Cannabis companies are increasingly the targets of putative class action lawsuits brought under the Telephone Consumer Protection Act (TCPA). Dozens of lawsuits alleging TCPA violations have been filed against cannabis industry participants, including marketers, and lawsuits continue to be filed at a steady rate. August alone saw a TCPA lawsuit filed against an industry giant, as well as a notable federal decision regarding a cannabis marketer’s request to stay a TCPA lawsuit against it.
On August 12, 2020, a consumer filed a TCPA case in the Southern District of New York against Curaleaf Inc., which markets itself as the “world’s largest cannabis company by revenue and the most diversified vertically integrated cannabis company in the United States.” The plaintiff alleges that, among other things, Curaleaf “bombard[s] consumers’ mobile phones with non-emergency advertising and marketing text messages without prior express written consent.” Brooks v. Curaleaf, Inc., Case No. 20-cv-6323 (S.D.N.Y., August 12, 2020). A week before the lawsuit against Curaleaf was filed, Native Hemp, a Missouri-based CBD company was also sued for alleged TCPA violations in Vermont federal court. Baker v. Native Hemp Co., Case No. 20-cv-115 (D. Vt., August 7, 2020). Plaintiffs accuse Native Hemp of sending unsolicited text messages through an autodialer.
These are just recent examples of escalating TCPA class action activity targeting cannabis industry participants. See also Abbink. v. Good Chemistry I, LLC, Case No. 20-cv-00871 (D. Colo., March 31, 2020); Camacho v. Hydroponics Inc., Case No. 20-cv-00980 (C.D. Cal., May 6, 2020); Duboise v. Infinite Bloom LLC, Case No. 20-cv-01073 (D. Ariz., June 2, 2020); Rohrer v. Phenos Collective Inc., Case No. 20-cv-00392 (E.D. Cal., May 29, 2020); Klitzner v. WherezHemp LLC, Case No. 20-cv-00926 (S.D. Cal., May 18, 2020); Jackson v. Euphoria Wellness LLC, Case No. 20-cv-03297 (N.D. Cal., May 15, 2020); Dewoskin v. Desert Lake Group, LLC, Case No. 20-cv-00806 (N.D. Ga. February 21, 2020) (Desert Lake Group dismissed on August 6, 2020).
As discussed recently on this blog, the TCPA has garnered the attention of the United States Supreme Court. A cannabis-industry case in the Ninth Circuit provides a look into whether courts may or may not stay TCPA litigations in light of an expected U.S. Supreme Court decision in the next year or so on the use of autodialing equipment in the matter Facebook Inc. v. Duguid. The Duguid matter could decide how the TCPA defines an “automated telephone dialing system,” and thus whether calls made with such equipment are prohibited. This is of particular importance to cannabis businesses using automated technology to engage with consumers.
On August 11, 2020, the Northern District of California rejected a motion to stay the class action pending a ruling in Duguid, which was filed by Baker Technologies’ (a Customer Relationship Management (CRM) and text platform utilized by cannabis industry businesses). See Komaiko v. Baker Techs., Case No. 19-cv-3795 (N.D. Cal. Aug. 11, 2020). The Court held that Baker Technologies had not provided evidence about what type of autodialing equipment it utilizes, and the Court could not determine what impact the Duguid case would have on the instant case. Accordingly, the Court left the door open for a potential stay if Baker Technologies offers evidence that its software does not have the capacity to perform as an autodialer. This could be a key argument to be made in other TCPA class action lawsuits where defendants could seek a stay of an action pending a decision in Duguid.
Given this proliferation of TCPA lawsuit filings, the cannabis industry should take note that it is a target for TCPA plaintiffs’ attorneys. As businesses continue to grow and combine, they must not overlook legal restrictions on communicating with consumers. Cannabis companies and other cannabis industry participants should carefully review any applicable internal terms & conditions that apply to the manner in which they engage with customers and how they obtain any contact information and also should assess their compliance and risk mitigation policies and practices to avoid becoming targets for TCPA litigation.
Generally speaking, TCPA litigation concerns allegations of one or more of the following statutory violations: (1) automated calls or text messages made without the required prior consent of the recipient; (2) calls or text messages to telephone numbers registered on the Federal do not call list; (3) calls or text messages to consumers who have specifically requested that the company stop calling or texting; and (4) failure of the company engaging in calls or text messages to implement and maintain the required procedures. Penalties can range between $500 to $1500 per each individual call or text in violation of the statute.
In general, businesses should seek to avoid TCPA liability by doing the following:
Cannabis industry businesses communicating with consumers and potential consumers should consult with in-house counsel or outside counsel on best practices and procedures to prevent potential exposure and liability under the TCPA.