On May 7, 2013, the US District Court for the Central District of California granted final approval of Steven Madden, Ltd.’s settlement of a nationwide class action alleging that it violated the Telephone Consumer Protection Act (TCPA) by sending plaintiff and class members unsolicited text message (SMS) advertisements. The court-approved settlement includes the following key terms:
- Steve Madden will pay up to $10 million, with an initial funding of $5 million and then additional funding in $1 million increments as needed up to the $10 million cap.
- Class members include “all persons Nationwide who from July 2010, until the date of Preliminary Approval [i.e., September 25, 2012], were sent any Text Message(s) promoting Steve Madden products and events from short codes 91919 or 623336.”
- Each class member receives $150 from the Settlement Fund, unless the total claims and other withdrawals from the Fund would exceed $10 million, in which case the $150 is reduced proportionally.
- The class representative receives an incentive award of $10,000.
- The settlement agreement provided for $2.5 million of the Fund to be paid to the plaintiffs’ lawyers, but the court halved that amount to $1.25 million and allowed an additional $140,119.90 in costs, both to be paid from the Settlement Fund.
- Administrative expenses of over $450,000 will also be paid from the Fund.
- Finally, Steve Madden has agreed that, going forward, it will obtain consumers’ prior express consent, in writing, to receive its text messages; that any such written authorization will contain “clear and conspicuous” language concerning their consent to receive text messages; that Steve Madden will retain proof of such consent for four years after receipt; and that any third-party marketing company Steve Madden engages will also follow those terms.
So why is Steve Madden paying up to $10 million to settle claims surrounding a two-year SMS marketing campaign? Plaintiff alleged that Steve Madden sent unsolicited text messages promoting Madden’s “Mobile Club” to over two hundred thousand consumers’ mobile phones. The TCPA provides for statutory damages of $500 – or $1500 if the violation is proven to be willful or intentional – for each unsolicited call or text message. Thus, by plaintiff’s estimate, Steve Madden faced exposure in excess of $100 million – more than Steve Madden’s 2011 net income in all. In her motion for final approval of the class settlement, plaintiff acknowledged that such a result could be self-defeating: “Such a massive verdict would be wholly unobtainable: Madden would be forced out of business, and the Class would likely be left out to dry by the bankruptcy process.”
In its defense, Steve Madden argued that it thought it could defeat class certification because of the predominant, individualized question of whether each customer gave their consent to receive the SMS in question. It noted that Plaintiff – and other class members – voluntarily provided their phone numbers while visiting Steve Madden’s stores. Finally, it pointed to the fact that it did not transmit the messages itself, but rather hired MoGreet to do so. (On this issue of a seller’s vicarious liability for a third-party marketing company’s alleged TCPA violations, click here to see our alert on the FCC’s May 9, 2013 Declaratory Ruling.)
In the end, the parties – and the court – acknowledged that the courts are split on (1) whether merely providing your mobile number to a company, without more, constitutes your “prior express consent” under the TCPA to receive calls or text messages from them or their marketing company, and (2) whether a particular person’s intention when providing their number is an inherently individualized issue that makes class certification inappropriate as a matter of law. The court agreed that these were open questions in the Ninth Circuit, supporting the fairness of the class settlement.
This case highlights the importance of closely monitoring both how you acquire your customer’s phone number, what you tell them when you collect it, and how you and your marketing partners use that information. Given the TCPA’s (excessive) statutory damages, the relative lack of clarity from the FCC and courts to date, and the potential exposure from large-scale mobile-marketing campaigns, the plaintiffs’ bar is extremely active in pursuing these cases.