Aleisa v. Square, Inc.

Background

Mishari Aleisa and Nicole Belluomini filed a proposed class action against Square, Inc. under the Telephone Consumer Protection Act (TCPA). They alleged that Square sent loyalty-related text messages to their cellphone numbers without authorization using an automatic telephone dialing system (ATDS), as defined by the TCPA.

Belluomini alleged that, after she paid for a purchase at Taste Kitchen & Table using Square’s point-of-sale system, she received an automated text inviting her to participate in Taste’s loyalty program. She alleged that she had not provided her cellphone number to receive a receipt or loyalty rewards and that the message caused an invasion of privacy, a private nuisance, diminished battery life, and lost time.

Aleisa alleged that, after providing his cellphone number to join Samovar Teahouse Café’s loyalty program through Square’s point-of-sale system, he received a text about earning a loyalty star. He also alleged that he received three other unauthorized texts after purchases at other food and beverage retailers. The complaint asserted non-willful and willful TCPA violations.

Square moved under Federal Rule of Civil Procedure 12(b)(1) to dismiss Belluomini’s claims for lack of Article III standing. The motion did not seek dismissal of Aleisa’s claims at that time. Square also moved to stay the action while the Supreme Court considered Facebook, Inc. v. Duguid, which concerned the definition of an ATDS under the TCPA.

Motion to Dismiss

The court denied Square’s motion to dismiss. It held that Belluomini’s allegation that she received a single unsolicited text was enough to allege an injury in fact under Ninth Circuit precedent. The court relied particularly on Van Patten, which held that one unsolicited telemarketing call or text can invade the privacy and disturb the solitude that the TCPA protects. The court noted that the Eleventh Circuit had reached a different conclusion in another case, but the Ninth Circuit’s decisions controlled this case.

The court also rejected Square’s argument that Belluomini could not show causation because she had provided her cellphone number, consented to the loyalty program, and agreed to receive automated marketing texts. Belluomini alleged in the complaint that she had not provided her number or consented to the texts. At the motion-to-dismiss stage, the court was required to accept those allegations as true.

The court further explained that the consent dispute concerned the merits of Belluomini’s TCPA claim, not Article III standing. Consent could serve as a defense to liability, but proving consent would not eliminate the court’s authority to decide the case. Because resolving Square’s factual challenge would require deciding a disputed issue central to the merits, the court found that the issue was not appropriate for resolution through the standing motion.

Motion to Stay

The court granted Square’s motion to stay the proceedings pending the Supreme Court’s decision in Duguid. The TCPA defines an ATDS as equipment with the capacity to store or produce telephone numbers and dial them, with the statute specifying use of a random or sequential number generator for producing numbers. The court explained that the D.C. Circuit had rejected the Federal Communications Commission’s broad definition of an ATDS, and that federal appellate courts had disagreed about the statutory definition.

Under Ninth Circuit precedent, equipment could qualify as an ATDS if it had the capacity to store numbers to be called and automatically dial them, even if the numbers were not generated randomly or sequentially. The court stated that the equipment Square allegedly used to send the loyalty texts likely fell within that definition. But the Supreme Court’s pending decision could adopt a narrower interpretation requiring a random or sequential number generator. The court said that decision could resolve a central legal issue and might dispose of the plaintiffs’ complaint because the complaint did not allege that Square’s system used such a generator.

Applying the factors governing stays, the court found that waiting would simplify an important legal question, avoid unnecessary discovery and class-action litigation costs, and create little hardship because the case remained at the pleadings stage. The court recognized the plaintiffs’ concern that third-party carriers might not retain text-message logs indefinitely. It concluded that preservation agreements, preservation subpoenas, and possible sanctions could address that concern.

Disposition

The court denied Square’s motion to dismiss and granted Square’s motion to stay pending the Supreme Court’s decision in Duguid. The parties were directed to meet and confer about preserving relevant evidence held by Square’s third-party vendors and to notify the court of the best preservation method. The court stated that it would maintain the stay if the parties provided adequate assurances and reserved authority to permit limited discovery aimed at preserving information from those vendors. Judge Edward M. Chen’s order disposed of the listed motions and did not decide the ultimate merits of the plaintiffs’ TCPA claims.