Dana Herra Aug. 27, 2015, 12:16am

The questions of whether and how much a music streaming service will need to pay for sending a text message to one of its subscribers must be decided in arbitration, a federal judge has ruled.

Plaintiff Megan Craddock filed a putative class action lawsuit against Beats Music LLC, claiming the company violated the federal Telephone Consumer Protection Act when it sent her a text message informing her of special offers on the company’s website. On Aug. 19, U.S. District Judge Joan H. Lefkow granted Beats Music’s motion to refer the matter to arbitration, based on the provisions in its user terms and conditions that address resolution of disputes.

According to court documents, Craddock downloaded a free seven-day trial of Beats’ music streaming app to her mobile phone in January 2014. The app notifies users that by clicking the “Start” button, they agree to the company’s terms of use and privacy policy. Shortly after downloading the app, Craddock received a text message from an unidentified number that read, “Beats Music Free Msg. You may qualify for special offers on Beats Music through AT&T,” and gave a link to Beats’ website.

According to court documents, Craddock said she never consented to receiving text messages. She filed suit in December 2014 on behalf of herself and “all persons within the United States who received one or more unauthorized text message advertisements on behalf of Beats at any time in the four years prior to the filing of the complaint.” The suit alleges violation of the TCPA, which prohibits the use of an automated dialing system to send text messages without the texted party’s prior express consent.

In its motion, Beats argued the case falls under the dispute resolutions section of the app’s terms of use. Among the passages in that section is one saying any “dispute controversy, or claim” must first be negotiated directly between the user and the company. If no resolution is achieved within 30 days, either party “may commence arbitration.” The section also includes a subsection that sets out specific procedures that should be followed in arbitration.

The terms of use agreement also contains a class action waiver and a section titled “AT&T Offers” that discusses special offers available to some AT&T customers. The privacy policy attached to the terms of use discloses that Beats may share user information with business partners to send communications about promotions, special offers and products.

In her analysis, Lefkow cited case law holding courts may not deny a party’s request to arbitrate unless the arbitration clause clearly does not cover the dispute. In this case, Lefkow wrote, Craddock claimed a narrower interpretation of the arbitration clause, saying it applies only to disputes arising from the agreement itself. Lefkow disagreed. In breaking down the arguments, she said it seems clear Craddock’s claims arise from Beats Music’s services, which are expressly covered in the arbitration clause.

The suit also attempts to claim the charges can’t be related to Beats’ services because the text message was sent by AT&T, an argument Lefkow dismissed.

“Craddock … cannot sue Beats Music while maintaining that AT&T was solely responsible for the message,” Lefkow wrote. “If she has determined that AT&T sent the text message independently she has sued the wrong party and should dismiss her claims against Beats Music.

“As is, Craddock’s claims will be sent to arbitration.”

The case has been stayed pending arbitration.

Craddock is represented in the action by attorneys Lauren E. Snyder and Matthew P. McCue, of Chicago, as well as the firms of Broderick Law PC, of Boston, and Murray Murphy Moul Basil LLP, of Columbus, Ohio.

Beats Music is represented by the firm of Latham & Watkins LLP, of Chicago.

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