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On April 1, 2020, the Supreme Court issued its long-awaited decision in Facebook, Inc. v. Duguid, providing much-needed clarity on what constitutes an “automatic telephone dialing system” (“ATDS”) under the Telephone Consumer Protection Act (“TCPA”) and, in the process, resolved a deep split among the circuit courts. The Supreme Court’s narrow definition of an ATDS under the TCPA is a major victory to businesses performing SMS marketing.
The TCPA broadly prohibits calls or texts using an ATDS made to a consumer’s cell phone, unless they are made for emergency purposes or with the express written consent of the recipient. This prohibition puts the definition of an ATDS front and center in TCPA litigation, and makes the difference between a text message costing a business $500 in penalties per text ($1500 in the event that a court finds the TCPA violation to be willful), or no liability at all.
The TCPA defines an ATDS 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.” 47 U.S.C. § 227(a)(1)(A)–(B).
This brief section has been the subject of hundreds, if not thousands, of pages of analysis and interpretation by district courts and courts of appeals alike, all using tools of statutory interpretation to reach wildly different results. This lack of clarity led to a circuit split among numerous circuit courts, prompting the Supreme Court to act in Facebook.
The primary source of confusion regarding the definition of an ATDS is whether the phrase “using a random or sequential number generator” modifies both of the verbs that precede it, “produce” and “store,” or just the verb that immediately precedes it – “produce.”
The Ninth Circuit was the first to deal with this issue in Marks v. Crunch San Diego, LLC, 904 F.3d 1041, 1052 (9th Cir. 2018). There, the Ninth Circuit framed the question as “whether, in order to be an ATDS, a device must dial numbers generated by a random or sequential number generator or if a device can be an ATDS if it merely dials numbers from a stored list.” Id. at 1050. After considering the statute in light of the canons of statutory interpretation, the court held that an ATDS must either (1) store numbers to be called, or (2) produce numbers to be called, using a random or sequential number generator. Id. at 1053. The Marks decision was used as a framework for similar interpretations in the Second and Sixth Circuits. See Duran v. La Boom Disco, Inc., 955 F.3d 279, 285 (2d Cir. 2020) (“a dialing system can be an ATDS if it can ‘store’ numbers, even if those numbers are generated elsewhere, including by a non-random- or non-sequential-number-generator—such as a person. At the same time, a dialing system can be an ATDS if it can ‘produce’ numbers ‘using a random or sequential number generator[.]’”); Allan v. Pennsylvania Higher Education Assistance Agency, 968 F. 3d 567, 579–80 (6th Cir. 2020) (same).
A competing view emerged in January 2020, when the Eleventh Circuit issued its opinion in Glasser v. Hilton Grand Vacations Co., LLC, 948 F.3d 1301 (11th Cir. 2020). Like their colleagues in the Ninth Circuit, the court in Glasser started with the question of whether the phrase “using a random or sequential number generator” modifies only the word “produce,” or both “produce” and “store.” Id. at 1306. The Eleventh Circuit, like those courts before it, recognized the ambiguity in the ATDS definition, but instead held that “using a random or sequential number generator” modified both “produce” and “store,” taking Section 227(a)(1) to mean that “to be an auto-dialer, the equipment must (1) store telephone numbers using a random or sequential number generator and dial them or (2) produce such numbers using a random or sequential number generator and dial them.” Id.
Less than a month later, the Eleventh Circuit’s position was bolstered by an opinion from the Seventh Circuit – Gadelhak v. AT&T Servs., Inc., 950 F.3d 458 (7th Cir. 2020) – where the court likewise held that “using a random or sequential number generator” modifies both “store” and “produce.” The court also recognized the practical problem of holding that an ATDS need only have the capability to store numbers: “Every iPhone today has that capacity right out of the box. An iPhone of course can store telephone numbers; it can also send text messages automatically, for example by using the ‘Do Not Disturb While Driving’ function. Every iPhone, then, has the necessary capacities to meet the statutory definition. That means that under Gadelhak’s interpretation, every call or text message sent from an iPhone without the prior express consent of the recipient could subject the sender to a $500 fine.” Id. at 467. To avoid this absurd result, the Seventh Circuit chose the narrow interpretation of an ATDS.
Facebook offers its users the option to enable extra security to protect their Facebook accounts. This extra layer of protection involved an automated text message notification to the phone number registered to a Facebook user when that user’s account is accessed on an unrecognized device or internet browser.
In 2014, Facebook began sending text message notifications to Noah Duguid to let him know that his Facebook account was being accessed from an unknown browser. Duguid, however, did not have a Facebook account. Duguid attempted to get the text messages to stop by replying “off” and “all off,” but the text messages continued unabated, in large part because these notifications could only be turned off within the settings of a user’s Facebook account – something Duguid lacked. In March 2015, Duguid filed suit against Facebook for violations of the TCPA, alleging that the platform that Facebook used to send him text messages constituted an ATDS.
In February 2017, Judge Tigar of the Northern District of California dismissed Duguid’s First Amended Complaint with prejudice. Duguid v. Facebook, Inc., No. 15-CV-00985-JST, 2017 WL 635117, at *1 (N.D. Cal. Feb. 16, 2017). The basis for the dismissal was that Duguid admitted in his complaint that Facebook was not generating the numbers to send messages randomly, but, instead, the numbers were provided by Facebook users to Facebook for additional account security. Id. at *4. Since the plain language of Duguid’s complaint alleged that a random or sequential number generator was not used, and that Facebook users were directly targeted for text messages, Facebook was not using an ATDS as a matter of law. Id. at *5.
On the heels of its ruling in Marks, the Ninth Circuit reversed the District Court’s ruling in Duguid v. Facebook, Inc., 926 F.3d 1146, 1151 (9th Cir. 2019). In its opinion, the Ninth Circuit reaffirmed Marks, holding that “an ATDS need not be able to use a random or sequential generator to store numbers—it suffices to merely have the capacity to ‘store numbers to be called’ and ‘to dial such numbers automatically.’” Id. at 1151. With this definition in hand, the Ninth Circuit found that Duguid’s complaint stated a claim for relief, as it contained allegations that Facebook maintained a database of phone numbers to be texted and/or called. Id.
The Supreme Court granted cert on July 9, 2020, and issued its opinion on April 1, 2021. The opinion was penned by Justice Sotomayor and joined by all other justices barring Justice Alito, who drafted a separate concurrence in the judgment. The Supreme Court resolved the circuit split by holding that the phrase “using a random or sequential number generator” modifies both “store” and “produce.” Facebook, Inc. v. Duguid, No. 19-511, — S. Ct. —-, 2021 WL 1215717, at *4 (U.S. Apr. 1, 2021). To arrive at this conclusion, the Supreme Court applied the “series-qualifier canon,” which provides that where there is a list of verbs followed by a modifying clause, a modifier at the end of the list typically applies to the entire series of verbs that preceded the modifier. Id. And, like the Seventh Circuit noted in Gadelhak, the Court held that “[e]xpanding 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 meant to use a scalpel. Duguid’s interpretation of an autodialer would capture virtually all modern cell phones, which have the capacity to ‘store … telephone numbers to be called’ and ‘dial such numbers.’” Id. at *6.
Additionally, the Supreme Court rejected the views of the Ninth Circuit and Second Circuit that the broad consumer protection goals of the TCPA warranted a similarly broad interpretation of the ATDS provision, stating “[t]hat Congress was broadly concerned about intrusive telemarketing practices, however, does not mean it adopted a broad autodialer definition. Congress expressly found that the use of random or sequential number generator technology caused unique problems for business, emergency, and cellular lines. Unsurprisingly, then, the autodialer definition Congress employed includes only devices that use such technology, and the autodialer prohibitions target calls made to such lines.” Id. at *7. The Court added that “Duguid’s quarrel is with Congress, which did not define an autodialer as malleably as he would have liked.” Id.
So, what does this all mean for businesses and their compliance with the TCPA going forward? In the short term, businesses that utilize certain SMS marketing platforms to connect with their customers can breathe a temporary sigh of relief. The vast majority of SMS platforms do not store and/or produce numbers to be called using a random or sequential number generator. Rather, the numbers stored in these systems are largely those numbers that have been provided to businesses by the customers themselves, like in the Facebook case. It would be smart to check with your SMS provider to ensure that your messaging program is TCPA compliant, as potential exposure for violation of the TCPA can be considerable even with the Supreme Court clarifying that the definition of ATDS is narrow.
Moreover, it is always possible that Congress accepts the invitation of the Supreme Court to revisit the TCPA and broaden the definition of an ATDS in such a way that avoids having every smartphone be considered a potential ATDS, but is not so narrow as to require storage and production of numbers to be called/texted using a random or sequential number generator.
One other consideration is the continuing viability of the “human intervention” defense, previously used in some cases to defeat TCPA claims alleging the usage of an ATDS. See, e.g., Glasser, 948 F. 3d at 1312. The defense essentially provides that even if a messaging platform could store and/or produce numbers using a random or sequential number generator, if those messages were sent with sufficient human interaction with the messaging platform, no liability could attach under the TCPA. See id. The Supreme Court appears to have eviscerated this possible defense in a footnote in the Facebook ruling. See Facebook, Inc. v. Duguid, No. 19-511, — S. Ct. —-, 2021 WL 1215717, at *6 n. 6 (U.S. Apr. 1, 2021). In attempting to alleviate the Court’s concern that cellphones could be an ATDS under the interpretation promoted by Duguid, Duguid drew from the human intervention defense to argue that too much human intervention was involved in the operation of a cellphone for it to be considered an ATDS. Id. The Supreme Court, however, countered with “[b]ut all devices require some human intervention, whether it takes the form of programming a cell phone to respond automatically to texts received while in ‘do not disturb’ mode or commanding a computer program to produce and dial phone numbers at random. We decline to interpret the TCPA as requiring such a difficult line-drawing exercise around how much automation is too much.” Id. This footnote suggests that the “human intervention” defense relied upon by businesses that utilize platforms that could be considered an ATDS may be a thing of the past.
Time will tell what the full effect of this ruling will have on the TCPA going forward, but in the short-term businesses should be happy with the result.
