Telemarketers’ Alleged Conduct Establishes Personal Jurisdiction over Principal with No Direct Forum Ties, Seventh Circuit Holds

The Seventh Circuit has reversed a decision from last year by the U.S. District Court for the Northern District of Illinois dismissing a TCPA claim for lack of personal jurisdiction over an alleged principal of the caller.  That decision, which we covered here, concluded that the plaintiff had not established an agency relationship between defendant Health Insurance Innovations, Inc. (“HII”) and the unnamed “lead generators” that had made the allegedly unsolicited calls.  Bilek v. Fed. Ins. Co., No. 19-8389, 2020 WL 3960445, at *5 (N.D. Ill. July 13, 2020).  As a result, the Northern District held that it lacked specific personal jurisdiction over HII, which had no connection to the forum state beyond its alleged relationship with the telemarketers that called the plaintiff in Illinois.  Id.

On appeal, the plaintiff argued that he had plausibly alleged an agency relationship and that the district court should therefore have imputed the caller’s conduct to HII when assessing whether it could exercise specific personal jurisdiction over the latter.  Bilek v. Fed. Ins. Co., No. 20-2504, 2021 WL 3503132, at *6 (7th Cir. Aug. 10, 2021).

Before addressing the sufficiency of the allegations, the Seventh Circuit found that exercising jurisdiction over a principal based solely on the conduct of an agent does not offend due process.  Id.  It noted that at least three other circuits have recognized this principle.  Id. (citing Nandjou v. Marriott Int’l, Inc., 985 F.3d 135, 150 (1st Cir. 2021); Celgard, LLC v. SK Innovation Co., 792 F.3d 1373, 1379 (Fed. Cir. 2015); Myers v. Bennett Law Offices, 238 F.3d 1068, 1073 (9th Cir. 2001)).  It also noted that both it and the U.S. Supreme Court have “long considered” agent conduct directed at the forum state to be “pertinent in the specific jurisdiction context” as an indication of purposeful availment of state law.  Id. (citing Asahi Metal Indus. Co. v. Superior Ct. of Cal., 480 U.S. 102, 112 (1987); Wis. Elec. Mfg. Co. v. Pennant Prods., Inc., 619 F.2d 676, 677 (7th Cir. 1980)).  “It follows,” the court reasoned, “that attributing an agent’s suit-related contacts to a principal to establish specific personal jurisdiction poses no due process bar.”  Id.

The court next found that the district court incorrectly held that the plaintiff had not adequately alleged the existence of an agency relationship between HII and the callers it had hired.  Id. at *7.  The plaintiff alleged that HII had contracted with the lead generators to market insurance sold by the co-defendant, Federal Insurance Company (“FIC”).  Id.  He also alleged that HII had facilitated the telemarketing campaign by providing health insurance quotes from FIC, emailing quotes to call recipients, and collecting information from the calls.  Id.  The court held that these allegations could establish an agency relationship based on actual authority and that, at the pleadings stage, the plaintiff did not necessarily need to provide “minute details” of the arrangement, such as who held control over the timing and quantity of the calls.  Id. at *7, *4 (citing Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008)).

The Seventh Circuit also reversed the district court’s dismissal of the claim against FIC, which had also been based on a perceived lack of an agency relationship with the callers.  Id. at *5.  According to the complaint, FIC authorized the callers to use FIC’s call scripts, tradename, and proprietary pricing information.  Id. at *3.  The court found that those allegations, if established, could give rise to vicarious liability.  Id.  In doing so, it contrasted Bilek’s allegations with those in another Seventh Circuit case where the plaintiff had alleged simply that the defendant’s products were advertised through generic means as part of a “common advertising arrangement.”  Id. at *4 (citing Warciak v. Subway Rests., Inc., 949 F.3d 354, 357 (7th Cir. 2020)).

One thing the Seventh Circuit did not address, however, is how courts should handle allegations affecting personal jurisdiction that the alleged principal says are false.  In this case, the trial court dismissed the claims because it found the agency allegations insufficient as a matter of law, and therefore did not hold a hearing as courts often do under Rule 12(b)(2).  In the absence of an evidentiary record, the Seventh Circuit accepted all of the plaintiff’s allegations as true.  But it is not clear what the trial court would have done—i.e., whether it would have held a hearing—if it had found the allegations sufficient.  It is one thing to allow a claim against a local defendant based on agency allegations, but it is another thing entirely to hale an out-of-state defendant into court based solely on such allegations without affording them an opportunity to challenge them.  If an alleged principal takes issue with such allegations, the district court should conduct an expedited assessment of the contested facts—similar to the way courts handle factual issues affecting subject-matter jurisdiction.  Such preliminary factual assessments are the only way courts can prevent plaintiffs from violating defendants’ due process rights by forcing them to litigate in forums to which they have no connection.