Highly Anticipated SCOTUS Ruling Upends TCPA Landscape

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In a landmark decision issued April 1, 2021, the Supreme Court settled a hotly-contested debate over the definition of “automatic telephone dialing system” (or “autodialer”) under the 1991 Telephone Consumer Privacy Act (“TCPA”). The Court’s decision is likely to upend the TCPA compliance and litigation landscape, as the law’s private right of action coupled with steep penalties for non-compliance have spawned countless class action lawsuits in recent years. SCOTUS resolved a circuit split over the definition of autodialer, which has been at the heart of many of these disputes, adopting the more narrow interpretation to avoid including any device that can dial numbers from a stored list.

Brief History

Congress enacted the TCPA to address consumer frustration with unwanted robocalls which had proliferated in the wake of technological advances that enabled marketers to automatically dial randomly-generated telephone numbers and send pre-recorded messages to consumers. In debates regarding the bill, Congress indicated concerns that not only were such robocalls a nuisance, they also could cause actual harm if autodialers randomly called emergency lines or tied up all of the sequentially numbered lines at a single entity. In response, Congress passed the TCPA, which, relevant to the April 1 ruling, generally prohibits the use of an autodialer or an artificial or pre-recorded voice to call emergency phone lines, guest or patient rooms in hospitals, health care facilities, senior living establishments, or pagers and cell phones without the express consent of the called party. Congress defined “automatic telephone dialing system” 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.”

Importantly, the TCPA has serious teeth, allowing for a private right of action and statutory damages of up to $500 per violation ($1,500 for intentional violations), with each non-compliant call or text counted as a separate violation. Given the volume of calls often at issue, potential damages in a TCPA class action suit could reach tens of millions of dollars.

In a 2012 Report and Order, the FCC went a step further, stating that marketers must obtain “prior express written consent for all telephone calls using an automatic telephone dialing system or a prerecorded voice to deliver a telemarketing message to wireless numbers and residential lines.” (emphasis added)

As cell phones became increasingly ubiquitous over the past 30 years, advertising efforts, including text message marketing, gravitated in the same direction. Plaintiffs in TCPA class action suits argued any computer capable of calling numbers using a random or sequential number generator constituted an “autodialer” for TCPA purposes, whether or not such random or sequential number generation technology actually was used to make calls. Defense counsel typically offered a more conservative interpretation, arguing that the plaintiffs’ position would mean that virtually all cell phones qualify as “autodialers” under the TCPA.

Attempting to settle the matter, the FCC issued its 2015 TCPA Omnibus Declaratory Ruling and Order, defining automatic telephone dialing system as any technology that “generally has the capacity to store or produce, and dial random or sequential numbers…even if it is not presently used for that purpose, including when the caller is calling a set list of consumers.” The 2015 Order effectively led to more TCPA litigation; once the FCC validated the broader interpretation, plaintiffs leveraged an expansive definition of autodialer to sue a wide variety of businesses that contacted consumers using text messages and other forms of telemarketing. As circuit courts diverged with respect to the validity of the FCC’s interpretation of autodialer, the TCPA remained fertile ground for class action litigation and lawsuits have continued apace.

Facebook, Inc. v. Duguid

The Supreme Court agreed to take up the question of the proper statutory definition of an autodialer under the TCPA in Facebook, Inc. v. Duguid.  The issue presented was whether the phrase “using a sequential or random number generator” qualified both of the words “stored” and “called”. This grammatical question is a matter of deep practical significance because most modern dialing technology does not use a sequential or random number generator to either store or call numbers. Instead, most modern technology involves the compilation or storing of lists of numbers that are neither random nor sequential, such as a list of existing customers or prospects.  The Ninth Circuit had held that “the adverbial phrase ‘using a random or sequential number generator’ modifies only the verb ‘to produce,’ and not the preceding verb, ‘to store’” thereby finding that the TCPA’s definition of autodialer was still broad enough to encompass a wide range of modern dialing technologies.

Writing for the Court, Justice Sotomayor put the autodialer debate to rest with a lesson in grammar and the canons of construction. Rejecting the definition of autodialer adopted in the FCC’s 2015 Order, the Court advised that “Congress defined an autodialer in terms of what it must do (‘store or produce telephone numbers to be called’) and how it must do it (‘using a random or sequential number generator’).” Notably, the Court specifically acknowledged and rejected the argument that any equipment with the capacity to store and automatically dial numbers should be considered an autodialer, holding “that a necessary feature of an autodialer under §227(a)(1)(A) is the capacity to use a random or sequential number generator to either store or produce phone numbers to be called.”

Key Takeaways

As the Court noted, Congress used tailored language when drafting the TCPA to prohibit the use of a specific type of autodialer. Since then, most marketers have largely retired that technology, instead using systems that send text messages to phone numbers on curated lists. Neither “random” nor “sequential”, these phone numbers are sent texts because the targeted recipient is believed to be in a group that’s likely to purchase the product or service marketed. Now that the Court has clarified that most text marketing technology is not considered an “autodialer” under the TCPA, companies that avail themselves of this technology will have greater leeway in their marketing efforts and—at least for the time being—face less risk of TCPA lawsuits and their attendant massive damages.

Going forward, the TCPA’s requirements and FCC guidance regarding consent will still apply to the extent an autodialer and/or a pre-recorded or artificial voice are used, as will the FCC’s “Do Not Call” rules. And other TCPA-related questions remain outstanding, such as what is meant by having the “capacity” to generate random or sequential numbers to be stored or dialed; the Court was not presented with that issue in this case, but it could provide a path for further litigation. In addition, Senator Ed Markey—one of the TCPA’s original architects—has expressed his disagreement with the ruling and indicated that Congressional action on this front may be forthcoming, stating in a press release that “…we can and will act to make right what the Supreme Court got wrong. We plan to soon introduce legislation to amend the TCPA, fix the Court’s error, and protect consumers.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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