United States: Perspective: Will More Courts Frown on SMS Ads?

Originally published October 19, 2005
Reprinted with permission from CNET News

SMS messaging has grown in popularity as a marketing tool, but a recent court ruling could mark the beginning of its end.

In the case of Joffe v. Acacia Mortgage, the Arizona Court of Appeals ruled last month (view PDF) that cellular SMS (short message service) messages fall under the purview of the Telephone Consumer Protection Act of 1991.

While arguments were made against this interpretation of the TCPA, there could be a real effect on companies that seek to send SMS messages if other courts adopt this approach.

No doubt, this fight is not over. Efforts will be made to convince courts to construe the TCPA differently.

In early 2001, Rodney Joffe received two uninvited text message solicitations on his cell phone from Acacia Mortgage. These messages were part of a marketing campaign to advertise low-interest home mortgages. Acacia had programmed its computers to send the solicitations as e-mails to consumer e-mail addresses.

No doubt, this fight is not over. When the e-mails reached Joffe's cellular carrier's domain, they automatically were converted into a format that could be transmitted to his cell phone number. Acacia was able to utilize the SMS service provided to Joffe by his cellular carrier. SMS permits cellular subscribers to send and receive text messages on their cell phones.

Joffe sued, arguing that Acacia had violated the TCPA's prohibition on using "any automatic dialing system" to make "any call" to "any telephone number assigned to a...cellular telephone service."

Acacia sought dismissal of Joffe's case, principally asserting that the TCPA was directed at telephone calls that involve two-way communications, and not to the sending of text messages. The trial court ruled in favor of Joffe, and Acacia appealed.

The Court of Appeals determined that it needed to resolve two major issues: first, whether Acacia actually "called" Joffe; and second, whether Acacia used an "automatic dialing system" in so doing. The Court of Appeals ultimately concluded that Acacia did call Joffe using such a system, and thus ruled that the trial court properly found liability under the TCPA.

In coming to its conclusion, the Court of Appeals acknowledged that the TCPA does not define the word "call," and noted Acacia's argument that for there to be a call, there must be the potential for a two-way, real-time voice intercommunication.

Still, the legislative history indicates that the TCPA was intended to address telemarketing practices emanating from the use of autodialers to generate millions of automated telephone calls. Moreover, the TCPA does not expressly limit the notion of a call to a two-way, real time voice intercommunication. That's why the Court of Appeals ruled that the TCPA was designed to regulate any attempt to make a call.

Indeed, according to the Court of Appeals, "it is the act of making a call, that is, of attempting to communicate to a cellular telephone number using certain equipment, that the TCPA prohibits," and "whether the call had the potential for a two-way real-time voice communication is irrelevant."

The Court of Appeals next considered whether Acacia used an "automatic dialing system" for making the calls. In this context, Acacia argued that it simply sent e-mails to e-mail addresses, and thus its conduct is not governed by the TCPA. However, the Court of Appeals found that whether a text message is sent Internet-to-phone or phone-to-phone, "the end result is the same," as "the recipient’s cellular telephone carrier forwards what is an SMS message to the recipient's cellular telephone." And here, according to the Court of Appeals, "Acacia co-opted the SMS service offered by Joffe’s carrier to deliver the SMS text messages to Joffe by telephone." And, in terms of the automatic nature of the system, Acacia did not dispute that its computers randomly or sequentially produced telephone numbers.

In rounding out its decision, the Court of Appeals held, contrary to Acacia’s argument, that the Can-Spam Act of 2003, which was enacted to protect consumers from unsolicited commercial e-mails, did not preempt the applicability of the TCPA in this arena. It noted that "Congress contemplated that the Can-Spam Act and the TCPA could have dual applicability."

SMS messaging is an emerging and growing tool for marketing. The TCPA was enacted long before SMS messaging was on the radar screen, so Congress did not explicitly consider whether such messaging constituted "calls" or whether systems used for such calls were "automatic dialing systems" under the statute.

With the Joffe case, one state appellate court has weighed in. There likely will be further fights in other jurisdictions, and time will tell how the legal rules of the game will be defined. In the meantime, fasten your seatbelts.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, among the 100 largest law firms in the United States, is a full-service firm of more than 600 lawyers. In addition to legal services, Duane Morris has independent affiliates employing approximately 100 professionals engaged in other disciplines. With offices in major markets, and as part of an international network of independent law firms, Duane Morris represents clients across the nation and around the world.