Who Bears Liability For That Call Or Fax? Courts Continue To Wrestle With Direct And Vicarious Liability

Whenever more than one individual or entity is allegedly involved in the “sending” of a fax or the making of a call or text, two key questions in the litigation are: (i) what must be pleaded to state a claim against each party and (ii) if indeed there was a violation, who bears responsibility for it?

In 2013, the FCC stated that “while a seller does not generally ‘initiate’ calls made through third-party telemarketers within the meaning of the TCPA, it nonetheless may be held vicariously liable under federal common law principles of agency . . .” In re Joint Petition filed by DISH Network, LLC, 28 FCC Rcd 6574, ¶ 1 (2013) (“Dish Network Order”). And in 2014, the FCC stated that the DISH Network Order “did not address or alter the treatment of facsimile transmissions under the TCPA or the Commission’s implementing regulations,” and “under the plain text of [the FCC’s definition of sender] – and unlike the robo-call and do-not-call contexts – direct liability for sending an unsolicited facsimile advertisement attaches to the entity (defined as the ‘sender’) whose goods or services are being promoted.” Letter from Laurence N. Bourne, Counsel, Federal Communications Commission to John Ley, Clerk of the Court for the Eleventh Circuit at 1, Palm Beach Golf Center-Boca, Inc. v. Sarris, No. 13-14013 (11th Cir. July 17, 2014), ECF No. 55 (previously discussed here). Though the Dish Network Order was intended to “clarify” these issues (28 FCC Rcd 6574, ¶ 1), they remain hotly contested, as indicated by two recent cases.

On November 30th, the Southern District of New York in Melito v. American Eagle Outfitters, Inc., No. 14-cv-2440, 2015 U.S. Dist. LEXIS 160349 (S.D.N.Y. Nov. 30, 2015) addressed the requirements for adequately pleading a TCPA claim based on vicarious liability for unsolicited texts. Plaintiffs alleged in their third amended complaint that Defendants continued to send unsolicited mass marketing texts advertising the American Eagle brand after Plaintiffs had sent “STOP” text messages in response to the ads. Plaintiffs alleged that American Eagle sent Experian a list of numbers to which text messages should be sent, Experian sent this information to Archer USA, Inc.’s text messaging platform, and the text messages were sent. Experian filed a 12(b)(6) motion to dismiss, which the court granted.

The court dismissed the claims against Experian on two grounds. First, the court held that Plaintiffs failed to adequately allege that Experian could be directly liable under the TCPA because according to the court’s plain reading of the statutory language, the TCPA only imposes liability upon persons that “make” a telephone call or text, i.e., persons that physically place or actually send the text messages, which Experian did not do. 2015 U.S. Dist. LEXIS 160349, at *13-18. Further, Experian could not plausibly be held directly liable for “initiating” the text messages, since that language in the statute applied to “sellers,” i.e., “the person or entity on whose behalf a telephone call or message is initiated for the purpose of encouraging the purchase . . . of . . . goods or services”—in this case, American Eagle Outfitters, not Experian. Id. at *19-20.

Second, the court held that Plaintiffs failed to adequately allege that Experian could be vicariously liable because Plaintiffs failed to plead any facts showing an agency relationship between Experian and Archer, the company who actually sent the text messages. Simply put, “mere conclusory allegations that Archer was Experian’s agent or that Experian had the right to control the sending of the texts, without more, fails to plead an agency relationship (between Experian and Archer) sufficient to allege vicarious liability under section 227(b)(1)(A)(iii) of the TCPA.” Id. at *21.

While the FCC has stated that the analysis of one’s liability for calls and texts is different than it is for faxes, a case now before the Seventh Circuit appears poised to resolve just how big of a difference that is, at least when it comes to what actually must be proven to prevail on the merits.

On November 5, 2015, the Seventh Circuit heard oral argument in Bridgeview Health Center Ltd. v. Clark, Nos. 14-3728 & 15-1793, a fax-based TCPA case where the primary issue on appeal was whether a defendant is liable for all of the faxes sent by a third party, or only for those faxes the third party was authorized by the defendant to send.

In Bridgeview, the defendant hired a company to send faxes to advertise his business—a small hearing-aid repair business with two locations in Indiana. Bridgeview Health Care Ctr. Ltd. v. Clark, No. 09-cv-5601, 2014 U.S. Dist. LEXIS 181671, at *3-6 (N.D. Ill. Nov. 21, 2014). The defendant admitted that he authorized the fax broadcasting company to send 100 faxes within a 20-mile radius of Terre Haute, Indiana and approved the language on the fax, but disputed that he authorized the fax broadcaster to send any faxes on his behalf outside of that radius (including to the plaintiff, a company located in Chicago). Id. at *3, 6. Using a vicarious liability analysis premised on the DISH Network Order, the court granted summary judgment for the plaintiff regarding the liability for the faxes sent within 20 miles of Terre Haute, but held that there were disputed issues of material fact regarding liability for faxes sent outside of that radius. Following a one-day bench trial, and still applying a vicarious liability analysis, the court ruled that the defendant was not liable for the thousands of faxes sent outside that radius because the defendant had not expressly or impliedly authorized the faxes to be sent outside of the specified geographical radius, nor was there apparent authority for the broadcaster to transmit the faxes outside that radius. Id. at *14-18.

The parties subsequently filed cross-motions to alter the judgment, both of which were denied. Bridgeview Health Care Ctr. Ltd. v. Clark, No. 09-cv-5601, 2015 U.S. Dist. LEXIS 45710 (N.D. Ill. Apr. 8, 2015). While the court agreed with the defendant that the TCPA was not a strict liability statute, the court also agreed with the plaintiff that its “previous recourse to principles of vicarious liability [was] unnecessary” and that its use of a “heightened standard of agency liability” was incorrect in light of the FCC’s view that the fax regulations impose direct liability, but noted that this “distinction between direct and vicarious liability [was] of little help” in resolving what standards govern direct liability under the TCPA. Id. at *14. Thus, the court held that “the phrase ‘on whose behalf’ [in the FCC’s definition of “sender”] requires a standard assessing a variety of factors surrounding a defendant’s role in providing direction to a third party”—a totality-of-the-circumstances approach—and affirmed its prior ruling. Id. at *20, *21-22.

On appeal, the plaintiff-appellant argued that the District Court erred in applying a totality of the circumstances approach. Rather, at oral argument (a recording is available here) Plaintiff argued that the TCPA creates a strict liability standard—an argument that drew concerns from the panel (starting at the 7:23 mark):

Judge Rovner: “You seem to be advocating for strict liability. If we took your argument to its logical conclusion, if a competitor wanted to put Affordable Digital out of business, it could simply send thousands of unsolicited faxes advertising its service, right?”

Phillip Bock (Plaintiff’s Counsel): “I mean, I suppose that’s true. The statute is strict liability. Courts have said that. The 11th Circuit has said it. Uh, there’s no. I don’t know of that ever happening. I’ve been doing these cases for about ten years. I’ve never heard of anybody sabotaging their competitor with junk faxes, but it’s possible.”

Judge Rovner: “Yeah, but under your theory, Affordable would then be liable for millions of dollars of statutory damages because the faxes advertise its goods or services. Can that really be what Congress intended?”

We expect the 7th Circuit opinion to be released in the spring. Check back here for updates.

Justin O. Kay

About the Author: Justin O. Kay

Justin Kay advises and defends business clients regarding their interactions and communications with consumers. He appears regularly on behalf of clients before federal and state courts, federal agencies and independent self-regulatory bodies, such as the National Advertising Division of the Better Business Bureau. Justin’s practice focuses on defending clients in the growing number of complex class actions arising under federal and state consumer protection and privacy laws such as the federal Telephone Consumer Protection Act, the Illinois Biometric Information Privacy Act and the California Consumer Privacy Act. He is a deputy leader of the litigation practice group.

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