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Client Alert: UPDATE - Circuit Split on Definition of “Autodialer” Under the TCPA Leaves Companies at Risk

UPDATE: On July 9, 2020, the Supreme Court granted a petition for certiorari from Facebook Inc., setting the court up to settle the circuit split over what constitutes an autodialer.  Facebook brought this appeal from a Ninth Circuit decision that revived a consumer class action against Facebook over unsolicited security texts sent to stored numbers, on the basis that the dialing system had the “capacity” to text randomly generated numbers.[1]  This follows a decision of the Second Circuit earlier this spring[2] that adopted the Ninth Circuit’s more expansive definition of an autodialer.

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In recent years, the Telephone Consumer Protection Act (“TCPA”) has been a major source of potential liability for companies that send marketing text messages.  The TCPA allows for consumer class action suits alleging that a company uses an automatic telephone dialing system (“autodialer”) to send text messages to consumers who have not previously given their prior express written consent.  The penalties for not complying with the TCPA are steep: up to $500 for each violation and up to $1,500 for each willful violation—that is, if proven, for each individual text.

A critical issue in TCPA cases is whether the equipment used to call or send text messages to the plaintiffs is an autodialer, and there is a developing split among the federal circuit courts about what constitutes an autodialer.  The TCPA defines an autodialer 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). 

In 2015, the Federal Communications Commission (“FCC”) issued an omnibus Declaratory Ruling & Order[3] holding that an autodialer is any equipment that has the potential capacity to store or produce, and dial, random or sequential numbers.  It specifically found that the autodialers need only have the “capacity” to dial random and sequential numbers, rather than the “present ability” to do so.

Later courts found this interpretation too broad.  In 2018, the D.C. Circuit Court of Appeals held that there must be more than a theoretical potential that the equipment could be used as an autodialer.[4]  Similarly, the Second and Third Circuits have both narrowly interpreted the definition, finding that an autodialer is only a device that has the present capability to store or produce and dial random or sequential numbers.[5]

By contrast, the Ninth Circuit has agreed with the FCC, interpreting the definition to cover any equipment that can “store” telephone numbers, regardless of whether the equipment uses a random or sequential number generator.[6]

In the last two months, the Eleventh and Seventh Circuits have joined the D.C., Second, and Third Circuits in taking the more narrow view.  On January 27, 2020, the Eleventh Circuit in Glasser v. Hilton Grand Vacations Co., LLC held that the definition of an autodialer is limited to systems that are capable of generating random or sequential blocks of telephone numbers for dialing, and it does not include “automated” dialing equipment that includes telephone numbers from a preset list, such as when a debt collector calls a list of specific debtors.[7]  Similarly, on February 19, 2020, in Gadelhak v. AT&T Services. Inc, the Seventh Circuit held that AT&T did not violate the TCPA by sending unwanted text messages because the system used to send the text messages “exclusively dial[ed] numbers stored in a customer database,” not from a number generator, and therefore it was not an autodialer.[8]  The Seventh Circuit reasoned that the most “natural” construction of the statute “based on sentence construction and grammar” requires an autodialer to be capable of generating random or sequential telephone numbers for dialing, and because the dialing system at issue was not capable of generating telephone numbers, but could instead only dial phone numbers from a stored list, it was not an autodialer. 

This circuit split leaves the Ninth Circuit as the only Circuit that, at this point, has followed the FCC’s lead and held that any equipment with the potential capability of dialing random or sequential numbers constitutes an autodialer, even if it is not presently doing so.  Accordingly, we anticipate that the Ninth Circuit will be the focus of the plaintiffs’ class action bar in future TCPA suits unless the Supreme Court resolves this split.  To mitigate the risk of liability, companies can consider other ways of reaching consumers directly that are not covered by the TCPA – for example, sending only “on demand” or direct messages, or using “over the top” (OTT) messaging platforms, such as WhatsApp or Facebook Messenger.

If you have any questions concerning the TCPA or any other issue concerning your business’s marketing programs, please contact Kate Dennis Nye or your Neal Gerber Eisenberg attorney.

 

[1] Facebook Inc. v. Duguid, No. 19-511

[2] Duran v. La Boom Disco, Inc., No. 19-600-cv (2d Cir. Apr. 7, 2020)

[3] Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991; American Association of Healthcare Administrative Management, Petition for Expedited Declaratory Ruling and Exemption; et al, 80 FR 61129 (10/09/2015).

[4] ACA International v. FCC, No. 15-1211 (D.C. Cir. Mar. 16, 2018).

[5] King v. Time Warner Cable Inc., No. 15-2474 (2d Cir. Jun. 29, 2018); Dominguez v. Yahoo, Inc., No. 17-1243 (3d Cir. Jun. 26, 2018).

[6] Marks v. Crunch San Diego, LLC, No. 14-56834 (9th Cir. Sept. 20, 2018).

[7] Glasser v. Hilton Grand Vacations Co., LLC, No., 18-14499 (11th Cir. Jan. 27, 2020).

[8] Gadelhak v. AT&T Servs. Inc., No. 19-1738 (7th Cir. Feb. 19, 2020).