It has been eight months since the Supreme Court of the United States decided, in Facebook v. Duguid, that the federal Telephone Consumer Protection Act’s (TCPA) outdated definition of an automated telephone dialing system (ATDS or autodialer) did not cover devices—like most modern phones—which can store numbers that are not randomized. This decision resolved a long-standing circuit split over how to interpret the TCPA, but it has not led to the clarity that many companies desired.

While courts have started applying the narrowed ATDS definition under Duguid, companies engaged in telemarketing are not yet in the clear as many had initially thought in the immediate aftermath of Duguid. A number of trends have emerged that give new teeth to TCPA-like claims, including a spike in cases at the state level, novel legal theories, and a focus on other aspects of the TCPA. Moving into 2022, we expect a continued evolution in complaints brought under state telemarketing laws, and we might also see legislation or FCC guidance intended to update the TCPA so that it applies to modern dialing technologies.

Background

With few exceptions, the TCPA prohibits making calls or text messages using an ATDS or prerecorded voice, unless the caller has obtained either “prior express consent” for informational calls or “prior express written consent” for telemarketing calls. The 1991 statute 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.” Since the D.C. Circuit Court of Appeals struck the FCC’s expansive interpretation of the TCPA in ACA International et al. v. FCC, circuit courts around the country have disagreed on how to define an ATDS. The Second, Sixth and Ninth Circuits held that a dialing system need not generate random or sequential numbers as long as it could store and automatically dial numbers. The Third, Seventh and Eleventh Circuits held that a dialing system could not be an ATDS unless it generated and dialed random or sequential numbers.

In April 2021, the Supreme Court held that to qualify as an ATDS under the TCPA, a device must have the capacity either to store, or to produce, a telephone number using a random or sequential number generator (e.g., 777-0000; then 777-0001; then 777-0002, and so on). Taking a business-friendly reading of the TCPA, the Court concluded that, based on the text and statutory context, “using a random or sequential number generator” applies to both “store” and “produce.” Thus, a device that simply stores phone numbers, not generated randomly or sequentially, for later dialing is not an ATDS.

While this was a favorable holding for businesses marketing by phone and text, the door is still open for TCPA plaintiffs to litigate the scope of the new ATDS interpretation. For example, footnote 7 in the Court’s decision immediately attracted the attention of TCPA plaintiffs’ attorneys. The footnote states: “[A]n autodialer might use a random number generator to determine the order in which to pick phone numbers from a preproduced list. It would then store those numbers to be dialed at a later time.” Because the decision does not clarify whether a liability is incurred by the mere fact that the company uses a device that has the capacity to use random or sequential number generator, some plaintiffs are seeking to argue that liability is incurred regardless of whether the business actually makes use of the random number generator.

Federal courts’ response to Duguid

Immediately following the Duguid decision, the number of TCPA filings declined and many TCPA plaintiffs dismissed their ATDS-based claims. Nonetheless, federal district courts have had plenty of occasions to apply Duguid in rulings which have generally been more favorable for defendants since April 2021.

Many plaintiffs bringing cases involving ATDS texting claims have failed to survive motions to dismiss on the basis that the TCPA did not apply to entities attempting to reach non-randomly produced phone numbers. Courts have found that plaintiffs did not plausibly allege that the defendant used an ATDS if the numbers are already stored on the device because either the plaintiff provided the number or it was obtained through a non-random or non-sequential method.

District courts have also found that defendants did not use a random or sequential number generator where (1) texts were sent based on a particular occurrence, (2) personalized texts were sent from a long code, and (3) defendants used a number generator to create IDs to track unique texts. These cases further illustrate federal courts’ leniency on defendants that use text communication channels post-Duguid.

Some plaintiffs have tried to argue that footnote 7 of the Duguid decision allows for systems to qualify as an ATDS if they use “a random number generator to determine the order in which to pick phone numbers from a preproduced list.” Courts have rejected this argument finding that plaintiffs are taking footnote 7 out of context.

Additional areas to watch include:

  • An uptick in cases under the prerecorded calls prong of the TCPA, as well as violations of the National Do Not Call Registry;
  • An alternative content-based theory under 47 CFR §64.1200(d)(4), which is focused on whether the entity sending the message has properly disclosed their identity in communications with their customers. This includes the name of the caller, the name of the party on whose behalf the call is being made, and a contact phone number or address. Case law remains unclear as to whether each individual text requires identification and whether there is a private right of action for violations of this provision. At least one court has held that there is a private right of action;
  • The requirement for callers to maintain their own do-not-call policies and an internal do-not-call list. Courts have found that a private right of action exists for such violations; and
  • Messages sent to individuals without the capacity to consent (g., under the age of majority).

While more difficult than before, pathways remain for plaintiffs to survive a motion to dismiss. Courts have denied motions to dismiss when plaintiffs allege that they had no prior relationship with the defendant, they heard pauses before the defendant came on the line, they received generic messages, defendants used spoofed numbers, and/or that a defendant’s system had the capacity either to store or to produce a telephone number using a random or sequential generator.

 

Plaintiffs turn to state law

In light of the recently narrowed ATDS definition under the TCPA, plaintiffs are increasingly focused on bringing cases under similar state laws. Many states have mini-TCPA laws with broader definitions of autodialers or broader scopes which give plaintiffs a potentially easier path to victory. For example:

  • Enacted in July 2021, Florida Telephone Solicitation Act (FTSA) has already been generating a significant volume of litigation, especially related to text messages. The distinguishing element of the FTSA is that there is no requirement to use a random or sequential number generator under the FTSA. Rather, any automated system that selects or dials phone numbers is considered an autodialer. Similar to the TCPA, the FTSA provides a private right of action with statutory damages of up to $500 per violation or $1,500 for each willful or knowing violation.
  • Connecticut’s mini-TCPA law requires prior express written consent for all unsolicited text and media messages for marketing and sales purposes. The messages do not have be sent using an ATDS. Thus, this law is much broader in scope than the TCPA. The law provides a private right of action, but plaintiffs are limited to seeking actual damages, punitive damages and reasonable attorneys’ fees since the law does not prescribe statutory damages like the TCPA or the FTSA.
  • Arizona’s mini-TCPA also applies more broadly than the TCPA. It applies when “automated system[s] for the selection and dialing of telephone numbers” are used. There is no private right of action, but penalties can still be significant.

Like Florida, it is likely that other state legislatures that disagree with the state of the TCPA post-Duguid may choose to enact their own TCPA-like legislation. We will continue to monitor legislation in other states.

Key Takeways

Although the lower federal courts appear to be strictly following the pro-business approach the Supreme Court took in the Duguid decision, legislation to amend the TCPA is likely, as well as guidance from the FCC. In addition, the rise in prominence of state mini-TCPA laws, especially ones that allow for a private right of action, like Florida, give plaintiffs a new tool to use against businesses engaged in marketing by phone and text.

To avoid violating these laws and running the risk of significant penalties, Companies would be wise to continue maintaining robust compliance programs that obtain documented affirmative consent before engaging in phone or text marketing. Companies should also have a robust program that enables them to honor recipients’ opt-out requests promptly.