an ATDS, but on whether the call
“employ[ed]” the defining features of any ATDS –
the “capacity to use a random or sequential number generator
to produce” or “store” the telephone number dialed
– when it made the challenged call or text. To help
illustrate its conclusion, the Court offered an example of a
hypothetical debt collector whose ATDS can dial in two modes
– (1) automatic: where random or sequential numbers are
dialed, and (2) list: where numbers are dialed from debt
collector’s customer list. It then explained that, while
collector’s equipment is an ATDS (because it has the capacity
to produce and dial random or sequential telephone number), there
is no Section 227(b)(1)(A)(iii) violation for calls or texts made
in list mode because the defining ATDS features of random or
sequential number generation are not used. Applying this
explanation, the Court concluded that the loan servicer’s calls
to the plaintiffs did not violate Section 227(b)(1)(A)(iii)because
the plaintiffs had failed establish that the loan servicer did in
fact rely on random or sequential number generation to make
them.

The Panzarella decision is significant as it requires
plaintiffs to prove that a challenged call employed an ATDS’s
capacity to generate random or sequential numbers to store or
produce telephone numbers, and not just that the dialing technology
has the capacity to be an ATDS. This higher standard should
alleviate the concerns of debt collectors in the Third Circuit who
are considering using dialing systems that could generate random or
sequential numbers for loan or jacket numbers, but who would not
use the technology to do so.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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