What the U.S. Supreme Court Facebook v. Duguid Decision Means for Your Business

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4/1/2021 18:00

The U.S. Supreme Court has issued a unanimous decision in Facebook v. Duguid.

What the Court Found

To qualify as an automatic telephone dialing system (ATDS) under the Telephone Consumer Protection Act, a device must have the capacity to either:

1. Store a telephone number using a random or sequential number generator, OR
2. Produce a telephone number using a random or sequential number generator.

In other words, equipment that can store or dial telephone numbers without using a random or sequential number generator does not qualify as an ATDS under the TCPA.
 

Why the Court’s Holding Matters for Businesses Seeking to Communicate with Consumers, and for Every American Who Owns a Cellphone

The court’s conclusion has massive significance for the accounts receivable management (ARM) industry, and for virtually any individual using 21st century technology to place calls, because if the court had accepted Duguid’s argument, your cellphone, my cellphone, everyone’s cellphone would be subject to the restrictions set out in the TCPA.

Justice Sonia Sotomayor explicitly rejected such a nonsensical outcome:

Expanding 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.” [Section] 227(a)(1). The TCPA’s liability provisions, then, could affect ordinary cell phone owners in the course of commonplace usage, such as speed dialing or sending automated text message responses. See [Section] 227(b)(3) (authorizing a $500 fine per violation, increased to $1,500 if the sender acted “willfully” or “knowingly”).

What Exactly Does the TCPA Say?

Section 227(a)(1) of the TCPA defines an ATDS as:

“equipment which has the capacity—

1. to store or produce telephone numbers to be called, using a random or sequential number generator; and
2. to dial such numbers.”

What Does This Decision Mean for the ARM Industry?

1. This is a huge victory for callers because it sharply limits the definition of an ATDS and excludes from that definition dialing from stored lists. However, that does not mean the TCPA is a dead letter or that anything goes.
2. TCPA compliance is still important because the Facebook decision does not touch artificial or prerecorded voice, the requisite level of consent, or Do-Not-Call issues. The decision’s impact is limited to the definition of “autodialer,” which is just one component of TCPA litigation. Other TCPA issues fully remain in play. Additionally, we expect the FCC to continue addressing TCPA issues that fall under its jurisdiction (e.g., implementing the TRACED Act, specifying TCPA exemptions). Accordingly, implementing and following best practices with regards to obtaining the appropriate level of consent, recordkeeping, and honoring consumers’ revocation of consent remain important. 
3. “Human intervention” is no longer relevant. The court rejected the argument made by Duguid for using the “human intervention” test to distinguish his preferred definition of autodialer from other technologies that also can “store a telephone number,” such as cellphones. In a footnote, the court stated that it declined to “interpret the TCPA as requiring such a difficult line-drawing exercise around how much automation is too much.”
4. “Capacity” is still an issue. Because the court failed to address the TCPA’s use of the word “capacity” in reference to the functionalities of autodialers, we are left with an open issue regarding whether a given technology qualifies as an autodialer. Lower courts or the FCC may address this issue.
5. The Facebook decision effectively invites further congressional (and state) regulation of automated calling. While this decision is a victory in providing clarity on the meaning of an ATDS, it seems unlikely to reduce (1) congressional efforts to limit calls to consumers; or (2) state legislation to regulate automated calling.
6. Callers must continue to be mindful of industry best practices and guidelines. The Facebook decision does not impact industry best practices and guidelines, such as CTIA’s Messaging Principles. 

How Did the TCPA Issue Get to the Supreme Court?

The parties in this case disputed whether Facebook used a “random or sequential number generator” when it sent texts to Noah Duguid, alerting him to login activity on a Facebook account linked to his telephone number. Duguid claimed he did not create a Facebook account and did not give Facebook his telephone number. He attempted to stop the text messages, but was unsuccessful. Duguid then sued Facebook in a putative class action, alleging that Facebook violated the TCPA by maintaining a database that stored phone numbers and programming its equipment to send automated text messages.

Facebook moved to dismiss the suit, arguing that the TCPA did not apply to the technology it used to send the text messages because Facebook did not use a “random or sequential number generator.” The U.S. District Court for the Northern District of California agreed and dismissed Duguid’s amended complaint with prejudice. 2017 WL 635117, *4–*5 (Feb. 16, 2017).

Duguid appealed, and the 9th Circuit reversed, holding that Section 227(a)(1) applies to a notification system like the one used by Facebook that has the capacity to dial automatically stored numbers [1]. This decision led to a split in several federal circuits, with the 2ng and 6th Circuits following the decision in the 9th, but the 3rd, 7th, and 11th Circuits reaching an opposite position, holding that technology must be able to generate random or sequential numbers to constitute an ATDS under the TCPA. 

When Facebook appealed the decision of the 9th Circuit, the Supreme Court granted certiorari to resolve the conflict among the Courts of Appeals [2] regarding whether an autodialer must have the capacity to generate random or sequential phone numbers. 591 U. S. ___ (2020).
Three Legs Under the Stool

In writing the court’s decision, Justice Sotomayor detailed three distinct bases for the court’s unanimous decision favoring Facebook’s position that equipment that can store or dial telephone numbers without using a random or sequential number generator does not qualify as an ATDS under the TCPA.

1. Read the statutory language for its natural meaning. The phrase “using a random or sequential number generator” in Section 227(a)(1)(A) modifies both of the two verbs that precede it (“store” and “produce”) (as Facebook contends) and so it does not modify only the closest one verb (“produce”) (as contended by Duguid). This conclusion is consistent with the “series-qualified canon” of construction. Additionally, the comma in Section 227(a)(1)(A) separating the modifying phrase from the antecedents suggests that the qualifier applies to all of the antecedents, instead of just the nearest one. Just like your English teacher said, grammar matters!
2. The statutory context dictates that the TCPA’s autodialer definition excludes equipment that does not use a random or sequential number generator. Congress found autodialer technology harmful because autodialers can dial emergency lines randomly or tie up all of the sequentially numbered phone lines at a single entity. Facebook’s interpretation of Section 227(a)(1)(A) better matches the scope of the TCPA to these specific concerns.
3. The “distributive canon” or any privacy-protection goals or the outdated nature of the ATDS technology do not justify the court in rewriting the TCPA—a job that can only be done by Congress.

The court found Duguid’s arguments on these points unpersuasive, as noted in these statements quoted directly from the court’s opinion:

• Duguid’s counterarguments cannot overcome the clear commands of [Section] 227(a)(1)(A)’s text and the statutory context.
• Duguid’s interpretation is contrary to the ordinary reading of the text and, by classifying almost all modern cellphones as autodialers, would produce an outcome that makes even less sense.
• Duguid greatly overstates the effects of accepting Facebook’s interpretation. … In any event, Duguid’s quarrel is with Congress, which did not define an autodialer as malleably as he would have liked. “Senescent” as a number generator (and perhaps the TCPA itself) may be, that is no justification for eschewing the best reading of [Section] 227(a)(1)(A). This Court must interpret what Congress wrote, which is that “using a random or sequential number generator” modifies both “store” and “produce.”

The Work of the Supreme Court – Wrangling Outdated Legal Language

While we may sometimes imagine the work of the U.S. Supreme Court involves esoteric issues unrelated to the immediate concerns of everyday Americans, the April 1 decision in Facebook v. Duguid is a concrete reminder that the highest federal court periodically issues decisions with the potential to immediately impact every person in the U.S.

In this case, the court determined how to apply a 30-year-old statute written with an admirable goal to stop abusive telemarketing but that uses language that does not account for and is far removed from today’s technology for modern communications. The unanimous decision in Facebook demonstrates the court’s ability to navigate these complex waters.

[1] In reaching its decision, the 9th Circuit held an autodialer need not be able to use a random or sequential generator to store numbers; it need only have the capacity to “‘store numbers to be called’” and “‘to dial such numbers automatically.’” 926 F. 3d 1146, 1151 (2019) (quoting Marks v. Crunch San Diego, LLC, 904 F. 3d 1041, 1053 (CA9 2018)). Note further, in ACA Int'l v. FCC, the U.S. Court of Appeals for the District of Columbia Circuit granted in part and denied in part the petition for review by a number of regulated entities of a 2015 FCC order in which the FCC sought to clarify aspects of the TCPA.  ACA Int'l v. FCC, 885 F.3d 687 (D.C. Cir. 2018). The court found it unreasonable for the TCPA to render every smartphone an ATDS and therefore subject to the TCPA’s restrictions.

[2] In its fourth footnote, the Supreme court refers readers to compare the conflicting opinions found at the following decisions: 926 F. 3d 1146, 1151–1152 (CA9 2019); Duran v. La Boom Disco, Inc., 955 F. 3d 279, 290 (CA2 2020); and Allan v. Pennsylvania Higher Educ. Assistance Agency, 968 F. 3d 567, 579–580 (CA6 2020), with https://www.acainternational.org/events/seminar-facebook-vs-duguid., 950 F. 3d 458, 468 (CA7 2020) (Barrett, J., for the court); Glasser v. Hilton Grand Vacations Co., 948 F. 3d 1301, 1306–1307 (CA11 2020); and Dominguez v. Yahoo, Inc., 894 F. 3d 116, 119 (CA3 2018).

Written by Betsy Clarke, ACA International's compliance analyst.