Second Appeals Court Rules TCPA Exemption for Collectors is Unconstitutional

A second Appeals Court has ruled that an exemption granting collectors the use of automated telephone dialing system when collecting debts owed to or guaranteed by the federal government is unconstitutional, and reversed a lower court’s dismissal of a lawsuit.

A copy of the ruling in Duguid v. Facebook, Inc., can be accessed by clicking here.

The plaintiff received a series of messages from the defendant alerting him that his account was being accessed by an unknown device or browser. The problem? The plaintiff did not have an account with the defendant and never consented to receiving the messages.

The plaintiff filed suit, alleging the defendant violated the Telephone Consumer Protection Act. A District Court judge granted the defendant’s motion to dismiss, ruling that the plaintiff “inadequately alleged” that the defendant used an ATDS to send the messages. The ruling was appealed to the Ninth Circuit.

In looking at its own definition of an ATDS, which it set in Marks v. Crunch, the Ninth Circuit ruled that the technology used by the defendant to send its messages met the definition of an ATDS, which it defines as “equipment which has the capacity — (1) to store numbers to be called or (2) to produce numbers to be called, using a random or sequential number generator—and to dial such numbers automatically.”

Because the class sought by the plaintiff in his lawsuit included messages that were placed with individuals after the debt collection exemption was enacted in 2015, the Ninth Circuit considered the constitutionality of the exemption in its ruling.

Congress enacted the exemption in 2015 as part of the Bipartisan Budget Act, as a means of allowing collectors who were essentially working on behalf of the federal government to collect student loans and mortgages, for example, to contact individuals on their cell phones using an ATDS. Since it was enacted, the exemption has faced several challenges, as members on both sides of the aisle in the House of Representatives and Senate seek to remove it.

Agreeing with the ruling from the Fourth Circuit in American Association of Political Consultants, Inc. et al v. Federal Communications Commission, the Ninth Circuit held that the exemption is content-based and not based on the relationship between the called party and the caller, thus it violates the First Amendment.

“It is obvious from the text that the debt-collection exception’s applicability turns entirely on the content of the communication — i.e., whether it is ‘solely to collect a debt owed to or guaranteed by the United States,’ ” the Ninth Circuit wrote. “The identity and relationship of the caller are irrelevant. And the government’s ‘innocuous justification’ — permitting third-party debt collectors to place calls on the government’s behalf using the same means as the government itself can use — ‘cannot transform a facially content-based law into one that is content neutral.”

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