Robinhood Financial faces Robotext class action lawsuit

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I wanted to highlight this very interesting new complaint that I took up today.

Robinhood Financial – which apparently runs some sort of self-service online brokerage that kids use these days – has been hit by a new class action lawsuit under Washington’s version of the TCPA, derived from texts sent by users of its app with their smartphones.

Apparently the Robinhood folks came up with a clever plan to market their product via SMS. But to get around the messy TCPA thing, they hired their countless users as henchmen to get their message across.

Available here, according to the complaint from Cooper Moore who gave-his-ballplayer-his-name Moore Complaint– Robinhood has a referral program where users of the brokerage can make some cash by encouraging other people to sign up for it. In order to make this “encouragement” easier for users, Robinhood has installed a nifty spam text blasting function in its app, which pre-fills marketing fluffs in an SMS and sends them to all contacts selected by a user.

Since people love to receive marketing copy from their friends – the theory goes – they sign up for a new Robinhood account right away, resulting in a tasty referral fee for the sender of the copy.

In reality, of course, the (now former) friends don’t like these messages at all – they’re essentially cold calling SMS marketing requests – and some of them want to sue for it.

But who to sue? And what for?

Obviously, it would be great for the plaintiff to sue Robinhood because she has the money – there’s a “theft from the rich” joke going on here somewhere but I can’t find it – but Robinhood didn’t send the text message.

Or did it?

The FCC issued a ruling some time ago addressing the circumstances under which an app maker is responsible for the messages sent by users of the app to promote the app’s diffusion. The general rule is that when a user chooses who sends the user invitations, it is the sender of the message, not the app maker.

But there is a second case law that contradicts this bright line – especially if a platform gets entangled in a user’s business by promoting the use of the platform to send otherwise illegal messages, the platform can be held liable for the messages.

Presumably – if the allegations are true – Robinhood relied on the FCC’s old YouMail judgment to argue that it was solely the end user who sent the message. And, presumably, the plaintiff is relying on the “other” set of cases I was referring to to maintain a claim.

It will be interesting to see how the “initiator” of the call battle develops – both sides have pretty good arguments and I wonder if a court will allow a seller of a product to collect bulk SMS through a referral fee system. (It doesn’t hurt the plaintiff’s chances that Washington state law recognizes liability for companies that help “transmit” illegal text!)

But there is a second MASSIVE piece on this case. Note that it was placed under Washington’s STATE edict which excludes text messaging –not under the TCPA. This is presumably because the end user’s cell phones are not ATDS-subscribed Facebook.

But Washington state law does not require the use of an ATDS. Instead of this: “[n]o Individuals doing business in the state can initiate or support the transmission of an electronic commercial text message to a[HandyinWashington“andan”electroniccommercialtextmessage”isdefinedas”anelectronictextmessagethatissentforrealestategoodsorservicesforsaleorfor”rentingandsellingofelectronicproductsforsaleorfor”rentalandsaleofelectronicgoodsforsalefor”isforelectronicgoodsforsalefor”is”forelectronicgoodsforsalefor”is”forsaleforsaletoelectronicproductsforsalefor”isspecial”forelectronicproductsforsalefor”is”forsaleforwholesale”is”forelectronicgoodsspecial”is”forsaleforelectronicgoodsforsale[HandyinWashington“initiierenoderunterstützenUndeine”elektronischekommerzielleTextnachricht”istdefiniertals”eineelektronischeTextnachrichtdiegesendetwirdumImmobilienWarenoderDienstleistungenzumVerkaufoderzurVermietungzubewerben”[cellphoneinWashington”Andan“electroniccommercialtextmessage”isdefinedas“meansanelectronictextmessagesenttopromoterealpropertygoodsorservicesforsaleorlease”

Hmmm….

Washington state law could be just as dangerous as Florida when it comes to text messaging, if that theory holds true. (It’s a good thing I’m a licensed attorney up there.)

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

Update: So I did a little research because I was curious and apparently that Cooper suit is a copycat suit. Robinhood was previously sued by a man named Isaac Gordon over a similar theory. The lawsuit survived a dismissal motion and was later certified!

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


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