It is not atypical for class actions to be brought seeking damages that can be characterized as nominal in nature. An oftentimes powerful incentive for potential class representatives to put their names on a putative class action is the promise of an incentive payment or award, paid to the class representative out of a class settlement fund purportedly to compensate the named plaintiff for work done on behalf of a class and assumption of those risks that come along with naming yourself in a lawsuit. However, the Eleventh Circuit Court of Appeals in Johnson v. NPAS Sols., LLC, No. 18-12344 (11th Cir. Sept. 17, 2020) has effectively nixed this practice, applying Supreme Court precedent from the 1880s to reverse what has become a routine practice in the class action settlement context, as well as increasing the scrutiny applied to attorneys’ fees awards.

This case arose when class representative Charles Johnson (“Johnson”) brought suit against NPAS Solutions, LLC (“NPAS”) on behalf of both himself and a putative class alleging violations of the Telephone Consumer Protection Act (the “TCPA”) in a federal district court in Florida. Less than eight months after the suit was filed, the parties reached a $1,432,000 million settlement, which the district court preliminarily approved, certifying the class for settlement purposes, appointing Johnson as the class representative, appointing Johnson’s lawyers as class counsel, and stating that Johnson could “petition the Court to receive an amount not to exceed $6,000 as acknowledgment of his role in prosecuting this case on behalf of the class members.”

Only one class member, Jenna Dickenson (“Dickenson”) objected to the settlement, objecting to the amount of the settlement, the method of calculating attorneys’ fees, and contended that Johnson’s $6,000 incentive award both contravened the Supreme Court’s decisions in Trustees v. Greenough, 105 U.S. 527 (1882), and Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 (1885), and created a conflict of interest between Johnson and other class members. The district court overruled Dickenson’s objections after holding a hearing on the matter, but did not provide a detailed explanation as to its reasoning in overruling those objections, and approved the settlement. Dickenson appealed the ruling to the Eleventh Circuit.

The Eleventh Circuit found three errors with the district court’s ruling. First, it found error in the timing of deadlines set by the trial court, as it required class members to file a settlement objection prior to the deadline for class counsel to file their fee petition. Second, it found the court’s boilerplate pronouncements on class members’ objections insufficient to explain its class-related decisions under the federal rules. Third, and most notably, the Eleventh Circuit disagreed with the district court’s decision to  award the class representative a $6,000 incentive payment as “acknowledgment of his role in prosecuting th[e] case on behalf of the [c]lass [m]embers.”

Regarding the incentive payments, the Eleventh Circuit agreed with Dickenson that Supreme Court precedent in Greenough and Pettus in fact prohibits incentive awards like the one earmarked for Johnson. The Court explained that Greenough and Pettus established the rule that attorneys’ fees can be paid from a “common fund,” but also established limits on the types of awards that attorneys and litigants may recover from the fund. Specifically, the Eleventh Circuit recognized that in Greenbough, the Supreme Court upheld the class representative’s award of attorneys’ fees and litigation expenses but rejected as without legal basis the award for his “personal services and private expenses”—in particular, the yearly salary and reimbursement for the money he spent during the case. Similarly, in Pettus, the Supreme Court explained that a class representative’s claim for “the expenses incurred in carrying on the suit and reclaiming the property subject to the trust” was proper, while his “claim to be compensated, out of the fund or property recovered, for his personal services and private expenses” was “unsupported by reason or authority.”

The Eleventh Circuit applied these holdings in Greenbough and Pettus to hold that “[a] plaintiff suing on behalf of a class can be reimbursed for attorneys’ fees and expenses incurred in carrying on the litigation, but he cannot be paid a salary or be reimbursed for his personal expenses,” and stated that the incentive award is analogous to a salary. The Eleventh Circuit observed that such incentive awards “are intended not only to compensate class representatives for their time (i.e., as a salary), but also to promote litigation by providing a prize to be won (i.e., as a bounty),” and as such, were improper for this additional reason. In so holding, the Eleventh Circuit recognized that “[t]he class-action settlement that underlies this appeal is just like so many others that have come before it. And in a way, that’s exactly the problem.” Unsurprisingly, Johnson argued that such incentive payments are routine, but the Court rejected such argument, stating that “familiarity breeds inattention, and it falls to us to correct the errors in the case before us.”

This is not the first time incentive awards have garnered scrutiny by the courts. Certain other federal appeals court have cast doubt upon the availability of incentive awards for lead plaintiff when that incentive is provided prior to settlement on the grounds that it  may create adequacy issues where the named plaintiff’s interests are no longer aligned with the class directly, or where incentive agreements created a conflict of interest between class counsel and the class representatives who entered into the agreements, on one hand, and the remaining members of the class, on the other hand.  See, e.g.,  Espenscheid, et al. v. DirectSat, LLC et al., Case No. 12-1943 (7th Cir., August 6, 2012); Rodriguez v. Disner, 688 F.3d 645, 656 (9th Cir. 2012). However, these same courts recognized their acceptance of incentive awards paid to named plaintiffs in the settlement context, recognizing that  “a class action plaintiff assumes a risk; should the suit fail, he may find himself liable for the defendant’s costs or even, if the suit is held to have been frivolous, for the defendant’s attorneys’ fees . . . as well as for as any time he spent sitting for depositions and otherwise participating in the litigation as any plaintiff must do.” Espenscheid, Case No. 12-1943 (7th Cir., August 6, 2012).

However, now that the Eleventh Circuit has resurfaced the decisions from Greenbough and Pettus, it is all but certain that the class action defense bar will seek to advance these arguments accepted in Johnson in other federal courts, as taking away incentive payments for named class representatives offers an effective tool to stem the proliferation of class actions.

When a class action settlement is proposed for approval, the class members have three options, (1) they can remain in the settlement class, (2) opt-out of the settlement to preserve their individual claims, or (3) they can object to the settlement if they believe it to be in some way unfair or inequitable. The latter option has been abused in the recent past, seeing class members filing frivolous objections to a class settlement, appealing decisions approving those settlements over their objections, and then soliciting the payment of individual settlements for dismissal of the appeal. This phenomenon, coined as “objector blackmail,” has possibly been brought to an end in the Seventh Circuit after the appellate court issued its ruling in Pearson v. Target Corp., No. 19-3095 on  Aug. 6, 2020.

In Pearson, consumers brought a class action against the sellers of a dietary supplement for violations of consumer protection laws based on alleged false claims about the supplement’s efficacy.  Three class members objected to a proposed class settlement submitted to the district court for approval. The district court, however, approved the settlement over their objections pursuant to Federal Rule of Civil Procedure 23. The objectors, however, appealed the denial of their objections to the class action settlement and then dismissed their appeals prior to any briefing in exchange for side settlement payments. Following dismissal of their appeals, a fellow class member sought to reopen the case in the district court by filing a motion for disgorgement of any payments made to the objectors in exchange for dismissing their appeal. After obtaining discovery, the record demonstrated that the three objectors had in fact received side payments in exchange for dismissal of their appeals while the class had received nothing. However, the district court did not provide the relief requested because there was no basis to conclude that the side settlements harmed the class by taking money that had been earmarked for it.

This ruling was thereafter appealed, and the Seventh Circuit considered whether a district court has the equitable power to order settling objectors to disgorge the proceeds of their private settlements for the benefit of the class. The Seventh Circuit reversed the district court’s ruling. The Court explained that the objectors had a duty to object only in “good faith, and imposed a limited representative or fiduciary duty on a class-based objector who, by appealing the denial of his objection on behalf of the class, temporarily takes “control of the common rights of all” the class members and thereby assumes “a duty fairly to represent those common rights.”

The Court stated:

These objectors made sweeping claims of general defects in the [settlement]. Either those objections had enough merit to stand a genuine chance of improving the entire class’s recovery, or they did not. If they did, the objectors sold off that genuine chance, which was the property of the entire class, for their own, strictly private, advantage. If they did not, the objectors’ settlements of meritless claims traded only on the strength of the underlying litigation, also the property of the entire class, to leverage defendants’ and class counsel’s desire to bring it to a close. Either way, the money the objectors received in excess of their interests as class members “was not paid for anything they owned,” and thus belongs in equity to the class.

Thus, the Court determined that disgorgement was the most appropriate remedy to right the objectors’ inequitable conduct.

This ruling is important when defending class cases because prior to the Court’s ruling in Pearson, a class member could file frivolous objections to a class action settlement, appeal the court orders overruling those objections in the hope of “extorting” or “blackmailing” class counsel to obtain side settlements to resolve the appeals, and dismiss the appeal prior to any briefing or ruling. The Seventh Circuit’s ruling in Pearson, however, provides the framework to reverse these settlements and disincentive this practice of “objector blackmail” moving forward.  As a result of this ruling, it will be less likely these serial objectors will be able to interfere with class settlements and extort money from defendant or run up the litigation costs associated with having to defend against a meritless appeal of a diligently negotiated settlement.

Seyfarth Synopsis: In the first ruling in response to the slew of room and board refund class actions filed in the wake of COVID-19, on July 29, 2020, in Rosenkrantz v. Arizona Board of Regents, No. 2:20-CV-01203 (D. Ariz.), Judge John Tuchi of the U.S. District Court for the District of Arizona granted the Universities’ Rule 12(b)(6) motion to dismiss for failure to state a claim. Judge Tuchi held that Plaintiffs failed to comply with an Arizona statute that required them to file a notice of claim with a public entity prior to filing suit. The Court’s ruling may prove useful for other colleges and universities sued in states with similar prerequisites. Because the ruling depends on a state-specific technicality, however, it is unlikely to quell the tide of similar class actions filed across the country.

Factual Background

Plaintiffs, parents of students enrolled at one of three public universities – the University of Arizona, Arizona State University, and Northern Arizona (the “Universities”) – during Spring 2020, filed a putative class action on behalf of all persons who paid the cost of room and board or fees for the Spring 2020 semester at the Universities. Id. at 2.

Plaintiffs claimed that, in response to the COVID-19 pandemic, the Universities forced students to move out of on-campus housing, moved all classes online, cancelled campus events, and ceased providing various services. Plaintiffs asserted that, despite these actions, the Universities failed to return or refund the cost of room and board or the fees for services. Id. at 1-2.

Plaintiffs alleged claims for breach of contract, unjust enrichment, and conversion seeking the return of pro-rated, unused funds, a declaration that the Universities wrongfully kept the monies paid for room and board and fees, and injunctive relief enjoining the Universities from retaining the pro-rated, unused portion of monies paid. Id. at 2.

The Universities moved to dismiss on the grounds that Plaintiffs failed to file a pre-suit notice of claim as required by A.R.S. 12-821.01(A). The Court granted the motion.

The Court’s Opinion

At the outset, the Court recognized that Arizona law requires a plaintiff to file a notice of claim with a public entity before suing it for damages. In the notice of claim, the claimant must set forth “facts sufficient to permit the public entity . . . to understand the basis on which liability is claimed” and “a specific amount for which the claim can be settled and the facts supporting that amount.” Id. at 3.

The Court noted that, because the statute functions to allow public entities to investigate and assess liability and to “assist in financial planning and budgeting,” which are fiscal considerations, the statute applies only to claims for money damages and does not apply when declaratory or injunctive relief is the “primary purpose of the litigation.” Id. A plaintiff, however, cannot circumvent the notice requirement by maintaining claims for monetary damages “under the guise of seeking declaratory relief.” Id.

Here, although Plaintiffs sought “disgorgement” of the pro-rated unused monies already paid, a “declaration” that the Universities are unlawfully withholding the funds, and an “injunction” enjoining the Universities from retaining them, the Court held that an equitable remedy is inappropriate where, as here, “an adequate legal remedy exists in the form of money damages.” Id. at 4. The Court concluded that all six of Plaintiffs’ claims, regardless of the label that Plaintiffs used, directly involved government funds and, therefore, were subject to the notice of claim requirement. Id. at 5.

The Court concluded that, although Plaintiffs alleged that they demanded the return of money through multiple channels, they did not allege that they had filed a notice of claim. The Court, therefore, found their action barred. Id. at 6-7.

Implications

Members of the plaintiffs’ class action bar have filed nearly 200 lawsuits seeking corona-virus related refunds to date, many against colleges and universities for failing to refund tuition, room and board, or other fees. Although Defendants scored the first win, in the form of a dismissal of one of the largest reimbursement class actions filed to date, the ruling’s usefulness may be limited for defense purposes. The Court relied upon a state-specific prerequisite to suit and did not reject the claims on their merits. Thus, it remains to be seen whether the Universities’ strategy of invoking the notice requirement at the motion to dismiss stage will impact the ultimate outcome of similar claims asserted on behalf of these or other putative class members. As a result, it is unlikely that this bellwether ruling will slow the fervor with which the plaintiffs’ class action bar continues to pursue similar cases.

Don’t Forget About the TCPA and the CAN-SPAM Act When Designing Your Marketing Communications Strategy

Seyfarth attorneys Jordan Vick, Robert Milligan, and Bart Lazar provided a back-to-basics primer on TCPA and CAN-SPAM rules and penalties regarding text, calls, and emails, plus helpful best practices with respect to using third-party vendors and externally sourced marketing lists.

As a conclusion to this webinar, we compiled a summary of takeaways:

  • The TCPA’s cell phone ban is here to stay given the Supreme Court’s decision to sever the problematic government debt exemption, rather than to invalidate the entire statute on First Amendment grounds.
  • Companies hungry for sales that interact with customers and prospective customers for business through text messages and faxes should obtain express written consent and provide appropriate opt out notices.
  • We can expect the Supreme Court to resolve the circuit split and provide definitive guidance on what constitutes an automatic telephone dialing system (aka autodialer) next year, as the Court has granted a petition for certiorari on that issue.
  • Recent FCC orders have emphasized that the key for determining whether mass text messaging platforms are automatic telephone dialing systems is whether human intervention is needed, not the volume of messages sent, which will be helpful for campaigns to interact with potential voters as election season heats up.
  • The FCC has not provided a free pass with respect to health care communications and communications regarding COVID, so those in the health care industry should continue to seek consent whenever possible and, when making COVID-related communications under the emergency purposes exemption, make sure the content is purely informational, not about billing or marketing.
  • It is important that communications with customers and potential customers be sent correctly to the right people to protect the company’s goodwill and comply with applicable law like the TCPA and CAN-SPAM.
  • Make sure that your company understands how it manages and processes personal data, particularly whether and how it obtains consents/opt-ins and how it  processes opt outs.
  • Companies are liable for both money and, in the court of consumer opinion, the actions of its service providers. Make sure they are reliant and compliant

View the recording and download the presentation materials on the Seyfarth website.

With the Supreme Court recently upholding the constitutionality of the Telephone Consumer Protection Act (“TCPA”), political campaigns, PACs, and grassroots GOTV organizations now know the tools by which they will be allowed to go to battle as it relates to the use of text messaging to get out the vote, raise awareness and raise funds.

Just as it was for Barack Obama’s historic 2008 election win, the ability for campaigns to find creative ways to engage new and previously-apathetic voters via text message while also complying with the TCPA’s texting restrictions will be of great import. But in the 2020 election, the importance can’t be understated – with the pandemic limiting person-to-person contact, our cell phones providing an increasing percentage of consumer’s daily content consumption, and with so many organizations now looking to galvanize new voters with shifting mindsets for social justice and change.

But, as has been the unintended consequence of this 31-year-old bill, it is already leading to significant legal exposure for failing to comply with the deceptively penal law – both from the Plaintiffs bar and from the FCC. From the 2016 and 2019 separate class actions filed against the Trump campaign for sending texts to people who never consented, to the recent class action filed this past June against a Georgia Congressional candidate for sending confirmation texts following opt-outs, to the $2.8 million FCC fine of a robocalling platform for sending a total of 180 unwanted texts ($16,000 penalty per text, as opposed to the $1,500 per text maximum allowable penalty in civil class actions).

This article will discuss campaign-related TCPA class action (and FCC) activity past and present, a trend which is sure to pick up in the coming months, particularly with the heightened awareness brought on by the recent Supreme Court decision. This article will then discuss some of the more common ways of reducing the risk of TCPA exposure from a legal perspective, and utilizing newer applications and technologies that facilitate manual / peer-to-peer texting on a large scale – a specific practice that was recently approved by the FCC in a declaratory ruling in late June.

TCPA and Campaigns: Obama ’08 and SCOTUS 2020 Clearing the Path

The TCPA was enacted in 1991 to combat a rising tide of unwanted telemarketing calls and faxes, and has since been expanded to cover calls to cell phones and text messaging. The original intent was to restrict automated or prerecorded (robo)calls unless the receiving party consents to receive the call, though critics have noted that technology has outpaced the federal statutes regulating telemarketing, leaving marketers uncertain as to what is and is not permitted under what was already a complex and difficult law to comply with.

But it was another challenge to the law’s constitutionality that recently was decided by the Supreme Court, who on July 6 struck down a specific exception for texts/calls related to the collection of federally-backed debts, but declined to strike down the bill in its entirety, instead severing the unconstitutional provision, and reiterating the heightened importance in 2020 of the TCPA and the need to protect consumer’s cell phones from these unwanted texts. (see related article on the recent Supreme Court’s decision)[1].

While the political organizations backing the challenge fell short of its ultimate goal of invalidating the entire bill, the ruling does at least provide some clarity on what it can and cannot do. But it also provides clarity for the Plaintiffs bar: with required statutory damages of $500-$1,500 per call or text, and essentially strict liability even when the texts/calls are made by a third party marketing company, class action judgments and settlements in the seven, eight, and nine figures are common among many industries (see related article for TCPA trends in the Cannabis industry)[2].

While the TCPA is primarily concerned with commercial solicitations, the law (and accompanying FCC regulations) do treat campaigns differently than other company’s involved in the sale of goods and services – for better and for worse. On the one hand, the First Amendment political speech is further protected with lessened restrictions on calls and texts, including political calls being exempt from the Federal Do Not Call List, autodial calls to landlines being permitted, and importantly, manually-dialed phone calls by volunteers being permitted even without the prior consent of the called party (among other differences). On the other hand, the law and the FCC recognize the dangers posed by abuses of TCPA compliance by political organizations, and has therefore provided the FCC with the authority to increase the available fine per violation from a maximum of $1,500 to a maximum of $16,000.

Even before anyone knew what COVID-19 was, texting was already proven to be an effective tool, with many studies showing one text the day before an election increased voter turnout by 0.5%, and with the cost per vote for a reminder text averaging about $15, as opposed to $25 for door-knocking and $20-$26 for live phone calls. Now, with the elimination of door knocking and the reduction in manual workforce call centers caused by COVID-19, texting stands to fill that a large part of that void.

The importance of texting first became truly evident in the 2008 election, when Barack Obama used text messaging to increase voter turnout in record numbers. But the way in which the campaign created their call list without violating the TCPA was truly the unsung hero in that portion of the strategy. While it of course requested cell phone numbers and obtained consents at traditional voter registration drives, but it got most of its mobile numbers through an interesting engagement strategy: if a voter texted the campaign, Obama would text back to announce his pick for Vice President.

This turned out to be a quite simple yet effective way to get around the most common TCPA obstacle: the exploit opt-in. However, as stated above, the TCPA has little forgiveness – and large consequences.

Campaign-Related TCPA Class Action and FCC Activity

Much like the Olympics, there is an inevitable wave of campaign-related TCPA class action activity every four years (and smaller waves every two years, somewhat akin to the Winter Olympics if we’re to extend the analogy). In March of 2016, the FCC the Federal Communications Commission (FCC) issued an Advisory to remind political campaigns of the “clear limits” on autodialed and prerecorded voice calls and texts under the TCPA. Nevertheless, the class action activity was fast and furious by April.

Case in point, the Trump campaign had a pair of TCPA class actions filed two days apart in April 2016, one with a lead Plaintiff who claims to never have provided his phone number, and one with a lead Plaintiff who provided his phone number to Event Brite in order to obtain a ticket to a Trump rally, but alleges that this action did not constitute consent to receive an unsolicited text message.

Though the campaign alleged that Plaintiff could not prove any use of auto-dialing, and defended the law suits into the beginning of the Presidency. After Trump won the election, the case created the unusual situation where the government had to consider defending a law against its own president, but it was reportedly settled in February 2017 for $200,000.[3]

This go-around, the Trump campaign was hit by another TCPA class action earlier in the process, just recently losing a motion to dismiss on June 8, 2020[4]. In this pending case, the Chief Judge’s ruling covered a number of issues of wide applicability and interest, holding that that a single text message is enough to establish Article III standing to sue.  While the court acknowledged the Eleventh Circuit’s contrary opinion in Salcedo v. Hanna, 936 F.3d 1162, 1172 (11th Cir. 2019), it agreed with the “logic of the majority of circuits…that a text message, while a different format than a phone call, voicemail, or fax, presents at least an equivalent level of disturbance and injury, and thus constitutes a cognizable injury under the TCPA.” The court also rejected the Campaign’s challenge to Plaintiffs’ pleading of the Campaign’s use of an automatic dialing system, deciding the issue now rather than at the summary judgment phase (as is done in other Circuits).

While these circuit splits were highlighted and addressed by the court in the recent Trump case, another recent class action suit filed against a longtime Georgia state senator highlights yet another important circuit split that could create liability for an unknowing campaign.[5] In According to the Complaint filed on June 22 against a long-time Georgia state senator an automatic telephone dialing system in was used in early May to send automated text messages to a large number of residents. However, the interesting wrinkle to this law suit is the additional allegation related to the common practice of sending a confirmation text following an “opt out” or “unsubscribe” by the consumer. Specifically, Plaintiffs allege that they texted “Stop” on May 9 in an effort to opt out of receiving the texts, and the automated system confirmed his number had been unsubscribed, thus constituting an additional message sent to him after he had “revoked” authority for the system to send him messages. Such an allegation can often come as a surprise to many companies and campaigns, particularly seeing as how some Circuits have held this “opt out follow-up” to be another unsolicited message, and some have found it to be acceptable. As such, the practice may be permitted when reaching out to certain individuals in certain states, but not as to others – leading to a “better safe than sorry” approach as the advisable approach when deciding whether or not to include these opt-out follow up texts in any texting marketing plan.

Reducing the potential for the Plaintiffs bar to tack on additional unwanted messages to the class count at a cost of $500-$1,500 per violation is no doubt a prime concern, but as discussed above, the Plaintiffs bar is not the only TCPA enforcement threat to political campaigns. The long arm of the FCC has shown its teeth as well, with one notable example being made in 2017 of a robocalling platform that assisted campaigns with a $2.88 million fine.

But aside from the message sent by the fine amount, the matter of Dialing Services LLC provided some guiding principles for any campaign looking to learn from others past mistakes. The matter actually began in 2012, when Dialing Services was responsible for 4.7 million calls in a three-month period for multiple clients. The FCC’s Enforcement Bureau put Dialing Services on notice of the violations by issuing a warning in 2013, but when the FCC later inspected Dialing Services years later, it found a total of 180 unsolicited calls to cell phones.

So why the hammer thrown down with the maximum $16,000 fine per violation? For starters, the Order reflects the FCC’s displeasure with Dialing Services for assisting clients in blocking or altering caller ID information, stating that the “Caller ID spoofing and blocking functionalities are designed to deceive consumers about the originating point of calls or to hide the originating point altogether.” Additionally, the FCC rejected Dialing Services’ argument that consumers may have provided prior express consent “orally or in ways not easily documented.”

Finally, so as to make it clear that more than one party can be liable under the TCPA for such actions, though the calls were made for the benefit of Dialing Services’ customers, Dialing Services was found to be liable for the TCPA violations because “the record also shows that Dialing Services was directly involved in creation of the content of illegal robocall campaigns and actively assisted clients with the creation and structure of messages. The Commission reasoned that Dialing Services was “so involved” in the calls, it either had the responsibility to obtain consent from the called parties or should have required the platform’s customers to provide proof of [the] respective consents” from the consumers receiving the calls.

What To Do (and recent FCC Guidance)

With the second surge of the pandemic gaining momentum as we speak, and the possibility of yet another surge (or even another pandemic) between now and November, its safe to say texting will be utilized by most every political campaigns, PACs, social movement, and grassroots Get Out the Vote organization we will come into contact with.  So, what can these organizations do to avoid crippling TCPA exposure and liability?

First, in a general sense, a state-by-state analysis of such laws is required prior to launching any political campaign or texting campaign, as a number of states have more restrictive laws on telemarketing, and some even attempt to regulate political speech or do not extend the exemptions that exist under the TCPA to political campaign calls (such as placing political calls on state DNC restrictions).

Campaigns using third party texting and marketing services must not only diligently vet the third party marketing companies to ensure proper TCPA (and campaign-specific) compliance protocols, but should also take additional steps as second layers of protection – such routinely cross-check the Federal Do Not Call List, which essentially acts as a published dating service between Plaintiffs attorneys and prospective Plaintiffs. And once voters opt out of receiving messages, campaigns should not only ensure those opts outs are subsequently complied with, but they would also be wise to eliminate any follow-up confirmation texts (or else risk being on the wrong side of the circuit split).

As always, the terms and conditions by which consent is initially given are of increasing importance, where a clear, conspicuous and enforceable arbitration provision and/or class action waiver will go a long way in limiting the potential TCPA class action exposure. Closely related then is the choice of law provision in any terms and conditions, since many states (such as California) have their own unique treatment of class action waivers and arbitration provisions, often resulting in challenges on various grounds. And as the FCC case discussed above shows, the consents better be documented, stored and retrievable, since the campaign / texting platform has the burden of proof to show consent was obtained.

Specific to the 2020 election, it remains to be seen who will find the most creative ways to effectively use text messaging without running afoul of the TCPA. Look for many campaigns to start employing new applications that facilitate manual, peer-to-peer texting on a large scale. These apps ensure that staff or volunteer texters use manual intervention to send texts to voters, which addresses the automatic dialing system restriction. Whereas previously campaigns could only text voters who had given their explicit consent, strategies such as these now allow campaigns to text cell numbers pulled from voter files.

Such a practice (or at least one specific application of this practice) was recently discussed and approved by the FCC in a Declaratory Ruling issued June 25, 2020. The petitioner argued that its P2P texting platform requires a human to “to actively and affirmatively manually dial each recipient’s number and transmit each message one at a time, and that it cannot store, produce, or dial random or sequential numbers. Rather, the sender dials a number and may choose to send either a pre-scripted or unique text message to begin a two-way text conversation. Though Consumer groups argued that P2P platforms such as this can send vast amounts of text messages in short time with minimal and meaningless human participation, the FCC reiterated that the relevant question as to whether a platform is an ATDS, is if the platform can store, produce, and dial random or sequential numbers without human intervention, not if many calls or texts can be made in short time.

As stated by the FCC, “The TCPA does not and was not intended to stop every type of call. Rather, it was limited only to calls made using an autodialer or an artificial or prerecorded voice.” However, campaigns and organizations must be careful not to get too cute or too creative, as the FCC has already shown its strong distaste for Caller ID spoofing and blocking functionalities designed to deceive voters about the originating point of calls. Additionally, in what may some NFL fans may consider the “Vontaze Burfict Rule of Thumb”, repeat offenders seem to face a significant threat of being hit with the maximum fines, even if the subsequent offenses are isolated or limited.

For continued updates on this developing and important legal issue in the 2020 election cycle….check your phone.

[1] See https://www.consumerclassdefense.com/2020/07/a-fractured-supreme-court-strikes-down-and-severs-the-tcpas-government-debt-exemption-leaving-the-rest-of-the-statute-intact/

[2] See https://www.consumerclassdefense.com/2020/06/mass-texts-how-the-cannabis-industry-must-deal-with-the-surge-of-tcpa-class-actions-during-covid-19/

[3] See https://www.politico.com/story/2017/02/donald-trump-texting-lawsuit-234768

[4] See Pederson v. Donald J. Trump for President, Inc., case number CV 19-2735, 2020 WL 3047779 (D. Minn. June 8, 2020).

[5] See Bowman v. Unterman, case number 1:20-cv-02612, in the U.S. District Court for the Northern District of Georgia.

Yesterday, a divided Supreme Court issued a plurality opinion in Barr v. American Association of Political Consultants, Inc.  (“Political Consultants”) striking down and severing a 2015 amendment to the TCPA, which exempts government debt collection calls (“government debt exemption”) from the statute’s general prohibition on calls to cell phones (“cell phone ban”).  The effect of this ruling was to affirm the Fourth Circuit’s decision and leave the cell phone ban intact.

A majority of justices agreed that the government debt exemption violated the First Amendment but disagreed as to everything else: whether strict or intermediate scrutiny governed the First Amendment analysis, whether the government debt exemption failed that analysis and whether the severability and equal protection principles applied by the plurality constitute an appropriate remedy.  In focusing on their disagreements, the Justices largely ignored the issue of political speech and the generous First Amendment protection usually afforded it.

The plurality opinion was drafted by Justice Kavanaugh, joined in full by Justices Robert and Alito and in part by Justice Thomas.  Kavanaugh began by offering this choice observation: “Americans passionately disagree about many things.  But they are largely united in their disdain for robocalls.”  (Kavanaugh Slip Op. at 1).  The plurality’s perception of public opinion appears to have been the main driver of its decision and the analysis used to reach its destination (upholding the TCPA) was relatively straightforward.

First, Kavanaugh found that the government debt exemption was a content-based restriction on speech subject to strict scrutiny and that the government conceded that the exemption could not survive strict scrutiny.  In doing so, Kavanaugh rejected the AAPC’s argument that Congress’s act of passing the government debt exemption in 2015, which permits what many consumers view as the most annoying and intrusive type of calls (debt collection), revealed that Congress did not have (or at least no longer had) a genuine concern for consumer privacy.  Instead, the AAPC contended, Congress was only concerned with collecting debt owed to the federal government.  But, wrote Kavanaugh, “As is not infrequently the case with either/or questions, the answer to this either/or question is “both.” Congress is interested both in collecting government debt and protecting consumer privacy.”  (Kavanaugh Slip Op. at 11). Second, Kavanaugh determined that severance was appropriate under both general severability and equal treatment principles, which allow unconstitutional laws to be cured by either “extending the benefits or burdens to the exempted class,” sometimes referred to as “leveling up or down.” (Kavanaugh Slip Op. at 17-20).

Justices Sotomayor, Breyer, Ginsburg and Kagan concurred in the judgment of the plurality with respect to severability, but wrote separately to emphasize their belief that strict scrutiny did not apply.  Sotomayor found that the government debt exemption failed intermediate scrutiny, while Beyer, Ginsburg, and Kagan found it did not and expressed concern that the plurality was using the First Amendment in a way that could “threaten the workings of ordinary regulatory programs posing little threat to the free marketplace of ideas enacted as a result of that public discourse.”  (Breyer Slip. Op. at 4).

Justice Gorsuch agreed with the plurality’s finding that the government debt exemption was subject to strict scrutiny and violated the First Amendment but disagreed as to why.  Of all of the Justices, Gorsuch was most sympathetic to the AAPC’s argument that the government’s consumer privacy rationale was suspect: “[If] the government thinks consumer privacy interests are insufficient to overcome its interest in collecting debts, it’s hard to see how the government might invoke consumer privacy interests to justify banning political speech.”  (Gorsuch Slip Op. at 3).   Gorsuch and Thomas were also most concerned with protecting speech and affording the AAPC a real remedy.  Instead of severing the government debt exemption, which has the perverse effect of expanding the TCPA’s restrictions on speech, Gorsuch and Thomas would have “leveled up” — expanded the benefits afforded government debt collection speech to political speech by awarding the AAPC a novel remedy: an injunction prohibiting the TCPA’s application to political speech.  (Id. at 5).

Takeaways and stray observations:

  • The plurality opinion, which invalidates the government debt exemption, applies only prospectively.  This means that any collection calls made to collect a government debt from the date the government debt exemption was enacted in 2015, to the date that the district court enters final judgment on remand, cannot serve as a basis for TCPA liability.  (Plurality Slip Op. at 22, n. 12).
  • Remember Political Consultants did not challenge the constitutionality of the many other content-based exemptions to the cell phone ban, such as those for certain healthcare related calls and package delivery notifications, which are created by the FCC pursuant to its rulemaking authority under 47 U.S.C. § 227(b)(2)(c).  Such challenges have not been able to overcome procedural hurdles arising from the Hobbs Act and the Chevron deference doctrine, which is why that issue was raised in the district court by AAPC but later withdrawn.  Whether a successful challenge to these content-based exemptions, or the FCC’s power to make such content-based exemptions in the first instance, remains to be seen.  (For an illuminating discussion of the Hobbs Act and Chevron deference in the context of the TCPA, see generally PDR Network, LLC v. Carlton & Harris Chiropractic, Inc., 588 U.S. ___ (2019)). 
  • None of the Justices commented on the explosion of (often abusive) TCPA litigation, although Justice Gorsuch did make some defense-friendly observations regarding the changes in cell phone billing practices and technology from 1991, when the TCPA was enacted, to present.  (Gorsuch Slip Op. at 1-2).
  • Political Consultants likely spells the death knell for the petition for certiorari in the case of Charter Communications, Inc., et al. v. Gallion, which raises the same First Amendment issue (albeit in the context of commercial speech), and has been pending with the Court since December 2019.
  • The petition for certiorari in Facebook, Inc. v. Duguid is still very much alive and, indeed, Facebook filed a supplemental brief the day after Political Consultants issued urging the Court to address its one remaining question presented: the deepening circuit split with respect to the TCPA’s definition of “automatic telephone dialing system.”
    • As expected, on July 9, 2020, the Supreme Court granted Facebook’s petition for certiorari in Duguid on the second question presented, which concerns the interpretation of the term “automatic telephone dialing system.”  It also denied the petition for certiorari in Gallion.
  • While Political Consultants was a setback for political campaigns in election season, the FCC did recently issue a campaign-friendly ruling on person-to-person (P2P) text messaging platforms.  More to come on that in a future post.

From court closures and the way judges conduct appearances and trials to the expected wave of lawsuits across a multitude of areas and industries, the COVID-19 outbreak is having a notable impact in the litigation space—and is expected to for quite some time.

To help navigate the litigation landscape, we are kicking off a webinar series that will take a look at what’s happening now and what to expect in terms of litigation practice and litigation trends in the months to come. The initial webinars detailed below will be supplemented by topic-specific programs that will take a deeper dive into the respective topics. Feel free to attend one or all, and please invite your colleagues.

Court Is “In Session”: The Post-Pandemic Courthouse

In the first installment of our Post-Pandemic Litigation Webinar Series, Seyfarth litigators from a variety of legal disciplines will examine the virtual courthouse in a post-pandemic world. Specifically, our presenters will address:

  • What is going on in courts across the country, and how/when are they rescheduling
  • How will state, federal, and bankruptcy courts run post-pandemic
  • Will we be able to have jury trials
  • How long this “new normal” is expected to last
  • Necessary tools needed to adapt and keep your cases moving forward
Moderator:

Scott Carlson, Partner, Seyfarth Shaw

Speakers:

Suzanna Bonham, Partner, Seyfarth Shaw
Gina Ferrari, Partner, Seyfarth Shaw
William Hanlon, Partner, Seyfarth Shaw
Scott Humphrey, Partner, Seyfarth Shaw

Tuesday, July 14, 2020

1:00 p.m. to 2:00 p.m. Eastern
12:00 p.m. to 1:00 p.m. Central
11:00 a.m. to 12:00 p.m. Mountain
10:00 a.m. to 11:00 a.m. Pacific

If you have any questions, please contact Colleen Vest at cvest@seyfarth.com and reference this event.

New Era, New Litigation: Lawsuits You Can Expect in the Post-Pandemic Environment

During the second installment of our Post-Pandemic Litigation Webinar Series, our panel will provide high-level insights on what companies of all sizes can expect in terms of litigation as a result of COVID-19. Specifically, our presenters will address the high-level trends we are observing in the following areas:

  • Bankruptcy and Financial Services
  • Class Actions and TCPA
  • Commercial Litigation
  • Construction and Real Estate Litigation
  • Health Care, Life Sciences, and Pharmaceutical
  • Securities Litigation
  • Trade Secrets and Cybersecurity/Privacy
Moderator:

James McGrath, Partner, Seyfarth Shaw

Speakers:

Kristine Argentine, Partner, Seyfarth Shaw
Jesse Coleman, Partner, Seyfarth Shaw
Tonya Esposito, Partner, Seyfarth Shaw
Richard Lutkus, Partner, Seyfarth Shaw
Kate Schumacher, Partner, Seyfarth Shaw
Rebecca Woods, Partner, Seyfarth Shaw

Wednesday, July 22, 2020

1:00 p.m. to 2:00 p.m. Eastern
12:00 p.m. to 1:00 p.m. Central
11:00 a.m. to 12:00 p.m. Mountain
10:00 a.m. to 11:00 a.m. Pacific

If you have any questions, please contact Danielle Freeman at dfreeman@seyfarth.com and reference this event.

Event Details

Wednesday, July 15, 2020
1:00 p.m. to 2:00 p.m. Eastern
12:00 p.m. to 1:00 p.m. Central
11:00 a.m. to 12:00 p.m. Mountain
10:00 a.m. to 11:00 a.m. Pacific

Consumer spending in the US plunged more than 13% as a result of the COVID-19 pandemic. As states begin reopening and marketers begin refocusing on acquiring new customers and strengthening their relationships with existing customers, it is imperative for marketers to remember that the Telephone Consumer Protection Act (TCPA) and CAN-SPAM Act apply to all marketing campaigns that involve texts, calls, and emails to consumers.

The TCPA continues to be one of the most heavily litigated consumer protection statutes in the country, with over 3,000 lawsuits filed in 2019. TCPA lawsuits are often brought as class actions because the statute provides for hefty fines ($500-$1,500) per text or call with no limit on the total amount of damages sought. As a result, the potential risk to businesses for TCPA non-compliance can be as catastrophic as the pandemic itself. While new privacy laws like the CCPA provide additional unsubscribe and class action rights to individuals, CAN-SPAM remains relevant in that each separate email sent in violation of CAN-SPAM remains subject to penalties of up to $43,280.

This webinar is intended for both attorneys and marketing professionals and will provide helpful tools for businesses to avoid becoming targets of consumer litigation. The presenters will provide a back-to-basics primer on TCPA and CAN-SPAM rules and penalties regarding text, calls, and emails. They will provide helpful best practices with respect to using third-party vendors and externally sourced marketing lists. The webinar will conclude with an overview of TCPA trends and hot topics.

Topics will include:

  • TCPA rules regarding texts and calls to consumers
  • CAN-SPAM Act rules with respect to emails
  • Interaction between the CCPA and CAN-SPAM
  • Penalties for non-compliance
  • Best practices with respect to using third-party vendors and externally-sourced marketing lists

TCPA trends and hot topics, including the FCC’s March 20, 2020, Declaratory Ruling regarding COVID-19 calls

Speakers

Jordan Vick, Partner, Seyfarth Shaw LLP
Robert Milligan, Partner, Seyfarth Shaw LLP
Bart Lazar, Partner, Seyfarth Shaw LLP

Register Here

https://connect.seyfarth.com/21/470/landing-pages/rsvp-blank-webinar.asp?sid=blankform

If you have any questions, please contact Colleen Vest at cvest@seyfarth.com and reference this event.

*CLE Credit for these webinars is approved in the following states: CA, IL, NJ and NY. CLE Credit is pending for GA, TX and VA. Credit will be applied for, but cannot be guaranteed, in all other eligible jurisdictions. Please note that in order to receive full credit for attending each webinar, the registrant must be present for the entire session.

A blog post authored by Seyfarth attorneys Darren Dummit, Robert Milligan and Stanley Jutkowitz, titled “Mass Texts: How the Cannabis Industry Must Deal with the Surge of TCPA Class Actions During Covid-19,” was referenced in a new story from Law.com.

The Law.com article explores how TCPA class actions are targeting the cannabis industry.

Read the full article at Law.com

 

THC, CBD, CBN … the cannabis industry is quite familiar with acronyms. But it’s another nasty little four letters, TCPA, that are—or should be—on the top of mind for every dispensary, delivery service, CRM platform, and private equity holding company. This as the US Supreme Court decides what the byzantine 30-year-old law will look like following a landmark decision expected by the end of June or July.

The Telephone Consumer Protection Act (TCPA), which regulates robocalls and unsolicited texts to consumers, has been the vehicle for a number of class action suits against cannabis companies over the past year, including an uptick of such suits during COVID-19. And with the advertising restrictions and younger demographics of the industry, the class actions are now bring brought in droves, with over 10 being brought over the last 6 weeks alone. Like a tremor before a larger quake, the impact of this trend is only beginning to be felt—just ask Eaze (the “Uber” of marijuana retail), who has been told by a California federal judge twice that its proposed $3.4 million settlement, based on the actions of a third party texting technology, is insufficient, and who was at the same time hit with another separate TCPA suit based on their current terms and conditions.

But it doesn’t take a seismologist to know the “big one(s)” are right around the corner for the cannabis industry, who should have noticed last week as an established cruise line company looked to consummate a $76 million TCPA settlement from 2017, only to have the plaintiffs’ counsel ask the court to bump its initial $15 million fee by another $3.49 million.

Assuming the TCPA is not radically altered by the upcoming Supreme Court decision, this article highlights the most relevant cannabis-related TCPA class action activity to-date, and more importantly, some of the ways cannabis companies can best avoid and defend these high exposure class action suits—including proper consent, opt outs, coordination with the Federal Do Not Call List, use of respectable marketing contractors and experienced marketing counsel, arbitration provisions, class action waivers, and the use of a more data-centric approach to customer data.

The perfect storm: TCPA & cannabis industry factors

The TCPA was enacted in 1991 to combat a rising tide of unwanted telemarketing calls and faxes, and has since been expanded to cover calls to cell phones and non-consensual text messaging. The original intent was to restrict automated or prerecorded (robo) calls unless the receiving party consents to receive the call, though critics have noted that technology has outpaced the federal statutes regulating telemarketing, leaving marketers uncertain as to what is and is not permitted under what was already a complex and difficult law to comply with.

And the law certainly has some teeth—given the statutory damages of $500–$1,500 per call or text, one can see how settlements can be in the nine figures. The law also has some reach, essentially imposing strict liability even when the texts/calls are made by a third party marketing company on behalf of their client. As such, compliance with the TCPA was already difficult for even the most established industries and companies.

Nevertheless, with state-by-state regulations restricting the advertising methods in the nascent cannabis industry, automated text messaging has become the preferred (or even necessary) method of reaching the primarily-younger consumers. Any cannabis consumer with a cellphone knows that these dispensaries and other services are often collecting phone numbers in connection with loyalty and rewards programs, which are then used for direct marketing purposes usually via SMS text messaging.

As such, even the more deliberate and careful cannabis companies face the inherent difficulties of complying with (and avoiding class action exposure from) the TCPA. Making matters even dicier is the flood of new cannabis companies looking to enter the market as quickly and directly as possible. Given all of the other regulation hurdles these companies need to jump over, it is the unknown or ignored TCPA speed bumps that could have the potential to cause the most damage regardless of whether the non-compliance is caused by recklessness or well-intentioned scrappiness.

For these reasons, a target has formed on the backs of cannabis companies for plaintiffs’ counsel looking to take advantage of the TCPA and the nascent cannabis industry, which are often funded by private equity or high net worth individuals/celebrities. When these holding companies also perform managerial or advisory services, the potential for them to be named as co-defendants in these class actions increases significantly—proving that securities litigation may not be the only class action trend worth watching as the money behind marijuana companies expands and becomes more integrated.

Eaze-y-does it: cannabis-related TCPA class action activity

The TCPA class action suits against cannabis companies have, in one form or another, been based on the following fact patterns: (1) texting non-clients who have never signed up or consented due to mass texting policies or practices; (2) texting non-clients who have never signed up or consented due to third party inputting error; (3) texting client consumers who did not give adequate consent to being texted; and (4) texting clients who have opted out of being texted (and/or are on the Federal Do Not Call List).

The most high-profile and widely applicable case study has to be the Eaze, the well-known online marketplace and technology platform for marijuana deliveries that’s been described (in a complaint) as the “Uber” of the cannabis industry. In what feels like a lifetime ago, Eaze user Farrah Williams brought suit on behalf of herself and others who, beginning in 2017, received alleged unwanted and unsolicited marketing text messages without their consent and without offering the option to opt out. Eaze sought to have the case sent to arbitration based on a “clickwrap” agreement in its terms of service, which plaintiffs did not deny agreeing to, but instead tried to dispute the legality of the contract itself due to marijuana’s nebulous federal legal status. In a notable yet limited victory for the cannabis industry, the court did not specifically rule on whether there was a legal contract, but it did find that the arbitration clause was severable from the contract as a whole, and sent the case to arbitration.

But not to rest on the laurels of any “victories”, the same plaintiffs’ counsel filed another lawsuit in 2018, this time with lead plaintiff Kristine Lloyd and over 51,000 class members, who allege they never enrolled in or used Eaze‘s services but nonetheless were “inundated” with the company’s unsolicited, autodialed text messages (sent by a third party technology provider). Eaze argued that Lloyd’s claims are based on verification texts that were accidentally sent to her when another user in Ohio apparently entered a single digit wrong when signing up for the service.

In April 2019, Eaze initially agreed to a $1.75 million proposed settlement of this class action claim, which also required Eaze to implement several “significant changes to its consumer marketing practices going forward.” The changes were to include instituting TCPA compliance training and marketing oversight of key personnel involved in text messaging; refraining from continuing to work with the third party company that sent most of the offending texts; inserting opt-out notices in all verification text messages; ensuring that verification reminder texts do not include advertising copy; and adjusting its user verification process to prevent nonusers from mistakenly and repeatedly receiving messages they had never requested, according to the motion.

This proposed settlement was rejected by a federal judge in the Northern District of California, who was skeptical of the low dollar amounts and felt the proposed claims processes were lacking. Subsequently, a second proposed settlement which increased the monetary sum to $3.49 million was also rejected, leaving the parties to continue litigating to this day, albeit with the inclusion of a new class of plaintiffs who are willing users of the app that may or may not have agreed to arbitration.

But Eaze is by no means alone. In June 2019, a group of plaintiffs filed a class action suit against Baker Technologies and its parent company Tilt Holdings Inc., alleging violations of the TCPA and California’s Unfair Competition Law. Tilt Holdings specializes in cannabis technology, and its subsidiary Baker Technologies provides customer relationship management services to retail stores, including online ordering, customer loyalty, messaging and analytics. Specifically, the suit alleges that Baker Technologies collected cell phone numbers, provided them to its cannabis dispensary clients and facilitated telemarketing text messages to those mobile numbers without first obtaining the necessary consent. The companies maintain that messages were only sent to customers who have voluntarily signed up to receive messages at dispensaries and that those customers may opt-out at any time—in full compliance with the TCPA.

But, that doesn’t stop the case from going forward or discovery from taking place. Baker Technologies urged the court last month to stay the action given the upcoming Supreme Court decision and the complexity of the case, which could implicate more than 1,000 dispensary clients, but that discussion may become moot with the decision expected soon.

Any potential uncertainty around TCPA certainly hasn’t stopped or slowed down the Plaintiffs’ bar, who in anticipation of the upcoming ruling, have instead hit the cannabis industry with more than a dozen class action TCPA suits over the last 6 weeks alone, targeting dispensaries and other companies in Oregon, Denver, Nevada, Florida, Arizona, and California—with the majority of cases brought in California. While the cannabis TCPA trend was emerging over the past year, the volume seems to be increasing over the past few months at an alarming rate, with headlines about “The Latest TCPA Suit Filed Against Cannabis Company” becoming almost ubiquitous in the industry trades.

What to do

The current US Supreme Court case asks whether the government debt collection exception to the TCPA is an unconstitutional, content-based carveout. The justices will soon be deciding whether to uphold the provision, sever the provision, or strike down the law entirely. It is unclear what changes may result from the decision to be handed down any day now, but for purposes of this article, we will assume the TCPA remains substantially intact.

In the meantime, it is clear that even established cannabis companies need to take proactive steps with their text messaging and marketing systems to minimize the risk of unwanted legal actions, knowing that full reliance on a third party to comply with the TCPA will not shield them against direct liability. And it is abundantly clear that younger companies who willfully or inadvertently fail to comply with the TCPA, or those who fail to adequately vet similarly-new third party marketing services, may be exposing themselves to significant liability.

Companies should therefore not only diligently vet the third party marketing companies to ensure proper TCPA compliance protocols, but should also take additional steps as a second layer of protection. One relatively straightforward step would be to routinely cross-check the Federal Do Not Call List, which essentially acts as a published dating service between plaintiffs’ attorneys and prospective plaintiffs. Of course the ability to initially opt out is a basic requirement, but companies need also provide for the continuing ability to opt out, and ensure those subsequent opt outs are complied with. This is already an issue that has been recurring in the cannabis TCPA litigation.

Before the text messages can be sent, the customer information must first be obtained through proper consent procedures—that again is a given. But the terms and conditions by which consent is given are of increasing importance, especially in light of the recent Eaze ruling which enforced the arbitration provision despite questions about the legality of the underlying subject of the contract. A clear, conspicuous and enforceable arbitration provision and class action waiver will go a long way in limiting the potential TCPA class action exposure. However, it must be noted that California law has its own treatment of class action waivers and arbitration provisions, often resulting in challenges on various grounds. In attempting to invalidate these agreements, plaintiffs will typically argue that such a provision cannot be enforceable if it waives an unwaivable public or statutory right, or whether it deals with a waiveable private right. For that reason, choice of law provisions and venue provisions should also be considered when drafting the terms and conditions. Additionally, companies need to ensure that a binding agreement has been formed as part of their sign up process, with appropriate click boxes.

Once the terms are agreed to, the opt outs are in-place, and the other “improvements” outlined in the proposed Eaze settlement, companies would also be wise to employ a more data-centric approach to customer data. Tracking and utilizing current customer data will not only bring all the usual marketing benefits, but it may also assist in defeating class certification by arguing individualized issues predominate over any common issues presented by the class, or that there are not in fact enough class members to warrant a class action. In one recent example, California cannabis delivery company Xaler defeated class certification in a TCPA suit this past January, when a federal judge found there were not enough consumers to justify bringing the case on a class basis (the suit has subsequently been dismissed in March).

Precautions should be taken by cannabis companies, but this is one area of the law where violations can happen even in the absence of negligence, with the potential for millions in damages. Prudent cannabis companies should select their marketing providers wisely and use competent counsel to navigate these minefields. As the cannabis industry landscape continues to evolve even during COVID-19 and as the smoke clears, without appropriate precautions in place, TCPA may soon become as recognizable as THC.