Consumer Finance Litigation

In Keyes v. Ocwen Loan Servicing, LLC, No. 17-cv-11492, 2018 WL 3914707 (E.D. Mich. Aug. 16, 2018), the Eastern District of Michigan determined that the system Ocwen Loan Servicing, LLC ("Ocwen") used to place calls, the Aspect Unified IP ("Aspect System"), was not an automatic telephone dialing system ("ATDS") within the meaning of the Telephone Consumer Protection Act ("TCPA").

Plaintiff Darcel Keyes ("Plaintiff") claimed Ocwen violated the TCPA by using its Aspect System to call her, despite her objections. See id. at *1. To support her claims, Plaintiff relied on an expert report that concluded Ocwen's Aspect System was an ATDS. The court, however, determined Plaintiff's expert report should be excluded because it lacked a sufficient factual basis and included impermissible legal conclusions. See id. at *3-5. The court explained Plaintiff's expert report "lacks an adequate factual basis because . . . [Plaintiff's expert] has not tested the relevant equipment." Id. at *4. Instead, Plaintiff's expert had merely "reviewed documents and manuals regarding (1) predictive dialers and [ATDSs], and (2) the Aspect System generally." Id. The court concluded that such review without testing Ocwen's Aspect System was not sufficient to meet the Daubert requirements. See id. Additionally, the court found that Plaintiff's expert's report improperly included legal conclusions because the expert had "defined the governing legal standard by providing an extensive history and explanation of what constitutes an ATDS under the TCPA" and the FCC's guidance and "applied that standard to the facts of the case." Id. at *5. The court, therefore, excluded Plaintiff's expert report.

The court then turned its analysis to whether Ocwen's Aspect System constituted an ATDS. In concluding that it did not, the court looked to the D.C. Circuit's decision in ACA International v. Federal Communications Commission, 885 F.3d 687 (D.C.C. 2018) and the language of the TCPA itself. The court noted that the ACA International decision "vacated the [FCC's] definition of the capacity of an autodialer" and "set aside the [FCC's] rulings regarding the functions an autodialer must be able to perform." Id. at *6. The court further determined that ACA International's decisions regarding the FCC guidance were binding because, when the various petitions challenging the 2015 FCC Guidance were assigned to the D.C. Circuit, the D.C. Circuit "became 'the sole forum for addressing…the validity of the FCC's rule[].'" Id. (citations omitted). Thus, the court concluded that the ACA International ruling on the FCC guidance was binding, even on courts in other circuits. See id. To evaluate whether Ocwen's Aspect System constituted an ATDS, the court analyzed the system's capacity and function.

The court recognized that the Second and Third Circuits determine whether a device has the capacity to constitute an ATDS by examining what will "'enable the device to function as an autodialer: . . . the simple flipping of a switch, or . . . essentially a top-to-bottom reconstruction of the equipment?' . . . The former would constitute an ATDS, whereas the latter would not." Id. at *7. The court found that Ocwen had demonstrated it "would need to alter the system's source code," which Ocwen did not have access to, in order for the Aspect System to function as an ATDS. Id. The court also observed that Plaintiff's capacity argument, when logically extended, was too similar to the approach to capacity that was rejected in ACA International. Id. Because the Aspect System did not have the capacity to function as an ATDS, the court concluded Ocwen was entitled to summary judgment on Plaintiff's TCPA claims. Additionally, the court concluded that to be an ATDS the device "must be able to generate random or sequential numbers to be dialed." Id. at *8. The court found that the Aspect System only dials from a set list and does not use a random or sequential number generator to place calls. See generally id. The court, therefore, determined Ocwen was entitled to summary judgment on the TCPA claims because the Aspect System "d[id] not possess the functions necessary to be an ATDS." Id. at *7.

The Keyes decision thus demonstrates a method for determining whether a device qualifies as an ATDS even when the FCC guidance is not considered.