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Ninth Circuit: Marketing Consultant Vicariously Liable for Texts Sent by Third-party Vendor
Practical Law Legal Update 9-582-0565 (Approx. 6 pages)
Ninth Circuit: Marketing Consultant Vicariously Liable for Texts Sent by Third-party Vendor
by Practical Law Commercial
| Published on 23 Sep 2014 • USA (National/Federal) |
In Gomez v. Campbell-Ewald Company, the US Court of Appeals for the Ninth Circuit held, among other things, that marketing coordinators may be vicariously liable for violations of the Telephone Consumer Protection Act (TCPA) for calls made by third parties, if an agency relationship exists between the marketing coordinator and the third-party caller.
On September 19, 2014, the US Court of Appeals for the Ninth Circuit held in Gomez v. Campbell-Ewald Co. (Gomez), among other things, that vicarious liability may be imposed on a marketing coordinator for violations of the Telephone Consumer Protection Act (TCPA) for texts sent by a third party if an agency relationship exists between the marketing coordinator and the third-party caller (No. 13-55486, (9th Cir. Sept. 19, 2014)).
Background
The TCPA prohibits any person from making telephone calls, including text messages, using either an automatic dialling system or an artificial or prerecorded voice, unless the caller has the recipient's prior express consent (47 U.S.C. § 227(b)(1)(A)(iii) and Satterfield v. Simon & Shuster, Inc., 569 F.3d 946 (9th Cir. 2009)). For more information on the TCPA rules on robocalls, see Legal Update, FCC Adopts New Restrictions on Prerecorded and Automated Telemarketing Calls.
Prior to this case, the Ninth Circuit had not explicitly addressed the issue of vicarious liability for TCPA violations.
Campbell-Ewald Co. (Campbell) entered into a service contract with the US Navy to develop and execute a multimedia recruiting campaign, which included sending text messages to cell phone users who had agreed to such solicitations. Campbell outsourced the text-messaging services to Mindmatics, which involved:
- Generating a list of phone numbers that fit the stated conditions.
- Transmitting the text messages.
Jose Gomez received an unsolicited text message that:
- Mindmatics transmitted.
- Was prohibited by the TCPA because Gomez never gave Campbell, the Navy or Mindmatics his prior express consent to receive the message.
Gomez brought a class action lawsuit against Campbell in the US District Court for the Central District of California alleging a violation of Section 227(b)(1)(A)(iii) of the TCPA. The Navy and Mindmatics were not named as parties to the lawsuit. The district court granted Campbell's subsequent motion for summary judgment.
For a discussion of another case that involved a similarly prohibited text, see Legal Update, 11th Circuit: Strict Liability Under TCPA for Automated and Prerecorded Calls and Texts.
Outcome
The Ninth Circuit reversed the district court, holding in relevant part that marketing coordinators may be held vicariously liable for TCPA violations when an agency relationship, as defined by federal common law, exists between the marketing coordinator and a third-party caller. The Ninth Circuit reasoned that:
- In the absence of clear congressional intent, courts must presume that Congress intended to incorporate and apply the traditional rules and standards for vicarious liability (see Thomas v. Taco Bell Corp., 879 F.Supp.2d 1079 (C.D. Cal. 2012), aff'd, No. 12-56458, (9th Cir. July 2, 2014)).
- The Federal Communications Commission (FCC) has repeatedly interpreted this TCPA section to impose vicarious liability. The Ninth Circuit afforded deference to the FCC's TCPA interpretations because the FCC is the statute's rule-implementing and enforcement agency (see Legal Update, FCC Rules Companies May Be Vicariously Liable for Telemarketer TCPA Violations).
- While not explicitly ruling on the issue of vicarious liability, the Ninth Circuit has previously allowed similar lawsuits to proceed against marketing consultants that were not responsible for transmitting text messages (Satterfield, 569 F.3d 946 (9th Cir. 2009)).
Practical Implications
Companies engaged in providing, purchasing and outsourcing direct marketing services should be aware that they may be held vicariously liable for their service providers' TCPA violations. In Gomez, the Ninth Circuit agreed with the FCC and several district courts, which had previously imposed vicarious liability on marketers for calls made by third parties where an agency relationship exists under federal common law.
However, TCPA vicarious liability is not entirely established, as:
- At least one district court has refused to apply vicarious liability for any TCPA violations (see Legal Update: TCPA Do-not-call Provisions Require Express Consent, No Vicarious Liability for Violations: S.D. Florida).
- The degree of control required to impose vicarious liability for TCPA violations is not wholly settled, despite the court's holding that the existence of an agency relationship under federal common law is sufficient. For example, the Ninth Circuit itself has recently refused to impose vicarious liability under facts similar to the facts in Gomez (see Thomas v. Taco Bell, No. 12-56458, (9th Cir. July 2, 2014)).
To help minimize the risk of vicarious liability under the TCPA, companies can seek to:
- Engage with reputable vendors who are less likely to violate the TCPA in the first instance.
- Obtain an indemnity from the third-party vendor responsible for actually making the calls.
For more information on the application of the TCPA to text messages, see Practice Note, Direct Marketing: Regulation of Unsolicited Commercial Communications: Text Message.
For an update on a declaratory ruling adopted by the FCC, see Legal Update, FCC Rules Companies May Be Vicariously Liable for Telemarketer TCPA Violations.