Decision on TCPA: Vicarious Liability For Text Messages

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The TCPA (Telephone Consumer Protection Act) prohibits many types of auto dialed/computer dialed calls to cell phones unless prior express permission was granted by the person called at the time of the financial transaction. Text messages are considered to be computerized calls under the TCPA. This is so important to consumers and businesses as the damages are $500 per call and this can actually increase to $1500 per call or text. Damages can be enormous.

There have been issues and arguments related to what liability is there when one company hires another company to actually make the calls or send the text messages.

One of the more recent opinions on this subject is from the Ninth Circuit Court of Appeals on September 19, 2014, in the case of Gomez v. Campbell-Ewald Company (link is to Google Scholar listing for this case).

It is a rather lengthy opinion so I’ll only include the relevant parts in quotations and then offer my thoughts on it.

Plaintiff Jose Gomez appeals adverse summary judgment on personal and putative class claims brought pursuant to the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227(b)(1)(A)(iii) (2012). Gomez alleges that the Campbell-Ewald Company instructed or allowed a third-party vendor to send unsolicited text messages on behalf of the United States Navy, with whom Campbell-Ewald had a marketing contract. Because we conclude that Campbell-Ewald is not entitled to immunity, and because we find no alternate basis upon which to grant its motion for summary judgment, we vacate the judgment and remand to the district court.

It is common for more than one company to be involved in the “campaign” or “broadcast” of calls and texts. We won’t focus on the immunity issue but if that is important in one of your cases there is a good discussion of this in the opinion.

The facts with respect to Gomez’s personal claim are largely undisputed. On May 11, 2006, Gomez received an unsolicited text message stating:

Destined for something big? Do it in the Navy. Get a career. An education. And a chance to serve a greater cause. For a FREE Navy video call [number].
The message was the result of collaboration between the Navy and the Campbell-Ewald Company,[1] a marketing consultant hired by the Navy to develop and execute a multimedia recruiting campaign. The Navy and Campbell-Ewald agreed to ” target=”_ young adults aged 18 to 24, and to send messages only to cellular users that had consented to solicitation. The message itself was sent by Mindmatics, to whom the dialing had been outsourced. Mindmatics was responsible for generating a list of phone numbers that fit the stated conditions, and for physically transmitting the messages. Neither the Navy nor Mindmatics is party to this suit.

There is no explanation for why the Navy and Mindmatics are not parties and it is not important for our discussion.

In 2010, Gomez filed the present action against Campbell-Ewald, alleging a single violation of 47 U.S.C. § 227(b)(1)(A)(iii), which states:

It shall be unlawful for any person within the United States, or any person outside the United States if the recipient is within the United States-
(A) to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice- …
(iii) to any telephone number assigned to a paging service [or] cellular telephone service. …
Gomez contends that he did not consent to receipt of the text message. He also notes that he was 40 years old at the time he received the message, well outside of the Navy’s target market. It is undisputed that a text message constitutes a call for the purposes of this section. See Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 952 (9th Cir. 2009) (“[W]e hold that a text message is a `call’ within the meaning of the TCPA.”).

After the court denied the motion, Campbell-Ewald moved for summary judgment, seeking derivative immunity under Yearsley v. W.A. Ross Construction Co., 309 U.S. 18 (1940). In opposition to the summary judgment motion, Gomez presented evidence that the Navy intended the messages to be sent only to individuals who had consented or “opted in” to receive messages like the recruiting text. A Navy representative testified that Campbell-Ewald was not authorized to send texts to individuals who had not opted in. The district court ultimately granted the motion, holding that Campbell-Ewald is “immune from liability under the doctrine of derivative sovereign immunity.” Gomez v. Campbell-Ewald Co., No. CV 10-2007 DMG CWX, 2013 WL 655237, at *6 (C.D. Cal. Feb. 22, 2013). Gomez filed a timely appeal, arguing that the Yearsley doctrine is inapplicable.

The motion to dismiss involved whether the claims were “moot” by an offer of judgment. Again we are skipping the immunity issues and going to the more applicable discussion of liability when someone else actually sent the texts or calls.

Campbell-Ewald nevertheless argues that it cannot be held liable for TCPA violations because it outsourced the dialing and did not actually make any calls on behalf of its client. See 47 U.S.C. § 227(b)(1)(A)(iii) (rendering it unlawful “to make any call” using an automated dialing system). Gomez, in fact, concedes that a third party transmitted the disputed messages. Even so, Campbell-Ewald’s argument is not persuasive.

There have been different viewpoints on this issue and this decision gives us some practical guidelines.

Although Campbell-Ewald did not send any text messages, it might be vicariously liable for the messages sent by Mindmatics. The statute itself is silent as to vicarious liability. We therefore assume that Congress intended to incorporate “ordinary tort-related vicarious liability rules.” Meyer v. Holley, 537 U.S. 280, 285 (2003). Accordingly, “[a]bsent a clear expression of Congressional intent to apply another standard, the Court must presume that Congress intended to apply the traditional standards of vicarious liability. …” Thomas v. Taco Bell Corp., 879 F. Supp. 2d 1079, 1084 (C.D. Cal. 2012), aff’d, ___ F. App’x ___, 2014 WL 2959160 (9th Cir. July 2, 2014) (per curiam). Although we have never expressly reached this question, several of our district courts have already concluded that the TCPA imposes vicarious liability where an agency relationship, as defined by federal common law, is established between the defendant and a third-party caller.[5]

This interpretation is consistent with that of the statute’s implementing agency, which has repeatedly acknowledged the existence of vicarious liability under the TCPA. The Federal Communications Commission is expressly imbued with authority to “prescribe regulations to implement the requirements” of the TCPA. 47 U.S.C. § 227(b)(2). As early as 1995, the FCC stated that “[c]alls placed by an agent of the telemarketer are treated as if the telemarketer itself placed the call.” In re Rules and Regulations Implementing the TCPA of 1991, 10 FCC Rcd. 12391, 12397 (1995). More recently, the FCC has clarified that vicarious liability is imposed “under federal common law principles of agency for violations of either section 227(b) or section 227(c) that are committed by third-party telemarketers.” In re Joint Petition Filed by Dish Network, LLC, 28 FCC Rcd. 6574, 6574 (2013). Because Congress has not spoken directly to this issue and because the FCC’s interpretation was included in a fully adjudicated declaratory ruling, the interpretation must be afforded Chevron deference. Metrophones Telecomms., Inc. v. Global Crossing Telecomms, Inc., 423 F.3d 1056, 1065 (9th Cir. 2005) (citing Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 980-85 (2005)) (other citations omitted), aff’d, 550 U.S. 45 (2007); see also Chevron, U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 843 (1984) (“If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation.” (footnote omitted)).

A pretty common sense approach and this is fairly well settled now. But the defendant had a clever argument — turns out “too clever” but still give it credit for making this argument which you will see next.

Campbell-Ewald concedes that the FCC already recognizes vicarious liability in this context, but argues that vicarious liability only extends to the merchant whose goods or services are being promoted by the telemarketing campaign.

So it argues that as a “marketing” company not actually selling the goods or services, it cannot be responsible when it hires a company to do the actual calling or texting. The court did not buy this.

Yet the statutory language suggests otherwise, as § 227(b) simply imposes liability upon “any person”-not “any merchant.” See Ali v. Fed. Bureau of Prisons, 552 U.S. 214, 221 (2008) (interpreting the use of “any” as “allencompassing”); 47 C.F.R. § 64.1200 (interpreting the phrase “any person” to reach individuals and entities). And although the FCC’s 2013 ruling may emphasize vicarious liability on the part of merchants, the FCC has never stated that vicarious liability is only applicable to these entities.[6] Indeed, such a construction would contradict “ordinary” rules of vicarious liability, Meyer, 537 U.S. at 285, which require courts to consider the interaction between the parties rather than their respective identities. See RESTATEMENT (THIRD) OF AGENCY (2006) §§ 2.01, 2.03, 4.01 (explaining that agency may be established by express authorization, implicit authorization, or ratification).

Given Campbell-Ewald’s concession that a merchant can be held liable for outsourced telemarketing, it is unclear why a third-party marketing consultant shouldn’t be subject to that same liability. As a matter of policy it seems more important to subject the consultant to the consequences of TCPA infraction. After all, a merchant presumably hires a consultant in part due to its expertise in marketing norms. It makes little sense to hold the merchant vicariously liable for a campaign he entrusts to an advertising professional, unless that professional is equally accountable for any resulting TCPA violation. In fact, Campbell-Ewald identifies no case in which a defendant was exempt from liability due to the outsourced transmission of the prohibited calls.

Moreover, our own precedent belies any argument that liability is not possible. In our seminal case regarding text messages and the TCPA, we allowed a case to proceed against an analogous marketing consultant who was not “responsible for the actual transmission of the text messages.” See Satterfield, 569 F.3d at 951. In Satterfield, a publisher had instructed a marketing consultant to create a text message campaign advertising a new Stephen King novel. Id. at 949. The consultant in turn outsourced the recipient selection and message transmission to two other subcontractors. Id. A recipient sued both the publisher and the marketing consultant for alleged violations of the TCPA. Id. at 950. The district court entered summary judgment in favor of both defendants, holding that the cellular user had consented to receive advertisements when it signed its cellular service contract. Id. We ultimately reversed and remanded the case, holding (inter alia) that the cellular service agreement did not constitute “express consent” to receive the advertisement in dispute. Id. at 955. So although we did not explain the basis of the defendants’ potential liability, we implicitly acknowledged the existence of that basis. The present case affords an opportunity to clarify that a defendant may be held vicariously liable for TCPA violations where the plaintiff establishes an agency relationship, as defined by federal common law, between the defendant and a third-party caller.

So what is the take home lesson from Gomez? That not only the company that actually makes the calls or sends the texts can be responsible, but also the companies that hire the actual callers can be liable as well.

From a defense standpoint, lawyers need to advise “merchants” and marketing companies that they cannot simply shield themselves by having someone else “do the deed” of making the calls.

And from the consumer standpoint where I live, we want to always look to suing not only the company that made the calls or sent the texts but find out who is behind that company. And then who is behind that one?

Defendants like to play “shell games” with this area of the law and we have to keep digging to find all of the parties that are responsible for what happened.

If you have questions about the TCPA and you live in Alabama, give us a call at 205-879-2447 or you can learn more about the TCPA on this blog or on our main consumer protection website.

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