Any company planning a large-scale promotional campaign via text messaging should tread carefully in light of a recent federal appeals court ruling that unsolicited text messages fall under the Telephone Consumer Protection Act (TCPA). The court also held that customer consent to receive promotional messages from one subscription service does not necessarily extend to other, unrelated companies that buy the subscriber list.
On June 19, 2009, the U.S. Court of Appeals for the Ninth Circuit held that an unsolicited text message sent to a cellular phone can fall within the scope of prohibited "calls" under the TCPA. Satterfield v. Simon & Schuster, Inc. is the first case on the issue by a federal court.
The plaintiff in the Satterfield class action had signed up for Nextones, a cell phone ringtones service, and agreed to receive promotions from "Nextones affiliates and brands." Her cell phone number and those of other Nextone users were then transferred, through transactions involving Internet and mobile-marketing companies, to an entity promoting Stephen King's book Cell for Simon & Schuster. The plaintiff received a promotional Cell text message that ended with "PwdByNexton." She sued Simon & Schuster and the marketing company for violating the TCPA, under which it is generally unlawful to make any "call" using any automated telephone dialing system without express consent of the recipient. 47 U.S.C. § 227(b)(1)(A).
The Ninth Circuit found that text messages fall under the TCPA, deferring to the Federal Communication Commission's interpretation of the statute. (A state court reached the same conclusion in Joffe v. Acacia Mortgage Corp. 121 P.2d 831 (Ariz. 2005)).
The other key holding was that Satterfield's consent to receive promotional material from Nextones' "affiliates and brands" did not constitute a consent to receive the Simon & Schuster text message. The Ninth Circuit found that Simon & Schuster could not claim to be a Nextones brand just by inserting "PwdByNexton" in its message because there was no contractual or corporate relationship.
Satterfield makes clear that text messaging campaigns may be just as risky as fax or telephone campaigns. Companies need to be wary of TCPA liability when considering such campaigns and consult with counsel familiar with TCPA regulations. A company should know who is going to receive its promotions, how a recipient list was compiled, how the promotions will go out, and if any recipients have expressly consented to receiving the information.
A red flag should go up for a company if its marketing department or marketing firm presents a list of telephone or fax numbers obtained from third parties who have purportedly "consented" to receive promotions, including by text message. The company should insist on seeing a copy of the actual consent and consult with counsel to determine whether it truly covers the promotion.
More broadly, because TCPA liability generally lies with the company whose goods or services are advertised in the unlawful message, even if that company did not directly transmit the message, it is not safe to rely on vendors hired to execute promotional campaigns to comply with the TCPA. Contracts with telesales marketers should explicitly require TCPA compliance and include a meaningful indemnity clause that will shift the risk for TCPA liability and loss to the vendor.
If you have concerns about the implication of the Satterfield ruling or other TCPA matters, please feel free to contact Robert R. Baron, Jr. (215.864.8335, email@example.com), or any other member of Ballard Spahr's Business Litigation Group. Questions may also be directed to Alan S. Kaplinsky (215.864.8544 or firstname.lastname@example.org), partner-in-charge of the firm's Consumer Financial Services Group.