The US Supreme Court in Facebook, Inc. v. Duguid unanimously held on April 1 that the Telephone Consumer Protection Act’s definition of an autodialer is limited to systems that have the capacity either to store a telephone number using a random or sequential number generator or to produce a telephone number using a random or sequential number generator, finding in favor of Facebook based on the plain text of the statute. While this decision eliminates the need for businesses to obtain full prior express written consent before collecting phone numbers for text messages or phone calls from call centers (through equipment that does not have the capacity to store or to dial numbers with random or sequential number generators), Congress may amend the statute to bring that requirement back, and consent from those whom you are texting or calling is still advisable. In addition, the National Do Not Call Registry and more restrictive state laws continue to be fertile grounds for regulators and class action lawyers. In this LawFlash, we examine the decision and consider four key takeaways.
The Telephone Consumer Protection Act (TCPA) places restrictions on various forms of outbound telephone calls whether for mass marketing or other purposes, such as debt collection and basic customer communication. These restrictions include, among other things, sending text messages and placing phone calls to subscribers of wireless services using an automatic telephone dialing system (autodialer). Pursuant to the statute, an autodialer “means 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 USC § 227(a)(1). The threshold issue of what equipment satisfies the TCPA’s definition of an autodialer is of significant import. Parties using equipment satisfying the definition of an autodialer must obtain prior express consent of text message recipients or called parties. Failure to obtain prior express consent exposes parties initiating text messages or calls to statutory damages calculated on the basis of each text message sent or call placed without such consent.
Statutory damages are set at $500 for each call and can be trebled to $1,500 per call for a “willful” violation, and there is no statutory damages cap, as sometimes found in other federal consumer protection statutes. Class action litigation proliferated across the country over the last five years largely due to the lure of hefty statutory damages and a ready pool of potential defendants with deep pockets. This continued notwithstanding a concerted effort by the business community to curtail the TCPA, making the Supreme Court’s decision in Facebook a long-awaited one for courts and litigants alike.
The issue largely came down to grammar per the Court: whether the phrase “using a random or sequential number generator” (in the above-quoted statute) modifies both “store” and “produce,” such that an autodialer would include only systems that randomly or sequentially generate phone numbers to be called, or whether the phrase modifies only “produce,” such that an autodialer would include any system that can store numbers dialed automatically, regardless of whether it also randomly or sequentially generates those numbers. In Facebook, the plaintiff, Noah Duguid, alleged that Facebook sent numerous text messages without Duguid’s consent. The US Court of Appeals for the Ninth Circuit found that Duguid adequately alleged Facebook’s use of an autodialer because the company’s dialer had the capacity to “store numbers to be called” and “to dial such numbers automatically,” rejecting an interpretation of the term autodialer that would also require such equipment to use a random or sequential number generator. In so holding, the Ninth Circuit emphasized that the TCPA’s purpose was to prohibit automated, unsolicited, and unwanted messages and that the law should be read broadly to accomplish those goals.
The Supreme Court granted certiorari on the question of whether the TCPA’s definition of autodialer “encompasses equipment that can ‘store’ and dial telephone numbers, even if the device does not ‘use a random or sequential number generator.’” The Court, in a unanimous decision authored by Justice Sotomayor, reads like a high school grammar lesson. The Court held that the TCPA’s definition of an autodialer requires that in all cases, whether in the context of storing or producing numbers, the system must have the capacity to use a random or sequential number generator. The Court relied on the “natural reading” of the provision, the context in which it was drafted, and interpretive canons to agree with Facebook that the phrase “random or sequential number generator” modifies both “store” and “produce.” In a concurring opinion, Justice Alito agreed with the majority’s reading of the autodialer provision but noted that the canons are not “inflexible rules” and instead identify how a reasonable reader would understand a phrase.
Although the decision focused on a grammatically pure construction of the text, the Court also found that classifying as autodialers equipment with the capacity to store and to dial telephone numbers is illogical because such a broad definition would capture “virtually all modern cell phones.” The Court also reasoned that the provision was drafted specifically to address concerns such as technology that would tie up the lines of businesses with sequentially numbered phone lines and cause consumers to incur unwanted fees, because at the time of TCPA enactment most wireless providers charged subscribers for incoming calls. In light of this context, the Court held that the TCPA’s autodialer provision applies only to devices that have the capacity to store or to dial phone numbers using a random or sequential number generator.
Of particular note, the Court rejected Duguid’s argument that a narrow reading of the autodialer provision would thwart Congress’s “broad privacy-protection goals,” reasoning that although “intrusive telemarketing practices” motivated Congress to adopt the TCPA, such policy goals do not require courts to broadly interpret the definition of an autodialer. This reasoning is of significant interest in light of the Court’s most recent decision on the TCPA, issued last year, in which the Court repeatedly referred to the TCPA as a “privacy” statute, intended above all to protect consumers from an “invasion of privacy.”
FOUR THINGS TO KNOW
Facebook Brings Long-Awaited Clarity on What Constitutes an Autodialer and Is Great News for Businesses That Use Text Messages and Calls to Communicate with Customers
In agreeing that the definition of an autodialer is limited to devices that have the capacity to store or to dial phone numbers using a random or sequential number generator, the Court endorsed arguments that companies defending TCPA actions arising from alleged autodialer use have repeatedly made over the last decade with varying success.
The decision has an immediate impact on businesses that want to communicate with customers by telephone or text message. The reality is that most businesses today target communications to consumers who are likely to be interested in their products or services, and they refrain from placing phone calls to random phone numbers or sending out text messages indiscriminately. But because of the ongoing uncertainty about the definition of an autodialer and decisions holding that any system that has the capacity to merely store numbers to be dialed automatically is an autodialer, these communications were subject to constant threat of litigation. Even systems designed to simply dial a list of customers or send text messages to particular individuals could run afoul of the TCPA. This decision provides welcome clarity to companies engaged in these communications.
Given that violations of the TCPA may result in penalties as high as $1,500 per text message or call, the Court’s ruling is a huge win for businesses that maintain databases of phone numbers to later send automated computer-generated text messages.
The TCPA May Be Due for a Rewrite
In endorsing a narrow reading of the autodialer definition, the Court made clear that unlike Congress, it lacks the ability to “rewrite the TCPA to update it for modern technology.” Given the vast advances in technology in the 30 years since the TCPA was enacted, as well as increasing public pressure regarding unwanted phone calls and text messages, we can expect calls for a proposed revision of the TCPA that would broaden the scope of prohibited telemarketing practices. In fact, just hours after the Facebook decision was issued, congressional Democrats announced plans to revisit the statute. Businesses may therefore want to proceed cautiously before dismantling their current advance written consent processes if a new consent requirement may emerge from imminent legislation.
Facebook Will Not Do Away with TCPA Liability Altogether
Whether or not Congress passes another autodialer ban in the future, businesses should be mindful of other potential sources of liability in the TCPA that remain intact. Plaintiffs’ counsel will likely point out that the Court’s decision indicates that the autodialer ban arguably still applies to any system that has the “capacity” to either store or produce numbers with a random or sequential number generator, and it is unclear what the impact of the Court’s decision will be on appellate circuits interpreting the statute’s reference to “capacity” broadly. Accordingly, it remains important for businesses to continue to evaluate their risks under the TCPA, including to ensure that they are not using systems that have the capacity to store or to dial numbers with random or sequential number generators, which would trigger potential TCPA liability.
Additionally, the Court was careful to note that its holding would not impact other, broader provisions of the TCPA, such as its prohibition on calls using “an artificial or prerecorded voice” in certain circumstances. Other provisions of the TCPA that remain intact include, but are not limited to, the statute’s do-not-call and junk fax rules.
Other Legal Pitfalls Exist
While the Facebook decision is welcome news for the business community, compliance with other statutes and regulations related to placing calls and texts to consumers remain attractive to regulators and class action plaintiffs. In particular, the FTC’s Telemarketing Sales Rule (TSR) established the National Do Not Call Registry. The TSR also places a broad array of restrictions on telemarketing practices. In addition, a number of states, including Connecticut, New Jersey, and Pennsylvania, have enacted mini-TCPAs designed to offer state law remedies for unwanted telemarketing calls. Finally, creative plaintiffs’ lawyers have relied on various state statutory catch-all consumer protection and consumer privacy laws to sue over unwanted calls from businesses. Accordingly, caution and careful compliance planning continue to be warranted.
Despite the significance of the Court’s decision, we expect that TCPA litigation will not immediately subside. The availability of statutory damages coupled with class formation will continue to tempt plaintiffs to allege TCPA violations for fantastic sums of money.
 We note that the Supreme Court assumed, without deciding, that the TCPA applies to unsolicited text messages, since this issue was not disputed by the parties.