March 17, 2012
Text Spam Class Action Against Jiffy Lube Moves Forward – In re Jiffy Lube Int’l, Inc., Text Spam Litigation
[Post by Venkat Balasubramani]
In re Jiffy Lube International, Inc., Text Spam Litigation, 11-md-2261-JM-JMA (N.D. Cal.; Mar. 9, 2012)
Plaintiffs filed a class action against Jiffy Lube (a multi-location franchisee Heartland Automotive Services) and TextMarks alleging TCPA violations based on text messages sent by TextMarks on behalf of Jiffy Lube:
JIFFY LUBE CUSTOMERS 1 TIME OFFER:REPLY Y TO JOIN OUR ECLUB FOR 45% OFF A SIGNATURE SERVICE OILCHANGE! STOP TO UNSUB MSG&DATA RATES MAY APPLY T&C:JIFFYTOS.COM.
The court denies Heartland’s motion to dismiss. The big takeaway from the order is that text message-based marketing is something that companies often screw up, and these screw-ups end up being costly. Given the draconian provisions of the TCPA (statutory damages, stringent consent provision, no free pass for the initial message, and liability for any unsolicited message that is sent with certain equipment), rulings like these make me think companies should consider avoiding text message-based marketing altogether.
TCPA Provides for Derivative Liability:
Heartland’s first argument was that it should not be held liable because it did not actually send out the text messages (TextMarks did). The court cites to Satterfield v. Simon & Schuster and notes that the Ninth Circuit had no problem imposing liability on Simon & Schuster despite the fact that Simon & Schuster did not physically send the messages. The court also cites to an unsolicited fax case for the proposition that “congressional tort actions implicitly include the doctrine of vicarious liability.” If advertisers were allowed to escape liability by not actually sending the messages, this would allow advertisers to make an end-run around the TCPA’s prohibitions.
Heartland also argued that plaintiffs failed to sufficiently plead vicarious liability, but the court says that plaintiffs’ allegation that Heartland "engaged TextMarks to send the messages" is sufficient.
Plaintiffs’ Prior Consent:
Heartland produced invoices and sought to rely on the invoices to demonstrate that plaintiffs consented to receive the messages. The court rejects Heartland’s request that the court take judicial notice of the invoices, saying they stand for the opposite of what plaintiffs allege in their complaint. The invoices are not central to plaintiffs’ claims; therefore, they are not properly the subject of judicial notice in the same way that contractual terms—which the plaintiff relies on in the complaint—are. In passing, the court expresses skepticism as to whether the invoices would satisfy the TCPA's strict consent requirements.
Were the Messages Sent Using an Auto-Dialer:
The TCPA only imposes liability for text messages that are sent using equipment that has the capacity to store or produce random numbers. Heartland argued that plaintiffs should only be permitted to allege the use of an auto-dialer on in formation and belief if (1) the content of the message was impersonal, and (2) the text message was sent by a specific SMS-short code. I think what Heartland is trying to argue is that only if the text messages bear indicia of being transmitted en masse should a TCPA plaintiff be entitled to allege the use of an auto-dialer on information and belief. The court rejects this, noting that in Simon & Schuster the Ninth Circuit only required that the equipment at issue have “the capacity” to store or produce numbers using a random or sequential number generator. Under Satterfield, it does not matter whether this capability was actually used to send the messages.
First Amendment Challenge:
Heartland also brings a First Amendment challenge, arguing that the broad definition of auto-dialer would mean that friends who text each other dinner invitations could incur TCPA liability, and this would render the statute overbroad. As expected, this argument doesn’t get much traction with the court. The court says that the statute is intended to protect consumers against the costs and privacy invasions that accompany unsolicited text messages, and regulating texts sent through auto-dialers adequately serves this interest. The court also says that the prospect of friends incurring liability under the TCPA for texting each other dinner invitations is fairly remote. At worst, this type of a text message lies at the fringe of the statute and thus the statute does not suffer from overbreadth issues.
Plaintiffs’ Cannot be Compelled to Arbitrate Their Claims:
Heartland finally argued that one of the plaintiffs who signed an agreement with Jiffy Lube (and other class members who fell into the same category) should be required to arbitrate their dispute. This plaintiff entered into an agreement while obtaining services at Jiffy Lube which contained the following provision:
[the parties] agree that any and all disputes, controversies or claims between Jiffy Lube and [the customer] (including breach of warranty, contract, tort or any other claim) will be resolved by mandatory arbitration according to the terms of this Mandatory Arbitration Agreement (“Agreement”), except that any such dispute can be resolved by a small claims court if and for so long as the dispute is within its jurisdiction. By this Agreement, Jiffy Lube and [customer] also agree to only bring disputes against each other in an individual capacity and not as a class representative or class member and waive the right to a jury trial.
The court says the arbitration language is “incredibly broad,” and application of the clause to disputes unrelated to the contract would raise conscionability issues. The court cites to a Judge Posner opinion and concludes that if enforced as drafted, “absurd results would ensue.” Heartland asked the court to construe it narrowly but the court declines, saying it is not authorized to do so. Even if the clause were construed to be limited to disputes “arising out of or relating” to the contract, the court says that the TCPA claims would not fall within the clause.
As mentioned above, text message litigation has been brutal for marketers and advertisers, and this decision is no different. (Liability for spam email in contrast has been much more limited.) To my knowledge, the issue of dervative liability hasn't been squarely argued by a TCPA defendant, but decisions have implicitly recognized that the TCPA provides for derivative liability in rejecting the requests to dismiss filed by advertisers who did not transmit the messages in question. From that standpoint, the ruling is not significant, but it is still worth nothing.
Outsourcing your text message-based marketing was a risky proposition to start with, but as this decision squarely allows for derivative liability (albeit under somewhat vague standards), this makes it an even riskier proposition. Marketers may labor under the perception that the initial text message is a freebie (from a liability standpoint) and including an opt-out from receiving future texts absolves the marketer or advertiser from liability under the TCPA. It's worth repeating that this is not the case.
"Group Text Services Grapple with TCPA Class Actions"
"Text Spam Lawsuit Against Citibank Moves Forward Despite Vague Allegations of Consent -- Ryabyshchuk v. Citibank"
"Court Rejects Constitutional Challenge to TCPA Based on Vagueness in "Prior Express Consent" Exception -- Kramer v. Autobytel, Inc."
"Another Court Finds that TCPA Applies to Text Messages -- Lozano v. Twentieth Century Fox Film Corp."
"Court Finds that SMS Spam Messages are Subject to the TCPA and Rejects First Amendment Defense -- Abbas v. Selling Source, LLC"
"Ninth Circuit Revives TCPA Claim--Satterfield v. Simon & Schuster"
"Cellphone Spam Violates TCPA--Joffe v. Acacia Mortgage"