Strange Brew: Restaurant Texting Case Highlights Importance of Maintaining TCPA Records

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Businesses using automated text messaging campaigns to market to its existing and prospective customers should heed the lessons of a Telephone Consumer Protection Act (TCPA) decision out of the Western District of Missouri examining the legality of a brewhouse chain’s SMS marketing campaign.

What is the TCPA anyway?

To back up, the TCPA imposes detailed restrictions on businesses engaging in telemarketing and—of particular importance to not a few of my business clients—the use of what the Act refers to as an “automatic telephone dialing system” (ATDS) to send such automated text messages to recipients.

Let’s be clear, as a business owner, you shouldn’t be fooled by the “telephone” portion of the TCPA moniker. The Federal Communications Commission (the federal agency tasked with TCPA enforcement) has already concluded that cell phones fall within the definition of “telephone” for purposes of TCPA’s restrictions, and the Act’s regulations have been expanded to clarify that text messages can, in fact, be deemed telemarketing “calls”.

For purposes of this article, however, whether your business actually markets via text messaging campaigns or is thinking about expanding its advertising through such means, it is important to understand that for any automated telemarketing calls or marketing text messages, your business must make sure it has the prior express written consent (“PEWC”) of the customer or prospect receiving such text.

If you’re a one man (or woman) show, or smaller operation that prefers the personal (and old school) touch of having live humans making individual calls or text messages to your prospects and customers one at a time then, to the extent those marketing calls comply with TCPA’s limitations on telemarketing, knock yourself out!

Why the TCPA (and legal compliance with it) is so important

For one thing, unlike, say, the CAN-SPAM Act that regulates marketing e-mails, private individuals can actually sue your business under the TCPA, in addition to the possibilities of FCC investigation, enforcement, and civil penalties.

The larger threat for most businesses, however, is the lawsuit component. Because of their relative ease of preparation and filing, imposition of strict liability, and significant statutory damages ($500 per violation, or up to $1,500 per willful violation), TCPA class actions have become a favorite of plaintiffs’ lawyers.

It bears repeating that if your business is found to have violated TCPA’s pre-requisites for automated, commercial text messages, it could be on the hook for at minimum $500 per violative text. Needless to say, depending on the number of recipients and auto-dialed marketing texts your business sent out, these civil penalties could add up very quickly.

The Beal Case

In Beal v. Outfield Brew House, Case No. 2:18-cv-4028-MDH (W.D. Mo. Feb. 20, 2020), Defendant Outfield Brew House, LLC had its staff collect phone numbers from the pub/restaurant’s diners who had provided their contact information on paper cards. The paper cards contained some TCPA disclosure language, which I will discuss in a future post. If you can’t wait that long, please use the contact form to the right or consult an attorney experienced in TCPA compliance issues.

For some inexplicable reason (at least to us lawyer-types), Brew House did not maintain copies of the signed paper cards which (presumably) proved their patrons’ consent but, instead, simply entered the customer contact information into a spreadsheet and later shredded the paper cards. From this spreadsheet, Brew House employees then uploaded the customer information into their computerized text messaging system. Brew House employees would then log into the text messaging system, select a group of patrons to whom promotional texts would be sent, and then manually press a button to send the text messages to those customers.

Plaintiff Beal, a customer who had received such promotional text messages from Brew House, filed a class action alleging that Brew House violated the TCPA by sending promotional text messages to customers using an ATDS without the required prior express written consent.

Trial Court decision

Defendant Brew House moved for summary judgment against Beal, which motion centered around the issue (and technicality) of whether Brew House’s text messaging equipment used by its staff was actually an ATDS.

In its ruling, the Missouri trial court judge noted the emerging split between the Federal circuit courts on this issue, namely the uncertainty regarding whether the equipment at issue must have the capacity for sequential or random number generation to fall within the definition of an ATDS, thus requiring PEWC under TCPA.

A slight majority of circuit courts having taken up the issue have interpreted the Act’s ATDS definition narrowly, holding that a phone or messaging system that does not randomly or sequentially generate phone numbers and then dial those numbers could not be considered an ATDS under the TCPA. On the other hand, the Ninth and Second Circuit, have viewed the ATDS definition more broadly, holding that it is not limited to devices with the capacity to call numbers produced by a random or sequential number generator, but also includes devices with any capacity to dial stored numbers automatically.

Fortunately for Brew House, the Missouri Federal judge opted for the majority circuit view and used the narrower definition of an ATDS embraced by the Third, Seventh, and Eleventh Circuits, finding that Beal’s (and his fellow plaintiffs’) PEWC was not required for the promo text messages sent.

Why Beal matters; Lessons for businesses that promote with autodialed SMS text messages

While the Defendant business in Beal was able to prevail on a widening circuit split over what is and isn’t an ATDS (a split in interpretation which the Supreme Court will likely resolve in its highly-anticipated Facebook, Inc. v. Duguid decision next year), the case nonetheless offers businesses some valuable takeaways for their own current or planned SMS text message promotion programs.

As I explained to one of my newer TCPA compliance clients the other day, TCPA is basically a law that wasn’t well written to begin with, that gets applied to technologies that didn’t really exist when it was enacted, regulated by an agency that doesn’t (IMHO) really do a great job of offering easy-for-businesses-to-follow guidance, not to mention all of the court decisions tasked with interpreting both!

The point is, TCPA is not just confusing and frustrating for the businesses having to deal with it. However, until SCOTUS can provide some additional clarity on what an ATDS is and isn’t, the best course for businesses using automated methods to text message its customers is not to rely on technicalities and always acquire the recipient’s PEWC no matter what.

You and your business’ defense counsel can make various arguments about whether or not the text messaging platform you employed was actually an ATDS or not, or whether the messages were actually promotional (versus, say, “transactional” (which require a lower level of customer consent under the Act), but if your business acquired and can demonstrate PEWC of the recipient(s) making a TCPA claim, then it’s pretty much game over (for the Plaintiff/s) at that point.

Which brings me to the second takeaway from Beal: For the love of all that is good, please Dear business owner, keep accurate, detailed, and hopefully searchable records of PEWC of your customers to whom you SMS text message.

Now, in fairness to Brew House, I have never managed a restaurant, let alone operated an entire restaurant chain, and goodness knows that restaurants have more than enough to deal with in these challenging times. However, just think about it—how hard would it really have been for Brew House to keep all of those little paper cards that got entered and just place them in storage somewhere for five years or until the statute of limitations on TCPA claims expired? If your business is using a paper card TCPA consent acquisition method similar to what Brew House did, please take the time to train your employees to hang on to and store each and every card/consent using whatever system you have in place for TCPA compliance.

Would it have been a pain for Brew House? For sure. Would it have been an added expense? You bet. Would such a process have undoubtedly cost less than having a high-priced team of attorneys defend a class action lawsuit in Federal district court? There, again, I’m going to say affirmative.

Conclusion

For all of these reasons, companies who are using automatic text messaging campaigns as part of their marketing efforts should establish well-defined procedures to obtain, document, store, and retrieve their customers’ (and prospects’) express written consent to receive ATDS promotional calls or texts. Doing so will help your business dramatically limit its private lawsuit and regulatory risk, not to mention the uncertainty, under the TCPA, regardless of which definition a court (or the Supreme Court ultimately) may adopt.

Finally, to paraphrase Lady Gaga and Beyonce, always—and I mean always—respect your customer’s decision to opt-out…


Ben Bhandhusavee is the Managing Attorney for BHANDLAW, PLLC, a startup, technology, and e-commerce law practice advising founders and management teams on company startup, corporate and technology transactions, e-commerce, as well as Internet privacy concerns. The firm serves corporate and individual clients throughout Arizona, the United States, and internationally. Our offices are conveniently located along the Camelback corridor in Phoenix’s financial district. For more information about our Internet & Data Privacy practice, feel free to reach out using the contact form on the right or call us at (602) 222-5542 to schedule a meeting. Connect with Ben on LinkedIn or Avvo.