One of the biggest facilitators of marijuana deliveries in California faces a possible class-action lawsuit that one Bay Area attorney says could threaten the company’s existence.
Farrah Williams, of San Diego, filed suit against San Francisco-based Eaze Solutions on May 2, alleging the delivery business violated federal law by spamming her and other customers with unsolicited text-message marketing.
Eaze is a technology company that is not licensed to engage in commercial cannabis activity but, rather, contends it acts as an intermediary by taking orders online from customers and facilitating deliveries from retail partners.
The firm operates in more than 100 cities in California and has reached over 300,000 customers since its founding in 2014, according to the lawsuit.
The company has raised $52 million – much of that through venture capital financing – and turned itself into a cannabis industry force.
But Eaze’s status could be jeopardized if Williams’ lawsuit succeeds – although success isn’t a sure bet.
The case also could have wide-ranging ramifications for an industry whose marketing avenues already are limited and heavily scrutinized.
“The reality is that (Eaze) ‘growth hacked’ its way to the top of the pot delivery business – specifically, by relentlessly bombarding existing and prospective customers with text messages and other digital spam … without anyone’s permission,” the suit alleges.
The suit, filed in a California federal court, hasn’t yet received class-action status.
The lawsuit alleges that Eaze violated the federal Telephone Consumer Protection Act (TCPA), a 1991 law that prohibits any company from making unsolicited calls or sending uninvited text messages to possible clients.
The most recent example cited in Williams’ lawsuit are two April 26 texts, including: “We miss you! Make a purchase in the next 7 days and get $10 of credit to use on your following purchase. Shop now at www.eaze.com/menu.”
Williams, who claims in the suit that she received “dozens” of unsolicited marketing texts from Eaze between September 2017 and May, is asking for up to $2,000 in damages per text message.
The lawsuit estimates there could be “tens of thousands” of other potential plaintiffs who received illegal and unsolicited texts.
Which means a court judgment could cost Eaze tens of millions of dollars depending on how the suit is resolved, said San Francisco attorney Tsan Abrahamson, an expert on the Telephone Consumer Protection Act.
“The TCPA has, particularly for smaller companies, bankrupted them,” Abrahamson said. “They have had to close their doors. So this is no joke.”
For instance, she noted:
Wells Fargo agreed to a $30 million settlement in a TCPA lawsuit in 2017.
Bank of America agreed to a $32 million TCPA settlement in 2014.
Even if the suit doesn’t reach class-action status, it could spawn copycat legal complaints, Abrahamson said.
“That’s certainly the fear,” she said. “You might even see lawyers that like to bring class-action suits (and advertise them).”
Abrahamson pointed out, however, that Eaze has not yet fully responded to the suit and could have options that will protect it. For examples, notes on its website that text recipients can opt out of marketing messages by replying “STOP” to any communication.
However, the lawsuit alleges, Williams was not given that option in the texts she received.
The lawsuit is in its infancy and could take months if not years to wind its way through the courts.
It’s been filed as a class-action suit in U.S. District Court in the Northern District of California, and such complaints typically require dozens of plaintiffs to gain that legal status.
But so far it appears only Williams has signed on as a plaintiff. One of her attorneys responded “no comment” when asked by MJBizDaily if other plaintiffs had joined the suit.
“The case, it’s really in its early stages, but we look forward to litigating it,” said David Hall, one of Williams’ lawyers.
The crux of the legal issue for Eaze, Abrahamson said, is that the Telephone Consumer Protection Act allows for enormous sums to be awarded to plaintiffs as a deterrent against companies engaging in the type of spam marketing that Williams alleges.
And, according to Abrahamson, legal precedent has shown that companies must have some type of prior consent before sending such text messages. Otherwise, they’ve broken the law and are vulnerable to lawsuits like Williams’.
“The TCPA says that what a consumer opts into has to be what the consumer believes they opted into, nothing more,” Abrahamson said, noting that such cases are fairly common, especially in the tech space.
‘Take it seriously’
Colorado-based cannabis industry attorney Rachel Gillette echoed many of Abrahamson’s thoughts about Eaze.
While Gillette declined to speculate on the strengths of the case or a possible outcome, she said Eaze “needs to absolutely take it seriously.”
“Lawsuits take a long time to play themselves out, and they cost a lot of money, and that’s on both sides,” Gillette said. “The reality is that there will be winners and there will be losers.
“Will it put (Eaze) out of business? I can’t speculate. It’s just impossible to know. But they should hire a good lawyer.”
Gillette said the cannabis industry’s takeaway from this situation should be a reminder about the importance of due diligence in every aspect of operations, including marketing.
“What it illustrates is you’ve got to be really careful out there, especially when you grow into a successful company,” she said. “There are always going to be people who want to tap into your financial success.”