Federal Appeals Court Narrows Meaning of “Automatic Telephone Dialing System” Under Telephone Consumer Protection Act

The Telephone Consumer Protection Act (TCPA) imposes liability for calling or texting cellular phone numbers using an Automatic Telephone Dialing System (ATDS) without sufficient prior express consent. The TCPA defines an ATDS as “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 creates a private cause of action and allows a plaintiff to recover statutory penalties of $500 per call or text in violation, or up to $1,500 for a knowing or willful violation. These statutory penalties have made the TCPA a useful tool for class-action plaintiffs’ attorneys seeking to hold companies liable for calls and texts over a four year statute of limitations period.

The Ninth Circuit has traditionally taken an expansive approach when defining what does and doesn’t qualify as an ATDS, extending the definition to virtually any kind of auto-dialer. Last year however, in Facebook, Inc. v. Duguid, the U.S. Supreme Court struck down the Ninth Circuit’s expansive approach to defining an ATDS, 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 database. Since Duguid, many TCPA defendants have argued that the definition of an ATDS requires that the random or sequential number generator be used to generate telephone numbers. Many TCPA defense attorneys also remained concerned that more liberal circuits, such as the Ninth and Second Circuits, might undermine Duguid’s conservative, defense-friendly ruling.

TCPA plaintiffs’ attorneys seized on a particular quirk in footnote 7 of the Duguid opinion where the Supreme Court addressed an argument concerning the overlapping of the “storing and producing functions” of an ATDS. In addressing a situation where an autodialer might not both store and produce numbers, the Supreme Court wrote: “For instance, an autodialer might use a random number generator to determine the order in which to pick phone numbers from a pre-produced list. It would then store those numbers to be dialed at a later time.” Plaintiffs’ attorneys have argued that companies that maintain customer contact lists and select which customers to contact on a given day using a random or sequential number generator are therefore using an ATDS.

However, in its recent ruling in Borden v. eFinancial, LLC, the Ninth Circuit categorically rejected the notion that such a scenario would constitute using an ATDS. In its ruling, 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 was not necessarily limited to the generation of “telephone numbers.” The Ninth Circuit disagreed.

Borden had provided his phone number to an insurance company on a website. He later began receiving text messages from eFinancial. Borden sued under the TCPA, claiming that eFinancial uses a “sequential number generator” to pick the order in which to call customers who had provided their phone numbers. He alleged that this type of number generator qualifies as an ATDS under the TCPA.

eFinancial sought dismissal arguing that the TCPA defines an ATDS as one that must generate telephone numbers to dial, not just any number to decide which pre-selected phone numbers to call. The district court agreed and dismissed the case. Borden appealed.

eFinancial made the same argument on appeal. Like the district court, the Ninth Circuit agreed with eFinancial, holding that “an ‘automatic telephone dialing system’ must generate and dial random or sequential telephone numbers under the TCPA’s plain text.”

The Ninth Circuit also rejected Borden’s “myopic focus on a single sentence in a footnote” as “ignor[ing] the broader context” of the Duguid holding. The Ninth Circuit explained that Duguid’s footnote 7 “merely addressed how an autodialer could both ‘store’ and ‘produce’ telephone numbers without rendering those two terms superfluous.” The Ninth Circuit further bolstered its result by noting 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.

The Court’s full opinion is available here.

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