The Supreme Court issued its much-anticipated decision in Facebook v. Duguid, unanimously adopting a narrow definition of what constitutes an automatic telephone dialing system (ATDS) under the Telephone Consumer Protection Act (TCPA).  The Court’s decision resolves the oft-contested issue of whether a device must use a “random or sequential number generator” to store or produce numbers to be called in order to meet the TCPA’s definition of an ATDS.  In a decision authored by Justice Sotomayor, the Court held that the TCPA only prohibits those devices that use a random or sequential number generator to store or produce numbers.  The Court’s holding means that calls or texts made from a preprogrammed list of numbers that do not use a random or sequential number generator are outside the scope of an ATDS.

The plaintiff in Duguid claimed that Facebook ran afoul of the TCPA when it sent him an automatic text alert that someone had attempted to access a Facebook account (which he did not have) using an unrecognized browser. Duguid claimed that Facebook used an ATDS to contact him because it maintained a database of stored phone numbers and sent automatic text messages whenever an associated account was accessed by an  unrecognized device or browser. The District Court for the Northern District of California granted Facebook’s motion to dismiss Duguid’s complaint, agreeing with Facebook that Duguid had not adequately alleged an ATDS was used to contact him, because he did not allege that Facebook messaged numbers that were randomly or sequentially generated.  The Ninth Circuit reversed, holding that to constitute an ATDS, a device need only be able to “store numbers to be called” and “to dial such numbers automatically”—a substantially broader definition than that adopted by federal courts across the country, including other circuit courts of appeals.

The Supreme Court reversed the Ninth Circuit and held that because the device Facebook used to contact Duguid did not have the capacity to randomly or sequentially store or produce numbers, it was not an ATDS.  Instead, Facebook’s notification system sent targeted messages to numbers linked to users’ Facebook accounts.  Applying rules of grammar and statutory construction, the Court found that any broader definition was not supported by an ordinary reading of the statute.  The Court also held that Duguid’s proposed reading was antithetical to the purpose of the TCPA—to prevent randomly generated calls to emergency lines or the tying up of sequential lines within a single entity.  “Expanding the definition,” of an ATDS “to encompass any equipment that merely stores and dials telephone numbers would take a chainsaw to these nuanced problems when Congress meant to use a scalpel,” and, more concerningly, “would capture virtually all modern cell phones, which have the capacity to ‘store . . . telephone numbers to be called’ and ‘dial such numbers.’”

The Supreme Court’s decision in Duguid is a significant victory for the defense bar and consumer financial services companies that have battled these claims for years.  As a result of the Supreme Court’s decision, financial services companies who send phone calls or text messages to their preprogrammed lists of customers, and who do not use any random or sequential number generator in the process, will fall outside the purview of the TCPA.  Importantly, Duguid does not impact the TCPA’s prohibition on sending artificial or prerecorded voice messages to landlines and cell phones, which remains in place.  Nevertheless, unless Congress decides to modify the statutory definition of an ATDS in response to the Supreme Court’s decision, the number of TCPA claims filed against financial institutions should be significantly reduced post-Duguid.