Gourmet Burger Chain Slapped with Class-Action Lawsuit Over Texting

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What you don’t know about SMS marketing could cost you $500 per email.

Gourmet Burger Chain Slapped with Class-Action Lawsuit Over Texting

Red Robin International has been slapped with a class-action lawsuit that alleges the gourmet burger chain sent unwanted text messages to customers.

Plaintiffs claim the texts were unauthorized and advertised Red Robin’s rewards and are in violation of the federal Telephone Consumer Protection Act (TCPA), reported Law360.

The lawsuit, which is seeking putative damages, was filed in a New Jersey federal court on Nov. 1.  If found guilty, Red Robin could be charged $500 - $1500 per text message sent.

The TCPA, which is overseen by the Federal Communications Commission (FCC) was enacted in 1991 to protect consumer privacy by prohibiting unwanted telemarketing calls, autodialed or prerecorded calls, and unsolicited faxes. Communications and marketing communications have evolved with the rise of mobile technology. TCPA has not.

Hospitality Technology reached out to several attorneys to comment on TCPA, and what restaurant marketers need to know about SMS marketing communications to protect their bottom lines.

“The number of lawsuits involving TCPA has spiraled out of control,” says Becca Wahlquist, partner at Snell and Wilmer in Phoenix. More than 3,000 lawsuits involving 42 industries are currently in the courts, she says. “Any legitimate American company can find itself subject to class-action litigation brought under TCPA. Quite a few” of these lawsuits were brought about because of SMS messages from loyalty programs.  

Over the years several restaurants have been sued for alleged violations of TCPA. Last year, a lawsuit against Checkers Drive-In Restaurants Inc. and its affiliate mobile marketer, was filed in a Chicago federal court. Rubio’s Restaurants, based in Carlsbad, Calif., was sued for $500,000 for alleged violations of TCPA lawsuit; the case was settled out of court.

The damages of $500 -$1500 per text “incentivizes litigation,” Wahlquist says. “High statutory damages can be in the tens of millions. These frightening potential damages encourage settlement.”

Lawyers Weigh In:  Best Practices
“You can do these types of communication in compliance with TCPA, but you need to be hyper aware of the rash of litigation around this type of communication. Ensure you have every protection in place,” says Wahlquist, who has testified before Congress about the TCPA and the extent of litigation abuse.   

“You do need to have consent to send texts,” she stresses. “This puts into focus the importance for all businesses that have opt-in text programs to consult with outside counsel to comply with laws.

“Be in touch with your company’s marketing program. Run it up through the legal department, and if your legal department is not expert in these types of laws, you should consult with outside counsel,” Wahlquist explains.  

Have a Compliant Plan
Michael Goodman, a partner at the Washington, D.C. firm Hudson Cook LLP, says, “Companies can mitigate risk by creating a compliant texting program before sending any text messages. This means determining if the company’s texting equipment satisfies the TCPA’s ‘autodialer’ standard; figuring out if the company will send advertising messages, non-advertising messages, or both; implementing a process for obtaining valid consent from recipients; giving recipients a way to opt out; and keeping records.”

HT: Is there any circumstances under which it would be OK to send customers SMS Texts without their approval? 
“In the hospitality world, it can be hard to tell if a message is advertising or not. A reservation reminder might not be advertising, but a reservation reminder that includes a coupon might be. If the company uses a service provider, the company’s agreement with the service provider should expressly require TCPA compliance, and the company should consider putting in place a way to monitor the service provider’s compliance. The company should also react quickly if the company learns that the service provider is not complying with the TCPA while acting on the company’s behalf,” states Goodman.

“The TCPA comes with a severe penalty structure and a private right of action. As a result, the plaintiff’s bar uses the TCPA aggressively. Companies must proceed with caution here, but with a compliant program, many companies find that texting is an effective way to communicate with consumers using a medium that consumers are comfortable with,” concludes Goodman.

Matthew Adams, a partner with Fox Rothschild in New Jersey and co-chair of the firm’s White Collar Criminal Defense and Regulatory Compliance practice group, adds, “Unwanted, so-called SPAM text messages, sent from an autodialer to your mobile phone are against the law. Such text messages are treated the same way as robo calls under TCPA. Most all commercial marketing via text/SMS messaging is done using autodialers. Therefore, marketers and their affiliated companies can be held liable for contacting you via text/SMS messaging for marketing purposes without your consent. The Federal Communications Commission (FCC) is tasked with enforcing this prohibition with per occurrence fines, and has established consumer complaint systems to address reports of violations.

“This general prohibition has two main exceptions: First, transactional, relationship messaging that is not intended for a marketing purpose is permitted. This means that a company having a pre-existing relationship with a consumer may send text/SMS messaging on things like account status. For example, a bank may send consumers a message because it detected a potential security breach in connection with the consumer’s account, but that bank may not send a message advertising its low interest rates on home loans.

“Second, non-commercial messages are permitted. This allows organizations involved in such things as political action and fundraising to target you by SMS/text messaging. This also permits emergency messaging by government agencies.

The hospitality industry is particularly vulnerable to ambiguities that arise when trying to discern the difference between permissible relationship messaging and impermissible commercial messaging. The reason for this vulnerability probably has a lot to do with the unique combination of goods and services that the hospitality industry provides. For instance, a hotel or restaurant guest likely can be informed on a one off basis that their room or table is available, but if that message includes information about the hotel’s spa services or the nightly specials at the restaurant, it could violate the TCPA,” says Adams.

HT: If a company uses a third-party service to do this type of communication, who is liable?  

“The TCPA makes it unlawful ‘to initiate’ certain telephone calls and text messages. The 2012 FCC declaratory ruling, In re Dish Network, 28 FCC Rcd. 6574 (2012), has been interpreted to establish that a person who does not physically initiate a telephone call, but rather relies on a third party to do so, may be held liable under the TCPA under the common law of agency," explains Adams. "Subsequent cases have applied the standard articulated in In re Dish Network to assess third-party liability under the TCPA to organizations that have relied upon a digital marketing company to send text/SMS messages for them. Therefore, it is not just unlawful to send the unwanted commercial text/SMS messages, it is also unlawful to have someone else acting on your behalf do it.

“Red Robin’s defense to this class action lawsuit rests within the existence and scope of the consent, if any, that its customers provided to the restaurant. Additionally, in the lawsuit, there have been problems alleged with Red Robin’s system for allowing guests to opt out of receiving messages. If those allegations are true, I would expect the restaurant to pursue contribution and/or indemnity from the service providers involved in administering that aspect of its marketing program,” notes Adams.