Why No One Will Tell You If You Are Using an ATDS.

The number one liability in our industry has been telemarketing-based class actions for the better part of the past decade. This was no surprise. When the 2013 amendments to the Telephone Consumer Protection Act went into play, it was obvious the poorly drafted legislation was going to create a fertile breeding ground for class action attorneys – which in turn has created a circus-like environment of plaintiff attorneys and defense attorneys, all claiming to be telemarketing “experts” and jockeying to get a piece of the action.

Historically, the vast majority of telemarketing class actions revolve around the use of the automatic telephone dialing system.  Clients should be very well aware that the use of an ATDS when calling or texting a lead’s cell phone – without the proper written authorization to do so – opens you up to a potentially disastrous class action.  We can conservatively estimate that our industry has been hit with hundreds of millions of dollars in class action losses over the past 10 years alone.  And all of this is due to the failure of the FTC to properly define exactly what is an ATDS, leaving it to the court system over the past 10+ years to figure this out at the expense of contractors and other businesses, and all while lining the pockets of the 1- 800-Sue-You lawyers.

But if you ask your CRM or phone system provider, no one is going to give you a clear yes-or-no answer as to whether or not your system is using an ATDS.  At best, you’re going to get a qualified “not likely” or “we don’t believe so” reply.

The reason for this is because it depends not only on the structure and use of your phone system, but on the jurisdiction where you’re operating or where you’re being sued. For many years, even an iPhone could be considered an ATDS. Then the Supreme Court told us in Facebook, Inc. v. Duguid that to be an ATDS, the system actually needs to have the capacity to use a random or sequential number generator (but even that decision left open quite a bit of interpretation). 

The good news is that the majority of courts in the country are now starting to take the position that a telephone system is not an ATDS if it is selecting or manipulating telephone numbers from a pre-existing database. In other words, if the numbers being stored/produced/dialed by the telephone system were not being generated by that system, but instead are basically telephone numbers from leads that you have acquired and entered into the system, then the system should not be considered an ATDS for purposes of telemarketing liability.  We are now seeing this position being upheld by the Courts of Appeals of the Second, Third, Eighth, and even the dangerous Ninth Circuit.  Oddly, in normally conservative states, such as Texas and Colorado, the opposite position still tends to hold sway, finding that telephone systems using a random or sequential number generator to select telephone numbers – even from a stored list – is an ATDS.

You might be able to get comfortable on this issue depending on the state in which you are operating, with the understanding that you’re still probably going to get sued and have to defend yourself. But if you’re running a multi-state operation or you simply want to avoid the issue entirely, all you need to do is make sure that your leads are being originated with the proper telemarketing/texting authorization. It is that simple.