Question Presented

The Supreme Court granted review of the question: “Whether the definition of ATDS in the TCPA encompasses any device that can “store” and “automatically dial” telephone numbers, even if the device does not “us[e] a random or sequential generator”?”

Six Circuits have previously answered the question. The Second, Sixth and Ninth held that a predictive dialer or system that dials from a stored list can qualify as an ATDS under the TCPA. The Third, Seventh, and Eleventh require that technology must have the capacity to generate random or sequential telephone numbers to qualify as an ATDS. The Seventh Circuit decision, Gadelhak v. AT&T Services, Inc., was penned by then-Judge Barrett, who participated in today’s argument. In addition, the D.C. Circuit’s 2018 remand in ACA International v. FCC questioned whether a broad reading of ATDS was lawful.

This case arises out of the Ninth Circuit’s broad approach to the definition of an automatic telephone dialing system under the TCPA.

Procedural History

The controversy comes before the Supreme Court on the basis of text messages that plaintiff Duguid allegedly received from Facebook in 2005. Duguid alleged that Facebook had violated the TCPA by maintaining a database of numbers on its computer and transmitting text message alerts to selected numbers from its database using an automated protocol. Facebook filed a motion to dismiss, arguing that Duguid had failed to plead the use of an ATDS. The district court held that the ATDS allegations were insufficient because they “strongly suggested direct targeting rather than random or sequential dialing” and dismissed the case. Soon after, the Ninth Circuit issued its decision in Marks v. Crunch San Diego, holding that an ATDS definition includes devices with the capacity to store numbers and to dial numbers automatically. Duguid appealed the prior dismissal of his claims and, applying Marks, the Ninth Circuit reversed. Facebook asked the Supreme Court to review the Ninth Circuit’s decision.

Briefing

Duguid, Facebook, and the United States have fully briefed the issue. Duguid argues for a broad definition of ATDS based on the statutory text and two canons of construction, the distributive-phrasing canon and last-antecedent canon, that he alleges show the adverbial phrase “using a random or sequential number generator” modifies the verb “to produce” but not the verb “to store.” Facebook, on the other hand, posits that the statutory language “using a random or sequential number generator” is an adverbial phrase that modifies both the verbs “store” and “produce.” Under that approach, the statutory text limits the definition of an ATDS to technology that uses a random- or sequential-number-generator. The United States filed a brief agreeing with Facebook that the plain text of the TCPA limits the definition of an ATDS to random- or sequential-number-generators. The government’s grammatical analysis focuses on the comma that precedes the adverbial phrase, pointing to past Supreme Court decisions and canons of statutory interpretation that advise such a comma is evidence that the phrase is meant to modify all antecedents (in this case, both the verbs “store” and “produce”).

Oral Argument

Argument in the case went over the scheduled hour by about 20 minutes. Facebook and the United States split the first 30 minutes and Duguid took the remaining time, excluding Facebook’s brief rebuttal. While oral argument does not always foretell the Court’s decision, certain trends developed.

• Grammatical Construction: A majority of Justices seemed to agree that Facebook and the United States had a stronger grammatical reading of the statute, but struggled with both the awkwardness of the construction, and the surplusage problem that their interpretation creates.
  • Justice Alito, for example, asked both Facebook and the United States whether it made sense to talk about random or sequential number generators as a device that can “store” numbers, wondering if their interpretation rendered the verb “store” superfluous. In response, the United States suggested that Congress was likely taking a “belt-and-suspenders” approach to drafting.
  • The Chief Justice, noting that most speakers do not resort to statutory canons of interpretation to understand language, suggested that the “sense” of the provision was more important than its syntax.
  • Justice Kavanaugh repeatedly asked about the different scope of the prohibition on artificial or prerecorded voice calls and “live” calls using an ATDS, as a way to understand the ATDS language.
  • Justice Gorsuch asked Facebook and the United States to address an alternate interpretation, offered by then-Judge Barrett in her decision in Gadelhak, that the clause “using a random or sequential number generator” could modify the phrase “telephone numbers to be called” instead of the verbs “store” and/or “produce.” Both parties asserted this interpretation would lead to their preferred outcome.
• Broader Questions on TCPA Scope: The Justices also pressed the parties on questions unrelated to the grammatical construction the statute.
  • Justice Thomas asked why “text messages” were covered by the TCPA at all, given that the statute’s language only regulates calls and later called the statute an “ill fit” for current technology. Justice Thomas’s question is indicative of a broader concern, shared expressly by Justices Sotomayor, Alito and Kavanaugh, that the TCPA may be ill-suited to regulate technology that looks very different from the technology available in 1991 when the TCPA was passed.
  • Justices Sotomayor, Barrett, Breyer, and Gorsuch each questioned whether the Ninth Circuit’s broad definition of an ATDS would expose all smartphone users to potential liability.
  • Justice Barrett was concerned specifically with the call-forwarding function and seemingly “automated” functions that modern cellphones are equipped with.
  • Duguid seemed unable to provide the Justices with a satisfactory answer on several of the non-grammatical issues and gave conflicting answers concerning the role for, and level of, human interaction necessary to remove technology from the definition of an ATDS.

The Court is expected to issue its ruling by Spring 2021. To learn more about the background of the case, the Circuit Courts’ varying definitions of an ATDS, and the potential implications for the Court’s ruling, consider listening to Kelley Drye litigator and Partner Paul Rosenthal’s preview podcast of Duguid or Kelley Drye’s monthly TCPA Tracker.

Click here to listen this episode.

The TCPA prohibits telemarketing calls to be placed using an ATDS without the requisite level of prior consent. Thus, the definition of what technology qualifies as an ATDS is often a fundamental, threshold question upon which TCPA litigation turns. Prior to 2015, the FCC had offered various, sometimes vague, interpretations of the term. In 2015, the FCC offered an expansive definition, which was set aside in March 2018 in the ACA International decision. While the issue has been before the FCC on remand for over two years now, courts nevertheless engaged in their own analysis of the statute, resulting in a broadening Circuit split on how the law is interpreted and applied and divergent outcomes based on the court in which the case is filed. Now the Supreme Court is poised (potentially) to resolve that dispute.

DEFINITION OF AN ATDS

Since the March 2018 decision of the Court of Appeals for the D.C. Circuit in ACA International set aside the FCC’s overbroad and expansive definition of an ATDS, two distinct interpretations of an ATDS have emerged. In Marks v. Crunch San Diego, the Ninth Circuit held that any equipment that dials telephone numbers from a stored list qualifies as an ATDS under the TCPA. That expansive approach threatens to encompass ordinary smartphones on the market within the TCPA’s ambit. This approach is also employed by the Second Circuit. In contrast, the Third, Seventh, and Eleventh Circuits have opted for a narrower, more textually honest and logical interpretation, that requires a showing that equipment has the present capacity to generate numbers using randomly or sequentially and dial them. (Arguably, the D.C. Circuit’s decision also called for an interpretation closer to the Third, Seventh and Eleventh Circuit interpretations). District Courts in the remaining Circuits (as well as some where the Circuit Courts have spoken) have generally (but inconsistently) adhered to one of these two approaches. Some of our prior discussions of these issues can be found here and here.

FACEBOOK SEEKS AN END TO TCPA CONFUSION

In Facebook, Inc. v. Noah Duguid, et al, Case No. 19-511 (2020), plaintiff Noah Duguid alleges that defendant Facebook had contacted him via text messages without appropriate levels of consent using an ATDS, as that term is defined under the TCPA. Mr. Duguid is not a Facebook customer and alleges that he received repeated login notification text messages from Facebook. Plaintiff alleges that he never provided the company with his cellphone number, much less prior express written consent to be contacted by text. Plaintiff’s original complaint was filed in the Northern District of California in March 2015 and dismissed without prejudice for failure to properly allege that an ATDS was used to send the texts at issue. In his Amended Complaint, Duguid added factual allegations that Facebook used an ATDS by maintaining a database of numbers on its computer and transmitting text message alerts to selected numbers from its database using an automated protocol.

Facebook again moved to dismiss Duguid’s allegations arguing that the TCPA was unconstitutional and that Duguid failed to plead the use of an ATDS. On February 16, 2017, the District Court granted Facebook’s motion to dismiss, finding the ATDS allegations were insufficient. Because of that finding, the court never reached the constitutional question. The court reasoned that Duguid’s ATDS allegations “strongly suggested direct targeting rather than random or sequential dialing,” which did not indicate the use of an ATDS. Importantly, the District Court rendered its opinion before the Ninth Circuit’s interpretation of the ATDS definition in Marks v. Crunch San Diego in September 2018.

On June 13, 2019, the Ninth Circuit reversed the lower court’s dismissal. Applying the Marks standard, the Ninth Circuit reasoned that Duguid had sufficiently alleged that Facebook used an ATDS by alleging the equipment “had the capacity to store numbers to be called and to dial such numbers automatically.” The Ninth Circuit separately addressed Facebook’s constitutional challenge to the TCPA and agreed that, although the TCPA included content- and speaker-based restrictions on speech, the overall statute could be salvaged by severing what it saw as the most offensive aspect—the government debt exception.

ISSUES BEFORE THE COURT

Facebook appealed and in its petition to the Supreme Court presented both the constitutional challenge and definitional question for review.

On July 6, 2020, the Supreme Court upheld the constitutionality of the TCPA in William P. Barr et al. v. American Association of Political Consultants et al., Case No. 19-631 (2020), thus mooting the constitutional challenge in Facebook’s petition. Our analysis of that decision can be found here.

On July 9, 2020, three days after it released its decision in Barr, the Supreme Court granted certiorari on the following question: Whether the definition of ATDS in the TCPA encompasses any device that can “store” and “automatically dial” telephone numbers, even if the device does not “us[e] a random or sequential generator”?

CONCLUSION

The Supreme Court’s resolution of this circuit split has the potential to forever change business communications by making it more or less difficult for businesses to reach their customers. As noted, a threshold question in TCPA litigation is whether equipment used to originate a call or text is an ATDS. The D.C. Circuit, in remanding the FCC’s 2015 expansive definition, noted that definition’s “eye-popping sweep.” Just how far the 29-year-old TCPA’s definition should reach into modern dialing technology has been a central question in litigation since the D.C. Circuit remand. How the Supreme Court addresses this could affect the methods businesses use to provide notifications and reminders to customers as well as how they obtain new customer and collect debts.

In addition to resolving the question of an ATDS, the Supreme Court’s acceptance of Facebook’s petition has other implications. In the short term, companies and practitioners are likely to see stays across the robust and active TCPA docket as lower courts await direction on this core (often threshold) legal question from the Supreme Court. While the decision in ACA International returned the ATDS definition to the FCC for consideration, the Supreme Court’s grant also makes it less likely that the FCC will take any additional affirmative steps on the definition of an ATDS until the Facebook case is decided.

The Supreme Court’s next term opens on October 5, 2020, and oral argument will be scheduled for a date sometime thereafter. A decision can be expected to be published sometime between the argument and when the terms recesses in late June/July 2021.

The most controversial aspects of the order are its interpretation of Section 230 of the Communications Decency Act ("CDA")—the statutory provision that shields online service providers from liability for user-generated content and the decisions they make about how to moderate that content—and its attempt to prompt the Federal Communications Commission ("FCC") to adopt regulations further interpreting the law. Reform of Section 230 has been under consideration in Congress for years, with Republicans and Democrats both offering different—and mostly contrary—critiques about how online platforms have failed to act in accordance with the statute while also benefitting from the liability protections.

Other directives in the EO attempt to elicit other parts of the federal government to discipline online platforms for their content moderation practices. Absent Congressional action, the EO’s directives appear to stand on shaky legal ground and are likely to have limited legal impact. However, the issuance of the EO alone may be unlawful, at least according to a complaint challenging the constitutionality of the EO filed with the U.S. District Court in D.C. by the Center for Democracy & Technology ("CDT"). According to the complaint, the EO violates the First Amendment, which strictly limits the government’s ability to abridge speech, by retaliating against Twitter for exercising its right to comment on the President’s statements and because it “seeks to curtail and chill the constitutionally protected speech of all online platforms and individuals” by demonstrating the government’s willingness to retaliate against those who criticize the government.

Seeks to “Clarify” the Scope of Section 230 Immunity Through FCC Regulations

Section 230 gives online service providers immunity from liability in two ways. First, Section 230(c)(1) says that online services are not the “publisher or speaker” of the user content they host. Publishers and speakers can be held liable for language that is, for example, libelous or defamatory. This clause prevents online services from being subject to lawsuits making such claims, while preserving the ability to bring direct suits against the users who actually generate the content. Second, Section 230(c)(2) says that online service providers cannot be held liable for “any action voluntarily taken in good faith to restrict access to or availability of material that [it] considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected.” This clause is designed to prevent online services from being deemed publishers when they make decisions about what user-generated content to remove. Its intent originally was to remove disincentives for online service providers to employ blocking and filtering technologies to protect children from online pornography.

The EO purports to clarify the scope of the immunity available under Section 230. Specifically, the EO says that online providers are not acting in “good faith” when they claim to be forums for free and open speech but instead engage in “deceptive or pretextual actions (often contrary to their stated terms of service) to stifle viewpoints with which they disagree.” According to the EO, under these circumstances, the online services are editorializing and therefore acting as publishers, in which case, the EO says the online services should lose their immunity under Section 230(c)(2). This interpretation, which is largely contrary to more than two decades of court precedents, would effectively mean that online services could be held liable for all the content their users post if it is determined their content moderation practices are biased.

To effectuate this interpretation, the EO sets out two directives. First, it directs “all executive departments and agencies [to] ensure that their application of section 230(c) properly reflects the narrow purpose of the section.” This directive is unlikely to carry any weight as Section 230 is not applied by federal agencies, but by courts, which are not subject to presidential directives. Second, the EO directs the National Telecommunications Information Association ("NTIA") to, within 60 days, file a petition for rulemaking asking the FCC to propose regulations to further clarify the circumstances under which an online service can lose its liability protection when it “restricts access to content” in a manner not specifically protected by subparagraph (c)(2)(A),” and the conditions under which such restrictions are not made in “good faith.”

Absent additional authority delegated by Congress, the FCC is unlikely to actually implement such regulations. The Commission has been reluctant to extend regulation to edge providers, such as online platforms, and its legal authority to do so has been debated. While the CDA technically added Section 230 into the Communications Act—the FCC’s regulatory sandbox—the Communications Act does not have any legal hooks that allow the agency to regulate online platforms and Section 230 itself does not provide the agency with any such independent authority. Tellingly, the FCC did not implement Section 230 in 1996 when the provision was added to the Act and does not have any rules on its books that interpret Section 230. Even if the FCC does have such authority, current leadership has already made clear, in the Restoring Internet Freedom order, that it does not want the agency to be the arbiter of neutrality for Internet service providers, which it ostensibly has the authority to do, let alone the arbiter of neutrality by online platforms, over which it has no explicit authority. While all five Commissioners released statements after the EO, three Commissioners expressed opposition or strong skepticism of the “good faith” concept. Thus, even if NTIA were to file a petition for rulemaking, new rules appear unlikely.

Other Directives in the Executive Order

While the directives above have received the most attention, the EO includes four other directives designed to penalize online platforms that engage in alleged viewpoint discrimination.

• Review Government Spending to Online Platforms – The EO directs executive branch departments and agencies to, within 30 days, assess their advertising and marketing spending on online platforms and report their findings to the Office of Management and Budget, while also directing the Department of Justice to “review the viewpoint-based speech restrictions imposed by each online platform identified in the report[s]” and assess whether any “are problematic vehicles for government speech due to viewpoint discrimination, deception to consumers, or other bad practices.” Conspicuously absent is an actual directive for departments and agencies to limit federal spending to such online platforms.
• FTC Review of Content Moderation Practices – The EO directs the Federal Trade Commission ("FTC") to “consider taking action” using its authority under Section 5 of the FTC Act to determine whether online platforms have engaged in unfair or deceptive acts or practices by “restrict[ing] speech in ways that do not align with those entities’ public representations about those practices,” which is something the FTC was already permitted to do. The FTC is also required to consider whether to develop a report describing the apparent 16,000 complaints that the White House received through its “Tech Bias” reporting tool.
• State Review of Content Moderation Practices – The EO directs the Attorney General to establish a working group to assess potential enforcement of state statutes prohibiting unfair or deceptive acts or practices against online platforms, develop model legislation for states that do not have such authority, and collect information regarding various practices by online platforms that could amount to viewpoint discrimination.
• Federal Legislation – The EO directs the Attorney General to “develop a proposal for Federal legislation that would be useful to promote the policy objectives” of the EO.

The order has garnered substantial criticism from online industry advocates and civil liberties groups alike. Among the online platforms, Twitter seemed undeterred by the EO, calling it a “reactionary and politicized approach” and promptly labeling another Trump tweet for glorifying violence in violation of its terms and conditions. Meanwhile, Facebook CEO Mark Zuckerberg, while critical of the EO, also critiqued Twitter’s actions, saying that social media companies should not be the arbiters of truth.

Initial reactions from the FCC Commissioners have been mixed. Republican Commissioner Carr was most supportive of the move, saying he welcomed the EO and its call for guidance on the “good faith” limitation in Section 230. Democratic Commissioner Rosenworcel had a contrary take, saying the EO would turn the FCC into the “speech police.” Both Commissioner Starks (a Democrat) and Commissioner O’Rielly (a Republican) avoided any direct criticism of the EO but affirmed the First Amendment’s important role in the issue. Chairman Pai largely stayed out of the fray, saying that the agency would “carefully review any petition for rulemaking” filed by NTIA. NTIA has not commented on the Executive Order.

The FTC commissioners have been silent on the EO, but the agency’s spokesperson, Peter Kaplan, said that “[t]he FTC is committed to robust enforcement of consumer protection and competition laws, including with respect to social media platforms, and consistent with our jurisdictional authority and constitutional limitations.”

Any substantive action at the FCC is likely months away, at best. NTIA has until July 27, 2020, to file its petition with the FCC, on which the FCC has no obligation to act. If the agency does respond, it may seek comment on whether to initiate a rulemaking first, before initiating a Notice of Proposed Rulemaking. Given the constitutional implications, the FTC may also hesitate to act in accordance with the EO. Regardless, we don’t expect any substantive action in 2020, if at all, particularly in light of the pending legal challenge by CDT. In the meantime, the impact of the EO will largely be political, not legal, while the purpose, meaning and fate of Section 230 is almost certain to be debated in Congress for years to come.