December 8, 2021

Volume XI, Number 342

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December 07, 2021

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December 06, 2021

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Supreme Court Decision a Win for Companies Marketing or Communicating via Phone or Text

In a landmark decision that will impact all companies that communicate with their customers via text or phone calls, the U.S. Supreme Court earlier this month overturned a broad interpretation that some federal courts had previously adopted with respect to the definition of an “automated telephone dialing system,” “ATDS,” or “autodialer.” In Facebook, Inc. v. Duguid et. al, the U.S. Supreme Court held that, to qualify as an autodialer, the equipment used by companies to dial consumers must actually have the capacity to use a random or sequential number generator to either store or produce a telephone number.

BACKGROUND

The Telephone Consumer Protection Act (TCPA) is a federal law that aims to limit unsolicited calls and text messages to consumers. Among other provisions, the TCPA prohibits initiating any call or text to a cell phone for a non-emergency purpose (whether for telemarketing or not) using an autodialer without first having obtained the recipient’s consent. Significantly, the TCPA provides automatic damages for each violating call or text regardless of intent, and provides for treble damages if the plaintiff can establish that violations are willful or knowing.

Before the Supreme Court’s decision, some courts had held that in order to be an “autodialer” under the TCPA, the equipment need only have the capacity to store numbers and dial those numbers, i.e., it need not use a random or sequential number generator. Under this interpretation, even a cell phone itself could be considered an “autodialer,” drastically increasing the risk that companies employing calls or texts to mobile phones could be found in violation of the TCPA. When paired with automatic damages for each violation and the relative ease of establishing a large number of violations (for example, based on a single offending text to numerous consumers), this expansive interpretation had resulted in numerous class actions against companies interacting with consumers’ cell phones. 

THE COURT’S HOLDING

At issue in the Facebook case was a Facebook security feature that allowed users to provide a cell phone number to Facebook for the purpose of sending those users a “login notification” via text message any time there was a potentially unauthorized attempt to log into the user’s Facebook account. The plaintiff had received multiple text messages notifying him of login attempts, but he did not have a Facebook account, and therefore he had not consented to such messages. He subsequently sued Facebook on the basis that those text messages violated the TCPA because Facebook’s security equipment constituted an “autodialer,” even though he did not allege that Facebook’s equipment used a random or sequential number generator to text him. Although the U.S. District Court for Northern District of California dismissed the case on the basis that plaintiff failed to allege that a random or sequential number generator was used, the Ninth Circuit reversed that dismissal and sided with the plaintiff, holding that it was not necessary for an autodialer to have the capacity to use a random or sequential number generator to store telephone numbers.

Earlier this month, the Supreme Court sided with Facebook, holding that “a necessary feature of an autodialer 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 opinion can be found here.

IMPLICATIONS OF THE SUPREME COURT’S DECISION FOR COMPANIES

The Supreme Court’s decision in the Facebook case is a big win for any company that uses phone calls and text messaging to communicate with customers because it significantly narrows the list of equipment that could be considered an autodialer.  

However, companies should be aware that “autodialer” is still a broad definition that includes equipment that has the capacity to store or produce numbers using a random or sequential number generator, even if that capability is not used in making the call or text. In addition, other restrictions under the TCPA are unaffected by this case and continue to present pitfalls for unwary companies. For that reason, companies should still pay attention to this law and continue to ensure that they have appropriate processes and procedures in place to ensure TCPA compliance.

©2021 Pierce Atwood LLP. All rights reserved.National Law Review, Volume XI, Number 102
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About this Author

Kasey Boucher Associate Pierce Atwood Business Mergers & Acquisitions, Technology Transactions & Outsourcing Trademark Intellectual Property & Technology
Associate

Kasey Boucher is an intellectual property and business attorney, and works with clients of all sizes, ranging from early-stage companies to leading companies within their respective industries.

Kasey represents clients on all aspects of trademark matters, including searching, prosecuting, and enforcing trademarks and brands. She assists clients with the protection, enforcement, and licensing of copyrights. In addition, Kasey advises companies on various aspects of advertising and unfair competition laws, including advertising claims, sweepstakes and contests, as well as consumer...

207-791-1235
Kyle J. Grover Portland Partner
Partner

Kyle Glover assists clients with a wide range of matters related to the negotiation of technology and intellectual property transactions, the prosecution and protection of trademarks, and compliance with data privacy and security requirements. Examples of matters on which he has worked include:

  • Negotiating and drafting a technology licensing agreement on behalf of a major energy utility

  • Advising a large software company on the legal aspects of the deployment of a new mobile app, including advising on terms of use, privacy, and trademark protection

    ...
207-791-1289
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