On April 1, 2021, the US Supreme Court issued a unanimous decision in a highly anticipated case regarding the definition of automatic telephone dialing systems (“ATDS”) under the Telephone Consumer Privacy Act (“TCPA”). The decision authored by Justice Sotomayor narrows the definition of an ATDS and could have a major impact on how businesses may market to consumers using telephone voice and text.
The TCPA, first enacted in 1991, sought to curb abusive telemarketing calls in part by limiting the use of some technology, including ATDSs, in many situations. These systems allowed telemarketers to generate and call large amounts of telephone numbers, far more than any human being could physically dial. This lead to a sharp increase in “robo-calls” contacting consumers and even at times tying up hospital and emergency service telephone lines.
The part of the statute at issue in this case banned “using any automatic telephone dialing system or an artificial or prerecorded voice” to call or text cellphones, as well as emergency telephone lines, hospital patient rooms, pagers, and phones that charge for incoming calls, among other restrictions. ATDSs are 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.” The law granted the Federal Communications Commission, state attorneys general and private parties the authority to sue those who don’t comply with the law for penalties up to $1,500 per call.
There have been many technological advances since the passage of the TCPA, including far wider adoption of cellphones and the obsolescence of the ATDSs specifically targeted by the law. As a result, more marketing calls (and texts) were placed to cellphones, potentially implicating the TCPA, while the issue of whether the devices placing the calls are ATDSs has become murkier and murkier. The plaintiff’s bar in particular has pushed for the courts to read the TCPA’s definition of ATDS more broadly and apply it to more modern technology, leading to circuit splits and decisions in some places that effectively conclude that any cellphone could be an ATDS.
Plaintiff Noah Duguid brought the case heard by the Court in a private lawsuit, alleging that defendant Facebook used an ATDS to send him text messages without the required consent from him. The system in question used an automated response protocol to alert a customer-provided number if someone made an attempt to access the customer’s Facebook account. Mr. Duguid alleged that he did not have a Facebook account and therefore never granted consent to Facebook sending 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 in his complaint. The court found that 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, reasoning that Duguid had sufficiently alleged the use of an ATSD by Facebook that “had the capacity to store numbers to be called and to dial such numbers automatically.” This was consistent with the Ninth Circuit’s view 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.
Although the Supreme Court reviewed the Ninth Circuit’s ATDS definition, five other federal circuit courts of appeals had weighed in on the issue, leading to a major circuit split. The Second and Sixth Circuits joined the Ninth to hold that any system capable of predictive dialing or storing lists of phone numbers 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).
The Supreme Court’s decision largely rested on issues of grammatical construction of the TCPA. However, the policy context loomed large throughout the litigation. The definition of ATDS adopted by half of the Circuits could mean than any marketing call placed by a cellphone to another cellphone required express consent from the customer, including one-off calls. Conversely, adopting the narrow definition of ATDS could open the floodgates for more marketing calls to cellphones, as random or sequential number generators are now largely obsolete and newer technology will not be as restricted.
The Court considered the practical implications of its ruling but nonetheless refused to impose “broad privacy-protection goals” onto the statute’s narrow definition of ATDSs. The Court noted that though Congress in 1991 “was broadly concerned about intrusive telemarketing practices … [this] does not mean it adopted a broad autodialer definition.” The Court also noted that the TCPA will continue to restrict artificial and prerecorded voice calls, regardless of the narrow reading of ATDS. In adopting the more narrow definition of ATDSs, the Court recognized that its decision could result in frustration for consumers. However, the Court found that “Duguid’s quarrel is with Congress” in that it is the body that should update the TCPA to address modern technology.
The decision is likely to have major implications for the future of telemarketing. First, it means that the TCPA does not ban the use of now-dominant predictive dialing technology, so long as an artificial or pre-recorded voice is not used. This technology often relies on massive amounts of data collected on American consumers that has the potential to make telemarketing calls more effective, and therefore more prevalent. Second, text-marketing is likely to increase at a large scale, as the decision greatly reduces the legal risk of engaging in a form of marketing that may businesses have been eager to try but found difficult to implement under the TCPA.
Business owners, especially those residing in Circuits that previously applied the broad ATDS definition, are likely to receive many pitches over the coming months from marketers eager to move into this widened space. Some important restrictions will still apply, however, such as those on the use of pre-recorded messages, contacting individuals on the “Do Not Call” list, and use of misleading practices. Every business considering use of telemarketing, whether by voice or text, should consult with counsel to limit legal exposure.
The long-term future remains uncertain but further change is almost certainly ahead. If there is public outcry due to an increase in marketing calls and messages, Congress may be spurred to either update the TCPA or finally adopt new federal privacy regulation. If Congress does not act, states may step into the void on the theory that there is no federal preemption on the issue because the Supreme Court narrowed the TCPA.
Businesses should therefore keep an eye to the future as they review their marketing practices. Customer consent to be contacted with marketing messages will continue to be the gold standard, as businesses that have express consent will almost certainly be able to continue to contact customers despite any future changes in the law. We therefore advise every business to develop their marketing strategies with an eye to the potential for future legislation.