Ninth Circuit Follows Fourth Circuit in Finding TCPA ‘Debt Collection’ Exemption Unconstitutional

TCPA Connect

Adding more fuel to an already raging fire, the Ninth Circuit has weighed in on a case that has the potential to make its way to the U.S. Supreme Court and finally provide much-needed guidance on the controversial Marks case as well as the constitutionality of the Telephone Consumer Protection Act (TCPA) in general.

Following in the recent footsteps of the Fourth Circuit in American Association of Political Consultants, Inc. v. FCC (AAPC), the Ninth Circuit became only the second federal appellate court to rule that the “debt-collection exception” of the TCPA, which exempts calls made solely to collect a debt owed to or guaranteed by the United States (i.e., government debt collectors, such as for school loans), was an unconstitutional restriction on speech under the First Amendment of the U.S. Constitution. But like the Fourth Circuit, the Ninth Circuit stopped short of striking down the entire TCPA as unconstitutional, commenting that the TCPA is “a longstanding and otherwise constitutional guardian of consumer privacy.”

The case is Duguid v. Facebook, Inc. There, plaintiff Noah Duguid claimed that Facebook used an “automatic telephone dialing system” (ATDS) to alert users, as a security precaution, when their account was accessed from an unrecognized device or browser. Duguid alleged in his complaint that he received security messages despite not being a Facebook customer or user and never consenting to such alerts.

Before addressing First Amendment issues, the Ninth Circuit first determined whether the plaintiff had sufficiently alleged use of an ATDS under its prior holding in Marks v. Crunch San Diego. That decision, as we have previously covered, held that “an ATDS need not be able to use a random or sequential generator to store numbers” and instead merely needs to “have the capacity to ‘store numbers to be called’ and ‘to dial such numbers automatically’” after the D.C. Circuit’s watershed ACA International (ACA) decision. The Marks decision, as our readers will recall, stands in stark contrast to the Second and Third Circuits’ post-ACA rulings on the definition of an ATDS, and has generally not been followed outside of the Ninth Circuit, albeit with some minor exceptions. (For Manatt’s continuing coverage on ACA and its impact on the definition of an ATDS under the TCPA, click here.)

Following its own precedent from Marks, the panel reversed the district court’s order of dismissal in favor of Facebook, ruling that Facebook’s equipment fell within the ATDS definition. In particular, the plaintiff had alleged that Facebook maintained a database of phone numbers and explained “how Facebook programs its equipment to automatically generate messages to those stored numbers.” The panel also found that the plaintiff supposedly had explained in sufficient detail how Facebook automates its messages. The panel held that those factual allegations sufficiently pleaded that Facebook used an ATDS under Marks.

Next, Facebook challenged the constitutionality of the entire TCPA and was at least partly successful, in that the panel declared the debt-collection exemption as being incompatible with the First Amendment. Consistent with the Fourth Circuit’s opinion in AAPC, the Ninth Circuit held that “the debt-collection exception is content-based and insufficiently tailored to advance the government’s interests in protecting privacy or the public fisc” (i.e., financial well-being). But the panel also found that “the debt-collection exception is severable from the TCPA” and thus, like in AAPC, the Ninth Circuit declined to rule that the TCPA as a whole is facially unconstitutional.

To read the entire decision in Duguid v. Facebook, Inc., click here.

Why it matters: In Duguid, the Ninth Circuit reaffirmed its highly criticized Marks decision, which broadly defined what constitutes an ATDS under the TCPA after ACA changed the landscape. However, the result in this case and in Marks is much different than how most other courts have recently defined an ATDS, which have widely (and we believe correctly) held that merely storing and dialing numbers is not enough to qualify as an ATDS. This case is also significant as being only the second federal appellate court decision to rule that any portion of the TCPA is unconstitutional. Consequently, this case sets the stage for the showdown in the U.S. Supreme Court that defense counsel have been hoping for, as the Court may not only resolve the circuit split created by Marks on the proper definition of an ATDS but could also strike down the entire TCPA as being unconstitutional. Thus, this case, like AAPC, will be one to watch in the coming months.