TCPA Defendants Defeat Class Certification, Novel Autodialer Arguments; Lose Supreme Court Bid

April 1, 2022

The 7th U.S. Circuit Court of Appeals recently served up a defense victory by ruling that defendants do not carry the burden of proof at class certification, even on issues where defendants would bear the burden on the merits. In another defense win, the 8th Circuit joined numerous courts in maintaining a narrow autodialer definition following the U.S. Supreme Court’s ruling in Facebook v. Duguid. But defendants were less pleased when the U.S. Supreme Court denied a petition for writ of certiorari that would have resolved the enforceability of the autodialer prohibitions.

7th Circuit: Plaintiff Carries Burden for Class Certification

On March 24, 2022, in Gorss Motels v. Brigadoon Fitness, the 7th Circuit affirmed denial of class certification because determining consent by proposed class members would be an individualized issue.

At the trial level, the motel operator plaintiff sought to certify a class of recipients of purportedly unsolicited fax advertisements sent by a fitness equipment distributor. The defendant demonstrated its list of recipients was assembled from a number of different relationships and circumstances, including its own database of customers, franchisees of hotel chains for which the defendant was a vendor, and trade show attendees. Because the list of recipients was assembled from different sources, and some of the recipients arguably provided consent through one or more means, the trial court found that consent issues raised the “specter of unlimited mini-trials,” and that the plaintiff failed to meet its burden of demonstrating that common issues of fact predominated.

The plaintiff appealed the denial of class certification and argued that the defendants failed to show with specific evidence that a “significant percentage” of the class provided prior express permission to receive faxes. The 7th Circuit, however, rejected the plaintiff’s argument that the defendant was required to prove that any single individual consented to receive the faxes, noting that such an argument had no appellate court support and relied on “an over-reading” of district court cases.

The court reiterated that, at the class-certification stage, the question was whether the plaintiff had carried its burden of demonstrating that there was some classwide way to resolve the permission issue. Specifically, the court explained that “it is the method of determining the answer and not the answer itself that drives the predominance consideration.” The court noted that the defendant had demonstrated that it had a large variety of relationships and contacts with the recipients of the faxes, which was enough to show that the question of whether a particular fax was solicited would require an individualized inquiry.

Ultimately, the court reaffirmed that, at the class certification stage, it is not the defendant’s burden to prove the merits of its defenses, but rather the plaintiff’s burden to demonstrate that common issues of law or fact would predominate.

8th Circuit Rejects Plaintiffs’ Facebook v. Duguid “Footnote 7” Argument

As McGuireWoods previously reported, the U.S. Supreme Court in Facebook v. Duguid rejected a broad definition of what constitutes an “automatic telephone dialing system” (autodialer) and ruled that, to constitute an ATDS, equipment must store numbers or produce numbers using a random or sequential number generator.

But even the U.S. Supreme Court’s seemingly defendant-friendly ruling did not cause plaintiffs to back down from ATDS litigation; instead, many plaintiffs latched onto footnote 7 in the Facebook opinion, which suggests, in part, that “an autodialer might use a random number generator to determine the order in which to pick phone numbers from a preproduced list.” Relying on that footnote, plaintiffs argue that equipment that uses a random or sequential number generator to determine the order in which to dial phone numbers from a preproduced list constitutes an ATDS.

On March 24, 2022, the 8th Circuit in Beal v. Truman Road Dev. became the most recent court to reject that argument. In Beal, the plaintiff argued that the defendant’s equipment “produced” numbers through the random selection of phone numbers from an existing list of contacts. Like other courts, the 8th Circuit rejected the argument that, under footnote 7, systems that randomly select from a list of nonrandom phone numbers are autodialers. The court reasoned that, “[w]hile subjects in other contexts may produce by selecting, a generator produces by generating. An electrical generator produces by generating electricity. A password generator produces by generating a password. And a random number generator produces by generating a random number.” Because the software at issue in Beal did not generate phone numbers to be called, it did not constitute an autodialer for purposes of the TCPA.

With this decision, the 8th Circuit joins a growing number of courts to reject these arguments, which bodes well for defendants as plaintiffs’ footnote 7 arguments — and, many hope, ATDS litigation — continue to lose steam.

U.S. Supreme Court Declines to Address Enforceability of Autodialer Prohibitions

As McGuireWoods previously covered, the U.S. Supreme Court in Barr v. AAPC declared unconstitutional an amendment to the TCPA’s restrictions on autodialed calls that allowed such calls when made to collect a debt owed to or guaranteed by the United States. But, in the process, Barr created an unresolved question that has challenged lower courts since then: Did Barr render the entire autodialer prohibition unenforceable from the time the amendment was enacted (November 2015) to the time the amendment was ruled unconstitutional (July 2020), or did Barr instead render unenforceable only the problematic government-debt exception, with the broader autodialer restrictions still applying retroactively to those same calls?

Since Barr, the majority of district courts held that Barr did not render the TCPA’s entire autodialer prohibitions unenforceable. But a handful of district courts disagreed, finding that the Barr decision meant there was no enforceable autodialer restriction in place between 2015 and 2020, and thus, no autodialed calls during that period violated the TCPA.

On March 21, 2022, the U.S. Supreme Court denied a petition for writ of certiorari regarding the 6th Circuit’s September 2021 opinion that reversed one of the outlier district courts in Lindenbaum v. Realgy. The 6th Circuit explained in Lindenbaum that Barr recognized that “the Constitution had automatically displaced the government-debt-collector exception from the start,” and that because that constitutional displacement applied throughout time — rather than only retroactively — the TCPA’s broader restrictions on autodialed calls remained in effect from 2015 onward. The U.S. Supreme Court’s decision not to review the 6th Circuit’s ruling leaves in place the 6th Circuit’s conclusion.