CRUISING TO A WIN: Another Court Rejects FN7 Argument—Dismisses TCPA Complaint at the Pleadings Stage in Marketing Suit

Editor’s Note: Big welcome to Sam–another tremendous addition to our powerful team! Be sure to check out the Facebook Ruling Resource Page for an up to date case list of post-Facebook ATDS decisions.

Plaintiffs continue to try and expand the Supreme Court’s recent decision in Facebook v. Duguid, relying on a strained and out-of-context reading of footnote 7 of that opinion.  And they keep losing.  Add to the list another case out of the Western District of Washington: Borden v. Efinancial, LLC, No. C19-1430JLR, 2021 U.S. Dist. LEXIS 153086 (W.D. Wash. Aug. 13, 2021).

Ask any marketing professional and they will tell you—this is a numbers game.  More customer contacts equals more sales.  By phone, text, or email, these contacts have to be automated—long gone are the days of phone banks staffed by hundreds of marketers.  Loyal readers know that such systems are often litigated under the TCPA which applies to certain “automatic telephone dialing system[s]” (ATDS) which have the capacity “to store or produce telephone numbers to be called, using a random or sequential number generator.”

That short phrase proved hard to consistently define and for years a split between the circuits left companies unsure which competing definition of “automatic telephone dialing system” under the TCPA would apply.  Recently, the U.S. Supreme Court addressed—and mostly resolved—this uncertainty in Facebook, Inc. v. Duguid, 141 S. Ct. 1163 (2021), holding that the phrase “using a random or sequential number generator” modifies both “store” and “produce.”

We say “mostly” because of a particular quirk in footnote 7 of the Duguid opinion where the Supreme Court noted the issue of when “the storing and producing functions” merge.  It reads, “For instance, an autodialer might use a random number generator to determine the order in which to pick phone numbers from a preproduced list. It would then store those numbers to be dialed at a later time.”  Plaintiffs have seized upon this footnote to argue that companies which maintain customer contact lists and select which customers to contact on a given day are using a random or sequential number generator and so are therefore using an ATDS.

It is now clear that the definition of an ATDS would encompass a system using a random number generator to create phone numbers to call.  But what about when the system uses a random number generator in another way, to select numbers from an existing list of contacts collected from an online form submittal?  If a given day’s contacts are pre-selected by a random or sequential number generator from a master list, is that an ATDS under Duguid?

Such was the case in Borden v. Efinancial, LLC, No. C19-1430JLR, 2021 U.S. Dist. LEXIS 153086 (W.D. Wash. Aug. 13, 2021).  In this case, plaintiff visited a website and submitted a form to get a quote for life insurance but decided against ultimately making that purchase.  The defendant, eFinancial, allegedly operated an automated system which sent text messages to customers by selecting contacts from a master list using a sequential number generator.  Plaintiff alleged that the use of a sequential number generator to pull contacts from the list of submitted phone numbers constituted an ATDS under the TCPA after Duguid.

You see the issue—looking past the consent-to-contact issue, plaintiff admitted he provided his number to the defendant, but alleges that defendant nonetheless used an ATDS because his number was selected for further contact through the use of a sequential number generator.  Think of this argument as the “production two-step”—a plaintiff “produces” his number to the master list in the first instance, but then the (potential) ATDS “produces” the number again when it selects the number from a master list and sends a text message.

Let us take step back and illustrate the issue at its most basic level.

There are a lot of telephone numbers in the United States, but not a limitless number.  Wikipedia tells us that there are 7,918,900 possible phone numbers per area code in the U.S., and with about 340 total area codes in use, that makes for just under 2.7 billion potential phone numbers.  Could a company use this list and text phone numbers from it using a random or sequential number generator and avoid the ATDS definition? For ATDS purposes, how would selecting numbers from this list be different from selecting from a list of numbers submitted by potential customers?

Back to Borden.  Plaintiff argued that the use of a sequential number generator to pick numbers from a master list constituted an ATDS under Duguid’s Footnote 7, “an autodialer might use a random number generator to determine the order in which to pick phone numbers from a preproduced list.”  And isn’t this exactly what plaintiff alleged eFinancial did?  Isn’t this what everyone does?

Perhaps, but the Court found that misread footnote 7.  Unfortunately, that is a faithful quote from footnote 7 and so the Court had to dive a little deeper to find out why plaintiff missed the mark.

Footnote 7 was centered on an amicus brief submitted by the Professional Association for Customer Engagement (PACE).  The PACE brief was submitted to support a narrower ATDS definition and so when the Court dove into the PACE brief itself, it found that the context made it clear that “the preproduced list of phone numbers referenced in footnote 7 was itself created through a random or sequential number generator, thus differentiating it from the stored list of consumer-provided phone numbers used by eFinancial.”  However one can stretch the words used in footnote 7, the context shines through.

Plaintiff thus failed to allege an ATDS and so failed to state a claim.  Case dismissed with prejudice.

Borden joins a growing number of district courts which have come to the same conclusion regarding the proper interpretation of footnote 7.  Specifically, courts in the Northern District of California and the District of South Carolina have come to a similar conclusion.  We here at TCPA world will continue to monitor the issue as it develops.

 

 

 

3 Comments

  1. Great stuff. You mentioned a “growing number of district courts”. What are the other districts at this point?

    1. Hi Marianne! At this point, I count the Northern District of California, the District of South Carolina, and the Eastern District of Michigan. E.D. Missouri has noted the issue but deferred the issue to summary judgment. But this is a fast-paced area of TCPA litigation, I wouldn’t be surprised if there are more as I type this.

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