The Ninth Circuit Further Narrows The Meaning Of ATDS Under The Telephone Consumer Protection Act
Among other things, the federal TCPA imposes liability for calling/texting cell phone numbers using an Automatic Telephone Dialing System (“ATDS”) without sufficient prior express consent. As defined by the TCPA, ATDS is “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 TCPA grants a private right of action and allows a plaintiff to recover statutory penalties of $500 per call/text in violation, or up to $1,500 for a knowing or willful violation. These statutory penalties have made the TCPA a favorite among class action plaintiffs’ attorneys seeking to hold companies liable for calls/texts over a four year statute of limitations period.
The Ninth Circuit has traditionally taken an expansive view of the meaning of ATDS to extend to virtually any kind of auto-dialer. In 2021, however, the U.S. Supreme Court reversed and rejected the Ninth Circuit’s broad definition of ATDS in Facebook, Inc. v. Duguid, ––– U.S. ––––, 141 S. Ct. 1163 (2021), generally holding that an auto-dialer is not an ATDS if the numbers being dialed are from an existing list of specific numbers, such as from a customer database. Yet, the Facebook case did not resolve all issues relating to ATDS, and many TCPA defense attorneys remained concerned that more liberal circuits, such as the Ninth and Second Circuits, might sidestep the Supreme Court’s conservative, defense-friendly ruling.
However, in its recent ruling in Borden v. eFinancial, LLC, No. 21-35746, —F.4th— (9th Cir., November 16, 2022), the Ninth Circuit followed both the letter and the spirit of Facebook, and further limited the meaning of ATDS. In particular, the Ninth Circuit held that to be an ATDS, telephone equipment “must generate and dial random or sequential telephone numbers under the TCPA’s plain text.” In other words, merely generating some random or sequential number during the dialing process (e.g. figuring out the order to call a list of phone numbers) is not sufficient to be considered an ATDS under the TCPA.
In Borden, the appellant David Borden argued that the term “random or sequential number generator” in the statute did not necessarily refer to “telephone numbers.” The Ninth Circuit disagreed. Borden had gone online to shop for insurance and ended up providing his phone number on Progressive.com’s website. After agreeing to receive autodialed calls from eFinancial at the telephone number he provided, Borden ultimately decided not to purchase any insurance from the site. Thereafter, Borden began receiving marketing messages from eFinancial and claimed he never agreed to such messages.
Borden sued eFinancial in a putative class action under the TCPA, alleging eFinancial used a “sequential number generator” to pick the order in which to call consumers who had provided their phone numbers. In particular, Borden claimed eFinancial’s equipment generated a sequential string of numbers which were then stored and assigned to a customer’s telephone number. Borden argued that Footnote 7 in the Supreme Court’s Facebook decision supported his position. Footnote 7 states, in part, that “an autodialer might use a random number generator to determine the order in which to pick phone numbers from a preproduced list.”
The district court dismissed his case, ruling eFinancial did not use an ATDS. On appeal, the Ninth Circuit affirmed, holding that an ATDS must randomly or sequentially generate telephone numbers, not just any number as Borden argued. The Ninth Circuit explained that the repeated use of the word “number” in the statutory definition of ATDS makes clear that it means “telephone number.” The Ninth Circuit presumed “Congress did not intend to create a confusion sandwich,” and “used the word ‘numbers’ to mean telephone numbers throughout the definition” of ATDS.
In addition, the Ninth Circuit rejected Borden’s “myopic focus on a single sentence in a footnote” as “ignor[ing] the broader context discussed by the [Supreme] Court. . .” The Ninth Circuit explained that Footnote 7 “merely addressed how an autodialer could both ‘store’ and ‘produce’ telephone numbers without rendering those two terms superfluous.” The court also noted that “[u]sing a random or sequential number generator to select from a pool of customer-provided phone numbers would not cause the harms contemplated by Congress.” Accordingly, the Ninth Circuit affirmed the district court’s order dismissing Borden’s claim.
What does this mean? The Ninth Circuit embraced the holding of the U.S. Supreme Court narrowly interpreting the meaning of ATDS, and did not rely on an arguable ambiguity in Facebook to avoid its implications. Nevertheless, the ongoing litigation over the meaning of ATDS demonstrates that companies should still do what they can to ensure they are obtaining prior express consent before making auto-dialed calls or text messages.