TCPA Tracker – Special Edition – Media, Telecoms, IT, Entertainment

Supreme Court Defines ATDS Under The TCPA

On April 1, 2021, in a unanimous decision, the Supreme Court
ruled that the definition of an automatic telephone dialing system
(“ATDS”) under the TCPA is limited by the plain grammar
of the statute itself. The Court, in a decision authored by Justice
Sotomayor, held that a device must have the capacity
to use a random or sequential number
generator in either storing or producing a telephone number, to
qualify as an ATDS under the TCPA. Facebook, Inc. v.
Duguid et al., Case No. 19-511 (2021).

Our preview of the Supreme Court’s consideration
of Duguid can be found here and our analysis of the oral
argument can be found here. The Court’s decision is discussed
below, and its opinion can be found here.

Background

Plaintiff Noah Duguid alleged that defendant Facebook had used
an ATDS without the requisite consent to contact him via text
message when its systems used an automated response protocol to
alert a customer-provided number of an access attempt. Mr. Duguid
alleged that he did not have a Facebook account and never provided
consent for Facebook to send him text messages. In 2018, the
Northern District of California dismissed Duguid’s TCPA claim
against Facebook because it held that he had failed to properly
allege the use of an ATDS where the complaint’s allegations
“strongly suggested direct targeting rather than random or
sequential dialing.” In 2019, the Ninth Circuit reversed the
lower court’s decision.  It reasoned that Duguid had
sufficiently pled the use of an ATDS by alleging Facebook’s
equipment “had the capacity to store numbers to be called and
to dial such numbers automatically.” The Ninth Circuit thus
held that any device or system that could store telephone numbers
was an ATDS restricted by the TCPA. Facebook appealed this decision
to the Supreme Court.

The TCPA defines an ATDS as equipment that has the capacity
“(A) to store or produce telephone numbers to be called, using
a random sequential number generator; and (B) to dial such
numbers.” The Supreme Court took up the following question:
“Whether the definition of ATDS in the TCPA encompasses any
device that can ‘store’ and ‘automatically
dial'” telephone numbers, even if the device does not
‘us[e] a random or sequential generator?'”

Although the Supreme
Court’s Duguid decision stemmed out of a
challenge to the Ninth Circuit’s ATDS definition, five other
federal circuit courts of appeals had weighed in on that issue,
creating a deep circuit split. The Second, Sixth, and Ninth Circuits had held that any
predictive dialer or system that dials from a stored list should be
considered an ATDS under the TCPA. On the other hand, the Third, Seventh, and Eleventh Circuits held that an ATDS must
have the capacity to generate random or sequential telephone
numbers to be subject to the restrictions of 47 U.S.C. §
227(b).

SCOTUS’s Decision: Supreme Court Reverses the Ninth
Circuit

In an opinion authored by Justice Sotomayor, a unanimous Supreme
Court held that to qualify as an ATDS subject to Section
227(b)’s restrictions, a device or system must use a random or
sequential number generator in storing or in producing a telephone
number. The Court found that because “the equipment in
question must use a random or sequential number generator” to
be an ATDS, “[t]his definition excludes equipment like
Facebook’s login notification system, which does not use such
technology.”

The Court started by confirming that a proper reading of the
statutory text confirmed the narrower standard. The Court reasoned
that under clear rules of grammar, the modifying phrase “using
a random or sequential number generator” modifies both
antecedent verbs: “store” and “produce.”
Additionally, the Court reasoned that because the modifying phrase
immediately follows the cohesive clause “store or produce
telephone numbers to be called” it would be odd to apply the
modifier to one part of the cohesive clause. Thus, the Supreme
Court cut through the grammatical roadblock that had led some
circuit courts into opining that equipment that could simply
“store” telephone numbers could be considered to be a
restricted ATDS.

Justice Sotomayor’s opinion also relied on the statutory
context of the TCPA to support the Court’s holding. The Court
noted that the TCPA’s ATDS restrictions “target a unique
type of telemarketing equipment that risks dialing emergency lines
randomly or tying up all the sequentially numbered lines at a
single entity.” Congress intended to address a very nuanced
problem; therefore, expanding the definition of an ATDS to
encompass any equipment that merely stores telephone numbers would
go beyond the intent of Congress, and “take a chainsaw to
these nuanced problems when Congress meant to use a
scalpel.”  Additionally, the Court noted that such an
expansive definition would encompass virtually all modern
cellphones and expose ordinary cell phone owners to TCPA liability
when they engage in speed dialing or send automated text message
responses, which could not have been Congress’s intent.

As to public policy concerns, the Court refused to impose
“broad privacy-protection goals” onto the statute’s
narrow definition of ATDS, noting: “[t]hat Congress was
broadly concerned about intrusive telemarketing practices, however,
does not mean it adopted a broad autodialer definition.” The
Court noted that the TCPA would continue to restrict artificial and
prerecorded voice calls, regardless of the narrow reading of ATDS,
and that fears of a “torrent” of “robocalls”
are thus overstated. In the end, as Judge Sotomayor explained,
“Duguid’s quarrel is with Congress, which did not define
an autodialer as malleably as he would have liked.”

In a short concurrence, Justice Alito agreed with the
Court’s ruling, but wrote separately to take issue with the
main opinion’s reliance on a “set” grammar rule. He
advised that the canons of statutory interpretation are meant to be
used as tools to help identify the way in which “a reasonable
reader” would have understood the text of a statute at the
time it was issued. The other justices dealt with Justice
Alito’s concurrence in a footnote, and reminded lower courts to
be methodical when interpreting statutory text.

Impact

There are hundreds of litigations and arbitrations pending
around the country dealing with claims of illegal use of an ATDS,
and dozens of high-profile class action cases have been stayed
pending the Supreme Court’s decision in Duguid.
The Court’s decision will alter the course of current and
future cases as courts and litigants now have a uniform definition
of an ATDS when assessing ATDS-based claims brought under Section
227(b) of the TCPA. Additionally, Duguid has
provided guidance for companies that wish to directly reach out to
current and prospective customers, by settling the question of what
types of devices and systems will be considered an ATDS so as to
require specific prior consents for their use. The decision has
already prompted calls for a legislative response to the
Court’s more narrow interpretation of ATDS from lawmakers who
want to “amend the [TCPA], fix the Court’s error, and
protect consumers.”

The Court’s decision also moots much of the ATDS
question remanded to the FCC in 2018
in ACA International v. FCC. Given that the Court has
now interpreted the ATDS definition, the FCC will not be required
to provide its own interpretation of the term. In addition, the
Court undermines alternative formulations of the ATDS definition
occasionally advanced by the FCC that inquire as to the ability to
initiate a high volume of calls or texts in a short period of time.
The Court’s statement that it does not “interpret the TCPA
as requiring such a difficult line-drawing exercise around how much
automation is enough” likely moots that line of inquiry.
Finally, several pending petitions ask the FCC to
create or modify exceptions to the ATDS restriction. Many of those
petitions will have less practical impact going forward.

Prerecorded/artificial voice call claims and Do Not Call
violation claims under the TCPA, however, were not the focus of the
Court’s decision. Callers should remain vigilant about their
communications practices and ensure that they have procedures in
place to remain fully compliant with the TCPA.