Cellphone Spammer to Face Fraud Class Action

SAN FRANCISCO (CN) - A federal judge left the bulk of a class action against a cellphone spammer intact, leaving it to face the music for charging millions of customers for unwanted services.

Lead plaintiffs Edward Fields, Cathie O'Hanks, Erik Kristianson, Richard Parmentier, Kimberly Brewster and Kristian Kunder filed their class action in October 2012 after receiving unsolicited text messages from defendant Wise Media.

The texts contained information about the company's subscription plans offering flirting tips, horoscope updates, celebrity gossip and weight loss advice.

A typical initial text sent to cellphone users by Wise Media stated: "Lovegenietips Flirting Tips; 3msg/week for $9.99/m T&Cs: lovegenietips.com Msg&data rates may apply. Reply HELP for help, STOP to cancel." Wise Media sent the texts with the help of equipment that produced cellphone numbers through a random sequential number generator.

Then, through a process known as "cramming," Wise Media enlisted the help of aggregators - including co-defendants Mobile Messenger Americas, mBlox Incorporated and Motricity - to act as middlemen between itself and cellphone companies.

The aggregators placed the charges on millions of cellphone bills and monitored complaints - for a piece of the revenue pie - regardless of whether users canceled or even responded to the texts at all.

Mobile Messenger Americas moved for dismissal of claims against it, which included violations of state unfair competition laws, conversion, negligence, unjust enrichment and money had and received. The company argued that the class failed to meet heightened pleading standards by spelling out the fraudulent activities.

But U.S. District Judge William Alsup, of the Northern California district, disagreed and found that all the causes of action rely "on the same unified course of fraudulent conduct, namely the allegedly fraudulent cramming scheme whereby plaintiffs were enrolled in and charged for subscription plans without permission."

Alsup found that the plaintiffs sufficiently pleaded claims for two of the three prongs of California's unfair competition law. He said that, despite Mobile Messenger's arguments that violations of the Public Utilities Code section relating to telephone charges applies only to phone companies and not aggregators, the plaintiffs adequately levied claims of unlawful activity.

"While [the PUC section] is silent as to which parties it governs, it is Mobile Messenger who glides over the clear meaning of the statute and the thrust of plaintiff's complaint," Alsup wrote. "No court has limited it to telephone companies or precluded its applicability to billing aggregators, and Mobile Messenger cites no authority supporting its contention that it should be exempt."

The plaintiffs also satisfied the fraud prong, since the aggregators' conduct would likely deceive members of the public. However, such conduct failed to meet the threshold of amounting to unfair competition under state law according to the judge.

"The unfairness prong must be tethered to some legislative policy; otherwise the courts will roam across the landscape of business practices picking and choosing which they like and which they dislike," Alsup wrote. "Plaintiffs urge that Mobile Messenger's conduct 'offends established public policies and is immoral, unethical, oppressive, unscrupulous and substantially injurious to consumers.' This cursory allegation fails to state a claim under the unfairness prong. Plaintiffs' opposition brief further argues that Mobile Messenger's conduct 'threatens competition' among aggregators because the proceeds from the subscription plans could subsidize the fees it charges to its clients. This contention appears nowhere in the complaint, which also fails to allege any specific constitutional, statutory, or regulatory provision to which Mobile Messenger's conduct is tethered."

Alsup also left the class's actions for conversion, negligence - and the common law counts of unjust enrichment and money had and received - intact. He found that at this stage of the proceedings, there was sufficient cause to believe that money was taken from cellphone users and restitution must be paid.

"Mobile Messenger argues that plaintiffs have not identified the sum of money converted with the requisite specificity and that the complaint merely asserts that the aggregator 'shared in the revenue' with Wise Media. This is inaccurate. Plaintiffs claim that Mobile Messenger charged consumers $9.99 per month -- an amount of money that is capable of identification," Alsup wrote.

He gave the lead plaintiffs until July 12 to amend their complaint to fix deficiencies in their unfair competition action.

A similar and short-lived class action against Wise Media - also filed last year - ended after the company produced website and text message evidence that the lead plaintiff in that case had consented to the "Lovegenietips" subscription plan.

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