On April 1, 2021, the US Supreme Court substantially limited the scope of the Telephone Consumer Protection Act's (TCPA) ban on automated calls and text messages by endorsing a narrow reading of the type of equipment covered under the statute.
In Facebook, Inc. v. Duguid, the Supreme Court held in an opinion authored by Justice Sotomayor (and joined by all other justices except for Justice Alito who concurred in the judgment but wrote separately) that to constitute an "automatic telephone dialing system" (ATDS) under the TCPA, equipment must "have the capacity either to store a telephone number using a random sequential generator or to produce a telephone number using a random or sequential number generator." No. 19-511 at 1. In doing so, the Supreme Court resolved a Circuit split as to whether the random or sequential number generator requirement applies only to equipment with the capacity to produce telephone numbers, as argued by Duguid, or whether it also applies to equipment with the capacity to store telephone numbers, as argued by Facebook. By endorsing the latter approach, the Supreme Court's ruling removes the threat of crushing statutory penalties for businesses making calls and sending text messages using technology with the capacity to store phone numbers, but not through the use of a random or sequential number generator.
The TCPA, enacted by Congress in 1991, prohibits "using any [ATDS]" to make non-emergency calls or calls without the prior express consent of the called party to "emergency telephone line[s]," "guest room[s] or patient room[s] of a hospital," or "telephone number[s] assigned to a paging service [or] cellular telephone service." 47 U.S.C. § 227(b)(1)(A)(i)-(iii). ATDS is defined 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). The TCPA contains a private right of action and allows claimants to recover actual damages or $500 per violation, which can be tripled, at a court's discretion, for willful and knowing violations. 47 U.S.C. § 227(b)(3).
The dispute before the Supreme Court concerned a Facebook security feature that alerts users via text message of attempts to access their account from unknown devices. Despite having never signed up to receive text messages, or even a Facebook account, Duguid allegedly received numerous text message alerts from Facebook for an account associated with his phone number. In response, Duguid filed a putative class action against Facebook alleging that it violated the TCPA by sending automated text messages to phone numbers stored by Facebook each time an unknown device attempted to access an associated account. In response, Facebook argued that Duguid failed to state a claim under the TCPA because he did not allege the text messages at issue were sent using a technology with the capacity to randomly or sequentially store phone numbers per 47 U.S.C. § 227(a)(1)(A). See generally Duguid at 3-4.
The US District Court for the Northern District of California agreed with Facebook and dismissed Duguid’s amended complaint. Duguid v. Facebook, Inc., No. 15-cv-00985, 2017 WL 635117, at *3-4 (N.D. Cal. Feb. 16, 2017). However, the Ninth Circuit reversed, holding "an ATDS need not be able to use a random or sequential generator to store numbers automatically —it suffices to merely have the capacity to 'store numbers to be called' and 'to dial such numbers automatically.'" Dugiud v. Facebook, Inc., 926 F.3d 1146, 1151 (9th Cir. 2019) (quoting Marks v. Crunch San Diego, LLC, 904 F.3d 1041, 1053 (9th Cir. 2018)).
The Supreme Court's Decision and Its Implications
In July 2020, the Supreme Court granted certiorari in Duguid to resolve a Circuit split with respect to their conflicting readings of an ATDS. Compare Duran v. La Boom Disco, Inc., 955 F.3d 279, 283-84, 290 (2d Cir. 2020) (agreeing with the Ninth Circuit's interpretation); Allan v. Penn. Higher Educ. Assistance Agency, 968 F.3d 567, 579-80 (6th Cir. 2020) (agreeing with the Ninth Circuit's interpretation) with Gadelhak v. AT&T Services, Inc., 950 F.3d 458, 468-69 (7th Cir. 2020) (Barrett, J.) (disagreeing with the Ninth Circuit's interpretation) and Glasser v. Hilton Grand Vacations Co., LLC, 948 F.3d 1301, 1306-1307 (11th Cir. 2020) (disagreeing with the Ninth Circuit's interpretation).
On April 1, 2021, the Court reversed the Ninth Circuit's decision in Duguid and concluded that "random or sequential number generator" modifies both "store" and "produce," as opposed to just the latter term.
First, the Court determined that reading "random or sequential number generator" to apply to both the terms "store" and "produce" adheres to the "conventional rules of grammar." Such rules, the Court argued, mandate that "'[w]hen there is a straightforward, parallel construction that involves all nouns or verbs in a series,' a modifier at the end of the list 'normally applies to the entire series.'" Duguid at 5 (internal citation omitted). Therefore, the Court concluded that "[i]t would be odd to apply the modifier ("using a random or sequential number generator") to only a portion of this cohesive preceding clause." Id. at 6. In addition, the Supreme Court focused on the presence of the comma preceding "using a random or sequential number generator," which it stated "further suggests that Congress intended the phrase 'using a random or sequential number generator' to apply equally to both preceding elements." Id. And finally, the Court declined to apply a number of interpretive methods advocated by Duguid, including the "rule of the last antecedent," which would be of no help to Duguid since "[t]he last antecedent before 'using a random or sequential number generator' is not 'produce'…but rather 'telephone numbers to be called.'" Id. at 7, 9-11.
Second, the Court concluded that "the statutory context" of the TCPA's autodialer ban mandates a narrow reading of ATDS. Id. at 8. The Court asserted that the TCPA's autodialer "prohibitions 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." Id. Specifically, the Court pointed to the fact that the TCPA's autodialer ban covers "'emergency telephone line[s]' and lines 'for which the called party is charged for the call'" in addition to "us[ing] an autodialer 'in such a way that two or more telephone lines of a multiline business are engaged simultaneously.'" Id. The Court expressed concern that a broader reading of ATDS "would take a chainsaw to these nuanced problems when Congress meant to use a scalpel" and "capture virtually all modern cell phones, which have the capacity to 'store…telephone numbers to be called' and ‘dial such numbers.'" Id.
The Supreme Court's decision in Duguid will likely have significant ramifications for both TCPA litigation and compliance. The Court's narrow interpretation of "ATDS" will likely exclude many technologies used by businesses to call and send text messages to consumers. The TCPA fight may move to Congress, as the Court stated that any public desire to curb the use of telephone dialing technology that merely stores telephone numbers must be established through legislation.
For now, it is sobering to think how many companies have had to pay extortionate settlements over the last three decades, in scores of TCPA class actions, despite the presence of clear language which limited the statute's reach. The old saw that a statute should be broadly construed because it has a "remedial purpose" provides no basis to ignore the plain language of the statute. Meanwhile, the TCPA elegantly displays how the threat of crushing statutory penalties can stifle the willingness of companies to seek appellate review. It took 30 years, and a protagonist named Facebook, to obtain this decision from the Supreme Court that ultimately turned on the plain language of the statute.