In an unpublished opinion, the Ninth Circuit recently affirmed a district court’s ruling that Taco Bell was not vicariously liable for text messages sent by a third party advertising a Taco Bell product. See Thomas v. Taco Bell Corp., No. 12-56458, 2014 WL 2959160 (9th Cir. July 2, 2014). The ruling is one of the first appellate decisions to consider vicarious liability for section 227(b) violations in the wake of an FCC declaratory ruling that had endorsed and indeed provided guidelines on that topic. See In re DISH Network, LLC, 28 F.C.C. Rcd. 6574 (2013). Unfortunately for companies grappling with these issues, the unpublished Ninth Circuit decision does not provide any additional clarity.
In Thomas, the plaintiff alleged that Taco Bell had authorized an association of local Taco Bell operators to send unsolicited text messages as part of a promotional campaign in violation of the TCPA. Although the party responsible for sending the text messages was a separate service provider hired by the association’s advertising agency, the plaintiff argued that Taco Bell’s involvement in the campaign made it vicariously liable for the TCPA violations.
The district court disagreed, concluding that Taco Bell’s alleged knowledge, approval, and fund administration of the campaign did not amount to the control requisite for establishing vicarious liability. Thomas v. Taco Bell Corp., 879 F. Supp. 2d 1079, 1086 (C.D. Cal. June 25, 2012). The court explained that a plaintiff must show the defendant controlled, or had a right to control, the third party’s activities. Id. at 1084. In granting summary judgment, the district court held the plaintiff had failed to show that Taco Bell had controlled the manner and means of the text message campaign conducted by the association. Id. at 1085.
On appeal, the Ninth Circuit affirmed the district court’s ruling. Thomas, 2014 WL 2959160 at *2. The court also noted the FCC’s declaratory ruling in Dish Network, in which the FCC had suggested that broad federal agency principles applied to the TCPA, such as principles of apparent authority and ratification. The Ninth Circuit concluded that the record lacked evidence to support vicarious liability under either of these. Apparent authority did not apply because the plaintiff had failed to show any reasonable, detrimental reliance on any apparent authority Taco Bell had allegedly bestowed on the association. Id. Ratification did not apply because establishing an agency relationship between Taco Bell and the association was a perquisite to ratification. Id.
The decision is of interest to practitioners in this area, as it suggests some of the obstacles to proving vicarious liability under any of the various theories identified by the FCC in Dish Network. As readers will know, the D.C. Circuit had previously held that the guidance provided by the FCC in Dish Network is not subject to deference under Chevron or any other grounds.
Given the lack of evidence in the case, the Ninth Circuit, by declining to publish its decision, appears to have deferred to another day whether and to what extent the “guidance” in Dish Network actually is a correct statement of the law under the TCPA. Until that day, courts addressing these claims will need to determine whether and to what extent the Dish Network ruling marks an appropriate standard by which to measure vicarious liability under the statute.