A Washington State District Court has denied Robinhood Financial LLC’s (“Robinhood”) motion to dismiss a class action text lawsuit. Robinhood, a cellphone-based brokerage application, became a household name in early 2021, as a result of the small retail investor movement. One method that Robinhood uses to acquire new users is by encouraging existing users to market for them, providing free shares of stock in return for new user referrals. As we understand the process, when a user decides to invite a contact, Robinhood will generate a ready-to-send text message with a unique referral link. A recent court decision establishes that, at least under Washington’s Commercial Electronic Mail Act (“CEMA”), recipients of these pre-composed text messages may have cause to file commercial message marketing text lawsuits against the sender.
The Lawsuit Between Moore and Robinhood
On March 14, 2018, Mr. Cooper Moore received a text message from a contact inviting him to download the Robinhood app. The text message contained a unique sign-up link and stated: “Join Robinhood and we’ll both get a stock like Apple, Ford, or Sprint for free. Make sure you use my link.” Under CEMA, “[n]o person conducting business in the state may initiate or assist in the transmission of an electronic commercial text message to a telephone number assigned” to a Washington State resident’s cell phone. Moore alleged that Robinhood’s generation of the subject text message constituted assistance sufficient for a finding of liability under CEMA. In response, Robinhood filed a motion to dismiss the action arguing, among other things, that its involvement in the sending of the allegedly violative text was nominal. After deliberation, the Court ruled in Moore’s favor, denying the motion to dismiss, thereby keeping the text lawsuit alive.
Why is this Text Lawsuit Different?
Typically, we see this type of consumer privacy claim brought federally under the Telephone Consumer Protection Act (“TCPA”). A major consideration in most TCPA lawsuits is whether or not an automatic telephone dialing system (“ATDS”) was employed. Under Washington’s CEMA, however, the use of an ATDS is not required for a viable text lawsuit to proceed. In this case, Moore does not allege that Robinhood employed an ATDS in the sending of the subject text message. Hence, two lawsuits involving the Robinhood referral texts either originated or were transferred to a State District Court in Washington. What matters under CEMA is whether the defendant initiated or assisted in the transmission of an unsolicited commercial text message.
Why Does the Pursuit of Robinhood Matter to Your Business?
Much has been written about the TCPA landscape post Facebook v. Duguid. In that decision, the United States Supreme Court narrowed the interpretation of what technology meets the definition of an ATDS under the TCPA. However, advertisers that conduct business nationwide still have to worry about jurisdictions like Washington where employing an ATDS is not necessarily part of the equation. Robinhood seems to have attempted to skirt ATDS liability by having its users do the advertising for them. However, as demonstrated in Moore, it is not that difficult for a plaintiff to bring a company to court in a jurisdiction where employing an ATDS is not even at issue. As we have repeatedly warned in this blog, businesses need to protect themselves from the ever-changing legal landscape and jurisdictional wrinkles that continue to define the telemarketing litigation field.
If you require assistance with telemarketing compliance or related litigation defense, please email us at info@kleinmoynihan.com or call us at (212) 246-0900.
The material contained herein is provided for information purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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