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Volume XI, Number 64

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One Free Bite?: Court Holds That a Seller Can Avoid TCPA Liability By Immediately Terminating Vendor That Made Illegal Calls

One of the trickiest issues confronting TCPA litigants is that of avoiding vicarious liability for calls made by third parties using your platform or selling your products.

Some courts, it seem, will infer vicarious liability most any time a call is made “on behalf” of a seller. Other courts seemingly require clear and direct evidence of actual control over the manner and means of communication by the caller.

Even where a court might find a lack of control or actual authority, however, many courts will still find a seller liable if it knowingly accepts the benefit of illegal conduct. In the context of phone calls made to collect debt this creates a weird rule that a creditor may need to allow an account to fall back into default and refund collected sums in order to avoid liability. The situation is not much better in the marketing context, however, where a seller often needs to grapple with the idea of trying to cancel contracts for products that were sold through illegal activity. How does that even work?

Well in McDermet v. Directv, Civil Action No. 19-11322-FDS2021 U.S. Dist. LEXIS 11123 (D. Mass. January 21, 2021) the court looked at the issue of ratification from a more practical perspective and held that a seller need not cancel or refund payments to avoid liability—it just needed to immediately fire the caller.

In McDermet, the callers were ostensibly selling the Defendant’s products, but for their own benefit. The Defendant did receive an incremental benefit from the sale by its authorized dealers, but it did not maintain any level of control over the individuals making the sales. The Court had little trouble holding that the Defendant had not actually or apparently authorized its network of dealers to make unlawful calls. But what about ratification? Surely the Defendant was liable for the calls because it accepted the benefit of sales even after learning of the potential TCPA violations, right?

Nope.

In the Court’s view it was enough that the Defendant terminated the dealers after learning of the plaintiff’s claims. As the Court views matters: “After [Defendant’s agents received the letter and thus “full knowledge of all material facts,” defendants investigated McDermet’s claims and terminated their contracts with the offending authorized retailers.” This was critical in the court’s view because it showed defendants did not “acquiesce[] in the agent’s action or fail[] promptly to disavow the unauthorized conduct after disclosure of material facts.”

That last assertion is a bit questionable—again the Defendants terminated the agents but there was no evidence that they disavowed the sale of the services that were enabled by the dealers’ purportedly illegal conduct. Nonetheless, score one for the good guys.

The take away here is that sellers need to remain ever vigilant about potentially illegal calls being made by thos authorized to sell its goods or services. While sellers are not instantly liable for calls made on their “behalf” the line for vicarious liability is very fuzzy. Sellers can best protect themselves by exercising limited (or no) control over the operations of their dealers (other than contract terms emphasizing the need to comply with the law) and by ruthlessly cutting vendors that the seller determines violate the TCPA or other enactments.

Always happy to discuss.

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© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume XI, Number 22
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About this Author

Eric Troutman Class Action Attorney
Of Counsel

Eric Troutman is one of the country’s prominent class action defense lawyers and is nationally recognized in Telephone Consumer Protection Act (TCPA) litigation and compliance. He has served as lead defense counsel in more than 70 national TCPA class actions and has litigated nearly a thousand individual TCPA cases in his role as national strategic litigation counsel for major banks and finance companies. He also helps industry participants build TCPA-compliant processes, policies, and systems.

Eric has built a national litigation practice based upon deep experience, rigorous...

213-689-6510
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