TCPA Connect

Defendant’s Calling System Ruled Not an Autodialer

A Telephone Consumer Protection Act defendant successfully persuaded a Michigan federal court judge that its calling system was not an automated dialing system because there was significant human involvement in dialing phone numbers.

Plaintiff Lakisha Smith alleged that defendant Stellar Recovery Inc. called her cell phone dozens of times without her consent about a debt in violation of both the Fair Debt Collection Practices Act and Telephone Consumer Protection Act. Under the TCPA, it is unlawful to use an automated telephone dialing system (ATDS) to make debt collection calls without prior consent. Defendant admitted to not obtaining consent, but disputed that some of the calls were made to plaintiff with an ATDS. Accordingly, Defendant filed for partial summary judgment on that issue.

Defendant made debt collection calls by uploading a list of numbers to a third-party program called LiveVox Human Call Initiator (HCI). Once the program was initiated, HCI would send the telephone numbers to human “clicker agents” who had to “accept and confirm each individual telephone number” in order for the call to be placed.1

One of the key characteristics of an ATDS is the ability to dial phone numbers without “human intervention.” Accordingly, a system that is unable to dial phone numbers without a degree of human involvement is not considered to be an ATDS.

Defendant argued that the HCI program is unable to dial phone numbers without “human intervention” because the “the equipment cannot store numbers, nor can it dial numbers without the call being initiated by the clicker agents.”

The Court agreed, finding that because of the function of the clicker agent confirming each telephone number individually, human intervention is “clearly required” to dial numbers with the HCI system. The Court pointed to other cases in which calling systems that relied on “human clickers” to initiate calls were found to not be an ATDS. In fact, one federal judge in Florida had previously analyzed Defendant’s HCI system, also ruling that it was not an ATDS.

The Court also found that the HCI system did not have the “capacity” to dial numbers without human intervention. Quoting the Florida federal judge’s ruling on the HCI system, the Court found:

“Stellar could hypothetically hire a team of programmers to modify and rewrite large portions of HCI’s code to enable HCI to make autodialed calls, eliminating clicker agents, the dashboard, and all human input. However, the fact that Stellar might be able to undertake such a pointless endeavor does not mean that HCI has the ‘capacity’ to be an autodialer or that it has the ‘potential functionality’ to be an autodialer within the meaning of the TCPA and the [FCC’s] 2015 Order.”

Accordingly, Judge Murphy granted Defendant’s partial summary judgment on the grounds that the HCI system is not an ATDS.

Why it matters: This decision adds to the growing progeny of cases finding that a calling system that is “clearly an advanced and efficient method of contacting debtors [or consumers]” does not mean that it is de facto an ATDS. Systems that require employees to operate their calling system and initiate calls do not qualify as an ATDS.

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Faxed Dinner Invite May Violate TCPA, Second Circuit Rules

The U.S. Court of Appeals for the Second Circuit handed a loss to a pharmaceutical company in a Telephone Consumer Protection Act action, reversing dismissal of the suit after finding that an unsolicited fax inviting doctors to a free dinner meeting could be considered an unsolicited advertisement.

On April 6, 2010, pharmaceutical company Boehringer Ingelheim Pharmaceuticals sent a fax to Physicians Healthsource, inviting one of the practice’s doctors to a free dinner meeting and discussion. The fax stated:

“Boehringer Ingelheim Pharmaceuticals, Inc. cordially invites you to join us for a dinner meeting entitled, 'It’s Time to Talk: Recognizing Female Sexual Dysfunction and Diagnosing Hypoactive Sexual Desire Disorder.' Based on recent data from a large U.S. study (PRESIDE), 43% of U.S. women aged [greater than] 18 years have experienced a sexual problem in their lives and 9.5% of the same group of women have experienced decreased sexual desire with distress. This program has been developed to discuss Female Sexual Dysfunction (FSD), including Hypoactive Sexual Desire Disorder (HSDD) including pathophysiology models, epidemiology, and diagnosis. We hope you will join us for this informative and stimulating program.”

The fax provided registration details but did not include an opt-out feature. Physicians Healthsource RSVP’d by filing a TCPA class action alleging that the fax was an unsolicited advertisement because it promoted the services and goods of Boehringer.

Boehringer moved to dismiss the suit and asked the Connecticut district court to take judicial notice of public records of the Food and Drug Administration showing that, at the time the fax was sent, the pharmaceutical company had submitted for approval to market a drug named Flibanserin to treat HSDD. Because the drug had yet to be approved by the FDA, Boehringer was forbidden to promote it, the defendant told the court, meaning the dinner was not a pretext to pitch a product or service.

The district court agreed and granted the motion to dismiss. Physicians Healthsource appealed and the Second Circuit reversed, holding that the fax may be an unsolicited advertisement in violation of the TCPA.

Reviewing the Federal Communications Commission’s 2006 Rule elaborating on the statute’s definition of “unsolicited advertisement,” the federal appellate panel cited language from the Rule that “facsimile messages that promote goods or services even at no cost, such as free magazine subscriptions, catalogs, or free consultations or seminars, are unsolicited advertisements under the TCPA’s definition. In many instances ‘free’ seminars serve as a pretext to advertise commercial products and services.”

Boehringer’s fax may have been just such a commercial pretext, the Second Circuit said. “Businesses are always eager to promote their wares and usually do not fund presentations for no business purpose,” the court wrote. At the early pleading stage, “where it is alleged that a firm sent an unsolicited fax promoting a free seminar discussing a subject that relates to the firm’s products or services, there is a plausible conclusion that the fax had the commercial purpose of promoting those products or services.”

The defendant can rebut such an inference, the panel noted, “by showing that it did not or would not advertise its products or services at the seminar, but only after discovery.”

Not every unsolicited fax promoting a free seminar satisfies the Rule, the court said. “There must be a commercial nexus to a firm’s business, i.e., its property, products, or services; that, in our view, is satisfied at the pleading stage where facts are alleged that the subject of the free seminar relates to that business.”

For example, if the Handy Widget Company funded a professorship at a local law school in the name of its deceased founder and faxed invitations on its letterhead to an inaugural lecture entitled “The Relevance of Greek Philosophers to Deconstructionism,” the complaint would not state a claim under the TCPA “because the Handy Widget Company is not in the business of philosophical musings,” the Second Circuit hypothesized.

Alternatively, if the fax invite was for a seminar on increasing widgets’ usefulness and productivity, a TCPA claim would be validly alleged.

The court was not persuaded that the lack of FDA approval for Boehringer’s FSD and HSDD drugs was dispositive. “Although not approved, the drug is intended as a remedy for the ailments to be discussed at the event,” the court wrote. “To be sure, Boehringer was prohibited from … ‘promoting’ an unapproved drug … but that prohibition is not necessarily inconsistent with the free dinner’s mentioning the possible future availability of the drug. Nothing in the statute or Rule limits their scope to the advertisement of products or services then available.”

One member of the panel authored a concurring opinion, agreeing that the complaint stated a claim under the TCPA, but writing separately to suggest an alternative reading of the 2006 Rule as treating free seminars as a per se advertisement under the statute.

“The 2006 Rule, in other words, can be read to say, in sum: Because of the frequency, observed by the Commission, that messages offering free goods or services in fact mask or precede efforts to sell something, the Commission has adopted a prophylactic presumption that fax messages offering free goods or services are advertisements and thus are prohibited by Section 277 (unless they are either sent with the consent of the recipient or meet the requirements for the statutory exception),” according to the concurrence.

To read the decision in Physicians Healthsource, Inc. v. Boehringer Ingelheim Pharmaceuticals, Inc., click here

Why it matters: While the majority of the Second Circuit panel declined to read the FCC’s 2006 Rule as creating a rebuttable presumption that a fax message offering free goods or services is an advertisement per se, the opinion still puts companies on notice that a faxed communication could create liability under the TCPA if a court finds a “commercial nexus” between the invitation and the company’s business. The panel did note that defendants can defend against the nexus with evidence of a non-commercial purpose. For example, Boehringer can present testimony of the dinner meeting participants as well as the meeting’s agenda, transcript, presentation slides, speaker list, or any internal e-mails or correspondence discussing the meeting, the court suggested.

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Facebook Scores Second Dismissal in TCPA Suit

For the second time, a California federal court dismissed a Telephone Consumer Protection Act lawsuit against Facebook, ruling that the plaintiff failed to adequately allege that text messages from the social networking site were sent using an automatic telephone dialing system (ATDS).

Noah Duguid originally filed his complaint in 2015, alleging that Facebook sent repeated text messages that his account had been accessed. One problem: Duguid didn’t have a Facebook account. Instead, he had purchased a cellphone with a recycled phone number. So when Duguid received texts stating “Your Facebook account was accessed by an unknown browser,” for example, he could not log in to the account to opt out of security messages because it was not his account.

His first complaint was dismissed by U.S. District Court Judge Jon S. Tigar last March, after the court determined that Duguid relied upon conclusory allegations that Facebook used an ATDS without providing evidence that the defendant sent text messages en masse to randomly or sequentially generated numbers. The court dismissed the suit without prejudice, allowing the plaintiff leave to amend.

But Duguid failed to improve upon his first attempt, Judge Tigar recently concluded, and dismissed the complaint with prejudice. Even recognizing that it may be difficult for a plaintiff to identify the specific type of dialing system used without the benefit of discovery, the court said Duguid’s allegations suggested direct targeting by Facebook that was inconsistent with the random or sequential number generation required for an ATDS.

“Courts generally rely on the message content, the context in which the message was received, and the existence of similar messages to assess whether an automated dialer was utilized,” the court wrote. Duguid repeated the central elements of an ATDS and asserted that Facebook’s system possesses all of them.

Duguid made additional allegations in his second complaint, specifically that Facebook uses a “computerized protocol for creating automated text messages programmed to appear customized to the user” through a template-based process and employed a two-factor authentication system for login approval that requires users to enter a code sent to mobile phones via text message when they log into Facebook from a new or unrecognized device. But these were insufficient for the court.

“It is unclear why Duguid believes these facts would strengthen the inference that Facebook sent text messages en masse using an ATDS,” Judge Tigar said. “To the contrary, allegations of customizable protocols and unique codes only further suggest, in line with Duguid’s other allegations, that the messages were sent through direct targeting.”

Even with the new allegations, Duguid again failed to allege the existence of an ATDS, the court said. “At best, his allegations are conclusory, given that he merely asserts that Facebook ‘maintains a database of phone numbers on its computer’ and ‘transmits alert text messages to selected numbers from its database using its automated protocol,’ without offering any factual support for this claim,” the court wrote. “At worst, this claim contradicts the variety of other allegations offered by Plaintiff, which suggest that Facebook does not dial numbers randomly but rather directly targets selected numbers based on the input of users and when certain logins were attempted.”

Given that Duguid’s allegations “strongly suggest direct targeting rather than random or sequential dialing,” Judge Tigar dismissed the suit with prejudice.

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

Why it matters: The decision is a victory for Facebook and other TCPA defendants, emphasizing that plaintiffs will not be able to survive a motion to dismiss on bare assertions that a text message was sent using an ATDS. Further guidance may be forthcoming on the issue, as Duguid has already filed a notice of appeal with the U.S. Circuit Court of Appeals for the Ninth Circuit.

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1Some calls were placed to Plaintiff using another system called Right Party Connect. Defendant conceded that this system was an ATDS as it did not involve the “clicker agents.”



pursuant to New York DR 2-101(f)

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