What is a “System” for ATDS Purposes? Important New TCPA Decision Takes a Decidedly Narrow Read on a Tricky Issue of (Almost) First Impression

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While we all await word of SCOTUS (hopefully) striking down the TCPA in the very near future, I bring word of an interesting case analyzing the definition of the word “system” in the TCPA—an often-overlooked part of the statute’s Sphyxian ATDS formulation.

The case is Panzarella v. Solutions, CIVIL ACTION NO. 18-3735, 2020 U.S. Dist. LEXIS 104746 (E.D. Pa. June 16, 2020) and be careful what you may be hearing about the case from other sources—it is way more important than people are making it out to be. (Just let me go first folks.)

Indeed, Panzarella is a case that almost ended the entire TCPAWorld as we know it (!) and it contains a very important take away for folks trying to manage TCPA risk (which is everyone reading this article). 

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Starting at the beginning, the TCPA governs automated telephone dialing systems, which are defined as “equipment” with the capacity to do… something. The precise functionalities required of an ATDS are the subject of endless debate but do not really play into Panzarella. Rather the issue there is what constitutes a dialing “system” to begin with? Or, perhaps better construed, what is the logical end to integrated components of “equipment” essential to a system placing a call and—if the “equipment” won’t function without those components—how can it be considered dialing equipment at all?

Ship of Theseus anyone?

In Panzerlla the Plaintiff argued that the Plaintiff’s dialer just can’t work without an attached database management system which—for whatever reason—has the ability to randomly generate phone numbers. Since the ability to randomly generate and dial numbers is the Holy Grail of TCPA application, the Plaintiff figures they have a sure thing—the “system” has the capacity to generate numbers and dial them. So, the argument goes, the system is an ATDS subject to the TCPA.

While I hate the argument, it actually isn’t terrible. In fact, it’s pretty good. We’ve seen courts stretch the definition of “system” much farther—for instance to encompass multiple cloud-based dialer domains that operate completely differently merely because they were accessible on a single computer. Eesh.

On the other hand we’ve seen courts refuse to deem a dialer capable of random dialing merely because an excel spreadsheet might be used to generate random numbers and all computers these days have an excel program icon on their desktop.

But Ponzarella’s argument was more than that Defendant’s system can make use of random numbers generated on a program available on the computer, it was that Defendant’s system must make use of a program that itself can separately, but non-essentially, generate such numbers.  So this is a bit of a tweener—this is the first case where a Plaintiff has argued that an essential component of a dialing system can undeniably perform a non-essential but statutorily-identified function: the ability to randomly generate numbers.

Interesting stuff.

The Court didn’t really take the issue head on, however, and elected instead to reject the first premise of Plainiff’s argument—that the database management system was part of the dialing “system” to begin with. And that ruling has big consequences. First, here’s the critical language:

Based on the record presented, the Court finds that the SQL server is distinct from the ININ dialing system.

Since the “system” making the calls—ININ—was distinct from the component that could generate numbers– the SQL server—the “system” could not perform the enumerated ATDS functions.

Cool. But why does the Court conclude SQL isn’t part of ININ if ININ can’t place calls without SQL’s help?

Interestingly the Court’s reasoning is based on the same basic premise underlying ACA Int’l rejection of the old 2015 TCPA Omnibus ruling—it must be so, because any other interpretation would render the application of the TCPA too expansive.

Everyone (hyperbole) uses SQL database technology. SQL serves as the back-end for a huge number of systems of record that, in turn, feed dialers. So if Plaintiff’s argument were accepted every one of those systems would qualify as an ATDS. And that—says the Panzrealla court—would render the TCPA far too expansive and far too broad.

I mean, if that were the case, then the mere storage of numbers in a database to be fed to a dialer to be automatically called would almost always trigger the TCPA. And that can’t be right.

See the trick folks?

My most sophisticated readers are smiling right now (I see you.) The Panzrealla Plaintiff’s argument essentially sought to harmonize Marks with Gadelhak by recognizing that the world’s most oft-used database management system has the ability (for some strange reason) to randomly or sequentially generate numbers. So, in essence, every system that can store (in a database) and dial numbers automatically would become an ATDS under either Marks or Gadelhak. It would have rendered the distinction in statutory ATDS interpretation meaningless as a practical matter and Marks would—in essence—have been the law wherever the argument was accepted.

Yikes.

Well we can thank the Panzrealla court for knocking that train off its TCPAWorld-ending tracks. Please don’t miss the importance of this one folks. If you see a “the-dialer-system-ncludes-the-database” argument keep this case handy!

One other critical take away here—pay attention to this one too—the SQL server was housed on different physical servers from the dialing software servers. Super important to the outcome here.

I know every single tech person out there is rolling their eyes saying “so what?” So this—normal people think that software programs residing in different metal cages are different systems even if they are connected through wires and are really no different than sequestration in virtual server environments in your techie brain. No but seriously—this stuff can make a world of difference and in Panzrella it probably resulted in the Defendant winning summary judgment. Here’s proof:

The database server being housed in separate hardware suggests that it should be considered a distinct system.

Notice that this ruling was made at the summary judgment stage, meaning that the court found–as a matter of law–that no reasonable juror could have concluded SQL was part of this dialing system. Would the court have still reached that conclusion if all the software components were sitting on a single Blade? Hmmmm….

Think of this as social distancing for your software components. (Too soon?) 

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