Although a federal court judge determined that the system used by a Telephone Consumer Protection Act defendant was not an automatic telephone dialing system for purposes of liability under the statute, the court said the plaintiff was entitled to damages for his claim under state law.

In 2012, Torrey Gragg called Orange Cab Company to request a ride. He completed his ride and the next day received a text from the company stating: "Taxi #850 dispatched @ 5:20. Smart phone? Book our cabs with Taxi Magic - #1 FREE taxi booking app." Gragg filed a putative class action suit alleging violations of the TCPA, as well as Washington's Commercial Electronic Mail Act (CEMA) and Consumer Protection Act (CPA).

Last year, Orange Cab successfully convinced U.S. District Court Judge Robert S. Lasnik that the system used by the company to send text messages to customers did not constitute an automated telephone dialing system (ATDS) under the TCPA. The system had the potential to store, produce, or call randomly or sequentially generated numbers, the court acknowledged, but lacked the present capacity to do so. The judge granted summary judgment to Orange Cab on the TCPA claim.

Gragg pushed forward on his state law claims, however, and moved for summary judgment on the grounds that the text he received was a "commercial electronic text message" under CEMA that entitled him to at least statutory damages of $500 per violation. This time, Judge Lasnik agreed with the plaintiff.

CEMA precludes the transmission of an electronic commercial text messages to a telephone number assigned to a Washington resident for cellular service. "Commercial" is defined as a message "sent to promote real property, goods, or services for sale or lease."

The text message was intended to perform two functions, the court said: to notify the customer that the requested cab had been dispatched (a customer service function) and to promote the use of the Taxi Magic app to make future bookings (a marketing function).

"Messages that serve both customer service and marketing purposes (such as calls from mortgage brokers notifying customers that interest rates had fallen) are 'sent to promote real property, goods, or services for sale or lease,'" the court said. Neither the statute nor the regulations require an explicit mention of a good, product, or service.

While customers clearly have an interest in being apprised of the status of their orders—or the dispatch of their cabs—adding a marketing message moved the text into the realm of liability. "If the dispatch notification were unencumbered by the marketing message for Taxi Magic, it would not have been a 'commercial electronic text message' under CEMA," Judge Lasnik wrote.

Having determined the text message violated the state statute, the court then considered whether damages were appropriate. CEMA did not create a private right of action for consumers with regard to text messages. A 2005 amendment adding a prohibition against phishing did establish a private right of action for that category of unlawful activity, leading the court to conclude that the legislature knew how to create such a right and declined to do so for text messages.

However, the court said that the plaintiff could enforce a violation of CEMA under the CPA, which permits recovery in a civil action for the greater of $500 or actual damages.

To read the order in Gragg v. Orange Cab Company, click here.

Why it matters: The case provides an important reminder for TCPA defendants that even with a victory on the federal statute, liability may remain under state law. In the Gragg case, Orange Cab successfully argued that its system did not constitute an ATDS but could not overcome the threshold for liability under Washington's CEMA, leaving the company on the hook for damages.