Gadelhak v. AT&T: The Seventh Circuit Joins the Eleventh Circuit in Taking a Big Bite Out of the TCPA

A .pdf copy of the Gadelhak opinion can be found here.

My last blog post (found here) provided a background of the evolving definition of “automated telephone dialing system” (ATDS) under the Telephone Consumer Protection Act (TCPA) and described the FCC’s long-running effort to expand the scope of the term.  In recent times, the FCC’s repeated attempts to classify predictive dialers as an ATDS have come under scrutiny.  First, the FCC faced issues with its interpretation in the case ACA Int’l v. FCC, 885 F.3d 687, 702-703 (D.C. Circ. 2018), which called into question the FCC’s inconsistent prior rulings that did not seem to be in harmony with the statutory language.  Then, last month, the Eleventh Circuit Court of Appeals in Glasser v. Hilton Grand Vacations Co., LLC, 948 F.3d 1301 (11th Cir. 2020) determined that predictive dialers (the industry standard equipment used for automated dialing) did not fall within the definition of ATDS because they did not use random or sequential number generators and, instead, called numbers from a list.  The prior blog post ended with this warning:

Following Glasser, it’s clear that the Ninth Circuit and Eleventh Circuit are directly at odds. Now, with two Circuit Courts advancing diametrically opposed statutory interpretations, the remaining Circuits will likely have to line up and pick sides.

Today, the Seventh Circuit picked a side with its decision in Ali Gadelhak v. AT&T Services, Inc., No. 19-1738, 2020 WL 808270 (7th Cir. Feb. 19, 2020).  The Court began its analysis of the ATDS definition by stating that “[t]he wording of the provision that we interpret today is enough to make a grammarian throw down her pen.”  The Court quoted the TCPA, which defines an ATDS as equipment with the capacity “to store or produce telephone numbers to be called, using a random or sequential number generator,” as well as the capacity to dial those numbers.  The Court noted that the main issue splitting the circuits is: “what the phrase ‘using a random or sequential number generator’ modifies.”

The specific system at issue in Gadelhak was AT&T’s “Customer Rules Feedback Tool,” a device that sent surveys to customers who have interacted with AT&T’s customer service department.  AT&T used the tool to send Chicago resident Ali Gadelhak five text message survey questions in Spanish.  Gadelhak was neither an AT&T customer nor a Spanish speaker and brought a national class action in response to his receipt of the texts.

The Court explained that when the TCPA was passed, telemarketers primarily used systems that randomly generated numbers and dialed them. These early telemarketers did not discriminate when determining who would answer their phone call because everyone was a potential purchaser of their product.  However, telemarketing practices have changed, as telemarketers have determined that it is more efficient and productive to target specific customers.  Thus, telemarketers now use the same equipment used by many companies to reach customers: equipment that automatically dials from a list.  It is this equipment, often referred to as a “predictive dialer,” that the FCC has found falls within the definition of the statute.

The Seventh Circuit noted that it had previously addressed this ATDS question in Blow v. Bijora, Inc., 855 F.3d 793 (7th Cir. 2017), but that at the time, a 2015 FCC Order interpreting the Act was on the books.  The Blow court determined that, absent a direct appeal of the order, the Hobbs Act required the Seventh Circuit to adopt the FCC’s definition.  However, since Blow was decided, the D.C. Circuit in ACA Int’l, had struck down portions of the 2015 FCC order, including its interpretation of the term ATDS.  Importantly, the Court then noted:

And contrary to Gadelhak’s assertion, ACA International did not leave prior FCC Orders intact.  Instead, the D.C. Circuit clarified its review also covered “the agency’s prior pronouncements” – its prior Orders.  Neither Blow nor any FCC Order binds us in this case.  We therefore interpret the statute’s text as though for the first time.

The Court then stated there were four (4) possible ways to interpret the statute:

Possible Statutory Interpretations

An ATDS is “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.”

(1) The phrase “using a random or sequential number generator” might modify both store and produce, which would mean that a device must be capable of performing at least one of those functions using a random or sequential number generator to qualify as an ATDS. (The Court noted that this is how the Third and Eleventh Circuits interpret the statute in Glasser (discussed above) and Dominguez v. Yahoo, Inc., 894 F.3d 116 (3rd Cir. 2018).)

(2) The phrase might describe the telephone numbers themselves, specifying that the definition captures only equipment that dials randomly or sequentially generated numbers.  (The Court noted that was how the district court had interpreted the provision.)

(3) The phrase might limit only the word produce, which would mean that the definition captures not only equipment that can produce numbers randomly or sequentially, but also any equipment that can simply store and dial numbers.  (The Court noted that this was the Ninth Circuit Court of Appeals’ interpretation in Marks v. Crunch San Diego, LLC, 904 F.3d 1041 (9th Cir. 2018).)

(4) The phrase could describe the manner in which the telephone numbers are to be called, regardless of how they are stored, produced, or generated.  (The Court noted that no court had taken this position.)

The Court then addressed each of these interpretations.  The Court’s findings regarding each interpretation are summarized below.

Interpretation One – The phrase modifies both store and produce

  • Pros:
    • Most natural interpretation in light of syntax and grammar.
    • When two conjoined verbs (to store or produce) share a direct object (telephone numbers to be called), a modifier following that object (using a random or sequential number generator) customarily modifies both verbs.
    • The placement of the comma in the statute further suggests that the modifier is meant to apply to the entire preceding clause.
  • Cons:
    • It is hard to see how a number generator could be used to “store” telephone numbers.
      • However, devices have previously existed that did have the capacity to generate random numbers and then store them in a file for a significant time before selecting them for dialing.
  • Conclusion: This is the most reasonable interpretation of the statute and is adopted by the Court.

Interpretation Two – The phrase modifies “telephone numbers” that are dialed

  • Pros:
    • This interpretation avoids the problems associated with the word “store” that the first interpretation causes.
  • Cons:
    • It is grammatically suspect. The phrase “using a random or sequential number generator” is an adverbial phrase with an elided preposition – it means “[by] using a random or sequential number generator.”  As an adverbial phrase that describes how something is to be done, it cannot modify a noun in this context.
  • Conclusion: Because telephone numbers obviously lack the capacity to “use” a number generator, it really requires the reader to add the word “generated” into the definition. Because the task of the Court is to interpret the words of Congress, not add to them, this cannot be the best interpretation.

Interpretation Three – The phrase modifies only produce

  • Pros:
    • This interpretation avoids the problems associated with the word “store” that the first interpretation causes.
    • The interpretation does not require the court to add a word to the statute, as the second interpretation does.
  • Cons:
    • It requires the court to contort the statutory text almost beyond recognition. It would be unnatural to splice “store” and “produce” to have the final modifying phrase “using a random or sequential number generator,” modify only the latter verb.
    • It would require a significant judicial rewrite of the statute.
    • It would be so broad of an interpretation as to include all smart phones in the definition of ATDS.
  • Conclusion: Because of both the grammatical issues presented in this interpretation and the unusual impact of such a broad finding, this cannot be the correct interpretation.

Interpretation Four – The phrase modifies only how numbers are to be called

  • Pros:
    • None
  • Cons:
    • Congress chose to insert a comma between “to be called” and “using a random or sequential number generator” and “a qualifying phrase separated from antecedents by a comma is evidence that the qualifier is supposed to apply to all the antecedents instead of only to the immediately preceding one.”
  • Conclusion: This interpretation is inferior to the first interpretation.

To date, 2020 has been a bad year for consumers with potential TCPA claims.  Both Glasser and Gadelhak have severely restricted the scope of the statute and highlighted the significant interpretive flaws contained within the Ninth Circuit’s Marks decision.  Absent a Congressional fix, one of the most litigated statutes in the United States may fade into obscurity.

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