Vicarious Liability - You’re You and I’m Me . . . or Maybe Not Holly Borgmann Head of Government Affairs ADT Michele Shuster Partner Mac Murray & Shuster PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE

The Industry’s Vicarious Liability Universe Federal Trade Commission (FTC) FTC Act Telemarketing Sales Rule (TSR) “Assisting and Facilitating” Federal Communications Commission (FCC) Telephone Consumer Protection Act (TCPA) Federal Common Law Principles of Agency States – Mirror FTC & FCC in varying degrees PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE

TCPA Vicarious Liability History FCC’s 2013 Dish Network Declaratory Ruling FCC’s 2015 Omnibus Ruling and Order United States of America and the States of California, Illinois, North Carolina, and Ohio, Plaintiffs, v. Dish Network, L.L.C., Defendant PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE

PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE 2013 Declaratory Ruling Primary liability extends to entity that physically places the call Seller can be held vicariously liable for calls under a common law agency theory Formal agency Apparent agency Ratification Did not discuss how a seller can avoid vicarious liability In many cases, actually muddied the water PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE

FCC Examples of Agency (burden shift) Seller allows access to information and systems normally only accessible by seller, including pricing nature of product customer information direct entry of customer sales information into seller system Use of seller’s name or trademark/service mark Approved, wrote or reviewed script Seller knew / should have known of violation and failed to stop it PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE

PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE What is binding FCC’s standard for primary and vicarious liability Com. Pai criticized the ruling (now Chairman) Not binding: guidance on application of agency principles PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE

2015 Omnibus Ruling and Order Addressed primary liability (apps, platform providers, etc.) “Direct connection between [the business] and the making of a call” including So involved in the placing of a call Willfully enable or assists telemarketer PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE

Principals Are Responsible For Their Agents! It’s Simple! Principals Are Responsible For Their Agents! PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE

PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE Hallmarks of Agency Initial and ongoing control Control over the 3rd party Contractually Nature of relationship Provide interim instructions Agent must agree to “right to control” and acts are within scope of control Can impose “constraints” PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE

Actual vs. Apparent Authority Ability to act on behalf of principal Express or inferred Acts necessary and incidental to express authority Apparent Party has legal power to transact with third party Reasonable 3rd party would believe the agent has authority to act on behalf of principal based on acts/manifestations by principal Principal must represent party as agent (can’t sit idly by) PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE

PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE Ratification No actual or apparent authority for specific act, but principal- agent relationship must exist “Ratifies” or “adopts” agent’s acts. Received the benefit of the act Can only be through the voluntary act of the principal Not bound by ratification w/o knowledge of material facts unless principal chose to ratify act and with knowledge of lack of awareness PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE

So they are an agent, now what? Negating Agency Acted outside of scope of authority Didn’t ratify behavior by knowingly accepting benefit of agents actions. PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE

PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE Cases – Common Themes The parties’ categorization of the relationship is of little significance The ability to control the manner and means of a 3rd party’s marketing The ability to give interim instructions Mere approval of campaign is not enough Providing marketing materials and leads Can extend to “middlemen” Lead generator for many different sellers = less likely an agent “Must comply with all laws” – violations outside of scope of authority Must take action when have knowledge of bad acts PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE

PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE Jones v. Royal Admin. Services 2017 U.S. App. LEXIS 14671 (August 9, 2017 Decision) PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE

PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE What’s next? Legislation proposed last year to encourage enhanced compliance efforts Put forward by Sen. Daines (R-MT) Carrot versus stick approach Affirmative defense Not adopted, but not objected to either Opportunity to seek FCC clarification? PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE

Contact Info Holly Borgmann ADT hborgmann@adt.com 561-226-3484 Michele Shuster Mac Murray & Shuster mshuster@mslawgroup.com 614-939-9955 PACE WASHINGTON SUMMIT | SEPTEMBER 17-19, 2017 | #17PACE