In the last three months, at least six different cannabis companies have been hit with Telephone Consumer Protection Act (TCPA) lawsuits. Each of these lawsuits is slightly different, but all are based on the same law and general set of facts: a cannabis company obtained the phone numbers of members of the public, and have been peppering them with text messages that are targeted advertisements. Because the individuals did not consent to receiving those texts, the messages appear to violate the TCPA.
It is fascinating that across all industries, including cannabis, folks are still firing away with TCPA lawsuits given that the TCPA is likely to be struck down in June 2020 as unconstitutional. The Supreme Court is currently reviewing whether the TCPA, i.e. the statute under which Plaintiffs’ claim arises, is constitutional, because a few years ago the government added an exception to the robo-calling statute for people calling to collect government backed debt (e.g. student loans). See Barr v. American Association of Political Consultants, Inc., Sup. Ct. Dkt. No. 19-631. This exception turned the TCPA into a content-based restriction on freedom of speech that does not pass strict scrutiny. Oral argument was heard by the Supreme Court on May 6, 2020.
At oral argument, the Justices asked questions clearly articulating that the TCPA might be struck down in its entirety. While questioning the parties, Chief Justice Roberts asked “[b]ut, when we sever provisions, it’s because they are illegal. Here, there’s nothing illegal about the government-debt exception. It just, when combined with the rest of the statute, makes the whole statute vulnerable. I wonder why in that situation the whole statute shouldn’t fall?” This line of questioning suggests that Justice Roberts was seriously considering striking down the law in its entirety. Similarly, Justice Ginsberg (who famously participated in oral argument from the hospital after recovering from surgery!) implied that a mere severance of the problematic government-backed-debt-exemption is not the correct remedy, i.e. the statute as a whole must go.
Therefore, for the cannabis companies who are stuck defending these cases, defendants may now consider simply moving the court to stay the action until the Supreme Court provides their decision on the TCPA’s fate. Federal courts in California have already granted such requests in similar cases. See, e.g. Nakai v. Charter Commc’ns, Inc., No. CV 19-8035-GW-SSX, 2020 WL 1908949, at *6 (C.D. Cal. Apr. 15, 2020) (granting a stay pending a decision in Barr for a TCPA cannabis class action, holding that “the stay here is less than three months, and any alleged harm to Plaintiff is minimal…[,]” and that “in the absence of a stay, [defendant] would be required to spend additional resources defending against this putative nationwide class action that may ultimately be rendered moot by the decision in [Barr]…”).
As we blogged about previously, these TCPA lawsuits are part of an ongoing problem with cannabis companies, and the industry as a whole. In many instances, companies spend too much of their time devoted to cannabis-specific regulations, and they tend to overlook other important laws that have major repercussions. From advertising restrictions to employment issues, we see cannabis companies run afoul of various rules that could have been avoided with better due diligence.
Certainly companies that violate the TCPA bear responsibility for their unlawful conduct. All companies should have legal protections and resources in place to scrutinize all aspects of their business and minimize liabilities. However, the constant stream of TCPA lawsuits against cannabis operators also may be a signal that the industry as a whole needs to do its part to fix a systemic issue. If cannabis companies weren’t so inundated with staying on top of complex and constantly-changing cannabis regulations, many might have more time and energy to cross their t’s and dot their i’s from a business standpoint. Of course, this is not meant in any way to excuse any violations of the law, but it is merely an observation of some of the unfortunate outcomes seen in highly-regulated industries, especially industries such as cannabis in which the tax burden is so high. Indeed, part of what makes it so hard for legal companies to combat the black market is the ongoing regulatory costs of doing business. Black market operators just don’t have to worry about following numerous complicated and constantly-evolving regulatory landscape, meaning it’s easier for them to focus on simply running a strong business. If regulators made adjustments to make the lives of state-legal cannabis operators even slightly easier, while simultaneously increasing enforcement mechanisms to quash the black market, such state-legal companies might stand a better chance of withstanding the test of time.
The TCPA lawsuits filed against cannabis companies include:
Joanne Bartel v. OG Collective LLC, case number 5:20-cv-01184, in the U.S. District Court for the Central District of California. (Filed on June 10, 2020)
Sharyl Duboise et al. v. Infinite Bloom LLC, case number 2:20-cv-01073, in the U.S. District Court for the District of Arizona. (Filed on June 2, 2020)
Rohrer v. Phenos Collective Inc., case number 1:20-at-00392, in the U.S. District Court for the Eastern District of California. (Filed on May 29, 2020)
Klitzner et al. v. WherezHemp LLC, case number 3:20-cv-00926, in the U.S. District Court for the Southern District of California. (Filed on May 18, 2020)
Jackson v. Euphoria Wellness LLC, case number 3:20-cv-03297, in U.S. District Court for the Northern District of California. (Filed on May 15, 2020)
Jeremy Berger et al. v. Therapeutic Hemp Inc. et al., case number 8:20-cv-00762, in the U.S. District Court for the Central District of California. (Filed on April 17, 2020)
Many thanks to Jason M. Ingber who co-authored this blog. Jason and Shuki attended UCLA Law School together, where they developed the critical thinking skills that are on display in this post. Jason is a litigation associate at Squire Patton Boggs, LLP, where his practice focuses on consumer class action defense, breach of contract, and consumer protection statutes. He can be reached at firstname.lastname@example.org.
Disclaimer: This article has been prepared and published for informational and educational purposes only and is not offered or intended, nor should it be construed, to be legal advice.