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E-Commerce News
Text Messages Violate Telephone Consumer Protection Act; E-Mail Excerpts Can't Constitute Contract
November 8, 2005
TEXT MESSAGES VIOLATE TELEPHONE CONSUMER PROTECTION ACT
When a marketer uses an automatic dialing system to send unsolicited text messages to cellular phone customers over the Internet does he violate the Telephone Consumer Protection Act ("TCPA")? The answer is "yes,” according to an Arizona state appeals court. The court also ruled that the TCPA could apply even if the CAN-SPAM Act also applied to the messages. The court also rejected the defendant's First Amendment challenge, finding hat the TCPA was a content-neutral regulation narrowly tailored to further a significant governmental interest.
In January 2001, the plaintiff answered his cell phone and twice discovered that he had received unrequested text message solicitations from the defendant, Acacia Mortgage, offering him low-interest rate mortgages (wow, an unsolicited ad for a low interest mortgage, what are the odds?). The defendant had programmed its computers to send the solicitations as electronic messages over the Internet to consumers' e-mail addresses. In the plaintiff's case, the computers generated the plaintiff's cell phone number, 602-XXX-XXXX, added his cell phone carrier's domain name, "att.net," and sent the messages to the e-mail address, 602XXXXXXX@att.net."
The plaintiff's carrier automatically converted the text of the messages into a format that could be transmitted to the plaintiff's cell phone number. In this way, the mortgage company took advantage of a service provided by the cell phone company called SMS, or short message service, which allows cell phone subscribers to send and receive text messages, known as SMS messages, on their cell phones.
The Arizona appeals court found that this practice 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." The system did indeed constitute a "call" placed by Acacia to the plaintiff, and did constitute an automatic dialing system of the type barred by the TCPA, even though the statute was passed before mainstream businesses contemplated using the Internet in this way.
The court noted that Congress designed the TCPA, which amended the Communications Act of 1934, "to deal with various telemarketing practices arising out of the telemarketing industry's use of sophisticated equipment, generically known as autodialers, to generate millions of automated telephone calls to residential and business telephone subscribers." Congress, however, created some confusion with the TCPA (again, what are the odds?) because the act did not define "call." The mortgage company argued that the TCPA only regulated ordinary telephone calls that presented the potential for two-way real time voice "intercommunication" that allows two people to speak to each other in real time, as though they were face-to-face. The court, however, rejected this argument, noting that "Congress used the word call to refer to an attempt to communicate by telephone." The language of the TCPA was expansive, the court found, as it referred to "any call ... using an automatic telephone dialing system ... to any telephone number assigned to a ... cellular telephone service."
Accordingly, the court said, sending an e-mail to an e-mail address was an attempt to communicate by telephone and constituted a call under TCPA even if the attempted communication did not present the potential for two-way real time voice intercommunications. The court found that whether a text message was sent phone-to-phone, or Internet-to-phone, it achieved the same result. The recipient's cellular telephone carrier forwarded what is an SMS message to the recipient's cellular telephone, and this did not constitute, as the defendant claimed, merely sending an e-mail to an e-mail address. The court agreed with the trial court's observation that the defendant "initiated a demand" to make a connection for the purpose of delivering a message by telephone to encourage the purchase of services. In doing so, the defendant attempted to communicate by telephone. "Under the TCPA, Acacia called Joffe," the court wrote.
Although the technology used to deliver the SMS messages to the plaintiff's cellular telephone may not have existed in 1991 when the TCPA was enacted, the wording of the statute was not limited to 1991 technology, the court decided. Congress prohibited calls made using "any automatic telephone dialing system." The Federal Communications Commission agreed with this conclusion in 2002, the court said.
Even though the court found that the mortgage company "called" the plaintiff, it concluded that nothing in the CAN-SPAM Act, passed 12 years after the TCPA, barred the applicability of the TCPA. Instead, the court found that the CAN-SPAM Act explicitly allowed both acts to apply.
The CAN-SPAM Act specifically barred unsolicited "mobile service commercial messages," or MSCMs, which are e-mail messages sent directly to wireless devices. The court referred to an FCC finding that MSCMs should "include any commercial electronic mail message as long as it is sent or delivered to an address that includes a reference to an Internet domain." But the court found "notably absent" from the FCC's order implementing the CAN-SPAM rules, any statement or suggestion that the language of the TCPA was not sufficiently broad to apply to Internet-to-phone SMS calls. And, application of the TCPA to Internet-to-phone messages did not render the CAN-SPAM Act superfluous, the court ruled, because the TCPA applied only to those calls placed using an automated dialing system or an artificial or prerecorded voice.
Finally, the court found that the TCPA did not violate the First Amendment to the United States' Constitution. According to the court, the TCPA created a content-neutral time, place and manner restriction on speech, which served a significant government interest in protecting the privacy of the home from unwarranted and unrequested intrusions, and was narrowly tailored to serve that interest. The court observed that cell phones have permeated American life, replacing traditional land-line phones in many places, and many people keep their cell phones with them at all times. The TCPA serves a significant government interest, the court held, by protecting the privacy of cellular telephone subscribers from automated calls.
Most consumers would agree that any law that limits the number of unsolicited ads for low interest loans, Viagra or male enhancements is a good thing.
E-MAIL EXCERPTS CAN'T CONSTITUTE CONTRACT
A United States Appellate Court has ruled recently that an e-mail from one party to another summarizing the status of negotiations over a complex agreement is not a binding contract because tentative agreement on some terms does not create separate contracts for those terms alone. According to the court, adopting a rule that recognizes a contract when only some terms have been agreed upon is "far too risky."
The stakes in the case were high. PFT Roberson Inc., a freight hauler, for several months, had negotiated with Volvo Trucks North America Inc. over a fleet services agreement. Although the parties never signed a formal agreement, Roberson accused Volvo of breach of contract. It argued that a 572-word e-mail from Volvo constituted a contract. The e-mail, captioned "Confirmation of our conversation," identified various contract terms the parties had agreed upon thus far and others that still required attention. Roberson convinced a jury, which found that the e-mail amounted to a contract and awarded Roberson $5 million in damages for Volvo's breach.
The U.S. Appellate Court for the Seventh Circuit reversed. According to the appellate court, the e-mail was merely an intermediate step on the way to a contract. Each of the supposedly agreed-upon terms implicated other documents and clauses that had not yet been finalized. Also, the wording of the e-mail was not framed as an offer to which Roberson could reply "I accept."
The court was troubled particularly by the idea that portions of the e-mail could be deemed stand alone contracts, in the absence of an overall agreement. "If any sign of agreement on any issue exposed the parties to a risk that a judge would deem the first-resolved items to be stand-alone contracts, the process of negotiation would be more cumbersome (the parties would have to hedge every sentence with cautionary legalese), and these extra negotiating expenses would raise the effective price," said Judge Frank Easterbrook. "Parties may negotiate toward a closing deal without the risk that a jury will think that some intermediate document is a contract."
The issue here wasn't whether e-mail could reflect a deal, the question was whether an enforceable deal even existed.
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This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.