Hard Sell: Sixth Circuit Denies Vicarious Liability for TCPA Violations Against Third-Parties Providing Back-End Services to Telemarketers
The limits of agency and vicarious liability are constantly being tested in TCPAWorld and a recent decision may give some guidance (and a breather) to third-parties who supply services to telemarketers. Specifically, a third-party’s agreement to supply a telemarketer with calling data and related-services to assist the telemarketer in carrying out its calling campaign is not sufficient to impose vicarious liability upon the third-party service provider. However, watch out for situations where the third-party is not merely assisting the telemarketer, but acting on its behalf and with its blessing.
The case is Lucas v. Telemarketer Calling From (407) 476-5680 & Other Tel. Nos., 2019 U.S. App. LEXIS 16106 (6th Cir. May 29, 2019). There, the plaintiff allegedly received telemarketing calls to his residential phone line despite having his number listed on the federal “do-not-call” registry. As TCPAWorld knows, this is a big no-no. As a result, he sued those telemarketers, but also sued the third-parties who, according to the plaintiff’s allegations, “provided substantial assistance to [the] telemarketers while knowing that those telemarketers were engaged in practices that violate the TCPA.”
As you may be thinking – “how” did those third-parties “substantially assist” the telemarketers’ calls? According to the plaintiff, the third-parties “(1) sold telephone numbers to [their] telemarketer clients; and (2) provided the telemarketers with [services] which allowed them to specify any name they chose to be displayed on a consumer’s caller ID device,” or as the court referred to it, “number spoofing.”
No dice according to the Sixth Circuit.
In its opinion, the court heeded the FCC’s guidance from its declaratory ruling in In re Dish Network, LLC, 28 FCC Rcd. 6574 (2013). Briefly, in Dish Network, the FCC clarified that “classical” notions of agency law apply in the context of the TCPA, such as traditional “principal-agent” relationships, “apparent authority” for a third-party to act on behalf of another, and situations where a principal “ratifies” the acts of its agent.
Applying this guidance, the Sixth Circuit concluded that the plaintiff failed to establish that the third-parties were vicariously liable for the telemarketing calls made to his residential line. Importantly, the court first noted that the third-parties did not “initiated [the] calls” to the plaintiff on behalf of the telemarketers – therefore, they were not “directly” liable under the TCPA.
Moving to vicarious liability, the court was unpersuaded by the evidence that the third-parties “encouraged and contributed to the illegal telemarketing practices engaged in by their telemarketer clients,” finding that those acts did not demonstrate that their telemarketing clients were “acting ‘on behalf of’” the third-parties when they made their calls, or that the telemarketing clients were “subject to [the third-parties’] control.” The court also rejected plaintiff’s argument that, by selling the call data to the telemarketers and providing the so-called “spoofing” service, the telemarketers acted with “apparent authority” on behalf of the third-parties, or that the third-parties “ratified” the telemarketers’ actions.
This case is a notable juxtaposition to the Czar’s recent post concerning the Fourth Circuit’s decision in Krakauer v. Dish Network, L.L.C., 2019 U.S. App. LEXIS 16111 (4th Cir. May 30, 2019). In Krakauer, the Fourth Circuit upheld a jury finding that Dish Network was vicariously liable for telemarketing calls made by third-parties on-behalf of Dish Network in violation of the “do-not-call” registry. There, according to the court, the evidence was “considerable” in that Dish Network maintained “broad authority over [the third-party contractor’s] business,” the third-party “was authorized to use Dish [Network’s] name and logo in carrying out its operation,” and Dish Network had agreed to police the third-party’s “TCPA compliance.” The evidence also showed that Dish Network “was . . . aware” of the third-party’s TCPA violations, but “took no meaningful action to ensure compliance” and “profited from [its] actions.”
The takeaway here, folks, is that third-parties who supply services to telemarketers on the non-consumer facing side of the bargain are more insulated from TCPA liability, while a third-party providing consumer-facing services on behalf of a telemarketer may be directly liable under the TCPA (and the telemarketer vicariously liable).