2. 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
Provide summary of presentation
Explain the universe of Vicarious Liability issues
Focus on TCPA vicarious liability in the wake of Dish Network decisions.
Discuss post Dish cases
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3. 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
"accomplice liability" is found in the Telemarketing Sales Rule which prohibits providing substantial assistance or support to any seller when the provider of such support knows or consciously avoids knowing that the seller is involved in acts which violate the Telemarketing Sales Rule
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4. 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
Declartory Ruling: FTC, Dish and several AG requested ruling as a result of the then pending FTC v. Dish Network case.
Binding on District Courts (Hobbs Act)
To provide guidance in this area, we find that the following are illustrative examples of evidence that may demonstrate that the telemarketer is the seller’s authorized representative with apparent authority to make the seller vicariously liable for the telemarketer’s section 227(b) violations. For example, apparent authority may be supported by evidence that the seller allows the outside sales entity access to information and systems that normally would be within the seller’s exclusive control, including: access to detailed information regarding the nature and pricing of the seller’s products and services or to the seller’s customer information. The ability by the outside sales entity to enter consumer information into the seller’s sales or customer systems, as well as the authority to use the seller’s trade name, trademark and service mark may also be relevant. It may also be persuasive that the seller approved, wrote or reviewed the outside entity’s telemarketing scripts. Finally, a seller would be responsible under the TCPA for the unauthorized conduct of a third-party telemarketer that is otherwise authorized to market on the seller’s behalf if the seller knew (or reasonably should have known) that the telemarketer was violating the TCPA on the seller’s behalf and the seller failed to take effective steps within its power to force the telemarketer to cease that conduct. At a minimum, evidence of these kinds of relationships – which consumers may acquire through discovery, if they are not independently privy to such information– should be sufficient to place upon the seller the burden of demonstrating that a reasonable consumer would not sensibly assume that the telemarketer was acting as the seller’s authorized agent.
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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
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6. 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
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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
Chevron deference - One of the most important principles in administrative law, established by the Supreme Court in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The case raised the issue of how courts should treat agency interpretations of statutes that mandated that agency to take some action. The Supreme Court held that courts should defer to agency interpretations of such statutes unless they are unreasonable.
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8. 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
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9. Principals Are Responsible For Their Agents!
It’s Simple!
Principals Are Responsible For Their Agents!
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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”
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11. 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)
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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
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13. 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.
Are there cases where third parties are not agents?
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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
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Jones v. Royal Admin. Services 2017 U.S. App. LEXIS (August 9, 2017 Decision)
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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?
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17. Contact Info
Holly Borgmann ADT
Michele Shuster
Mac Murray & Shuster
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