Businesses that communicate with
consumers by telephone—whether calling or sending SMS (text) or MMS (multimedia)
messages—must worry about litigious consumers (and their attorneys) who are on
the lookout for possibly technical violations of the law that can be used to
extort settlements from businesses. Even
a weak case that likely can’t go the distance and produce a win at trial can
still be a costly stick used to force a business to pay an early settlement,
rather than pay expensive defense costs to vindicate its rights in court. As explained below, a recent case filed against
a Washington cab company shows why businesses must be careful.
The applicable law is the Telephone
Consumer Protection Act (“TCPA”), 47 U.S.C.
§ 277. It
prohibits a business from using an automatic telephone dialing system (“ATDS”)
to make a call or send a message to a cell phone, without having the express
prior consent of the person being called/texted.
Although an ATDS was initially defined as a system that called random
numbers, it now includes equipment used to contact specific numbers, say, from
a customer list. To determine whether a
business actually used an ATDS, courts consider whether a system can dial
numbers “without human intervention” and look at factors such as the volume of,
and reason for, a challenged set of calls or messages. Damages under the TCPA include a $500 penalty
for each
violation, which can be trebled to reach $1,500 for a knowing and willful violation.
Certainly, the TCPA is not a bad thing
since none of us wants to be harassed with junk calls or messages that can cause
charges and consume monthly data allowances.
However, a recent case filed against a cab company demonstrates that
seemingly innocent and well-intended communication practices can still land a company in court.
In Torrey
Gragg v. Orange Cab Company, Inc. (case no. C12-0576RSL in the U.S.
District Court for the Western District of Washington), the plaintiff is an
Orange Cab customer who ordered an Orange Cab on a Saturday evening and used it
to travel somewhere. Then, on the
following Sunday, sometime after 9:00 p.m., he received a text from Orange Cab stating
that a cab had been dispatched at 5:20 p.m. in response to his call, and
including an invitation to use Orange Cab’s app. Yes, that’s the entire “beef” upon which this case
is based.
The plaintiff initially sued Orange Cab
but had his complaint thrown out by the court because he had simply alleged
that Orange Cab had violated the TCPA by using an ATDS to text him—believing
that the more than 24-hour gap between his order and the company’s text showed
this as an improper telemarketing practice worthy of damages under the TCPA. Because the plaintiff had ordered a cab shortly before receiving the text responding to that order,
however, the court was not willing to assume that the cab company's text was in fact sent by an ATDS rather than a person. But, then plaintiff then amended his complaint
to claim (not prove) that Orange Cab had used a phone system to send tens
of thousands of consumers a similar text to market its app. Unfortunately for Orange Cab, the court just ruled
in an Order that the plaintiff had added allegations that were sufficient to survive the company’s motion
to dismiss. And so the case, and the
related legal fees, continue.
While the cab company certainly has numerous defenses that it can raise, doing so will probably involve costly discovery and additional motion practice--expenses that will almost certainly not be recoverable in the case and that will continue to make settlement an option worth considering.
What’s more, the plaintiff has indicated
in other filings that this will be a class action including other consumers who
received similar texts—and who will each likely demand at least $500 per text from
Orange Cab. This is especially
concerning for companies facing TCPA class actions, because a 2012 ruling by the U.S.
Supreme Court indicates that the TCPA provides a claim under federal law, which
means that any plaintiff can file a TCPA claim in federal court without needing
to meet requirements for diversity of citizenship or amount in controversy. That ruling is also problematic for companies
facing class actions, because it removes previously available state law
defenses to attempts to bring class actions.
(The Supreme Court case is Mims v.
Arrow Financial Services, LLC, Case No. 10-1195. Download Mims opinion here.)
Although Orange Cab reasonably did not anticipate becoming mired in this litigation based on its texting practices, its travails should serve as a warning to other businesses: Because savvy plaintiffs and their lawyers are out there looking for an excuse to bring the next TCPA class action, businesses must consider the law's requirements in all telephonic communications.