Papa John?s SMS practices could cost it over $250M in damages
Papa John?s faces a class action suit over text messages allegedly sent to customers not interested in receiving such communications, with damages potentially reaching more than $250 million.
The case is the latest example of the dangers marketers face when they engage in text messaging programs without understanding the regulations governing this activity. The suit alleges that 500,000 illegal text messages were sent to Papa John?s customers across the country.
"Papa John's plans to appeal this preliminary court ruling," said Caroline Oyler, senior vice president of legal affairs at Papa John's, Louisville, KY. "The preliminary ruling is not based on the merits of the case.
"This lawsuit does not involve Papa John's corporate text messaging program," she said. "It is related to a third-party text messaging vendor used by a small number of Papa John's franchisees more than two years ago.
"While it is premature to comment on the merits, we have seen no basis for the plaintiff's damages estimate, and we will continue to aggressively defend the case."
According to the complaint, marketing company OnTime4U told Papa John?s franchisees that it was legal to send texts without customer consent because there was an existing business relationship between the customers and Papa John?s.
Certain Papa John?s franchisees provided the marketing company with lists of customers that included cell phone numbers. OnTime4U used this information to send text messages encouraging consumers to purchase Papa John?s products.
The complaint says there is no evidence in the record that any customer who received messages sent by OnTime4U gave their consent.
There is also no evidence that Papa John?s contracted directly with OnTime4U. However, the plaintiff alleges that Papa John?s authorized its franchisees to use OnTime4U?s services.
The pizza chain formally disavowed the program in a memo sent to corporate stores and franchisees in April 2010. The memo explains that the company had been receiving complaints about unsolicited SMS messages and, upon investigation, determined that the messages were ?most likely illegal.?
Franchisees were directed at that time to take all necessary steps to reclaim the customer data shared with OnTime4U.
?The number of lawsuits filed over allegedly unsolicited text messages has increased dramatically in recent years,? said Gonzalo Mon, attorney with Kelley Drye & Warren LLP, Washington.
?Some of the cases may involve knowing violations of the TCPA and other laws,? he said. ?Marketers may mistakenly think that they won?t get caught or that the consequences won?t be too high.
?But I think most cases don?t involve knowing violations - instead, they involve poor planning or inadequate review. For example, a company may quickly launch a text message program without going through a legal review process.
A potentially costly mistake
Papa John?s customers could be awarded $500 or more for each text messages, making this potentially one of the largest damages awards recovered under the federal Telephone Consumer Protection Act, which makes it illegal to send to text messages to consumers who have not opted-in to receive such communications.
The suit was filed on Nov. 9 on behalf of Papa John?s customers in the United States who allegedly were sent unwanted text messages advertising Papa John?s pizza.
Suits such as the one against Papa John?s underscore the need for marketers to thoroughly understand the rules and regulations governing mobile marketing before they engage in any outreach to their customers.
?Companies need to slow down and carefully examine a mobile campaign before it launches,? Mr. Mon said. ?It?s essential that a lawyer with expertise in mobile marketing be involved in the review process.
?Most of the class actions we?ve seen in recent years could have been easily avoided if the marketers conducted a thorough review prior to launch,? he said.
?I know that, sometimes, there is a tendency to try to skip that step in order to cut costs and launch quickly, but the recent string of multi-million dollar settlements demonstrates that?s a very short-sighted approach. It will cost exponentially less time and money to do things right from the start.?
Lawyers see opportunity
Per Mr. Mon, the increase in the number lawsuits regarding unwanted text messages is partially being driven by more companies violating relevant laws. However, at the same time, some of the increase in being driven by lawyers.
?I think the increase is mostly because class action attorneys have come to see these cases as an easy way to make money,? Mr. Mon said. ?For example, a recent case involving text messages sent by Jiffy Lube settled for $47 million.
?Many class action attorneys are motivated less by stopping harm to consumers than they are by getting a share of the settlement money,? he said.
Chantal Tode is associate editor on Mobile Marketer, New York