On December 8, 2020, the Supreme Court heard oral argument to consider the TCPA’s definition of an “automatic telephone dialer system” (ATDS) in Facebook, Inc. v. Duguid, Noah et al., Dkt. 19-511. The Supreme Court is tasked with interpreting the scope of liability under the TCPA, and its resolution may bring much needed clarity to companies struggling with the meaning of that definition, particularly in light of a current split among circuits on the question and the D.C. Circuit’s 2018 decision, ACA International v. Federal Trade Commission striking down the FCC’s own interpretation. Because the TCPA imposes significant statutory penalties for calling or sending text messages using an ATDS to cellphones in violation of the act, clarification of the meaning of an ATDS may help companies mitigate their risks and curtail potential TCPA class action lawsuits.

The Court is reviewing the following question posed in Facebook’s petition:

Whether the definition of ATDS in the TCPA encompasses any device that can “store” and “automatically dial” telephone numbers, even if the device does not “us[e] a random or sequential number generator.”

The TCPA defines an ATDS as “equipment which has the capacity—(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers. 47 U.S.C. § 227(a)(1).

The principal dispute is whether the clause “using a random or sequential number generator” modifies both “storing” and “producing” or only “producing.” In the case of the former, systems that dial phone numbers from a stored list that is not generated at random or on a sequential basis (the vast majority of accused systems) would not be covered by the TCPA. If, however, the Court finds that the phrase, “using a random or sequential number generator” applies only to producing (not storing) numbers for dialing, then systems that dial phone numbers from a stored list could well be covered by the TCPA.

Prior to the DC Circuit’s ACA International decision in 2018, most courts accepted the FCC’s 2015 interpretation of the definition of ATDS. While accepting that the qualifier “using a random or sequential number generator” applied to both “storing” and “producing” (a view recently confirmed in the FCC’s recent June 25 declaratory ruling in response to a petition by P2P Alliance), the FCC nevertheless determined that equipment having the “capacity” to store, produce and dial such numbers applied to equipment that had either the current or potential capacity to do so. That interpretation of ATDS was so broad that almost any programmable device (having the potential capacity to use a random or sequential number generator), including every smartphone, could be considered an ATDS. Given that broad interpretation, the 2015 FCC decision set off a tidal wave of litigation (which has still not fully ebbed). However, in ACA International, the DC Circuit struck down the FCC’s broad interpretation, leaving the interpretation of what constitutes an ATDS to the courts (and setting off the current circuit split).

The Circuit Split:

The question posed to the Supreme Court addresses one aspect of the ATDS definition that has split the circuit courts, namely whether the phrase “using a random or sequential number generator” applies to both the “storing” and “producing” of dialed numbers or only “producing.” Even if the Supreme Court rules on this question, courts will continue to grapple with a related question, whether human intervention in the dialing process could move a system outside the ambit of an ATDS.

The Third Circuit, Seventh Circuit and Eleventh Circuit have adopted a more narrow definition of an ATDS

Currently, the majority of circuits adopt a more narrow view of the definition of ATDS. In 2018, the Third Circuit issued the first of several circuit court decisions applicable to the ATDS definition. While not directly addressing the issue, the decision assumed, consistent with prior (and current) FCC guidance, that the using a random or sequential number generator applied to both production and storage. Dominguez v. Yahoo, 894 F.3d 116 (3rd Cir. 2018). The Third Circuit found that because the accused system could not “generat[e] random or sequential telephone numbers and dial[] those numbers,” it was not an ATDS. Id. at 121. In arriving at its decision, the Third Circuit also noted the role of human intervention, where the service sent text messages only to numbers “that had been individually and manually inputted into its system by a user.” Id.

The Eleventh Circuit, in a more detailed opinion examining the issue in January 2020, adopted the narrow definition of an ATDS when it determined that a dialing system that required random or sequential input for both storing and producing to qualify as an ATDS. Glasser v. Hilton Grand Vacations, 948 F.3d 1301 (11th Cir. 2020). The Eleventh Circuit also emphasized the degree of human intervention in the system, noting that “[e]ven if the statute covers devices that can automatically dial a stored list of non-randomly generated numbers” (e.g., under the Ninth Circuit and Second Circuit broad definition) the accused device “still would not qualify” because a human marketing team had to first manually select the intended call recipients and then a separate human operator had to review the list and select a recipient to call. Id. at 1312.

The Seventh Circuit, in February 2020, adopted the narrow definition of an ATDS when it held that the clause “using a random or sequential number generator” modifies both “store” and “produce” in the statutory definition of an ATDS. Gadelhak v. AT&T Services, Inc., 950 F.3d 458, 459 (7th Cir. Feb. 19, 2020). In doing so, the Seventh Circuit determined that a system that “exclusively dials numbers stored in a customer database” was not an ATDS. Id.

 The Ninth Circuit and Second Circuit have adopted the broadest definition of an ATDS

By contrast, in its decision in ACA International, the Ninth Circuit interpreted an ATDS to cover systems that could either (1) store numbers to be dialed (without the use of a number generator), or (2) produce numbers sequentially or using a random number generator. Marks v. Crunch San Diego, LLC, 904 F.3d 1041, 1052-1053 (9th Cir. 2018). In doing so, the Ninth Circuit expressly declined to follow the Third Circuit’s treatment of the issue in Dominguez v. Yahoo that adopted a narrower interpretation. Id. at 1052 n.8. The Second Circuit, acknowledging the circuit split, followed the Ninth Circuit in adopting the broad interpretation in 2020. Duran v. LA BOOM DISCO, Inc., No. 19-600-cv (*4 n.5) (2d Cir. April 7, 2020). The Second Circuit similarly rejected arguments that human intervention (e.g., “that a human determined the time at which the messages were sent”) was dispositive on whether a system was an ATDS.

Background of the Facebook v. Duguid Dispute:

In Facebook v. Duguid, the disputed system is part of a multi-factor authentication security framework that Facebook uses to verify user identity. Facebook users opt-in to the framework and consent to receiving text messages that notify them when their respective accounts are accessed from a potentially suspicious location.

The class action plaintiff, Duguid, asserted that he received multiple such security alert text messages on his cellphone despite, he asserts, not being a Facebook user and never providing Facebook with his phone number. Facebook’s petition suggests that Duguid’s cellphone number may have been recycled from a previous user. Duguid alleges that he unsuccessfully attempted to unsubscribe to the security alerts.

Duguid subsequently filed suit, asserting violations of the TCPA, and Facebook moved to dismiss raising constitutional and statutory defenses. The district court granted Facebook’s motion to dismiss. In doing so, the district court determined that Duguid’s allegations were insufficient to plead a violation of the TCPA because they suggested that the security alerts were “direct targeting that is inconsistent with the sort of random or sequential number generation required for an ATDS.” Facebook Petition for Certiorari, p. 9. Duguid appealed the decision to the Ninth Circuit, which reversed the district court based on the Ninth Circuit’s broad interpretation of an ATDS. Facebook subsequently petitioned for review by the Supreme Court and the Court granted cert. The solicitor general of the United States filed briefs in support of Petitioner.

Oral Argument:

At oral argument before the Court last December, Facebook argued that conventions of grammar, punctuation, and statutory interpretation dictate that the phrase “using a random or sequential number generator” be read as a qualifier that applied to both storing and producing phone numbers to be called, making the law only applicable to devices that employ random or sequential number generators. Interpreting the law otherwise would result in an impossible breadth of sweeping liability, they argued, and the Court should not improperly expand the scope of the TCPA through judicial interpretation, even if the definition in the law is now outdated. The solicitor general’s office argued for the federal government, echoing many of Facebook’s arguments and emphasizing that even with a narrow reading, there would still be a broad prohibition on robocalls.

Duguid argued that all conventions of statutory interpretation would result in a reading that the law applied to both devices that use a “random or sequential number generator to produce numbers” and those that “store numbers to be called.” They argued that Facebook’s reading would eviscerate the TCPA, allowing large companies to make unwanted calls using stored numbers, creating the same nuisance that led to the development of the law.

The questions of the justices focused on the potential impact of the court’s decision, the proper interpretation of the ATDS definition in historical context, and the extent of human intervention needed to avoid liability. Justices Roberts and Kavanaugh expressed skepticism that adopting Facebook’s interpretation would result in a flood of unwanted robocalls, noting that even under the narrower interpretation of an ATDS, unwanted prerecorded and artificial voice calls were still prohibited to both landlines and sensitive phone lines. The Justices also asked about the meaning of the ATDS both on its face and in light of technological developments. Towards the end of the oral argument, the Justices began to ask whether and to what amount, human intervention was required in placing calls to avoid liability under the TCPA.

What To Expect:

 The Court’s opinion in Facebook v. Duguid is expected before the end of the term in June. Some scholars think that the addition of Justice Amy Coney Barrett could influence the outcome. Before she was on the Court, Justice Barrett authored a Seventh Circuit opinion narrowly holding that Automatic Telephone Dialing Systems (ATDS) only include equipment with a “random or sequential” number generator, excluding smartphones and similar devices that store numbers. No matter the outcome, the decision will substantially affect marketing communications going forward and could extend to influence questions of statutory interpretation in response to technological developments, even outside of the TCPA context.

In view of the circuit split, the Supreme Court’s decision may impact multiple current TCPA class action. Companies otherwise using dialing technologies should carefully review the systems they have adopted and the degree of “human intervention” required to make calls. Additionally, even though the TCPA is an opt-in regime, companies should consider how they respond to requests to opt-out of telephone calls or texts, as responses to opt-outs may be considered as a mitigating factor.

Ropes & Gray will continue to monitor TCPA litigation developments.