The Telephone Consumer Protection Act (“TCPA”) carries the risk of annihilative damages for class action defendants based on its remarkable statutory damages scheme. Because of this risk, the statute has been the subject of significant court and agency attention recently. And much of this attention – from the D.C. Circuit’s opinion in ACA International to the Federal Communication Commission’s (“FCC”) upcoming ruling – has been aimed at limiting the TCPA’s reach. Some in the industry hoped that the next nail in the TCPA’s coffin (after the impending FCC decision and PDR case) would be the United States Supreme Court agreeing to review the Ninth Circuit’s recent decision in Marks v. Crunch San Diego, which advanced a controversial interpretation of the statute’s reach. Now, we can all put our hammers away for a while because Marks has settled according to a recent report from ACA International.

Although the settlement prevents Supreme Court review, the impact of the ruling in Marks is by no means certain. In the coming months, the industry expects the FCC to issue rules that may contradict Marks. If that occurs, courts in the Ninth Circuit will be forced to confront a conflict between Marks and the FCC, which may ultimately percolate up to the Ninth Circuit again. At this point, only one thing is clear – the Marks decision will survive for another day as authority for interpreting the TCPA in federal courts in Arizona, California, Idaho, Montana, Nevada, Oregon, and Washington.

Background of the Marks Case

Jordan Marks signed up for a gym membership with Crunch Fitness. Over an eleven-month period, he received three text messages from the gym, which Marks contends did not have prior express consent to contact him. Crunch uses a “Textmunication” system, which is a web-based marketing platform designed to send promotional text messages to a list of stored telephone numbers, which can be input manually or automatically.

Based on these text messages, Marks filed a putative class action against Crunch in 2014, alleging violations of the TCPA. The district court granted summary judgment in Crunch’s favor, holding that its system did not qualify as an Automatic Telephone Dialing System (“ATDS”) because it did not have the capacity to randomly or sequentially generate numbers and then dial those numbers. On September 21, 2018, the Ninth Circuit reversed. In its decision, the Court took an exceptionally broad view of what constitutes an ATDS. This decision was contrary to precedent in several other circuits, including the Third Circuit and D.C. Circuit. On October 30, 2018, the Ninth Circuit denied a petition for rehearing en banc.

Crunch’s Appeal

On January 28, 2019, Crunch filed a petition for writ of certiorari in the U.S. Supreme Court, asking the Court to overturn the Ninth Circuit’s decision in Marks. In the appeal, Crunch contended that the Ninth Circuit’s interpretation of the definition of an ATDS contradicted the plain text and purpose of the statute. Specifically, the petition argued that the Ninth Circuit’s interpretation omits the statutory requirement that a telephone system use a random or sequential number generator to qualify as an ATDS in favor of a consumer-friendly definition of the phrase. The petition focused on the fact that Marks created a Circuit split as to the meaning of ATDS.

Although there was no guarantee that the Supreme Court would grant certiorari, many in the industry hoped that the Court would use Marks to settle the meaning of ATDS nationwide and, in turn, limit much of the TCPA litigation seen in recent years. Now that the parties have settled Marks, the decision is the law in the Ninth Circuit for the time being.

What to Expect Next

In the coming months, the FCC is expected to issue new rules on the meaning of an ATDS under the TCPA. If those rules interpret the definition of ATDS more narrowly than Marks, it will set up an interesting debate in the Ninth Circuit.

When the Ninth Circuit decided Marks, it did so in the absence of guidance from the FCC. The D.C. Circuit had vacated the FCC’s previous guidance months earlier in the ACA International case. If the FCC’s forthcoming rules conflict with Marks, which many expect, district courts in the Ninth Circuit will have to decide whether to follow the FCC or the Ninth Circuit. Or, they may avoid that debate altogether by concluding that Marks would have followed FCC guidance if it existed at the time, which would allow district courts to harmonize Ninth Circuit jurisprudence with FCC guidance.

On that last point, we expect additional guidance from the Supreme Court soon. In November 2018, the Supreme Court granted certiorari in PDR Network LLC, et al. v. Carlton & Harris Chiropractic. In that case, the Supreme Court will address how much deference district courts must give to the FCC when interpreting the TCPA. In short, the TCPA has many moving parts – from FCC Orders, to PDR Network, to the impact of Marks. Troutman Sanders will continue tracking these issues closely.