Smith v. Microsoft: Motion to Dismiss Class Action Denied

A federal judge has denied Microsoft’s motion to dismiss a putative class action alleging that Microsoft sent spam text messages to consumers.  See Smith v. Microsoft Corp., No. 11-1958 (S.D. Cal. Jul. 20, 2012) (order denying motion to dismiss) (available here).  Microsoft had argued that the plaintiff could not establish “actual harm” and therefore did not satisfy federal Article III standing requirements.  Smith and other recent rulings, most prominently the U.S. Supreme Court’s ruling in Edwards v. First Am. Corp. (available here), have caused legal observers to revise expectations of a tighter Article III standing jurisprudence leading to more early dismissals in federal court.

The Smith action alleges that Microsoft sent unsolicited text messages to consumers promoting its popular Xbox gaming platform, in violation of the Telephone Consumer Protection Act (TCPA).  Microsoft sought an early dismissal of the action on the ground that the named plaintiff lacked Article III standing because he could not show that he suffered actual economic injury.  In particular, Microsoft emphasized that the named plaintiff had not incurred any additional cell phone charges due to the texts.  However, Judge Janis Sammartino rejected Microsoft’s argument, ruling that the TCPA confers standing irrespective of whether a plaintiff incurs charges or other direct pecuniary detriment, thus allowing the putative class action to proceed without proof of additional charges being incurred attendant to the spam messages. 

The ruling’s underlying reasoning has a potentially wide reach.  In addition to grounding her ruling in the TCPA’s overt language and legislative history, Judge Sammartino analogized it to other statutes designed to promote similar privacy protections, referencing the Wiretap Act (addressed in In re iPhone Application Litigation, 2012 WL 2126351 (N.D. Cal. 2012)), the Video Privacy Protection Act (addressed in In re Hulu Privacy Litigation, 2012 WL 2119193 (N.D. Cal. 2012)), and the Stored Communications Act (addressed in Gaos v. Google, Inc., 2012 WL 1094646 (N.D. Cal. 2012)).  Order at 9. 

The Smith action seeks statutory damages pursuant to the TCPA (which provides for a minimum of $500 per violation) as well as injunctive relief that would proscribe “all wireless spam activities” by Microsoft.