Steve Madden Settles TCPA Violations for $10 Million

Steve Madden footwear pic Nordstrom

STEVE MADDEN in trouble again, this time for violating the consumer. The publicly traded shoe designer has been no stranger to lawsuits in the past but this one is slightly different. The Telephone Consumer Protection Act (“TCPA”) provides for, among other things, statutory damages to individuals who receive unsolicited text messages to personal mobile phones – unless the messages are sent for emergency purposes or the recipient has given his or her express consent to receive such messages.  Companies that hire third parties to advertise on their behalf can also be held “vicariously liable” for the acts of those third party advertisers and predicted that many class action suits will arise in the future. 

Last week proved those predictions to be true and provided a real life example of the TCPA’s authority to hold hiring companies liable for the acts of their third party advertisers. posted kleinmoynihan.com

Steve Madden Shoe Company Class Action Lawsuit

Steve Madden, Ltd. (“Steve Madden”), an international shoe retailer, was accused of sending more than 200,000 text messages to consumers through one of its third party advertisers.  The company presented two defenses to these accusations:

1. That consumers had implicitly consented to receive text message solicitations by providing their cell phone numbers while visiting Steve Madden stores; and alternatively
2. That a third party advertiser sent the text messages and should be responsible, not Steve Madden.

Those who have been following this blog should know that neither of these defenses is viable.  First, under the TCPA, consumers must provide express and unambiguous consent to receive unsolicited text messages for commercial purposes.  A customer that verbally provides his or her mobile phone number at a point-of-sale retail outlet without being expressly told how that number will be used, has not provided “consent” under TCPA requirements.  Beginning October 16, 2013, a heightened standard will be imposed under the TCPA, requiring prior express written consent to send autodialed and/or pre-recorded text messages to cell phones for marketing purposes.  Limited exceptions will apply to this requirement, such as calls/texts from the consumer’s cellular carrier, debt collectors, informational notices and healthcare-related calls.  If a dispute concerning consent arises, the advertiser bears the burden of proof to demonstrate that a clear and conspicuous disclosure was provided and that the consumer unambiguously consented to receive text messages and/or telemarketing calls to the number provided.

Second, in a Declaratory Ruling issued on May 9, 2013 the FCC ruled that a seller who does not “initiate” calls/text messages as contemplated under the TCPA can nevertheless be held liable where there is an “agency relationship” with its third party advertisers.  Some of the factors that the FCC cited in determining whether an agency relationship exists include the following, as restated here:

• Evidence that the seller allows the outside sales entity access to information and systems that normally would be within the seller’s exclusive control, including access to detailed information regarding the nature of seller’s customer information, e.g. cell phone numbers provided at the seller’s store;
• Evidence that the outside sales entity has the ability to enter consumer information into the seller’s sales or customer systems, as well as the authority to use the seller’s trade name, trademark and service mark;
• Evidence that the seller approved, wrote or reviewed the outside entity’s telemarketing scripts; and
• Evidence that seller knew (or reasonably should have known) that the third party advertiser was violating the TCPA on the seller’s behalf and the seller failed to take effective steps within its power to force the advertiser to cease that conduct.
• In the case of Steve Madden, we would assume that a majority of these factors were satisfied.

TCPA Penalties

The TCPA provides for either actual damages or statutory damages ranging from $500 to $1,500 per unsolicited message.  Considering that text message marketing campaigns often yield thousands, and in this case hundreds of thousands, of text messages, potential damages under the TCPA may escalate very quickly, as evidenced by the fact that Steve Madden was willing to settle the case against it for $10 million dollars.

Should it opt to engage in this method of marketing in the future, as part of the settlement agreement, Steve Madden also agreed to obtain consumers’ express consent, in writing, to receiving marketing text messages.  The company must retain that proof of compliance for four years and require its third party advertisers to abide by these terms.

For a brief description of how to handle a situation in which a TCPA action is brought against you, please see our post entitled, How to Defend a TCPA Lawsuit.

The settlement of Steve Madden’s case should be of interest to text message marketers and those generally interested in the Internet and mobile marketing spaces. If you are interested in learning more about this topic or pursuing a text message-based advertising campaign, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney.  Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

KMT certainly put forwarded the case clearly (thank you) but what does this action mean for advertisers?


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