December 7, 2021

Volume XI, Number 341

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December 06, 2021

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STEALING FROM THE POOR?: Robinhood Financial Faces Robotext Class Action For Encouraging its Users to Text Their Friends–and it Highlights Additional State Risk

Wanted to highlight this extremely interesting new complaint I picked up today.

Robinhood Financial–which apparently operates some sort of self-serve online brokerage the kids are using these days– has been hit with a new class action under Washington’s version of the TCPA arising out of texts being sent by users of their app using their smartphones.

Apparently the Robinhood folks have devised a clever plan to market their product via text message. But to get around the messy TCPA thing, they have enlisted their myriad users as minions to spread their message.

According to the complaint filed by shoulda-been-ballplayer-given-his-name Cooper Moore–available here Moore complaint— Robinhood has a referral program where users of the brokerage can make some money if they encourage other people to sign up for it. To make it easier for users to provide such “encouragement” Robinhood has installed a nifty spam text blasting functionality into its app that prepopulates marketing fluff into an SMS and sends it to all contacts selected by a user.

Since people love receiving marketing texts from their friends–the theory goes–they’ll promptly sign up for a new Robinhood account, resulting in the sender of the texts netting a tasty referral fee.

In reality, of course, the (now former) friends receiving these messages don’t like them one bit–they’re essentially cold call marketing solicitations via text message–and some of them want to sue for it.

But who to sue? And for what?

Obviously it would be great for the Plaintiff to sue Robinhood since it has the money to spare–there’s a “stealing from the rich” joke here somewhere but I can’t seem to find it–but Robinhood didn’t send the text.

Or did it?

The FCC issued a ruling a while back addressing the circumstances under which an app manufacturer is responsible for the messages sent by users of the app encouraging the app to proliferate. The general bright line rule is that where a user is choosing who to send invites to the user is the sender of the message–not the app manufacturer.

But there’s a second line of case law that runs counter to this bright line proposition–specifically where a platform entangles itself with a user’s business by encouraging the use of the platform to send otherwise illegal messages, the platform can find itself liable for the messages.

Presumably–if the allegations are true–Robinhood is relying on the old YouMail ruling from the FCC to argue it was the end user solely that sent the message. And presumably Plaintiff is relying on the “other” line of cases I was referring to to sustain a claim.

It will be interesting to see how the “initiator” of the call battle plays out–both sides have pretty good arguments and I wonder whether a court will allow a seller of a product to crowd source mass texting using a referral fee scheme. (It doesn’t hurt Plaintiff’s chances that Washington state law recognizes liability for companies that   “assist the transmission” of illegal texts!)

But there’s a second MASSIVE piece to this case. Notice that it was brought under Washignton’s STATE enactment barring text messages–not under the TCPA. Presumably this is because the end user’s cell phones are not ATDS under Facebook. 

But under Washington state law the use of an ATDS is not required. Instead: “[n]o person conducting business in the state may initiate or assist in the transmission of an electronic commercial text message to a [cell phone in Washington.” And an “electronic commercial text message” is defined as “means an electronic text message sent to promote real property, goods, or services for sale or lease.”

Hmmm….

Washington state law may end up being just as dangerous as Florida when it comes to text messages if this theory holds water. (Good thing I’m licensed to practice law up there.)

We’ll keep an eye on this one and see where it goes.

Update: So I did a little research because I was curious and apparently this Cooper suit is a copycat suit. Robinhood was previously sued by a guy named Isaac Gordon on a similar theory. The suit survived a motion to dismiss and was later certified! 

© Copyright 2021 Squire Patton Boggs (US) LLPNational Law Review, Volume XI, Number 326
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About this Author

Eric Troutman Class Action Attorney
Of Counsel

Eric Troutman is one of the country’s prominent class action defense lawyers and is nationally recognized in Telephone Consumer Protection Act (TCPA) litigation and compliance. He has served as lead defense counsel in more than 70 national TCPA class actions and has litigated nearly a thousand individual TCPA cases in his role as national strategic litigation counsel for major banks and finance companies. He also helps industry participants build TCPA-compliant processes, policies, and systems.

Eric has built a national litigation practice based upon deep experience, rigorous...

213-689-6510
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