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The Telephone Consumer Protection Act (TCPA) restricts the use of an “automatic telephone dialing system” (ATDS), which the TCPA defines as a device that has the capacity “to store or produce telephone numbers to be called, using a random or sequential number generator” and to “dial those numbers.” Courts have split over whether the phrase “using a random or sequential number generator” modifies only the term “produce,” or both the terms “store” and “produce.” This matters because most businesses store customers’ telephone numbers and may call them with an automated system; if “using a random or sequential number generator” modifies only “produce” but not “store,” then any system that stores numbers and dials them would be swept into the TCPA’s purview. In fact, since most cellphones also store numbers and can automatically call them, even an individual using their cellphone to place a call could potentially be subject to the TCPA.

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On April 1, the U.S. Supreme Court resolved the definitional struggle by holding that “using a random or sequential number generator” modifies both the terms “store” and “produce.” The decision narrows the TCPA’s scope, representing a significant victory for creditors, loan servicers, and other businesses that call their customers using automated systems. However, because the decision does not affect the separate TCPA bar on making calls to cellphones using a “prerecorded or artificial voice” without consent, creditors and other businesses should still take care when calling cellphone numbers.

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In 1991, Congress passed the TCPA to address the proliferation of intrusive, nuisance calls from telemarketers to consumers and businesses, particularly to cellphones. The TCPA prohibits callers from using an ATDS to make calls or send text messages to cellphones without the called party’s consent. When the TCPA was enacted, cellphones were not as ubiquitous as they are today, and it was common for carriers to charge cellphone owners on a per-minute basis for each call. To stop the flood of “robocalls,” Congress gave recipients of prohibited calls a private right of action to pursue statutory damages of $500 to $1,500 per call.

In Duguid v. Facebook, the plaintiff, Duguid, received numerous text messages alerting him of login activity on an account linked to his telephone number. Because the plaintiff did not have an account (and thus could not have consented to the messages), he filed a putative class action in the U.S. District Court for the Northern District of California, alleging that the text messages violated the TCPA.

The defendant filed a motion to dismiss, arguing that Duguid failed to allege that the text messages were sent using a system that randomly or sequentially generated telephone numbers. The court agreed and dismissed the complaint with prejudice. The U.S. Circuit Court for the Ninth Circuit reversed, holding that to qualify as an ATDS, a telephone system need only have the capacity to “store numbers to be called” and “to dial such numbers automatically.” The Second and Sixth Circuits agreed with this interpretation, while the Third, Seventh and Eleventh Circuits did not. The Supreme Court granted certiorari to resolve the conflict.

In an opinion written by Justice Sotomayor, in which Chief Justice Roberts and Justices Breyer, Kagan, Gorsuch, Kavanaugh and Barrett joined, the Supreme Court reversed the Ninth Circuit’s decision. Based on the TCPA’s text and broader context, the court held that the phrase “using a random or sequential number generator” modifies both of the verbs preceding it, meaning that a necessary feature of an ATDS under the TCPA is the capacity to use a random or sequential number generator to either store or produce phone numbers to be called. The court reasoned that under the “series-qualifier” canon of statutory interpretation, a modifying clause at the end of a series of nouns or verbs applies to the entire series, not to just the last noun or verb in the series. Additionally, the court reasoned that Congress was specifically concerned about autodialers randomly calling emergency lines or tying up all the sequentially numbered phone lines at a single entity. Congress’s concerns led the Supreme Court to conclude that a random or sequential number generator is a necessary component of an ATDS.

The court, however, was careful to note that the “statute separately prohibits calls using ‘an artificial or prerecorded voice’ to various types of phone lines, including home phones and cell phones, unless an exception applies,” adding that “[o]ur decision does not affect that prohibition.”

The Supreme Court’s decision may provide relief to businesses that make routine calls to customers whose numbers would be neither stored nor produced using a random or sequential number generator. However, many businesses not only use automated systems to call their customers but also leave messages with a prerecorded or computer-generated voice. Businesses placing such calls should continue to consider the TCPA in formulating their calling strategies.

Jessica E. Salisbury-Copper 937.443.6854 <a href="mailto:Jessica.Salisbury-Copper@ThompsonHine.com">Jessica.Salisbury-Copper@ThompsonHine.com</a>

Scott A. King 937.443.6560 <a href="mailto:Scott.King@ThompsonHine.com">Scott.King@ThompsonHine.com</a>

Doori Song 216.566.5648 <a href="mailto:Doori.Song@ThompsonHine.com">Doori.Song@ThompsonHine.com</a>

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

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https://admin.thompsonhine.com/wp-content/uploads/2022/04/Business_Litigation_Update_-_Supreme_Court_Narrows_TCPA_Definition_of_ATDS.pdf

Supreme Court Narrows TCPA Definition of ATDS

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