Sins of our Marketers: SMS, the Telephone Consumer Protection Act, and Strict Liability

In continuing a trend that took hold nearly four years ago in Satterfield v. Simon & Schuster, Inc., 569 F. 3d 946 (9th Cir. 2009), a putative class action was filed on January 25, 2013 alleging that unsolicited SMS texts give rise to statutory damages under the Telephone Consumer Protection Act (TCPA).  Although the suit may have been brought against a big box retailer the allegations are based on the conduct of “a mobile technology company whose identity is currently unknown.”

Under the TCPA, it is unlawful to make “any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system [ATDS] . . . [to any] cellular telephone service.” 47 U.S.C. Sec. 227(b)(1)(A).  Although the TCPA was enacted years before SMS was a reality, the FTC, as well as courts in California and Chicago, have interpreted the undefined term “any call” to include  SMS texts so long as the SMS text was sent using an ATDS.

Courts have already ruled that “the TCPA is essentially a strict liability statute which imposes liability for erroneous unsolicited faxes.” Alea London Ltd. v. Am. Home Services, 638 F.3d 768, 776 (11th Cir. 2011) (citation omitted).  See also Universal Underwriters Ins. Co. v. Lou Fusz Auto. Network, Inc., 401 F.3d 876, 882 (8th Cir. 2005) (“The Act makes no exception for senders who mistakenly believe that recipients’ permission or invitation existed.”).  This means that class action counsel need only demonstrate that the SMS messages went out unsolicited via an ATDS and statutory damages will likely follow.

As now being pressed in the Hill putative class action filed on January 25, 2013, this strict liability for unsolicited SMS messages may also extend from the actual sender, i.e., marketer, to the retailer.  Several years ago, the FTC responded to a request for public comments filed by the FCC regarding the following two questions:   “First, does a call placed by an entity that markets a seller’s goods and services qualify as a call made on behalf of, and initiated by, the seller, even if the seller does not physically place the call?; and second, what should determine whether a telemarketing call is made “on behalf of” a seller, thus triggering liability under the TCPA?”

The FTC answered with a vigorous defense of its view that “the plain meaning of the law and its regulations supports holding sellers liable for calls made for the seller’s benefit.”  Given the FTC was merely responding to the FCC’s request for comments and given the FCC has yet to release its final ruling, it remains to be seen whether the courts will ultimately side with the FTC view.  Indeed, several courts have explicitly rejected the FTC position regarding vicarious strict liability.  See e.g.Mey v. Pinnacle Security, LLC, No. 5:11CV47, slip op. at  (N.D.W.Va. Sept. 12, 2012) (“In the Spring of 2011, the FCC released a public notice requesting comment on the issue of strict “on behalf of” liability under §227(b)(3), and this Court has not received information that a ruling has yet been issued on the matter.  26 FCC Rcd 5040. . . . Accordingly, this Court finds that the TCPA does not provide strict “on behalf of” liability under § 277(b)(3).”) (citing Thomas v. Taco Bell Corp., 2012 U.S. Dist. LEXIS 107097, No. SACV 09-01097-CJC (C. D. Calif. June 25, 2012).

Whether or not the FTC is ultimately vindicated by the courts on this issue, it is clear that the FTC is not oblivious to the mechanics of mobile marketing.   For example, the FTC has found that a one-time text message confirming a consumer’s request that no further text messages be sent was not violative of the TCPA.  Notwithstanding any current temporary safe harbor that may exist, the takeaway remains that firms may be on the hook for what their marketing, promotional, and advertising firms are doing when it comes to SMS campaigns.

Given the FTC’s stated desire to visit on innocent retailers the sins of their marketers and the difficulty to insure against this risk, it is obviously more important than ever for those who rely on SMS campaigns to always verify appropriate consent and obtain suitable contractual indemnifications.