Wick v. Twilio, Inc

Filing 45

ORDER Denying 38 Defendant's Motion for Rule 11 Sanctions; by Judge Robert S. Lasnik.(RM)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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NOAH WICK on behalf of himself and all
others similarly situated,
Plaintiff,

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v.

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Case No. C16-914RSL

TWILIO INC.,

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ORDER DENYING DEFENDANT’S
MOTION FOR RULE 11 SANCTIONS
Defendant.

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I. INTRODUCTION
This matter comes before the Court on defendant’s motion for sanctions pursuant to Fed.

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R. Civ. P. 11 (Dkt. #38). For the reasons set forth below, the Court finds oral argument

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unnecessary and denies the motion.

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II. BACKGROUND

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In February 2016, plaintiff saw an advertisement for a nutritional supplement while

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online. Plaintiff understood the advertisement to offer a free sample of the supplement. Plaintiff

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followed the link to the website of the supplier, Crevalor, and entered his contact information but

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then discovered no free samples remained. He elected not to finish the transaction and closed

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the browser. Almost immediately, he received a phone call and a text message encouraging him

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to divulge his credit card information and complete a transaction.

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ORDER DENYING DEFENDANT’S
MOTION FOR RULE 11 SANCTIONS- 1

In June 2016, plaintiff filed a complaint in federal court alleging violations of the Federal

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Telephone Consumer Protection Act (TCPA) and other Washington statutes. Plaintiff’s theory

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of the case is that defendant, a software company that provides services to online retailers like

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Crevalor, violated laws forbidding certain marketing practices. Defendant moved to dismiss the

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complaint in July 2016. Without responding, plaintiff filed an amended complaint in August

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2016. Defendant again moved to dismiss the amended complaint, and the Court dismissed the

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complaint in November 2016.

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In the order dismissing the complaint, the Court found that plaintiff had adequately

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consented to receive calls and messages related to customer service. Dkt. #34 at 1-2. The Court

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reasoned that the TCPA did not cover calls made with the prior express consent of the called

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party, provided that the call was not an advertisement or telemarketing. Id. at 3.1 Knowingly

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giving one’s phone number to another provides express consent for that party to call with

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messages that do not amount to advertisement or telemarketing. Id. at 3-4. Messages with

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instructions for how a potential customer may complete a process he or she initiated are not

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telemarketing. Id. at 4-5. The Court concluded the call and message sent to plaintiff, as pleaded,

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were not telemarketing and gave plaintiff leave to amend his complaint. Id. at 5, 8.
Plaintiff filed a second amended complaint two weeks after the dismissal. Defendant

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served notice of its intention to move for Rule 11 sanctions and filed its motion in late

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December.2 Plaintiff’s response to the motion includes a request for attorney’s fees should they

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prevail on the Rule 11 motion. Dkt. #39 at 2.
III. ANALYSIS

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When, as here, a “complaint is the primary focus of Rule 11 proceedings, a district court

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In order to escape liability under the TCPA, calls with advertisements or telemarketing
require express written consent. Dkt. #34 at 3.
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The parties do not dispute defendant complied with the procedural requirements of Rule

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ORDER DENYING DEFENDANT’S
MOTION FOR RULE 11 SANCTIONS- 2

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must conduct a two-prong inquiry to determine (1) whether the complaint is legally or factually

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baseless from an objective perspective, and (2) if the attorney has conducted a reasonable and

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competent inquiry before signing and filing it.” Holgate v. Baldwin, 425 F.3d 671, 675-76 (9th

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Cir. 2005) (internal quotations and citation omitted). “As shorthand for this test, we use the

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word frivolous to denote a filing that is both baseless and made without a reasonable and

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competent inquiry.” Id. at 676 (source’s emphasis) (internal quotations and citation omitted).

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A. Adequate Legal Basis

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Defendant argues plaintiff’s second amended complaint is frivolous because it adds no

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relevant facts to the dismissed complaint and advances the same legal theory. Dkt. #38 at 4-5.

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In fact, defense counsel’s position is that no new complaint could comply with Rule 11. Dkt.

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#38 at 8. Plaintiff insists that no clear authority forecloses his new complaint and that the

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changes reflected in the second amended complaint “are well grounded in existing law, or the

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good faith extension of the law.” Dkt. #39 at 6.
Plaintiff’s second amended complaint makes allegations that differ in material ways from

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those in the dismissed complaint. Those differences are responsive to the Court’s order

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dismissing the earlier complaint. For instance, plaintiff alleges the call and text message were

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intended “to encourage plaintiff to purchase a product.” Dkt. 40-1 at 22, ¶¶38-40. Plaintiff also

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alleges the free sample “is part of an auto-ship program by which the recipient’s credit card is

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authorized to be charged a fee every month until cancelled by the recipient.” Dkt. 40-1 at 25,

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¶50.

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The order did not, as defendant would have it, put plaintiff “on notice that pursuit of a

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TCPA claim against Twilio had no basis in law or fact.” Dkt. 38 at 3. If that were true, the

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claim would have been dismissed with prejudice. Regardless of whether the new facts would

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change the result of a motion to dismiss, the Court cannot conclude the second amended

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complaint is legally or factually unsupportable.

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ORDER DENYING DEFENDANT’S
MOTION FOR RULE 11 SANCTIONS- 3

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B. Reasonable and Competent Inquiry
Defendant argues there could not have been a reasonable inquiry into the merits of the

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second amended complaint given its similarity to the dismissed amended complaint. Dkt. #43 at

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2. It argues sanctions are appropriate because the additional facts and information in the second

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amended complaint “are entirely irrelevant to both Twilio and the TCPA,” and the claims are

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materially identical to those in the other complaints. Id.

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Plaintiff offers two declarations by academic figures in support of their opposition to

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sanctions. The two were hired after defendant’s counsel informed plaintiff’s counsel of their

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intent to move for sanctions. Dkt. #40 at 2.

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The first is an statement by Professor Ira Kalb, who teaches marketing at the University

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of Southern California. Dkt. #41. Plaintiff submits Professor Kalb’s statement puts the new

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facts of the second amended complaint in the appropriate context. Professor Kalb describes

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Crevalor’s tactic as a “bait and switch” where vendors offer free products to customers but then

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insist on payment for a similar product. Dkt. #41 at 2. This behavior is purportedly intended to

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promote and sell products. Dkt. #41 at 6. Professor Kalb also defines industry standards for

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customer service and contrasts them with defendant’s behavior. Dkt. #41 at 5-9.

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The second is a statement by Professor John Strait, an attorney with extensive experience

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in legal ethics. Dkt. #42. Professor Strait outlines the additional factual allegations in the

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second amended complaint and concludes the complaint complies with the Rules of Professional

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Conduct and Rule 11. Specifically, Professor Strait argues the new allegations “are based on

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reasonable inquiry and . . . present a reasonable and non-frivolous attempt to correct the factual

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deficiencies of the First Amended Complaint.” Dkt. #42 at 8.

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The Court is satisfied plaintiff’s second amended complaint is the result of a sufficiently
rigorous inquiry to avoid Rule 11 sanctions.
IV. REMEDY

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Plaintiff seeks attorney’s fees as the prevailing party in the event the Court denies the

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ORDER DENYING DEFENDANT’S
MOTION FOR RULE 11 SANCTIONS- 4

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motion. Dkt. #39 at 2. Rule 11(c)(2) provides that “[i]f warranted, the court may award to the

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prevailing party the reasonable expenses, including attorney’s fees, incurred for [the Rule 11]

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motion.” The 1993 Advisory Committee Note to Rule 11 provides that the Rule “should not be

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employed . . . to test the legal sufficiency or efficacy of allegations in the pleadings; other

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motions are available for those purposes.” Defendant’s characterization of this Court’s prior

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order as foreclosing any TCPA claim is obviously inconsistent with that order’s leave to amend

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the complaint. Defendant’s motion for sanctions also devotes considerable attention to the

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purported irrelevance and insufficiency of plaintiff’s new factual allegations. See Dkt. #38 at 7-

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8 and Dkt. #43 at 4. Defendant’s Rule 11 motion would have been more appropriate in

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conjunction with or after a motion to dismiss. In light of the limited use of Rule 11, the

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availability of other methods for dismissing defective claims, and the new factual material

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alleged in the second amended complaint with leave of the Court, the Court will hold plaintiff’s

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request for attorney’s fees in abeyance pending the outcome of a motion to dismiss.
V. CONCLUSION

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For the foregoing reasons, defendant’s motion (Dkt. #38) is DENIED.

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Dated this 23rd day of February, 2017.

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A

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Robert S. Lasnik
United States District Judge

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ORDER DENYING DEFENDANT’S
MOTION FOR RULE 11 SANCTIONS- 5