Jiffy Lube Offers $47 Million to Settle Text Message Spamming Class Action

Recently Ed Brooks of vAuto tweeted about a proposed offer by a Jiffy Lube franchisee to settle a class action lawsuit for 47 million dollars.  When I see a settlement offer like that pop up in my Twitter feed, I ask some questions.  Like what did the Jiffy Lube franchisee (Heartland Automotive Services, Inc. or hereinafter “Heartland”) allegedly do wrong and what lead to such a large settlement offer to make this case go away?  I have to preface this discussion by saying that, at the time of publication of this post, the Federal District Court hearing the case had not approved Heartland’s settlement offer.  I’m not going to get into the “sausage making” of the Federal Rules of Civil Procedure and class action lawsuits.  For our purposes, what triggered the plaintiffs’ complaint and what we can learn from that is a more important discussion for members of the automotive profession.

Heartland contracted with a vendor (“TextMarks“) to solicit customers via text messages sent to their mobile devices.  Normally, the advertiser will try to entice consumers into sending a text message, containing a “GoCode” to a certain number.  After consumers do this, they are offered an opportunity to opt-in to receive  future promotional communication via text messaging.  Consumers are also instructed that in order to stop receiving these messages, they have to send a text message containing a short message like “STOP” or “END.”  So what went wrong?

TextMarks allegedly skipped a crucial step when it sent unsolicited text messages to 2.3 million mobile phone numbers.  If the ratio of mobile phones that received the message to people is 1:1, that means as many people received these messages that live in Dallas and San Jose.  Individuals who received these messages brought a lawsuit against Heartland and TextMarks, alleging the transmission of these text messages violated the Telephone Consumer Protection Act (or “TCPA”).  TCPA prohibits businesses from using an automated dialing system to contact mobile phone users without their consent.  While TCPA does not expressly address text messaging, several courts have interpreted TCPA to encompass text messages sent in a similar fashion (i.e. by some type of automated system).  TCPA affords statutory damages for willful or intentional damages ranging from $500-$1500 per incident.  In Heartland’s case, this means potential liability of over one billion dollars (with a B) assuming $500 per violation.  In that light, 47 million dollars doesn’t seem so bad at all.  While the complete terms of the settlement have not been published, it appears that Heartland will offer 47 million dollars worth of services to plaintiffs in the class action along with reimbursement of the plaintiffs’ attorney’s fees.

So, what can we learn from Heartland’s misfortune?  As my Commercial Law professor at UVA was fond of saying, “it may not be your fault, but it’s certainly your problem.”  It wasn’t Heartland’s fault that TextMarks allegedly made this mistake.  Because of the relationship between TextMarks and Heartland and the nature of the alleged TCPA violation, TextMark’s fault is now Heartland’s problem.  So, go through your vendor agreements with a fine-tooth comb (assuming you don’t do so already) and have an attorney look at the indemnification provisions.  Do what you can to avoid problems by drafting an agreement that protects you from the start.  And if you don’t have them yet, now is a good time to put in some processes at your dealership that address text message communication between your employees and consumers.  As more and more consumers embrace feature-rich mobile phones and smartphones as an integral communication tool, you can expect to see more and more lawsuits relating to these kinds of messages.

Photo:  by dogfaceboy (via Flickr)

Additional sources used for this post:

TextMarks Responsible for Largest Proposed SMS Spam Settlement of $47M

Jiffy Lube Agrees to Settle Text Spam Lawsuit for $47 Million

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