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Los Angeles Lakers Tackle Frivolous Telephone Consumer Privacy Suit with No Litigation Coverage

Companies are increasingly concerned about abuses of the Telephone Consumer Protection Act (“TCPA”), a well-intentioned federal statute enacted to protect consumers from unsolicited messages. Under the TCPA, companies are prohibited from using an automated dialer, sending unsolicited SMS messages, and sending unsolicited fax messages to consumers. The TCPA further requires that consumers must be given opt out information so that they can revoke consent from receiving messages after making consumer-initiated communications. If companies are found to be in violation of the TCPA, they can be fined statutory fees ranging from $500 to $1,500.

Although the TCPA was enacted to protect consumers from invasive telemarketing practices, the application of the statute has shifted into a source of significant frivolous litigation. For example, in Emanuel v. Los Angeles Lakers, Inc.[note]Emanuel v. Los Angeles Lakers, Inc., No. CV 12-9936-GW SHX, 2013 WL 1719035 (C.D. Cal. Apr. 18, 2013)[/note], Mr. David Emanuel filed a putative class action suit against the Los Angeles Lakers (“Lakers”) for violations of the TCPA by sending him and similarly situated plaintiffs purportedly unsolicited text messages. On October 13, 2012, Mr. Emanuel attended a Lakers game at Staples Center, during which the Lakers encouraged fans to send a text message to a number to display fan-provided messages on the Staples Center’s jumbotron. The arena requested texts from fans by displaying the following statement: “TEXT your message to 525377.” After seeing this statement, Mr. Emanuel sent a text message saying, “I love you Facey. Happy Date Night.” Shortly thereafter, Mr. Emanuel received a text message from the 525377 number which stated: “Thnx! Txt as many times as u like. Not all msgs go on screen. Txt ALERTS for Lakers News alerts. Msg & Data Rates May Apply. Txt STOP to quit. Txt INFO for info.” This message was challenged by Mr. Emanuel in the class action. Mr. Emanuel alleged that the Lakers did not inform him that, by sending his initial text message, he would be consenting to receive future text messages. Further, Mr. Emanuel claimed that, because the Lakers did not receive his consent before sending him an unsolicited text message, the Lakers engaged in negligent, knowing, and willful violations of the TCPA.

The court concluded that the text message was not a violation under the TCPA because Mr. Emanuel voluntarily sent a text to the Lakers wanting to display the contents of his message on the Staples Center jumbotron. Therefore, Mr. Emanuel consented to receiving a responsive text from the Lakers. The court noted that when Mr. Emanuel sought to display his message on the Staples Center jumbotron via text, it would be difficult for him to confirm that the Lakers had received his message without a responsive text. Further, the court concluded that the Lakers’ responsive text provided Mr. Emanuel with information relevant to the original message he initiated. Indeed, the responsive text had the effect of notifying Mr. Emanuel that his message may not be chosen to be displayed on the jumbotron.

Frivolous lawsuits, such as Emanuel v. Los Angeles Lakers, Inc., are of great concern to companies. In 2013, the same year Emanuel v. Los Angeles Lakers, Inc. was litigated, approximately 1,200 TCPA lawsuits[note]FCC Seeks Comment on Two Petitions Related to Recent TCPA Rule Changes, Arent Fox Newsroom (Nov. 5, 2013),[/note] were filed by plaintiffs. Besides the frivolity of the lawsuits, commercial general liability insurers have increasingly added TCPA exclusions to their policies. The effect of these exclusions leaves companies without coverage for invasion of privacy claims. To illustrate, at the time of Mr. Emanuel’s lawsuit, the Lakers were insured by Federal Insurance Company (“FIC”) through a “Corporate Liability Coverage” that obligated FIC to pay for losses resulting from any civil proceeding commenced against the Lakers for a “Wrongful Act.” The Lakers sought payment from FIC in light of this policy for the costs incurred from defending against Mr. Emanuel’s class action lawsuit. FIC denied coverage, citing an exclusion for claims “based upon, arising from, or in consequence of…invasion of privacy[.]” When the Lakers sued FIC in 2017, the Ninth Circuit[note]Los Angeles Lakers, Inc. v. Fed. Ins. Co., 869 F.3d 795 (9th Cir. 2017)[/note] held that the Lakers’ policy – which excluded privacy claims – did not cover TCPA claims because a TCPA claim is “inherently an invasion of privacy claim.”
While the Lakers were merely trying to offer fan engagement at the arena during a game, which was not for marketing or business purposes, the Lakers found themselves fending off a frivolous TCPA lawsuit without an insurance coverage safety blanket. This fact set and issue is not limited to the Lakers because many sports teams, venues, and establishments have instituted similar SMS text-based engagement methods, which could give rise to frivolous lawsuits that may not be covered by litigation insurance. As such, many companies may find themselves looking to other types of insurance policies for TCPA coverage. Moreover, companies that have litigation insurance or liability coverage would be wise to check their coverage to determine whether invasions of privacy are excluded from their policies and seek coverage for invasion of privacy elsewhere.