TCPA update: SCOTUS clarifies TCPA auto-dialer requirements

A recent U.S. Supreme Court decision should bring needed clarity and relief for businesses following a torrent of class action litigation under the Telephone Consumer Protection Act ("TCPA"). In Facebook, Inc. v. Duguid,¹ the Supreme Court ruled that the TCPA's prohibition against sending unsolicited telephone and text messages from automatic dialing systems only applies to those systems with the capacity to use a "random or sequential number generator" to store or produce telephone numbers to be dialed.² The decision overrules prior Ninth Circuit authority allowing TCPA claims over dialing systems that merely have the capacity to "store" numbers and dial them automatically, without the capacity to generate numbers sequentially or randomly.³ Because many modern dialing systems (particularly in the context of text message advertising campaigns) lack the capacity to use a random or sequential generator, this decision should significantly restrict the ability of plaintiffs to bring TCPA claims over automated text and dialing campaigns, although the TCPA's separate prohibitions against telephone calls using "an artificial or pre-recorded voice" remain in place.

Background

The TCPA, which became law in 1991, restricts the use of an automatic telephone dialing system (ATDS) to transmit calls or texts to mobile numbers without the recipient's prior express consent.⁴ Companies face a minimum statutory civil penalty of $500 for each call or text made in violation of the statute. This penalty has led to hundreds of TCPA class actions, putting companies at risk of severe liability when damages are calculated on a classwide basis. In some of these cases, companies were sued under an agency theory for promotional campaigns run by outside marketing firms. Other cases involved automated messages sent by businesses with existing customer relationships, but which were received by persons who allegedly did not consent to receiving them or did not actually have a prior business relationship.

The Duguid case involved this second category of TCPA litigation. Plaintiff Noah Duguid, who did not have a Facebook account, allegedly received a text message from Facebook advising him that someone had attempted to access the Facebook account associated with his telephone number.⁵ He filed suit, alleging that Facebook violated 47 U.S.C. 227(b)(1)(A) by purportedly using an ATDS to send text messages to his mobile number without his "prior express consent."⁶ Facebook moved to dismiss, arguing that there was no allegation in Duguid's complaint that its system sent text messages to numbers that were randomly or sequentially generated.⁷ The district court agreed with Facebook that the allegations failed to support an inference that Facebook's dialing system had the capacity to store or dial numbers using a random or sequential number generator.⁸

After the district court dismissed Duguid's complaint, the Ninth Circuit held in Marks v. Crunch San Diego, LLC that a dialing system need not be able to use a random or sequential generator to store numbers, but instead could qualify as an ATDS if it merely had the capacity to "'store numbers to be called' and 'to dial such numbers automatically.'"⁹ The Ninth Circuit reached this outcome by holding that the phrase "using a random or sequential number generator" in the TCPA's definition of an ATDS modifies the word "produce" but not the word "store" in the "store or produce" clause that precedes it, which would mean that a system could qualify as an ATDS even if it did not have the capacity to generate numbers using a random or sequential number generator.¹⁰ Relying on this intervening decision, the Ninth Circuit reversed the dismissal of Duguid's complaint.¹¹ Other circuits, however, have held that the "random or sequential number generator" clause modifies both "store" and "produce," and that a system would not be an ATDS if it did not have the capacity to generate numbers randomly or sequentially.¹² The Supreme Court granted certiorari to resolve this circuit split.¹³

The Supreme Court's decision

In a unanimous decision authored by Justice Sonia Sotomayor, the Supreme Court reversed the Ninth Circuit's decision and held that a dialing system must have "the capacity to use a random or sequential number generator to either store or produce phone numbers to be called" to qualify as an ATDS.¹⁴ Relying on the "series-qualifier" interpretive canon, which provides that a modifier at the end of a series of verbs will usually apply to all verbs in the series, the court concluded that the most natural reading of the ADTS definition was to apply the "random or sequential" generation requirement to both "store" and "produce."¹⁵ The use of a comma immediately before the "random or sequential" phrase further supported reading that phrase as applying to both verbs that preceded it.¹⁶ The opinion also noted that applying the Ninth Circuit's construction would effectively make all modern cellphones fall within the definition of ATDS, as virtually all smartphones have the capacity to store and dial sets of numbers.¹⁷

Justice Sotomayor further observed that applying the "random or sequential" generation requirement to both verbs was consistent with the TCPA's statutory purpose, noting that "Congress expressly found that the use of random or sequential number generator technology caused unique problems for business, emergency, and cellular lines" through the risk of such a system "dialing emergency lines randomly or tying up all the sequentially numbered lines at a single entity."¹⁸ It was therefore consistent with Congressional intent to construe the ATDS definition as applying only to devices with this capacity.¹⁹ In rejecting Duguid's contention that such an interpretation would "unleash" a "torrent of robocalls," the Supreme Court also noted that the TCPA's separate prohibition against the use of "an artificial or prerecorded voice" in other types of phone calls would continue to apply.²⁰ Justice Samuel Alito wrote a separate concurrence fully supporting the court's conclusion that "using a random or sequential number generator" applied to the word "store," but emphasizing that the use of the "series-qualifier" canon is context-specific and should not be applied "mechanically."²¹

Takeaways

The Facebook decision should make it significantly more difficult for TCPA plaintiffs to allege and prove that a dialing system is an ATDS. Many modern dialing systems, including those used to send automated text messages, do not use random or sequential number generation technology. Companies should nonetheless remain vigilant in securing express consent from recipients before sending text messages automatically. Companies should also exercise caution in ensuring that outside marketing firms conducting text or telephone advertising campaigns on their behalf are procuring express consent from recipients and are not using a system with the capacity to generate numbers randomly or sequentially. While district courts should grant dismissal more readily following the Supreme Court's decision, plaintiffs may continue to bring TCPA claims with the hope of getting access to discovery. Companies should also keep in mind that the TCPA's separate prohibitions against telephone messages using "an artificial or prerecorded voice" still apply, as do the TCPA's prohibitions against sending unsolicited advertisements by fax and the TCPA's protections for numbers listed on an applicable "Do-Not-Call" list.²² While the Facebook decision should hopefully reduce the number of TCPA class actions that are filed, companies should remain vigilant given the draconian class-wide damages awards possible in such matters.