[co-author: Kerry Gibbons]
Three months after the Supreme Court’s landmark Facebook ruling, a growing number of trial courts have grappled with interpreting and applying the High Court’s directive. One of the more interesting decisions came out of the Eastern District of Michigan recently. In Barry v. Ally Fin., Inc., No. 20-cv-12378, 2021 WL 2936636, at *1-7 (E.D. Mich. July 13, 2021), the district court dismissed a putative TCPA class action on the grounds that the plaintiff failed to allege use of an ATDS. More significantly, the district court interpreted Facebook to hold that to be an ATDS, the dialing system must actually use a random or sequential number generator to call the plaintiff, and not merely have the capacity to do so.
In Barry, the plaintiff alleged that Ally Financial, Inc. violated the TCPA by calling her cell phone without her permission in an attempt to reach her brother regarding his delinquent car loan. Id. at *2. Plaintiff complained that she received calls that were “unsolicited but nonetheless directed to her, on behalf of her brother.” Id. Plaintiff’s class allegations claimed that Ally had a “scheme” to “pressure borrowers to make payment on their loans” by calling their relatives and acquaintances and embarrassing the borrowers with the perception of being “deadbeats.” Id. at *2. The proposed class definition encompassed persons who did not have an account with Ally yet received calls on their cell phones using an ATDS in connection with another individual’s delinquent car loan. Id. The court previously stayed the case pending the Facebook ruling and then entered an order to show cause as to why it should not dismiss plaintiff’s suit in light of the Facebook ruling. Id. at *3.
The court concluded that the plaintiff had pled herself out of court because she alleged that Ally had directed the calls to her specifically, to discuss her brother’s account, and “expressly concede[d]” that “[her] number was likely called from a stored list.” Id. at *3. Moreover, the court reasoned that it “could only conclude that the technology that called her used a stored list containing the names and numbers of persons to be contacted; had the technology stored or produced [p]laintiff’s number at random or in sequence, it would have no way of knowing that it was contacting someone associated with a specific account holder.” Id.
Capacity vs. Use of a Random or Sequential Number Generator
Although the court noted that the “Supreme Court in [Facebook] plainly held 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 numbers to be called,’” the court squarely rejected plaintiff’s argument that “capacity” was not only a necessary but a sufficient element to make a dialer an ATDS. Id. (quoting Facebook, Inc. v. Duguid, 141 S. Ct. 1163, 1173 (2021)). The court concluded that capacity alone does not make a system an ATDS. Id. at *4. The court focused on the fact that the TCPA prohibits the “use” of an ATDS to “make any call” (47 U.S.C. § 227), and held that a random or sequential number generator must actually be used in the making of the particular call for the TCPA suit to be viable. Id. The court reasoned:
To accept Plaintiff’s argument that she only has to show that the autodialing system used by Defendant has the capacity to use a random or sequential number generator, even though she concedes that such alleged capacity was not used to make calls to her (or to the purported class members), would have the effect of imposing liability on a defendant whenever it has such a system, with admittedly no nexus to the alleged harm to the plaintiff.
Id. Despite the statute’s use of the word “capacity” in the ATDS definition (§ 227(a)(1)(A)), the court noted that the Facebook opinion stated that “‘Congress’ definition of an autodialer requires that, in all cases, whether storing or producing numbers to be dialed, the equipment in question must use a random or sequential number generator.’” Id. at *4 (quoting Facebook, 141 S. Ct. at 1170) (emphasis added by district court). Here, “these calls were targeted at specific individuals in connection with specific accounts held by Defendant. That ends this case.” Id. at *4.
Turning to the pleading burden, the court made clear that even if “capacity” were sufficient to state a claim, the court still would have dismissed the case for failure to allege facts showing that defendant’s dialing system had such capacity. “Plaintiff’s mere speculation . . . that [Ally’s] dialing system might have the capacity to use randomly generated numbers to call other unknown persons, for some other unknown reason, without any factual basis in the pleadings to support that speculative possibility, fails to satisfy Twombly, which limits claimants to plausible claims, not just possible ones.” Id. at *5.
The court also rejected plaintiff’s argument, relying on footnote 7 of the Facebook opinion, that a dialer might be an ATDS if it uses a random number generator to pick the order in which to dial numbers from a set list. Id. at *6. As other courts have done, the Barry court concluded such an argument “takes footnote 7 out of context.” Id. In footnote 7, the Supreme Court explained that Congress—when crafting the statutory language—could logically have intended for the phrase “random or sequential number generator” to modify “store” as well as “produce.” Id. But in footnote 7 the Supreme Court explicitly referred to a brief discussing devices from 1988 that used a random number generator to store, for later dialing, numbers on a list that had itself been created by a random or sequential number generator—not a randomized list of numbers that were not created by a random or sequential number generator. Id.
The court in Barry joins at least two other district courts in its rejection of plaintiff arguments predicated on footnote 7. See Timms v. USAA Fed. Sav. Bank, No. 3:18-CV-01495, 2021 WL 2354931, at *7 (D.S.C. June 9, 2021); Hufnus v. DoNotPay, Inc., No. 20-cv-08701, 2021 WL 2585488, at *1 (N.D. Cal. June 24, 2021); but see also Carl v. First Nat’l Bank of Omaha, No. 2:19-cv-00504, 2021 WL 2444162, at *9 (finding “the issue is not amenable to summary judgment on the current record”). But the Barry decision goes a step further in another regard—its plain insistence that in order to plausibly allege use of an ATDS, “capacity” (as opposed to actual use) is insufficient. If other courts follow this opinion, suits predicated on ATDS allegations should not survive a motion to dismiss where the complaint on its face shows that the plaintiff was called purposefully rather than randomly. The plaintiff’s speculation that defendant’s dialer might have some hidden capacity to use a random or sequential number generator should not create a fact issue allowing the plaintiff to inflict expensive and burdensome discovery on the defendant.
The court’s opinion suggests another issue that the court did not pursue – the question of Article III standing to sue in federal court. Although the district court did not frame the issue in terms of standing, the court observed that allowing a TCPA suit to proceed when the dialer’s “capacity” to store or produce numbers with a random or sequential number generator was not actually used to call the plaintiff would create the risk of a statutory violation – and statutory damages – with “no nexus to the alleged harm to the plaintiff.” That lack of nexus between the supposed statutory violation and any “concrete and particularized injury” to the plaintiff certainly suggests a lack of Article III standing. As the Supreme Court ruled in Spokeo, Inc. v. Robbins, 578 U.S. 330 (2016) and reiterated just last month in TransUnion LLC v. Ramirez, No. 20-297, 594 U.S. ___, slip op. at 11 (June 25, 2021) (Kavanaugh, J.), “an injury in law is not an injury in fact,” and standing requires a real, not abstract harm. Quite simply, “No concrete harm, no standing.” Id. at 27. Of course, some defendants may elect not to raise the standing issue, preferring to remain in federal court to argue on the merits that they did not use an ATDS under Facebook rather than litigate the TCPA claims in state court.
We will of course continue to follow the development of the law as more courts – at the trial and eventually the appellate level – grapple with the interpretation of Facebook in the coming months.