The Supreme Court continues on Tuesday its “live” broadcasts of the audio portion of its hearings on pending cases. The first case, dealing with Facebook as a target of a robocall lawsuit, marks the second time in recent months that the Court has explored the scope of the 1991 ban on robocalling. The second case involves a dispute over when a commercial dispute must be sent to a neutral arbitrator to work out a decision. The Court’s hearings are expected to be broadcast online at C-SPAN.org/supremecourt
First hearing, starting at 10 a.m.:
Facebook v. Duguid
Background: Since 1991, Americans who use cellphones have been protected by a federal telephone privacy law from robocalls that they have not agreed to receive. Just last July, the Supreme Court reinforced that protection, ruling that it remains intact even though another part of that law (allowing the government to make robo debt-collection calls) was unconstitutional as beyond Congress’s powers.
Three days after that decision, the Justices agreed to hear another case on the meaning of that law — a case in which a smartphone user accused the tech giant, Facebook, of sending illegal text messages to his phone. The outcome of the case, though, might not be limited to big companies like Facebook; it potentially might reach anyone using a smartphone that has stored several numbers, perhaps to enable speed-dialing.
The 1991 law forbids the use of an “automatic telephone dialing system” to make calls to a cell phone without the phone user’s consent. It defines such a system as one that uses “a random or sequential number generator.” The meaning of that definition is at the core of the new case that Facebook took to the Supreme Court.
Violations of the law can lead to very heavy fines – up to $1,500 per call made without consent. Facebook argues that the availability of such fines has made the law a favorite for lawyers pursuing claims for a wide class of phone users instead of just for single users.
The case began when Facebook sent out a series of security messages to the cellphone of a Connecticut man, Noah Duguid. Like other social-media companies, Facebook provides users with security features that provide text messages warning the user when a particular phone number has been accessed from a suspicious source. That enables the user to act to protect the privacy of that number.
In March 2015, Duguid sued Facebook, on his own and as a representative of others who may have received such security texts without their consent, seeking $1,500 in damages for each such message. Duguid said that he had never used Facebook and had never given it his phone number, but he had still received a number of the alerts. He contended that he had tried, without success, to unsubscribe from Facebook. (Facebook has suggested that Duguid probably had a phone number that had been recycled from a former user.)
The lawsuit contended that the text messages had come from an automatic telephone dialing system. A lower federal appeals court ruled that the law applies to any automatic telephone dialing system that has the capacity to store numbers and to dial them automatically. It found that the definition of such devices as one with random or sequential number was not a significant narrowing of the law’s coverage.
Taking the case on to the Supreme Court, Facebook argued that the lower court’s ruling “sweeps into the prohibition almost any call or text made from any modern smartphone.” Those devices, it noted, routinely include a capacity to store numbers and to dial them automatically. Facebook also noted that the lower courts are split on how to interpret the scope of the law.
If the law is going to be enforced as broadly as the lower court did in this case, Facebook contends, it will be unconstitutional because it would impose far-reaching restrictions on the freedom of digital speech.
The federal government is taking part in the case to support the constitutionality of the 1991 law. It also supports Facebook’s argument that the lower court read the ban on robocalls too broadly.
The question before the Court: Does the federal ban on robocalls to cellphones apply to any device that has the capacity to store telephone numbers and to dial them automatically, or does it only apply to a device that can generate a large volume of calls that it can dial at random?
Significance: The telephone privacy law at issue is one of the most popular consumer-protection laws that Congress has passed, especially in the modern age of aggressive telemarketing by telephone or texting. As Facebook notes, it also has produced a flood of claims in federal courts, with the potential for heavy penalties.
It is obvious that the decision the Court reaches in this case will have an immediate and widespread impact on those companies that engage heavily in texting as part of their business model, and similarly fast and broad impact on the privacy of cellphone users.
As this case has developed in filings before the Supreme Court, Facebook has drawn wide support from technology firms and business organizations in general, while the individual user has gained similarly broad support among consumer and privacy advocates.
It is also an important case because the law governing the new digital economy is still in its early development stage, so each decision that the Supreme Court makes has the character of shaping technology even as that technology undergoes swift changes. It is for that reason that the Court has cautioned that legal interpretations of new technology should be approached cautiously.
That caution may work against the sweeping interpretation that the lower court gave to the 1991 law. Also working against that interpretation is the tendency of the current Court majority to read the actual wording of federal laws quite literally. Diminishing the significance of the definition spelled out in the law contradicts that tendency.
Working in favor of the lower court ruling is the intent of Congress to provide significant protection for consumer privacy, so far as congressional purpose has an influence on how a law is interpreted.
Second hearing, starting at about 11 a.m.:
Henry Schein Inc. v. Archer & White Sales Inc.
Background: Centuries ago, human beings figured out that there had to be a better way to settle disputes than by brute force. That has matured over time from the simple practice of allowing a village elder, whose wisdom was commonly respected, to work things out, hopefully in a peaceful way. Courts became a more modern version, functioning as part of the governing structure.
But there has also been development of other modes of dispute-resolution, functioning to a very significant degree outside of the courts. One such mode is arbitration. It is characterized by agreement between private parties, in business, labor or even in professional sports, to send their disputes to a neutral figure, an arbitrator, for resolution.
The two sides usually have some role in picking the arbitrator, and they sometimes pay the costs mutually. In modern times, those costs are generally less than the expense of taking a dispute to court (especially when courts allow the two sides’ lawyers to engage in extensive maneuvering as they gather evidence from each other – the so-called “discovery” process, which can be time-consuming and costly.)
The arbitrator’s greatest power results when the two sides have agreed to make the arbitration decision binding on them. In recent years, the binding arbitration approach has run into an increasing criticism that it tends to favor business firms over consumers, who have little option but to accept that approach when they sign contracts to buy goods or obtain services.
Since 1925, when Congress passed the Federal Arbitration Act, it has been national policy to favor arbitration and the courts’ role has been limited mainly to enforcing the terms of the arbitration clauses that the two sides agreed to write into their private contracts. (Part of the reason Congress enacted that law was to counter the hostility that courts had been showing to the competition from private dispute resolution.)
Arbitration, and especially binding arbitration, has gained even greater favor in the business community, in reaction to the modern rise of consumer “class-action” lawsuits. Because each individual consumer may not have much bargaining power in dealing with a major company, so there is increasing interest in the alternative of joining with other consumers who share a commercial grievance in a lawsuit against the company.
The binding arbitration clause in consumer contracts has been a workable way to head off such lawsuits. And, in recent years, the Supreme Court majority has tended to be more sympathetic to those clauses, especially in cases of consumer grievances.
The new case at the Court involves two competing companies that distribute dental equipment from manufacturers to dentists. One accused the other of engaging in anti-competitive practices, and sought to file an antitrust lawsuit. The other company contended that the two are bound by an arbitration agreement.
A lower federal court ruled that the arbitration clause in the contract could not be enforced, because there were other provisions in the contract that exempted some disputes from arbitration. Lower courts are split on how to interpret a contract with such conflicting clauses.
The question before the Court: How much authority do federal courts have to bar arbitration of a commercial dispute by the courts’ own reading of a clause calling for arbitration, because another clause seems to contradict that assignment?
Significance: The outcome of the case could be very significant, if the Court writes a broad ruling that strictly limits the power of the federal courts to pore over the specific wording of arbitration clauses and decide for themselves when arbitration is available, or not. If, however, it decides narrowly, on the specific text of the agreement at issue, the case could have less impact on the law of arbitration.
On Wednesday, the Court will wind up the week with a 90-minute hearing on two combined cases growing out of the financial crisis of 2008 and its impact on the housing market.