TCPA and CEMA are Landmines for Marijuana Companies

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TCPA and CEMA are Landmines for Marijuana Companies

It seems like a no brainer. A company is offering you increased sales by virtue of a simple text based marketing campaign. You only have to use their platform, upload some customer phone numbers, and you’re off to the races.

Hold on there! Have you considered the liability issues that may arise from a text-based marketing campaign? Have you considered the impact of the federal Telephone Consumer Protection Act (“TCPA”) and of Washington’s Consumer Electronic Mail Act (“CEMA”)? Both have large impacts on the ability to perform any sort of text messaging without prior authorizations.

The TCPA was designed to precent large calling centers from dialing sequentially or using a random number generator to queue up calls for call centers. Both the TCPA and CEMA provide for statutory penalties or actual damages, based on whatever is larger.

The penalties under both statutes are large — $500 per text message per person. Three text messages sent to 1000 numbers without express consent and/or express written consent (more on that below), could amount to total damages of $3,000,000. If the Court finds the violation was wilfull, some of these penalties could increase threefold.

Knowing how CEMA and the TCPA function will help you to properly structure your text message marketing program, know what questions to ask your provider, and prevent future litigation. If you don’t comply with these statutes in your text marketing program, you WILL be subject to a lawsuit. Attorneys practicing in this area have a steady stream of people that will bring them any unsolicited text message, which can result in a lawsuit within 1 business day of sending the same (seriously, I have seen this happen to my clients).

Washington’s Consumer Electronic Mail Act

Washington State controls the use of text messaging through its Consumer Electronic Mail Act (“CEMA”), which is found at Chapter 19.190 RCW. CEMA applies to any “electronic text message sent to promote real property, goods, or services for sale or lease.” RCW 19.190.010(3). CEMA prohibits the sending of commercial electronic text messages without explicit permission of the receiving party. What amounts to consent is not explicitly designed. If your consent program does not have an explicit written component, you may have a hard time proving that you had the consent of the person that received the text message. Some courts have taken the view that providing a phone number to your company is enough to prove consent, others require something more.

CEMA does not create a private cause of action for commercial text message. Rather, the statute provides only for a cause of action under Washington’s Consumer Protection Act (“CPA”). Importantly, the sending of an unsolicited text message establishes all five elements of a CPA claim. CEMA also requires the text message at issue be a “Commercial Electronic Message,” which is defined as “an electronic text message sent to promote real property, goods, or services for sale or lease.”

The Telephone Consumer Protection Act

In addition to CEMA, cases are also often brought under the Telephone Consumer Protection Act, otherwise known as the TCPA. The statute is found at 47 U.S.C. § 227 and prohibits the calling of a person’s cellular phone by an Automatic Telephone Dialing System (“ATDS”), which is defined as a system capable of calling numbers utilizing a random number generator.

It shall be unlawful for any person within the United States . . .

(A) 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.
(iii) to any telephone number assigned to a paging service, cellular telephone service, or other radio common carrier service, or any service for which the called party is charged for the call.

A text message is a call under the TCPA. A Plaintiff need not allege you sent the text message directly. It is sufficient that the text was sent by another under your authority.

In order to prove liability under the TCPA, the Plaintiff must prove “(1) the defendant called a cellular telephone number; (2) using an automatic telephone dialing system; (3) without the recipient’s prior express consent.”

Consent under the TCPA is different than that required under CEMA. The TCPA requires prior express WRITTEN consent. Largely, this is accomplished through a stand alone opt-in text message. Many people send a first text message that contains a consent for the opt-in, but which includes a marketing message as well. Courts have found that these do not meet the prior express written consent requirement, and this could subject you to a class action lawsuit.

What is an ATDS?

Use of an Automated Telephone Dialer System (ATDS) is only a requirement of the TCPA. You can still be subject to liability under CEMA even if an ATDS is not used. But whether you have used an ATDS is in a state of flux. The statute requires that, to be an ATDS, the system must “have the capacity” to dial randomly or sequentially. Nothing in the statute requires the ATDS be utilized using random number generation or sequential dialing, only that the system be capable of such. An ATDS is defined by statute as equipment which has the capacity to both “store or produce telephone numbers to be called, using a random or sequential number generator,” and “to dial such numbers.”

It is important to note the text of the TCPA has been in conflict with FCC interpretation. Under the Hobbes Act, FCC interpretation on the TCPA rules the day until overturned by a Court of Appeals. The FCC has interpreted an ATDS more broadly than the statute. Since that time, courts have found that unless the dialer meets the requirements laid out in the statute, that is it not an ATDS, and thus the claim fails.

In addition, there is a case pending before the United States Supreme Court, which has already been argued, which will interpret the definition of ATDS and what it means to have the capacity to be an ATDS. In the case, brought by Facebook, the Plaintiff had sought to utilize an expansive definition of ATDS, claiming that as long as a dialer could be modified utilizing, essentially, any software or hardware upgrade, to function as an autodialer, that it met the definition of ATDS under the TCPA. Facebook has sought a narrow interpretation, in line with common sense, that the equipment needs to have the current capacity to function as an autodialer, even if that particular function was not utilized in sending the text message. If the Supreme Court rules in Facebook’s favor, it would be a death knell for Plaintiff’s case here. The Plaintiff in that case argued that, if the system could have the capacity with hardware or software upgrades, that it could be an ATDS.

This has led to several cases being in a state of flux until this definition is resolved by the Supreme Court.

Unique Issues in Cannabis

Generally, these suits are resolved through the payment of money to the class, which is primarily guided towards the attorneys and the class action representative (the original plaintiff). Successful early resolutions usually include coupons or gift certificates for services. However, in cases that are brought in federal court, the court is unlikely to accept a coupon or gift certificate to a Cannabis shop. In addition, there are potential issues regarding whether gift certificates with cash value are available to cannabis shops. In settling these cases, the attorney you choose will need to be competent not only in TCPA claims, but in Cannabis law as well.

The Takeaway

Get your text message marketing program checked out before you ever send the first text message. Make sure you have a system that tracks opt-ins and do not send mixed messages. If you have send unsolicited text messages in the past, be sure to fix it now, before you get embroiled in a class action lawsuit.

If you have any questions regarding the TCPA or CEMA, or if you have been sued over your text message program, please call Gleam Law. Our attorneys are skilled in representing clients in both planning their text message program and in defending TCPA and CEMA claims. We are here to help!