Up in Smoke: TCPA Class Action Against Cannabis Start-Up Ease Put to Bed By Binding Arbitration Clause

The Cannabis industry is not immune from the Telephone Consumer Protection Act as a number of cases targeting cannabis suppliers and retailers have tested purported telemarketing techniques used by “pushers” in this “budding” trade.   But the TCPA is a mere nuisance compared to another, potentially existential, threat facing the industry—as the subject matter of cannabis transactions—you know, marijuana—remains illegal to sell under federal law, are contracts to buy and sell the green stuff even enforceable?

In a fascinating new decision handed down earlier this week, a Court in California faced a case intersecting both issues and was asked to determine whether a contract to facilitate the purchase and distribution of marijuana can be lawfully created under California law, which forbids contracts lacking a “lawful object.” Its answer—let an arbitrator figure it out.

In Williams v. Eaze Sols., Inc., Case No. 3:18-cv-02598-JD, 2019 U.S. Dist. LEXIS 182942 (N.D. Cal.  Oct. 21, 2019) the Plaintiff signed up for Eaze—an online application that apparently makes it easier for people to buy dope. Groovy.

After signing up and accepting the terms and conditions on Eaze’s platform the Plaintiff began receiving telemarketing calls, apparently trying to convince her to buy more marijuana. Plaintiff contends she did not want these calls and sued Eaze under the TCPA, which prevents calls to cell phones using certain automated technology without consent.

While it is unclear from the case precisely how Eaze was placing calls and whether it had consent to make the calls, Eaze sought to have the entire battle fought out in arbitration rather than in federal court. It submitted to the Court that by singing up for its marijuana-to-you services the Plaintiff had agreed to arbitrate any disputes it had with Eaze.

Although Eaze probably assumed its customers would not be the litigious bunch—imagine walking into federal court with a story that starts with “so I was buying some marijuana online and…”— Plaintiff fought Eaze tooth and nail to stay in court and pursue her case as a class action. Her theory—the arbitration clause was not enforceable because the entire contract between her and Eaze lacked a lawful basis since marijuana distribution remains illegal under federal law. Since the contract to buy and sell dope wasn’t legally enforceable in her mind (!) she could not be compelled to arbitrate her TCPA claims against Eaze.

The court disagreed and enforced arbitration, but interestingly not because it held the entire contract was enforceable. Rather the Court determined that the contract might not be valid but even if it wasn’t an arbitration clause contained within a void contract is still subject to enforcement. That is, even if the rest of the contract cannot be enforced, the TCPA claim still had to be resolved in arbitration because the portion of the contract dealing with arbitration remains enforceable.

Accordingly the Court compelled the dispute to arbitration and Plaintiff will be forced to convince the arbitrator that Eaze called her without consent in violation of the TCPA.

So there you go folks. If you sign up with Eaze any resulting contracts with your friendly local drug dispensary (dealer?) may not be enforceable in Court but you certainly will have to arbitrate any disputes arising out of phone calls they may make to you encouraging you to lighten up a bit.