A class action lawsuit against Baker Technologies and its parent company Tilt Holdings Inc. may have the cannabis industry reconsidering its telemarketing practices.

Plaintiffs Richard Komaiko and Marcie Cooperman filed the litigation against the Denver-based cannabis industry business service provider in federal court in the Northern District of California June 28 over alleged repeated violations of federal and state telemarketing legislation. The lawsuit alleges that Baker’s involvement in sending telemarketing text messages violated the federal Telephone Consumer Protection Act (TCPA) and California’s Unfair Competition Law (UCL).

According to the complaint, Baker collected mobile phone numbers and provided them to its cannabis dispensary clients. The lawsuit alleges that Baker was heavily involved in sending telemarketing text messages to the phone numbers without first obtaining the proper written consent to do so.

“As we understand it, Baker basically provides services to about 1,100 cannabis dispensaries throughout the country,” said Peter Roldan, partner at Emergent LLP, which represents the plaintiffs in the case. “Baker’s business model … stresses the importance of text marketing to its client dispensaries. They make it clear that one of the services they can provide is this direct advertising, which, for dispensaries, it’s one of the few legal ways for them to advertise because there are a lot of restrictions that apply to advertising for businesses in the cannabis industry. They market heavily their ability to reach potential clients through these texts.”

Baker has an application that harvests mobile phone numbers from the customers of its clients’ dispensaries, according to Roldan. Baker then allows its clients to send text messages to the phone numbers using an automatic telephone dialing system (ATDS), he said.

“One of the things it does is it allows these texts to be sent to the recipients from spoof numbers, so, it’s not necessarily the number of the business on behalf of whom the text is being sent,” Roldan added.

According to Roldan, Baker is liable under the TCPA because the company was heavily involved in all aspects of the telemarketing efforts—it gathered phone numbers, provided a means to create databases with the phone numbers and transmitted the text messages using these databases. Baker also manages the orders that are ultimately generated by the text messages, Roldan added.

“I think Baker’s position would be that they’re essentially just acting as a telecom company—they’re just the means through which messages are sent,” he said. “But for the reasons that I’ve explained, we allege that they actually have an active role in collecting numbers, determining how and when to send texts, and how their clients can best utilize their telemarketing services.”

The reason all of this could be illegal, Roldan said, is that, allegedly, neither Baker nor its client dispensaries have obtained the express written consent of the customers whose phone numbers they are collecting. This direct consent is required under the TCPA.

“You can’t just send texts to customers using an automatic dialing system unless there’s prior express written consent to receive those messages,” Roldan said. “Our representative clients say they’ve been receiving these texts from Baker’s clients, and they also confirm that they never provided this written consent.”

The TCPA provides for statutory damages up to $1,500 for each unlawful text message, and Emergent LLP believes that Baker sent messages in violation of applicable laws to thousands of customers.

“As far as the TCPA claims, it’s $500 for a negligent violation of the TCPA and $1,500 if the company is found to have intentionally violated the act,” Roldan said. “As far as our two clients, we understand that between the two of them, they’ve received about 250 texts so far.”

Emergent LLP has also pleaded claims under the UCL, alleging that by sending these text messages, Baker has caused its clients’ customers economic harm, as the recipients were charged for the unauthorized text messages.

The lawsuit has been served to the counsel of Baker and Tilt, and Emergent LLP is awaiting their response to the pleading.

“I’m not sure what they plan to do, whether they intend to answer the complaint, or they plan to bring a motion to dismiss,” Roldan said.

More broadly speaking, the case illustrates how critical it is for cannabis businesses to be in compliance with not only the regulations specific to the cannabis industry, but also the laws that apply to all businesses in general, especially when it comes to consumer privacy, Roldan said.

Although the TCPA was originally designed to cover telemarketing phone calls, it has taken a new meaning in this day and age, when most people use their cell phones for text messages, Roldan said.

“If I see a phone call from an unknown number, I often just ignore it, whereas if somebody sends me a text, I have no choice but to look at it to see if it’s something I actually wanted,” he said. “There’s no way to screen that until after the fact. … The government understandably has made consumer privacy a priority, and we think it’s important for all businesses to make sure that they’re in compliance with those laws so that consumers aren’t harmed.”