Advertising Law Blog

In Johnson v. Yahoo!, Inc., decided on January 4, 2016 in the Northern District of Illinois, a class of about half a million people was certified in Telephone Consumer Protection Act (TCPA) litigation against Yahoo for sending a welcoming text message, allegedly without consent.

Yahoo’s Messenger service allows registered users to send online messages to others. The main part of the claim concerns the portion of this service called Mobile SMS Messenger Service, or PC2SMS, a feature which converted the online message into a text message that was sent to a recipient’s cell phone number.

Yahoo configured the PC2SMS system so that the first time a given cell phone number received a text message from the system, the number was also sent a text message stating: “A Yahoo! user has sent you a message. Reply to that SMS to respond. Reply INFO to this SMS for help or go to yahoo.it/imsms.” The plaintiffs contend Yahoo’s text message violated the TCPA.

Yahoo’s defense is that the plaintiffs consented to receive the texts when they agreed to Yahoo’s universal terms of service.  One of the plaintiffs (a T-Mobile user named Calderin) clearly agreed to Yahoo’s terms of service, and Judge Manish Shah found that her claims were therefore not typical of her proposed class.  Consequently, Judge Shah declined to certify Ms. Calderin’s proposed class consisting of T-Mobile customers who received a welcome text from Yahoo.

But the other proposed lead plaintiff (a Sprint user named Johnson) never agreed to Yahoo’s terms of service. Yahoo apparently obtained Ms. Johnson’s cell phone number indirectly.  Judge Shah agreed with Ms. Johnson’s portion of the certification motion and therefore certified a class of Sprint customers who received the welcome text from Yahoo.  Specifically, the following class was certified: “All persons within the United States to whose cellular telephone number Yahoo sent the Welcome Message during the period commencing March 1, 2013 through March 31, 2013, while such cellular number was assigned to Sprint, and whose cellular telephone number is not associated with a Yahoo user in Yahoo’s records.”

The court summed up its reasoning as follows: “I find class treatment to be the superior way to proceed in this case. [However,] there is a prospect that significant management difficulties could arise as the case moves forward. If plaintiff and her counsel cannot provide a manageable, cost-effective plan for identifying and communicating with the class, and resolving issues of consent, then decertification may follow. But without more concrete evidentiary support, defendant’s fears are not sufficient to defeat class certification.”

The January 4th ruling did not decide the ultimate question of liability, namely whether the TCPA was violated. And all may not be lost for Yahoo on this point, because Judge Shah’s opinion contained some encouraging dicta to the effect that consent can be found through the act of supplying your telephone number to Yahoo. The court wrote, “giving one’s number[…]  still constitutes prior express consent. […] The TCPA does not require a consenter to specify that an automatic telephone dialing system may be used. I agree with this majority interpretation.”

Rather, the ruling was a decision on a motion for class certification, meaning that the Court agreed to make one ruling that governs the claims of everyone in the now-certified class. With a $500-per-text penalty and 500,000 class members, the certification  of a class makes proceeding to a ruling on the merits a high-risk proposition, even for deep-pocketed corporations. Yahoo argued that the $500-per-text penalty for 500,000 class members would be financially ruinous. The court was unmoved, replying that “complaints of disproportionality are better taken up with Congress.”

Takeaway: While reaching consumers by automatically generated text messages can be helpful to many companies, the TCPA also makes it a potentially disastrous path to take if the companies cannot be sure the consumers have consented to be contacted in that manner. Look for Yahoo to enter into an eight-figure settlement to rid itself of a potential nine-figure judgment.