August 19, 2019

August 19, 2019

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Security Company Found Vicariously Liable for TCPA Violations Committed by Lead Seller

The realm of lead generation can present a minefield of TCPA risks.  The recent order granting summary judgment in Braver v. NorthStar Alarm Systems, LLC, No. CIV-17-0383, 2019 WL 3208651 (W.D. Ok. Jul. 15, 2019) illustrates the potentially catastrophic effects of taking the wrong steps in that minefield, particularly when it comes to the liability lead buyers may face for TCPA violations committed by the sources from which they purchase leads. 

Before breaking down what happened in Braver, it is helpful to start with a few figures from that case:

  • 252,765 calls at issue made by the lead seller to generate leads in a nine month period;

  • A mere 150 customers acquired from those leads by the lead buyer;

  • $126,000,000 - $379,000,000 in potential exposure the lead buyer now faces for TCPA violations committed by the lead seller in generating those leads.

Without a doubt, these figures demonstrate the significant risk inherent in even a relatively small (and seemingly unsuccessful) marketing campaign.  To any business this space, Braver highlights the critical importance of carefully vetting lead sources, and the strategic management of these types of third party relationships. 

Braver is a TCPA class action arising out of a lead buyer/seller relationship.  According to the court’s ruling granting summary judgment in favor of the Plaintiff, Defendant NorthStar purchased leads from Yodel between February and October 2016.  Yodel was selling NorthStar “qualified” leads by essentially cold calling lists of telephone numbers using a soundboard system.  Some leads were warm transferred to NorthStar, and others were called back by NorthStar. 

Notably, the fact that Yodel made the calls in question without consent was not in dispute.  And since Northstar did not make the calls directly, the key issue in the case was whether NorthStar could be held vicariously liable for the TCPA violations committed by Yodel. 

The FCC and several courts have held that under federal common-law principles of agency, there may be vicarious liability for TCPA violations.  There are three theories under which a non-caller may be vicariously liable for TCPA violations of a direct caller: actual/classical agency, apparent authority, and ratification.  The court in Braver found that NorthStar was vicariously liable for the TCPA violations Yodel committed in generating leads purchased by NorthStar under each of these theories.  While there is some variation among these three legal theories, from a practical perspective the court’s conclusion came down to the following set of undisputed facts: 

  1. NorthStar reviewed a sample script provided by Yodel, then told Yodel to begin making calls “with the understanding they would be using th[e] script.”

  2. The script generically described a modern home security system (full color, touch screen, ability to use home automation, cell phone control, etc.) which was “an accurate description of a system NorthStar provides,” which "confirmed" NorthStar was "involved in determining the script."

  3. NorthStar was aware that Yodel was going to use soundboard technology to deliver prerecorded voices in audio clips.

  4. Yodel and NorthStar had an agreed upon delivery method for leads (either warm transfers, or call backs).

  5. Both Yodel and NorthStar made statements which identified the initial call as being from the “Security Help Center.”

  6. Northstar received some complaints about the calls placed by Yodel, and had a policy for responding to complaints about the “robocalls.”

  7. NorthStar caused Yodel to change its procedures from time to time, including changing the transfer procedure, and the pace/flow of leads transfers.

  8. NorthStar had “some involvement” in determining which numbers Yodel called by directing Yodel to make calls to zip codes in which NorthStar did business.

  9. NorthStar and Yodel agreed to changes in the compensation structure for the purchase of leads;

  10. NorthStar and Yodel shared information about the lead campaign. Yodel would upload consumer lead data directly into NorthStar’s telemarketing software, and NorthStar provided regular reports to Yodel about the sales it was making as a result of Yodel’s call.

What is most notable here is that many (but not necessarily all) of these facts describe a fairly typical lead buyer/seller arrangement in which there is some measure of coordination between the two parties on how leads are to be generated and delivered.  Indeed, taking the court’s reasoning in Braver to its logical extreme, practically any lead buyer/seller relationship could be considered an agency under one or more agency theories.

This, in turn, highlights the critical importance to lead buyers of vetting their lead sources, and taking the appropriate risk mitigation measures to help protect themselves from potential TCPA violations that may be committed by their lead sources.  On the lead seller side, this highlights the importance of ensuring a TCPA compliant process of generating leads.  Indeed, according to the Braver ruling, Yodel had provided assurances that their leads were TCPA-compliant, and may therefore be on the hook to NorthStar for the liability NorthStar now faces for the potential breach of those assurances.

Braver shows just how quickly leads can turn radioactive if proper measures are not taken to ensure TCPA compliance.  And given the extraordinarily steep penalties for non-compliance—particularly when aggregated in a class action—even relatively small or modest marketing campaigns can result in levels of exposure that may pose an existential threat to business.

Copyright © 2019 Womble Bond Dickinson (US) LLP All Rights Reserved.

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About this Author

Artin Betpera, Class action litigation lawyer, Womble
Senior Counsel

Artin serves as a chief lieutenant on one the nation’s most experienced and powerful class action defense teams.  Precise and analytic, Artin brings over a decade of experience to bear on complex litigation problems.

Artin adeptly manages significant volumes of litigation for some of the country’s largest banks and financial institutions, never losing sight of providing an exceptional level of service to his clients.  He has been a dedicated financial services litigator since starting the practice of law at ground-zero of the financial crisis, affording him with...

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