On Friday, June 19, 2009, the Ninth Circuit Court of Appeals reversed a district court decision involving a mobile marketing campaign. A key issue in the case is whether text messages are subject to the Telephone Consumer Protection Act (the "TCPA"), a law that was drafted before the advent of text messaging. Although the Ninth Circuit remanded the case so that the district court could develop more facts, the decision underscores the importance of ensuring that marketers get express consent before sending text messages consumers.
Background on the Case
Laci Satterfield became a registered user of Nextones in order to receive a free ring tone. During the registration process, Ms. Satterfield checked a box which read, in part: "I would like to receive promotions from Nextones affiliates and brands." On January 18, 2006, Ms. Satterfield received a text message from Simon & Schuster advertising a novel by Stephen King. Shortly thereafter, Ms. Satterfield filed a class action lawsuit alleging that Simon & Schuster's text message campaign violated the TCPA.
In June 2007, the Federal Court for the Northern District of California granted summary judgment to Simon & Schuster holding that the company did not violate the TCPA. Specifically, the court determined that the text message campaign did not violate the TCPA's prohibition against using an automatic telephone dialing system (an "ATDS") because the device used to send the messages did not fall within the statutory definition of an ATDS. Moreover, the court found that Ms. Satterfield had agreed to receive text messages when she registered for Nextones.
Ninth Circuit Opinion
On Friday, June 19, 2009, the Ninth Circuit Court of Appeals reversed the district court decision and remanded the case for further proceedings. The Ninth Circuit held that the district court had erred because (1) the text message was a "call" within the meaning of the TCPA, (2) there was a disputed issue of material fact as to whether the system Simon & Schuster used was an ATDS, and that (3) Ms. Satterfield did not consent to receive messages from Simon & Schuster because Simon & Schuster is not an affiliate or brand of Nextones.
- The TCPA applies to certain types of "calls." Simon & Schuster had argued that the sending of text messages did not constitute a "call" under the TCPA. Although the district court did not rule on that point, the Ninth Circuit disagreed with Simon & Schuster's argument. The term "call" is not defined by the TCPA. However, the Federal Communications Commission has noted that the statute encompasses both "voice calls and text calls to wireless numbers including, for example, short message service (SMS) calls, provided the call is made to a telephone number assigned to such service." The Ninth Circuit found this interpretation to be reasonable and, therefore, that the text message campaign was subject to the TCPA.
- The TCPA generally prohibits the use of an ATDS to place calls to a mobile number without the "prior express consent of the called party." An ATDS is equipment that has "the capacity to store or produce telephone numbers to be called, using a random or sequential number generator and to dial such numbers." The district court had held that the system used to send the messages was not an ATDS because the system did not actually store, produce, or call numbers using a random or sequential number generator. The Ninth Circuit, however, held that the proper question was whether the system had the capacity to do those things. There was no evidence in the record on that point.
- Simon & Schuster had argued, and the district court agreed, that Ms. Satterfield had consented to receive text messages when she signed up for Nextones. The Ninth Circuit noted, however, that the term to which Ms. Satterfield had agreed specifically referred to promotions from Nextones "affiliates" and "brands." The Ninth Circuit found that Simon & Schuster was not an affiliate of Nextones because Nextones neither owns nor controls Simon & Schuster. Moreover, Simon & Schuster was not a brand of Nextones. Therefore, the consent that Ms. Satterfield provided on the registration form did not apply to the messages sent by Simon & Schuster.
It's important to note that the Ninth Circuit didn't decide that Simon & Schuster violated any law. Instead, it decided that the district court should not have granted summary judgment in the company's favor because of various outstanding factual issues. Nevertheless, this decision — along with whatever the district court decides on remand — is likely to affect every company that sends text messages to consumers.
What This Means for Marketers
Consumers are showing a greater willingness to interact with companies on their mobile devices. However, consumers are only willing to interact on their own terms, and they don't want to receive unsolicited messages. If a consumer gets a text message he didn't want, that consumer is likely to complain. Moreover, those complaints are likely to lead to lawsuits and regulatory actions. In recent years, many companies have paid high prices — up to $7 million — for failing to get adequate consent in mobile promotions. Those types of challenges are likely to continue, so companies need to make sure they comply with relevant laws.
The key lesson for mobile marketers is that they should not send text messages to any consumer unless the consumer has provided express consent to receive messages from the sender. When seeking consent from consumers, it's important to make sure that the consumer understands the terms to which he is being asked to agree. Marketers have little to gain and a lot to lose from sending messages that consumers did not specifically want. Therefore, it is important to clearly disclose what types of messages a consumer can expect to receive and which company will send the messages.
Kelley Drye & Warren's Advertising Law Practice Group
has substantial experience assisting clients in structuring a wide variety of mobile promotions. We are available to assist clients with developing strategies to address issues contained in this Advisory.
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Gonzalo E. Mon