Is Texting Putting Your Business in Jeopardy?

Closeup shot of a man using a cellphone

by Garrett J. Olexa, Member, Jennings, Strouss & Salmon

In recent years text messaging has become an inexpensive form of marketing for businesses.  Unfortunately, for the unsuspecting business owner, texting could put your business in jeopardy if not done right. 

The Telephone Consumer Protection Act (TCPA) is not a new law.  It was passed in 1991.  While it was originally enacted to target the telemarketing industry making invasive phone calls into homes across America, it was drafted to allow consumers to bring small claims court actions for violations of the Act[1], in recent years it has been used by class action attorneys to target businesses who use text message campaigns to promote their business.  These lawsuits have spurred hundreds of millions of dollars in verdicts and settlements[2].  The foregoing, combined with favorable rulings in certain parts of the country and the lack of statutory damage cap (i.e. a limit on the amount of damages that could be awarded in a given claim), means these types of claims are not likely to disappear any time soon.

In simple terms, the TCPA makes it unlawful for any person to use an automatic telephone dialing system (ATDS) to call or text another’s cell phone except for emergency purposes or unless prior express consent has been given.  The TCPA allows a plaintiff to recover his or her “actual monetary loss,” or $500 for each violation, whichever is greater.[3]  If a court finds that a defendant “willfully or knowingly violated” the statute, the court may, in its discretion, triple the amount of claimant’s actual or statutory damages.  While the minimum $500 per violation may not sound like much, it only takes one unlawful text to amount to a “violation.”  Thus, if your business last year used an ATDS[4] to send, for example, 10,000 text messages as part of an advertising or marketing campaign and you did not comply with the TCPA, you could be facing liability of $5,000,000 or more.  Further, simply using a third party to send text messages may not be sufficient to excuse you from liability.

While you might assume such violations will be covered by either your business liability insurance or even cyber coverage, many insurance companies were quick to react to these costly lawsuits and have carved out exclusions from coverage for TCPA violations.  Thus, check your policy language.  The exclusion may refer to the TCPA by name, or it may include more general language that indicates your coverage will not apply to any claim arising out of an alleged violation of any law that restricts or prohibits the sending of any communication that the recipient did not specifically request to receive.

The TCPA, of course, does not bar all business text messaging, but unless you know the difference between what the TCPA permits and what constitutes a violation, you are flying blind.  Unsuspecting businesses of all sizes have fallen into the trappings of the TCPA.  Thus, if you are going to use mass text messages to attempt to solicit new business, it is strongly recommended that you either familiarize yourself with the TCPA first or consult with an attorney familiar with this statute to avoid potential liability.

[1] 137 Cong. Rec. S16204-01 (1991).
[2] 47 U.S.C. § 227(b)(1)(A)(iii); Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 952 (9th Cir. 2009).
[3] 47 U.S.C. § 227(b)(3)(B).
[4] 47 U.S.C. § 227(a)(1) and (b)(1).

For more information on this topic or other litigation law matters, please contact Mr. Olexa.

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