The Kennedy Privacy Law Firm

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1 The Kennedy Privacy Law Firm th Street, NW Washington, DC Charles H. Kennedy Phone: (202) Mobile: (202) January 2, 2018 emarketing Newsletter business customers as falling outside the autodialer category defined in the Telephone Consumer Protection Act ( TCPA ). As we discuss below, the HCI system s legal successes are real, but do not change the fact that any automated dialing system is vulnerable to challenge under the FCC s overbroad reading of the autodialer definition. Also, as the new year proceeds, we ll continue to watch the Court of Appeals docket for a decision in ACA v. FCC. If there s any news, I ll send a bulletin from wherever my wanderings take me. Best wishes to all. The Autodialer Definition in the Courts: the Legal Success of the HCI System No sane person wants to read a long legal newsletter just after the Holidays, so this one is short and sweet. In response to inquiries from clients and friends, I m offering my thoughts on the HCI dialing system from LiveVox, which that company is promoting to 1 In the Matter of Rules and Regulations Implementing the Telephone Consumer As readers of this Newsletter know, the FCC s Omnibus TCPA Order of 2015 declared that anything more sophisticated than a rotary telephone might be an automatic telephone dialing system ( ATDS or autodialer ) as defined in the TCPA. 1 Protection Act of 1991, 30 FCC Rcd 7961, 7974 (July 10, 2015) ( 2015 Order ). 1

2 Accordingly, any company that uses even the most rudimentary automated dialing system is at risk if it places calls to mobile telephone numbers without the called party s prior express consent. When the 2015 Order was released, businesses were rightly concerned about how literally courts would apply the FCC s analysis to pending and future TCPA classaction claims. It is now over two years since the 2015 order was entered, and dozens of court decisions have applied the FCC s rationale to a variety of dialing equipment and systems. One interesting development is several courts apparent endorsement of the Human Control Initiator ( HCI ) dialing system from LiveVox, Inc., which we discuss below. The Human Intervention Question On at least two occasions preceding the 2015 order, the Commission announced what seemed to be a simple criterion for identifying an ATDS: in the Commission s words, the basic function [of an autodialer] is the capacity to dial numbers without human intervention. 2 Although this standard did not answer all questions (for example, how much human intervention, and at what stage in the calling process, will take a device out of the ATDS category?), it appeared to reduce the autodialer classification problem to a single, manageable inquiry. Unfortunately, the FCC muddied the waters when it stated, in its 2015 Order, that the capacity to dial without human intervention 2 The quotation is from Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 18 FCC Rcd 14014, (2003) (emphasis in original). The Commission reaffirmed the human intervention test in Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991; Request of ACA International for Clarification is not the sole test of an autodialer. According to the Commission, how the human intervention element will affect the status of a device will be specific to each individual piece of equipment, and therefore must be a case-by-case determination. 3 Other features of a device, such as the ability to store numbers or dial them randomly or in sequence, might trump the fact that a device requires human intervention in order to complete a call. 4 And, just to muddy the waters further, the Commission stated that even a device s unutilized potential to function as an autodialer might bring it within the definition. 5 Despite the FCC s hedging, courts have relied strongly on the human intervention test in cases decided since the 2015 order was entered, including cases that involve the HCI dialer. The HCI System in the Courts LiveVox s HCI system is Web-based and requires human intervention as part of the dialing process. An employee of the HCI user, known as a clicker agent, connects with the LiveVox portal, which advises the agent when another employee, known as a closer agent, is available to take a call. Based upon that information, the clicker agent confirm[s] in a dialogue box that a call should be launched to a particular telephone number. 6 The software that enables this process is hosted at LiveVox s facility not the user s premises on a server that is separate from the equipment that supports LiveVox s fully automated dialing products. and Declaratory Ruling, 23 FCC Rcd 559, 566 (2008) Order, Id., Id., Arora v. Transworld Systems Inc., Case No. 15- cv-4941 (N.D. Ill. 2017), Slip Op. p. 1 ( Arora ). 2

3 HCI does not use any statistical algorithm to minimize agent wait time between calls, nor does it incorporate any random or sequential number generator. 7 HCI also does not possess any features that may be activated to enable automated calling. 8 The first decision to apply the rationale of the 2015 Order to an HCI system is Pozo v. Stellar Recovery Agency, Inc., in which Stellar, a debt collector, allegedly made automated collection calls to a mobile number that it mistakenly believed was assigned to a debtor. 9 The recipient of the calls sued Stellar for abusive collection practices and violations of the TCPA. Stellar moved for summary judgment on the TCPA claims, arguing that the calls were placed using an HCI system that did not satisfy the definition of an ATDS. The court agreed with Stellar, finding that even under the interpretation set out in the FCC s 2015 Order, the HCI system fell outside the autodialer definition because it required human intervention to complete the dialing process and could not be used in a full-automatic mode unless Stellar first hired a team of programmers to modify and rewrite large portions of HCI s code to make automated calls without human intervention. 10 In the court s view, the fact that the defendant might be able to undertake such a pointless endeavor does not mean that HCI has the capacity to be an autodialer or that it has the potential functionality to be an autodialer within the meaning of the TCPA and the 2015 Order. 11 At least three subsequent decisions have followed the Pozo court s reasoning. Notably, in Smith v. Stellar Recovery, Inc., the plaintiff sued the same debt collector that was sued in the Pozo case. 12 As in Pozo, Stellar argued that its HCI dialing system did not satisfy the TCPA s autodialer definition. The court upheld this argument, agreeing with a magistrate s finding that the HCI equipment is configured in such a way that it cannot dial phone numbers without the clicker agents initiating the call, and therefore the system, while clearly an advanced and efficient method of contacting debtors, is not an autodialer. 13 The magistrate in Smith also addressed, in more detail than the Pozo court had, the capacity language of the 2015 Order. As described by the magistrate, the plaintiff s complaint apparently argued that the HCI system had both the present and the potential capacity to perform autodialer functions. As to HCI s present capacity, the plaintiff noted that the HCI system relies upon a campaign database of telephone numbers that are stored on a LiveVox server and presented to the clicker agent for dialing by an Automatic Call Distributor ( ACD ). In the plaintiff s view, all of these components combined give the HCI system the capacity to store numbers and dial those numbers. 7 Pozo v. Stellar Recovery Collection Agency, Inc., Case No. 8:15-cv-929-T-AEP (M.D. Fla. 2016), Slip Op. p. 4 ( Pozo ). 8 Id., Slip Op. p Pozo, supra. 10 Id., Slip Op. pp Id., Slip Op. p. 11 (emphasis in original). 12 Smith v. Stellar Recovery, Inc., Case No. 2:15- cv (E.D. Mich. March 13, 2017), adopting a magistrate s recommendation that summary judgment be granted for plaintiff. The magistrate s report and recommendation is set out in Smith v. Stellar Recovery, Inc., Case No. 2:15- cv (E.D. Mich. Feb. 7, 2017) ( Smith Magistrate s Report and Recommendation ). 13 Smith Magistrate s Report and Recommendation, Slip Op. p. 10 (emphasis in original). 3

4 The magistrate sidestepped the plaintiff s present storage capacity argument by distinguishing the HCI system, including the ACD and the clicker agent s dialing function, from the LiveVox server in which the campaign database of numbers is kept and from which the ACD retrieves numbers for dialing. The magistrate then pointed out that the ACD merely feeds numbers individually to the clicker agent and lacks any kind of persistent storage capacity. 14 Accordingly, the HCI system lacks present storage capacity for purposes of the autodialer definition. On the question of the HCI system s potential capacity, the plaintiff apparently argued, like the plaintiff in Pozo, that the system could be configured to dial automatically, and pointed out that another LiveVox product, known as Right Party Connect or RPC, performs automatic dialing. The magistrate rejected this future capacity argument: The undersigned notes that the FCC has interpreted capacity broadly, finding that a piece of equipment can possess the requisite capacity to satisfy the statutory definition of autodialer even if, for example, it requires the addition of software to actually perform the functions of an autodialer.... [The defendant s expert] testified, however, that the HCI system includes both hardware and software components, that these are not shared by the RPC or any of the other dialing systems, and that they are unique to the HCI system... Plaintiff did not present proof to dispute this; for example, proof that the HCI hardware 14 Id., Slip Op. p Id., Slip Op. p Schlusselberg v. Receivables Performance Management, LLC, Civ. Action No (FLW) (D.N.J. 2017). components could run the RPC program, or proof that the HCI system is simply a software program without its own uniquely configured hardware components. 15 A subsequent case involving the HCI system was decided in June, In that case, the plaintiff argued that HCI is in fact an ATDS, because he allegedly heard an initial period of silence when he answered Defendant s calls. 16 In the absence of evidence to support this inference, and in light of the HCI system s reliance on a clicker agent s human intervention to place each call, the court granted the defendant s motion for summary judgment. 17 Finally, in August of 2017, a federal court in Illinois granted summary judgment in favor of a caller that allegedly called the plaintiff using an HCI system. By this time the court had the benefit of the Pozo, Smith and Schlusselberg decisions, and had no difficulty finding that the HCI system is not an autodialer. 18 Implications of the HCI Decisions LiveVox has cited its judicial successes in its marketing (which is fair enough so would I!) but users of dialing systems should be aware that as long as the 2015 Order remains authoritative, no automated dialing system including the HCI is entirely immune from challenge. For example, in the Smith case, the defendant benefited from the magistrate s decision to separate the phone number database in the LiveVox server from the HCI system, which then could be characterized as lacking the capacity to store numbers. A proplaintiff court might have decided that 17 Id., Slip Op. p Arora, supra. 4

5 question differently, and that decision might have resulted in a defeat for the defendant. 19 We also should point out that to the extent the rationale of the four HCI cases is persuasive to other courts, that rationale should extend to any system that uses click-through dialing and retrieves numbers from a Webbased database that is separate from the equipment that feeds individual numbers to the dialing agent. 20 LiveVox s HCI system is not the only product in the marketplace that functions in these ways. This is where I add the usual disclaimers: Nothing in this Newsletter is legal advice, and you should let me know if you want off my mailing list by ing me at ckennedy@kennedyonprivacy.com, where I m also interested in receiving questions and comments. 19 See, e.g., Blow v. Bijora, Inc., Case Nos , (7 th Cir. 2017), Slip Op. p. 14 (finding that evidence of a dialer s lack of present capacity to use a random or sequential number generator is insufficient to take the dialer out of the ATDS category, if it can be shown that the device had the potential capacity to use a random or sequential number generator). 20 See, e.g., Derby v. AOL, Inc., Case No. 5:15-cv RMW (N.D. Cal. 2015), Slip Op. pp. 7-8 (finding that defendant s use of AOL Instant Messaging did not constitute use of an autodialer). 5