Last month Adam Bowser from Arent Fox LLP wrote a pretty extensive article about the importance of arbitration clauses in a brand’s SMS marketing terms & conditions. This last week, a ruling by a U.S. District Judge in the TCPA text messaging lawsuit against Sears proved why arbitration agreements are so important.
In this case, a New Jersey federal judge approved Sears’ bid for arbitration, as it was proven that the plaintiff had agreed to an arbitration clause when they signed up for Kmart’s (owned by Sears Holding Corp.) mobile messages through a program called Shop Your Way. This means that this dispute will be decided outside of court by a neutral arbitrator. The benefit of arbitration is that it is usually much cheaper and faster than litigation in federal or state court due largely to streamlined or limited discovery procedures.
According to court filings, the plaintiff signed up for Shop Your Way text messages at a Kmart store by entering his mobile number into a point-of-sale device. The sign-up screen said, “I agree to get SYWR text messages 10msgs/mo + confirmation of opt-out. I asked for/agree to SYWR Terms. Msg+Data rates may apply. CONFIRM YOUR MOBILE #.” The plaintiff then selected, “YES I agree and # is correct.” on the point of sale device.
While the plaintiff conceded that he did consent to receive Shop Your Way text messages from Kmart, the plaintiff argued that he didn’t also agree to receive text messages from Sears, a corporate affiliate of Kmart. The plaintiff alleged in his TCPA lawsuit that between October 2015 and June 2016, Sears sent him roughly 68 text messages that were “fully automated.” Whether the plaintiff should also be deemed to have consented to receive Sears’ messages when he agreed to receive Shop Your Way text messages from Kmart is yet to be decided. One thing is certain: this case will be decided through arbitration, rather than federal or state court.
In its recent ruling, the court ultimately found that the point-of-sales opt-in method presented the plaintiff with a clear offer that “explicitly and succinctly” included terms by reference. “Plaintiff clearly had the opportunity to obtain the terms, and had notice that he was agreeing to terms, if he chose not to read them,” the judge said. “Plaintiff accepted the contract terms and the included arbitration clause.”
To get feedback on this ruling’s significance, we reached out to some notable TCPA attorneys to get their comments, which are below.
“The Sears decision reinforces the value of including a well drafted arbitration provision in a company’s terms of service. An enforceable arbitration provision is an important tool to help combat the rising costs and exposure associated with TCPA class action litigation. In essence, an arbitration provision returns the TCPA to the original intent of Congress, in which an individual that feels harmed by unauthorized calls is empowered to pursue his or her claims individually, rather than making the TCPA about multi-million windfalls for professional plaintiffs and their lawyers.” – David Carter from TCPA Defense Force
“This decision perfectly illustrates how effective a relatively straightforward arbitration provision can be to stop a putative class action in its tracks. And it’s worth emphasizing that this was not a relatively straightforward TCPA case: consumer provides consent to Company A and starts receiving marketing messages from Company B is a fact pattern that would whet any TCPA attorney’s appetite. Yet the fact that even Company B – here Sears – could enforce the arbitration provision to end the litigation relatively quickly demonstrates that arbitration provisions can effectively serve as a poison pill to potentially ruinous class action litigation.” – Adam Bowser from Arent Fox LLP
While we highly recommend our clients include an arbitration clause in their mobile messaging terms & conditions, it’s almost just as important to make sure you’re using a double opt-in. While a double opt-in is not a requirement of the Telephone Consumer Protection Act (TCPA), the level of confirmation a double opt-in requires, makes it the only practical way of meeting the letter of the law. You can read more about the need for a double opt-in by clicking here.