TCPA Litigation Update: The Aftermath of the Supreme Court’s Facebook v. Duguid Decision

On April 1, 2021, the Supreme Court released its highly anticipated and unanimous decision in Facebook v. Duguid, resolving a long-standing circuit split on the definition of an automatic telephone dialing system (ATDS or autodialer) under the Telephone Consumer Protection Act (TCPA).  Reversing the Ninth Circuit, the Court concluded that merely having the capacity to store numbers and dial them automatically is not enough to make a device qualify as an ATDS.  Although this new clarity regarding the definition of an autodialer will help entities ensure compliance with the TCPA, it does not signify an end to TCPA policies or litigation. 

The ATDS Debate and How We Got Here

In the last several years, TCPA litigation, typically class action cases, have become a multibillion-dollar industry.  The TCPA prohibits unconsented calls or texts using an autodialer or prerecorded voice. 47 U.S.C. § 227(b)(1)(A)(iii).  An autodialer is defined 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.” Id. at § 227(a)(1).  Since the D.C. Circuit struck the FCC’s broad interpretation of the TCPA in 2018, the circuit courts have disagreed on how to define an ATDS.  The Third, Seventh and Eleventh Circuits held that an ATDS requires random or sequential number generation.  The Second, Sixth and Ninth Circuits held that a system need not generate random or sequential numbers as long as it could store and automatically dial numbers.

The Facebook case resulted from unwanted security text messages alerting Plaintiff Duguid of attempts to log in to a Facebook account that he did not actually have.  After trying unsuccessfully to stop the unwanted messages, Mr. Duguid filed a putative class action, alleging Facebook violated the TCPA by storing numbers and programming its equipment to send automated text messages.  Facebook countered that the TCPA did not apply because its technology does not use a “random or sequential number generator.”  The Northern District of California agreed with Facebook and dismissed the Complaint, but the Ninth Circuit Court of Appeals reversed and held that, to be an autodialer, equipment need only have the capacity to store numbers to be called and to dial such numbers automatically.

The Decision

The opinion, delivered by Justice Sotomayor, focused on the statutory language and construction and the intent of Congress when it enacted the TCPA in 1991 and avoided issues concerning the meaning of the word “automatic” or how much human intervention was required to avoid being deemed as an ATDS.  The Court rejected Mr. Duguid’s suggested construction finding that there was no grammatical basis for expanding the phrase “using a random or sequential number generator” to apply to the word “produce” but not to the word “store.”  Thus, whether storing or producing numbers to be called, the equipment must use a random or sequential number generator to be an ATDS.  Noting that when the Act was passed Congress was concerned with telemarketing equipment that would automatically dial emergency lines or tie up sequential lines at a company, Justice Sotomayor wrote 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 only intended to use a scalpel.”  She further noted that, under the broad definition proposed by Mr. Duguid, even an ordinary mobile device could be considered an autodialer.

Take Aways

1. TCPA Litigation is Reduced but not Dead - While certainly a win for the companies, the Facebook decision does not foreclose all avenues for recovery under the TCPA.  In footnote 7, the Court provided an example where equipment might still qualify as an autodialer if it uses a random number generator to determine the order in which to pick phone numbers from a pre-produced list and stores those numbers to be dialed at a later time.  Further, the holding still allows for TCPA plaintiffs to make capacity arguments and to raise claims under state unfair and deceptive trade practice laws.
2. Companies Should Maintain Policies and Indemnity rights - While the Facebook decision helps reduce the risk of TCPA litigation, companies should not abandon compliance measures that avoid unconsented communications with their customers.  Further, companies that contract with vendors should seek reps, warranties and indemnities to ensure the vendor’s systems are not established or used as autodialers.
3. Other prohibitions are not affected - The decision does not affect the TCPA’s automated calling restrictions with respect to artificial voices, prerecorded voice messages and the Do Not Call Rules. Companies should maintain robust compliance in connection with these features including Interactive Voice Response (IVR), ringless voicemail or voicemail drops, and artificial intelligence (AI) messages.
4. Unwanted calls and texts are bad business - Contacting consumers who did not give consent to be contacted by you is bad for your brand and business.  In an era of social media and instant feedback, companies that make unwanted calls are subject to negative attention.  People who don’t want or expect to be contacted by you are more likely to be annoyed than they are to take advantage of whatever offer you are making.
5. Congressional/FCC Regulation - Facebook’s win sparked outrage from Congress and consumer advocacy groups, aided by the Supreme Court’s commentary that number generation and the TCPA itself are antiquated.  Legislation to amend the TCPA is likely, and the FCC under a new administration might consider further guidance to weigh in, especially on open questions.

Should you have any questions, please contact Robert Van Arnam at rvanarnam@williamsmullen.com or 919.981.4055.