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When is a seller liable for illegal calls made by a third party telemarketer? Fleshing out vicarious liability under the Telephone Consumer Protection Act

Using a telemarketer to market goods or services can be extremely costly to the seller if the telemarketer conducts its business in a manner that violates the Telephone Consumer Protection Act (TCPA).[1]  Penalties for violations of the TCPA range from $500 to $1,500 per call.  And with call or text campaigns that may reach thousands of recipients, or even millions – the potential liability can be astronomical.[2] It should be no surprise TCPA class action lawsuits are flourishing.

Often, though, telemarketing firms that make the calls are small businesses with limited assets.  A multi-million dollar judgment isn’t worth anything to class action lawyers if they cannot collect it.  As a consequence, the potential targets of the class action cases expand to include all of the parties from the telemarketer to the seller and any intermediaries in between.

Generally speaking, a seller cannot be directly liable for TCPA violations for telephone calls it does not make.[3]  However, a seller may be vicariously liable for violations of the TCPA by telemarketers or others hired by the seller or its agents under the federal common law of agency.[4]  The term “[a]gency means more than mere passive permission; it involves request, instruction, or command.”[5] Thus a seller may be liable for the acts of its agents who make the calls under theories of: (1) actual authority; (2) apparent authority; or (3) ratification.[6]

To determine if agency exists for purposes of liability under the TCPA, federal courts look to the amount of control the seller has over the “manner and means” of the call or text campaign.[7] “Control” under the TCPA is evidenced by several factors.  The more these control factors are present, the more likely the seller will be vicariously liable if the telemarketer violates the TCPA.

One such factor is evidence of defendant’s “day-to-day” business relationship with the caller.[8] Another factor is whether the defendant provided instructions on call quality or when or how many people to call.[9] Providing “materials, training, and scripts” is not enough to meet this standard.[10] Neither does merely “reviewing [an agent]’s work and making recommendations for improvement.”[11] A third possible factor is whether the principal shared access to the agent’s data or records.[12]Finally, mere knowledge of the call campaign, approval of the call campaign, and fund administration, are generally insufficient to constitute control.[13]

It’s clear that if a seller wants to use a third party telemarketer to market its good or services, the more control the seller maintains over the manner in which the telemarketer’s calls or texts are made exposes the seller to a higher risk of vicarious liability if the telemarketer runs afoul of the TCPA.

This post was drafted by Patrick McLaughlin, an attorney in the Spencer Fane St. Louis, MO office. For more information, visit spencerfane.com.

[1] 47 U.S.C. §§ 227, et seq.

[2] A jury recently found Dish Network liable for more than 51,000 calls to 18,000 class members, resulting in an award of $20.5 million In Krakauer v. Dish Network LLC, No. 14-0333 (M.D.N.C.)

[3] In re Dish Network, 28 FCC Rcd. at 6582-93.

[4] In re DISH Network, LLC, 28 F.C.C. Rcd. At 6584; see also Thomas v. Taco Bell Corp. (Taco Bell I), 879 F. Supp. 2d 1079, 1084 (C.D. Cal. 2012); aff’d, 582 F. App’s 678, 679-80 (Taco Bell II)(9th Cir. 2014).

[5] Taco Bell I, 879 F. Supp. 2d at 1084-85.

[6] Makaron v. GE Sec.Mfg., Inc., No. CV-14-1274-GW AGRX, 2015 WL 3526253, at *6 (C.D. Cal. May 18, 2015); Restatement (Third) of Agency §§ 2.01, 2.03, 4.01 (2006).

[7] Taco Bell I, 879 F. Supp. 2d at 1084.

[8] Petri v. Mercy Health, No. 4:15 CV 1296 CDP, 2016 U.S. LEXIS 167135, at *7 (E.D. Mo. Dec.5, 2016); Sun Microsystems Inc., 622 F. Supp. 2d at 899.

[9] Jones v. All American Auto Protection, Inc., No. 3:14-CV- 001990LRH-WGC, 2015 WL 7566685, at *4 (D. Nev. Nov. 24, 2015); Mais v. Gulf Coast Collection Bureau, Inc., 944 F. Supp. 2d at 1244-45.

[10] Jones, 2015 WL 7566685, at *4.

[11] Henderson v. United Student Aid Funds, Inc., No. 13-cv-1845 JLS, 2017 U.S. Dist. LEXIS 28165, at *19 (S.D. Cal. Feb. 27, 2017).

[12] Mey v. Pinnacle, LLC, No. 5:11CV47, 2012 WL 4009718, at *5; Lushe, 2014 U.S. Dist. LEXIS 157124, at *14.

[13] Taco Bell I, 879 F. Supp. 2d at 1086; Kern v. VIP Travel Serviceset al., No. 1:16-cv-00008-JTN-RSK, 2017 U.S. Dist. LEXIS 71139, at *2-4, 19 (W.D. Mich. May 10, 2017).