Inadequate consumer opt-in language could cost Simon & Schuster $100 million in class-action damages for text-message advertising campaign

by Dell C. "D. C." Toedt III on 2009-07-10

Here’s an object lesson about the importance of double-checking the consumer opt-in language before committing to a big spam-type marketing campaign.

Simon & Schuster hired a marketing firm to send out text-message advertisements for a Steven King horror novel. A subscriber received one of these text-message ads on her cell phone. She sued in federal district court for violation of the Telephone Consumer Protection Act (TCPA), seeking class-action status.

Simon & Schuster offered several defenses. One was that the subscriber had supposedly consented to receive advertisements by checking an opt-in box when she signed up for a free ring tone. (The TCPA provides an exemption in such cases.) The trial court dismissed the case on that ground (and others).

But it turned out S&S wasn’t out of the woods.

The Ninth Circuit appeals court overruled the trial court. It said that the opt-in language was not broad enough: the language gave consent only to receiving ads from the cell-phone carrier, Nextel, and its affiliates. The appellate court said that Simon & Schuster was not a Nextel affiliate in any sense of the word; it did not even have a direct contractual relationship with Nextel, let alone the kind of control relationship usually necessary.

Oops.

FOOTNOTE: See the Definition clauses – general section of the FirstDrafter library for definitions of ‘affiliate.’

The plaintiff hasn’t won yet, because there are still more facts that have to be determined first. According to one commentator, though, Simon & Schuster could be looking at a class-action damage award of as much as $100 million. They’d have to sell a lot of Steven King novels to pay for that. (I’m betting on a settlement.)