The Supreme Court and the TCPA: What Companies Should Know About the Recent Ruling
By Sherrese M. Smith, John Gasparini, John J. Michels, & Jacqueline W. Cooney
On April 1, 2021, the Supreme Court issued an important opinion narrowing the application of the Telephone Consumer Privacy Act (TCPA). In the decision, the Court determined that the transmission of text messages does not violate the TCPA if the technology employed to send the messages does not actually utilize a “random or sequential number generator.”
The Court’s ruling narrows the scope of the TCPA by narrowing the types of devices and equipment that can constitute an “automatic telephone dialing system” (ATDS). Because the use of an ATDS is one of the threshold requirements of bringing TCPA cases, the decision has the practical effect of limiting the TCPA to telemarketing calls and text messages made with a device that “must have the capacity to store a telephone number using a random or sequential number generator, or to produce a telephone number using a random or sequential number generator”. As the Court made clear, this definition did not apply to the sending of account security text messages to users’ phone numbers.
The outcome of this case resolves a deep split in the decisions of federal district and appellate courts on the applicability of the TCPA to “robo-calls” using randomly generated numbers. The decision has the potential to significantly limit TCPA-related class action litigation in the near term, as recent cases have focused on precisely this issue.
There will likely be an immediate effect on cases that have been stayed pending the Supreme Court decision—there are currently around 5,000 active cases related to TCPA today, a number that some observers predict will fall significantly in the coming weeks. The decision also will likely slow the recent increase in TCPA cases brought against companies that auto-dial phone calls or that send automated text messages based on a stored list of numbers, such as from a database of current or former customers.
The decision may also trigger a legislative reaction as well. Specifically, Congress may react by considering legislation to expand the scope of the TCPA, a move that is supported by the plaintiffs’ bar and consumer advocates. For example, the Electronic Privacy Information Center (EPIC), a consumer privacy watchdog group, has already called for Congressional action along those lines. In a Democrat-controlled Congress, legislation to further regulate companies’ use of robo-calls is not beyond possibility.
What Should Companies Do if They Currently Use Auto-Dialing to Contact Consumers?
First, companies should not use ATDS to randomly call or text consumers. While the Court’s newly articulated approach limits TCPA liability in some contexts, the use of randomly generated numbers to call or text consumers who have not expressly consented to receiving calls remains prohibited.
Second, companies that use auto-dialing to call or text consumers based on stored lists or databases of current or former customers can likely continue to do so at present. However, companies should work with counsel to carefully review their current TCPA practices, and should discuss whether any planned changes to such programs would comport with existing law and judicial decisions. As a best practice, companies should also continue to provide mechanisms for consumers to opt out of marketing calls and text messages, and should honor opt-out requests as they occur.
Finally, companies should work with counsel to identify and prepare for potential legislative developments in this space. It is possible that this decision will serve as an impetus for congressional action, meaning that the scope of this provision of the TCPA may not be narrow for long. Paul Hastings will continue to monitor TCPA updates and post additional alerts on any notable developments.