Examining the Arguments Behind the TCPA Autodialer Circuit Split That the Supreme Court Will Consider Next Term

On July 9, 2020, the Supreme Court granted Facebook’s petition for certiorari in Duguid v. Facebook. As we recently discussed, the Supreme Court’s upcoming decision in this case will have a significant impact on the operation of the Telephone Consumer Protection Act (TCPA), a federal statute designed to protect consumers from certain unwanted calls. Specifically, Duguid will consider the definition of “automatic telephone dialing system” (ATDS or autodialer)—an important threshold definition in determining whether a party is liable for statutory damages under the TCPA. Below, we explore the variety of technical arguments parties have advanced in interpreting this term in the torrent of TCPA litigation that has ultimately spawned a circuit split.

How Did We Get Here?

In 2015, the Federal Communications Commission (FCC or Commission)—the agency charged with implementing the TCPA—promulgated an extremely broad definition of the term autodialer. The statutory text of the TCPA defines an autodialer as any equipment that “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.”[1] The FCC’s 2015 Declaratory Ruling defined “capacity” under this provision to encompass “potential functionalities” and “future possibility” rather than just present capability.[2] The Commission also stated that some predictive dialers may qualify as an ATDS even if they did not have the ability to generate random or sequential telephone numbers.[3] These interpretations resulted in a sweeping definition that was broad enough to cover every device that could conceivably obtain the ability to function as an ATDS in the future.

But the FCC’s extremely expansive interpretation of the term “autodialer” did not stand for long.  In 2018, the D.C. Circuit invalidated it in ACA International v. FCC. First, the D.C. Circuit found the Commission’s interpretation of the term “capacity” would sweep in every smartphone in the country because “smartphone apps can introduce ATDS functionality into the device[.]”[4] The court declined to give the TCPA such an “eye-popping sweep,” finding that this “anomalous outcome[]” was “bottomed in an unreasonable, and impermissible, interpretation of the statute’s reach.”[5] Second, the D.C. Circuit found that the Commission’s ruling was not a product of reasoned decisionmaking vis-à-vis the functions a device needed to have to qualify as an ATDS.[6] The court found the Commission’s reasoning contradictory, seemingly endorsing two competing approaches to this question, concluding both (i) that a device must be able to generate and dial random or sequential numbers to constitute an autodialer, and (ii) that a device can constitute an autodialer “even if it has no capacity itself to generate random or sequential numbers (and instead can only dial from an externally supplied set of numbers).”[7] The D.C. Circuit concluded that “the Commission cannot, consistent with reasoned decisionmaking, espouse both competing interpretations in the same order.”[8]

With these two holdings, the court effectively rescinded the agency’s primary guidance—deficient as it was—on the term “autodialer.” In the wake of ACA International, and in the absence of definitive action from the Commission on these issues, a contentious circuit split has developed across the federal judiciary.

Specifically, the Third, Seventh, and Eleventh Circuits have taken a narrow approach to interpreting ATDS. Under these courts’ reading, a device would not qualify as an ATDS unless it utilizes a random or sequential number generator. The Second and Ninth Circuits, however, have read the term more broadly. Under their interpretation, calling equipment is an ATDS if it either (1) produces numbers using a random or sequential number generator or (2) stores numbers—regardless of whether it uses a random or sequential number generator.

We describe these decisions in more detail below.

 The Third, Seventh, and Eleventh Circuits Construe the ATDS Definition Narrowly

In January, the Eleventh Circuit held that ATDS includes only those devices that use a random or sequential number generator.  Interpreting the statutory text—“equipment which has the capacity . . . to store or produce telephone numbers to be called, using a random or sequential number generator,” 47 U.S.C. §227(a)(1)(A)—the Eleventh Circuit provided three chief rationales for this reading of the statute.

First, the court found that “[w]hen two conjoined verbs (‘to store or produce’) share a direct object (‘telephone numbers to be called’), a modifier following that object (‘using a random or sequential number generator’) customarily modifies both verbs.”[9] The court thus concluded that a device could constitute an ATDS only if it could “us[e] a random or sequential number generator” when either storing or producing telephone numbers.[10]

Second, drawing on historical context, the court observed that both the FCC and reviewing courts had interpreted ATDS narrowly to include only devices equipped with random or sequential number generators between 1991—the time of the TCPA’s passage—and 2003.[11]

Third, the court found that, just as in ACA International, a contrary interpretation would encompass virtually every telephone in the country.[12] Observing that this outcome would render moot parts of the Fair Debt Collection Act, raise grave First Amendment concerns, and make millions of Americans liable for statutory damages, the court declined to provide an “exponential expansion of coverage in a law targeting auto-dialers and randomly generated numbers.”[13]

In February, the Seventh Circuit took a similar tack. In Gadelhak v. AT&T Services, Inc., the Seventh Circuit concluded that the Eleventh Circuit’s narrow interpretation was “the most natural one based on sentence construction and grammar.”[14] It concluded that, in addition to the Eleventh Circuit’s reasoning, “[t]he placement of the comma before ‘using a random or sequential number generator’ in the statute further suggests that the modifier is meant to apply to the entire preceding clause.”[15] Although the Seventh Circuit acknowledged that it was difficult to imagine how a random or sequential number generator could “store” telephone numbers, the court noted that “[t]he record before the FCC reveals that at the time of the statute’s enactment, devices existed with the capacity to generate random numbers and then store them in a file for a significant time before selecting them for dialing.”[16]

The Seventh Circuit rejected the broad interpretation of ATDS espoused by the Second and the Ninth Circuits. It found that such a reading would constitute a “significant judicial rewrite” of the autodialer definition of the TCPA because (i) “telephone numbers” is plainly the object of both “store” and “produce,” and (ii) a finding that “using a random or sequential number generator” modified only “produce” would thus be incoherent by splicing the words for purposes of a subsequent modifier but not a subsequent object.[17] The Gadelhak Court also rejected the plaintiff’s argument that “Congress blessed his interpretation” when it amended the TCPA in 2015 because “at the time of the congressional amendment . . . the D.C. Circuit was already reviewing ACA International.”[18] Finally, the Seventh Circuit noted that such an expansive definition would be incongruent with the remainder of the TCPA because it “is a sweeping restriction on private consumer conduct that is inconsistent with the statute’s narrower focus.”[19]

In June 2018, the Third Circuit concluded that a plaintiff must demonstrate that a device “generat[es] random or sequential telephone numbers and dial[s] those numbers” to prove that a device functions as an autodialer.[20] The court’s rationale was short and mostly centered around the then-recently issued ACA International decision.

The Second and the Ninth Circuits Interpret the Autodialer Definition Broadly

The Ninth Circuit created the ATDS circuit split in 2018 when it “decline[d] to follow” the Third Circuit’s Dominguez decision in Marks v. Crunch San Diego, LLC.[21] The Marks Court drew from Commission precedent, concluding that Congress locked in the Commission’s definition of ATDS in 2015 when it decided “not to amend the statutory definition of ATDS to overrule the FCC’s interpretation” while adding the government debt collection exemption.[22] This rationale does not provide an answer to the Seventh Circuit’s argument countering the indicia of congressional intent in Gadelhak (though this decision predates Gadelhak). The FCC has acknowledged that the D.C. Circuit and Ninth Circuit opinions are irreconcilable.[23]

Most recently, the Second Circuit concurred with the Ninth Circuit in Duran v. LaBoom Disco, Inc.[24] The Duran Court concluded that the “clause requiring the use of ‘a random or sequential number generator’ modifies only the verb ‘produce’ in the statute, but not the word ‘store’” for three reasons.[25]

First, the court found that this interpretation avoided surplusage. The court noted that “any number that is stored using a number-generator is also produced by the same number-generator; otherwise, it is not clear what ‘storing’ using a number-generator could mean.”[26] Accordingly, the court reasoned, finding that “using a random or sequential number generator” modified both “store” and “produce” would render the word “produce” surplusage.[27] By contrast, finding that the modifier applied to only “produce” would give that word independent meaning because “each verb is independently significant to the creation of a comprehensive statute, one that regulates dialing systems that can store numbers of all kinds or that can produce numbers in a particular way (randomly or sequentially).”[28]

Second, the court found that a narrow interpretation of “autodialer” did not comport with the structure of the TCPA. Specifically, the Second Circuit pointed to the TCPA exception which permits the use of ATDS to collect a debt owed to the United States.[29] The court reasoned that “it would be highly inefficient” for the federal government to attempt to collect a debt owed by using a random or sequential number generator because this would require it to “call numbers haphazardly until it luckily found someone who owed it money.”[30] Rather, the court concluded, “the only way this exception makes sense is if an ATDS can make calls or texts using a human-generated list of phone numbers.”[31]

Third, the court found that its interpretation was “confirmed by the FCC’s consistent interpretation of the TCPA.”[32] The court concluded that FCC orders from 2003, 2008, and 2012 counseled in favor of its broader interpretation.[33]

The Supreme Court’s Ruling on the Definition of ATDS Will Have Monumental Implications for TCPA Liability

As Facebook recently told the Supreme Court, the Circuits are “deeply divided” on the definition of “autodialer” in the TCPA. And the price tag of this gridlock is tallied in the billions of dollars in litigation fees. Studies by the U.S. Chamber Institute for Legal Reform have repeatedly confirmed the systematic abuse of the TCPA against legitimate business.

Guidance on the definition of ATDS is now likely to come from the Supreme Court before the FCC weighs in. While the Commission has sought comment on multiple occasions since its 2015 Declaratory Ruling was invalidated, it has yet to resolve the issue.[34] Now, with Duguid set to be considered by the Supreme Court for the October Term 2020, a decision on this pivotal definition will likely come in 2021. For these reasons, we expect a number of amici at the briefing stage. Stakeholders across the calling party spectrum should pay close attention to the progress of this case and engage in the upcoming proceedings before the Court.

[1] 47 U.S.C § 227(a)(1).

[2] Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Declaratory Ruling and Order, CG Docket No. 02-278, WC Docket No. 07-135, FCC 15-72, ¶¶ 16 & 20 (2015) (“2015 Declaratory Ruling”).

[3] Id. at ¶ 14.

[4] ACA International v. FCC, 885 F.3d 687, 697 (D.C. Cir. 2018).

[5] Id.

[6] Id. at 701-03.

[7] Id. at 702.

[8] Id. at 703.

[9] Glasser v. Hilton Grand Vacations Co., 948 F.3d 1301, 1306 (11th Cir. 2020).

[10] Id.

[11] Id. at 1307.

[12] Id. at 1309.

[13] Id. at 1309–10.

[14] 950 F.3d 458, 464 (7th Cir. 2020).

[15] Id.

[16] Id. at 465.

[17] Id. at 466.

[18] Id. at 467.

[19] Id.

[20] Dominguez v. Yahoo, Inc., 894 F.3d 116, 121 (3d Cir. 2018).

[21] 904 F.3d 1041, 1052, n.8 (9th Cir. 2018).

[22] Id. at 1052.

[23] Consumer and Government Affairs Bureau Seeks Further Comment on Interpretation of the Telephone Consumer Protection Act in Light of the Ninth Circuit’s Marks v. Crunch San Diego, LLC Decision, Public Notice, CG Docket Nos. 18-152, 02-278 (rel. Oct. 3, 2018).

[24] 955 F.3d 279 (2d Cir. 2020).

[25] Id. at 284.

[26] Id. (emphasis in original).

[27] Id.

[28] Id. at 285.

[29] Id. Note that this provision was declared unconstitutional last Monday in Barr v. American Association of Political Consultants, Inc.

[30] Id.

[31] Id.

[32] Id.

[33] Id. at 286–87.

[34] A recent bureau-level Declaratory Ruling sheds light on the definition of ATDS, but it does not speak the broader ATDS questions left open in the wake of ACA International.