The Law and Business of Social Media
September 06, 2012 - Litigation

G2G, Yo Quiero TB: Taco Bell Found Not Liable for Franchisee Text Message Campaign

Plaintiffs’ attorneys seeking to cash in on grande class action lawsuits against companies that launch text message advertising campaigns suffered a setback in June as the U.S. District Court in the Southern District of California granted Taco Bell summary judgment in a lawsuit for Taco Bell’s alleged violation of the Telephone Consumer Protection Act (TCPA). The case, Thomas v. Taco Bell, was brought on behalf of a number of the 17,000 mobile phone owners in the Chicago area who received a text message in October 2005 encouraging them to purchase an order of delicious Nachos Bellgrande from their local Taco Bell franchises.  As unsolicited text message advertisements are often found to violate the TCPA, there may have been a case against the marketing company that actually sent the text messages, but the plaintiffs instead asserted their claim against the local Chicago franchisee association that ordered the advertisement and Taco Bell itself.  The case against the association was dropped for a lack of personal jurisdiction, while the court granted summary judgment to Taco Bell based on a finding that Taco Bell was not vicariously liable for the franchisee association’s texting campaign.

Using precedent from the Ninth Circuit, the court stated that vicarious liability for the text message campaign would have existed only if Taco Bell controlled the “manner and means” of the text message campaign.  Although the franchisee association did need to secure Taco Bell’s approval in order to receive reimbursement from Taco Bell for the campaign, the court held that control of the “purse strings” in this case did not constitute Taco Bell’s control of the manner and means of the advertising, particularly because the franchisee association could have launched the campaign with alternative funding without Taco Bell’s permission or any repercussions from the franchisor.  The court also rejected the plaintiffs’ argument that Taco Bell having one member on the franchisee association’s board (out of four) established control, as this minority interest was not controlling, and further stressed that approval by a company of an advertising campaign is not the same as the control required for liability.

This decision allows a little more breathing room for large franchisor companies, as it suggests that a franchisor-franchisee relationship does not automatically lead to vicarious liability for violations of the TCPA, which can carry penalties of up to $500 for each violation (a vast increase in cost over the usual five or so cents per text).  However, since the Ninth Circuit declared in Scatterfield v. Simon & Schuster, Inc. that text messages are tantamount to phone calls for the purposes of the TCPA, plaintiffs’ attorneys have been relentless in their attacks on companies that employ text message ad campaigns (as we previously pointed out in this blog, hockey fans are now suing their own beloved team for text-related TCPA violations).  In fact, the Thomas summary judgment was Taco Bell’s second favorable TCPA decision in a month, with a California District Court dismissing a claim that Taco Bell’s confirmatory opt-out messages violated the TCPA just one week earlier.  Despite these two victories for Taco Bell, with hundreds of companies launching thousands of advertising campaigns and promotions leading to the sending of millions of text messages, it seems unlikely that plaintiffs will have a shortage of TCPA claims any time soon.