Washington state’s Consumer Electronic Mail Act (“CEMA”), a statute enacted back in 2003 prohibits companies conducting business in Washington state from sending or providing “substantial assistance or support” in the transmission of commercial text messages to Washington residents absent their clear and affirmative consent. Notably, CEMA fails to explain what exactly constitutes “substantial.” Given that the TCPA only applies to the “initiator” or “maker” of the call, CEMA’s scope is considerably broader, and has become a recent vehicle for claims by class action plaintiffs that would otherwise be barred under the TCPA.

In particular, “refer-a-friend” programs, which companies often use to encourage their existing customers to send text messages promoting the company in exchange for rewards, are increasingly the subject of class action lawsuits brought under CEMA. Specifically, this year, class action lawsuits alleging CEMA violations have been initiated against Block, Inc. (“Block”), a parent company of Cash App, and Capital One. In both of these cases, judges have not granted a motion to dismiss and allowed litigation to proceed.

Block

In Block, the Court concluded that Plaintiff had alleged sufficient facts to support a plausible claim for relief under CEMA, and therefore allowed the case to proceed. Block, which offers electronic financial services through Cash App, established a marketing campaign called “Invite Friends.” Through that campaign, Cash App users can refer their contacts to Cash App. Once the referred individual signs up for Cash App and makes a qualifying payment, both the user and the contact will receive $5. Through the Cash App mobile app, users can click the “Invite Friends” button, which redirects them to a page where they can select individuals to send the “Invite Friends” text to. The app ultimately generates a pre-composed text message, which can be altered, to the contact soliciting the contact to use the Cash App’s service and containing a hyperlink to create a Cash App account.

In allowing the case to move forward, the Court found that Block (1) established the Cash App and referral program, (2) created the software that allowed users to select contacts to send the referral to, and (3) created a pre-composed message that users could use. The application could also access users’ messaging applications. The Court determined that such a process creates easy steps for users to follow in order for the referral message to be sent. The Court also noted that Block conducted business in the state and assisted Cash App users in the transmission of commercial text messages.

Robinhood

Just in July, Robinhood Financial LLC (“Robinhood”) settled a CEMA case regarding its refer-a-friend marketing program for $9 million. Plaintiffs in that case alleged that Robinhood as part of its refer-a-friend program violated CEMA by “substantially assisting” its users in the commercial electronic transmission of unsolicited commercial text messages to prospective customers, who were Washington state recipients. Specifically, in the order denying Robinhood’s motion to dismiss, the Court noted that through its refer-a-friend program, Robinhood developed and ordered the entire “chain of events” leading to the messages’ formulation and transmission. The Court pointed out that the Robinhood app (1) prompts users to refer contacts with the promise of free stocks, (2) pre-composes the messages, and (3) automatically generates the messages within the users’ cell phone in such a way that it enables them to be sent by the users with as few as four total clicks. The Court also noted that the messages more closely resemble Robinhood advertisements than messages from friends. Notably, the court highlighted that even if users have full control over the final messages, content, and timing—which would be important for a TCPA analysis on whether the company “initiated the messages—the only thing that needs to be proved for CEMA purposes is whether Robinhood provided “substantial assistance or support” to its users in formulating, composing, sending, originating, initiating, or transmitting such messages.

Capital One

While the class actions against Block and Robinhood focus on such entities’ assistance in transmitting messages, in the Capital One case, Plaintiffs allege that cardmembers who transmit “Refer a Friend” messages to their contacts are agents of Capital One. Specifically, Capital One cardmembers initiate the transmission of those text messages on Capital One’s behalf. Capital One allegedly controls the process for initiating the transmittal of commercial text messages to Washington residents who have not provided the necessary consent, drafts the messages’ text, creates the referral links and web pages for the program, and directs existing customers to send messages to their contacts. Additionally, Capital One allegedly through its cardmembers establishes the impression that referral text message recipients are actually dealing with Capital One. Capital One responded to Plaintiffs’ arguments by arguing that its customers are responsible for sending Refer a Friend messages; that is, customers make the affirmative decision to send text messages to their contacts. This case demonstrates that plaintiffs may have multiple avenues in bringing CEMA cases. Specifically, plaintiffs may either focus on entities’ assistance in transmitting messages or on customers’ transmission of messages on an entity’s behalf.

Key Take-Aways

Given that CEMA has a set statutory damages amount of $500 for each unlawful text message and its broad scope, plaintiffs may increasingly target similar referral programs.

As such, companies should be careful in managing, facilitating, or encouraging text referral programs, especially when doing business in Washington state. In fact, certain companies are considering blocking Washington users from referral programs. Companies should be aware that merely substantially assisting or supporting the transmission of commercial text messages may give rise to a CEMA claim.