United States: The Supreme Court Issues Its Long Awaited Decision In Facebook And Clears Up The Circuit Split On The Definition Of An ATDS

At long last, the Supreme Court issued its ruling on Facebook, Inc. v. Duguid  and it is overwhelmingly good news for Defendants.

Background

For any company that markets via text messages, the Telephone Consumer Protection Act ("TCPA") has been a major source of potential liability, providing for steep statutory damages for any company that uses an automatic telephone dialing system ("autodialer") to send text messages to consumers without their prior express consent. The TCPA defines an autodialer as equipment with the capacity to both "store or produce telephone numbers to be called, using a random sequential number generator," and to dial those numbers.  47 U.S.C. § 227(a)(1).

Over the years, a circuit split emerged over the critical issue of which equipment used to call or send text messages to consumers constitutes an autodialer. In 2015, the Federal Communications Commission ("FCC") issued a Declaratory Ruling and Order, finding that an autodialer is any  equipment that has the potential capacity  to store or produce, and dial, random or sequential numbers. Thus, the FCC questionably broadened the meaning of capacity and distinguished it from "present capability," thereby significantly expanding the scope of what equipment is an autodialer.

In September 2018, the Ninth Circuit agreed with the FCC and interpreted the definition of an autodialer to include any equipment that can "store" telephone numbers, regardless of whether the equipment uses a random or sequential number generator. Marks v. Crunch San Diego, LLC, No. 14-56834 (9th Cir. Sept. 20, 2018). Later, the Sixth Circuit in Allan v. Pa. Higher Educ. Assistance Agency, held, consistent with the Ninth Circuit, that the TCPA statutory definition of an ATDS includes telephone equipment that can automatically dial phone numbers stored in a list, rather than just phone numbers that the equipment randomly or sequential generates.

In contrast, in the years following, several Courts of Appeal, including the Seventh Circuit, found the FCC's interpretation too broad. Those courts narrowly interpreted the definition, finding that an autodialer is only a device that has the present capacity to store or produce and dial random or sequential numbers. King v. Time Warner Cable Inc., No. 15-2474 (2d Cir. Jun. 29, 2018); Dominguez v. Yahoo, Inc., No. 17-1243 (3d Cir. Jun. 26, 2018); Glasser v. Hilton Grand Vacations Co., LLC, No., 18-14499 (11th Cir. Jan. 27, 2020); Gadelhak v. AT&T Servs. Inc., No. 19-1738 (7th Cir. Feb. 19, 2020).  For instance, in February 2020, the Seventh Circuit in Gadelhak, held that because the system used to send the text messages "exclusively dial[ed] numbers stored in a customer database," and did not use a number generator to store or dial numbers, it was not an autodialer. The Seventh Circuit went on to state that the most natural construction of the statute requires an autodialer to be capable of generating random or sequential telephone numbers for dialing and that did not include a system that automatically dialed numbers from a stored list.

On July 9, 2020, the Supreme Court granted a petition for certiorari from Facebook, Inc., pressing the Court to settle the circuit split over what constitutes an autodialer. In the Facebook v. Duguid  case, Facebook sent a text notification to the plaintiff about someone attempting to log into his account, but the plaintiff did not have a Facebook account and did not consent to receiving such text messages. He then brought a putative class action for violation of the TCPA. Facebook countered that the TCPA did not apply because the technology it used to text the plaintiff did not use a random or sequential number generator.

The Opinion

In an 9-0 opinion written by Justice Sotomayor and joined by Chief Justice Roberts and Justices Thomas, Breyer, Kagan, Gorsuch, Kavanaugh, and Barrett (Justice Alito concurring), the Supreme Court agreed with Facebook, holding that: "Congress' definition of an autodialer requires that in all cases, whether storing or producing numbers to be called, the equipment in question must use a random or sequential number generator."

In reaching its ruling, the Supreme Court parsed the canons of grammatical construction and found that the most natural reading of the text is that the clause "using a random or sequential number generator" modifies both of the two verbs that precede the clause: "store" and "produce." The Court further found that this interpretation of an autodialer is more in line with the purpose of the TCPA to protect against a situation where an autodialer can "simultaneously tie up all the lines of any business with sequentially numbered phone lines," and "inconveniencing consumers and imposing unwanted fees." The Court noted that "expanding the definition of an autodialer to encompass any equipment that merely stores and dials telephone numbers would take a chainsaw to these nuanced problems when Congress meant to use a scalpel." Indeed, the Court recognized that the plaintiff's definition  of an autodialers would capture  "virtually all modern cell phones."

Key Takeaways

(1) Facebook is overwhelmingly good news for businesses who interact with and market to existing and potential customers via text and who use equipment such as predictive dialers to call cell phones because they no longer have to worry about securing consent, even for marketing messages.

(2) Callers still cannot use prerecorded or artificial voices, as those are separate violations, and calls and texts must still comply with the other provisions of the TCPA and the FCC's implementing rules, as well as other laws affecting privacy rights with respect to marketing calls. (These can get complicated, so call us if you have questions!)

(3) A few final words of caution (it is the TCPA, after all) ... the Supreme Court did not address the meaning of the word "capacity," which is in the plain language of the statute. Thus, the Court left open the question of whether a company can be liable if the equipment used has the capacity  to store or produce numbers using a random or sequential number generator even if that technology was not utilized for that particular text message or call campaign. In addition, in footnote 7 of its opinion, the Court seemed to imply that a "random or sequential number generator" might encompass equipment which "determine[s] the order in which to pick phone numbers from a preproduced list" and "then store[s] those numbers to be dialed at a later time," rather than equipment which actually generates numbers. It will be interesting to see how the plaintiffs' bar attempts to use these loose ends.

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