An Indiana District Court Foreshadows a Split in Authority as to Personal Liability of Corporate Officers

The District Court for the Northern District of Illinois, in Black v. First Impression Interactive, Inc., No. 21 C 3745, 2022 WL 169652 (Jan. 19, 2022), denied a motion to dismiss a TCPA claim and, in so doing, highlighted a potential split among authorities as to the extent of personal liability for corporate officers and employees.

Plaintiff brought suit against two individuals, “the only officers and employees of First Impression,” a defunct corporation that had dissolved prior to the lawsuit.  Id. at *1.  Because First Impression had dissolved and the defendants were named individually, the court considered three theories of personal liability:  “(1) ʻvicarious liability’; (2) ‘relief defendants’; and (3) ‘personal participation.’”  Id. at *2.

The court rejected the plaintiff’s theory of vicarious liability.  It reasoned that only a principal may be vicariously liable, and “a corporation is the principal for its officers and employees.”  Id. at *2.  The court then found insufficient authority to sustain the plaintiff’s second theory “that a plaintiff who obtains a judgment against a defunct corporation can pursue supplemental proceeding against the shareholders.”  Id. at *3.  Except for a single trial-level case, the court found “no authority that it is proper for shareholders to be defendants on the substantive claims without a separate basis for personal liability.”  Id.

The court was persuaded at the initial pleadings stage, however, by the plaintiff’s argument that the defendants had personally participated in the TCPA violation.  Id. at *4.  The defendants countered “that allowing this claim would improperly deprive them of ‘the protection of the corporate form’ . . . because corporate officers ‘ordinarily are not subject to corporate liabilities.’”  Id. at *3 (citations omitted).  The court reasoned, however, that “[t]he corporate form does not shield officers and employees from liability for bad acts they commit in the course of their employment.”  Id.  And it noted that “the majority of district courts” impose “‘personal-participation liability’ under the TCPA.”  Id.

The concept of personal-participation liability, defendants argued, rests “on the challenged assumption that traditional forms of common-law personal liability remain available under federal statutes by default.”  Id.  For example, the United States Supreme Court found no Congressional intent to include aiding-and-abetting liability in the Securities Act “because such liability was not expressly provided in the statute.”  Id. (citing Cent. Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 184 (1994)).

The Third and Seventh Circuits appear skeptical as to whether the TCPA has any personal-participation liability for corporate officers.  In City Select Auto Sales, Inc. v. David Randall Associates, Inc., the Third Circuit considered “whether Congress and the FCC intended [to] impose personal liability on officers who act on the corporation’s behalf.”  885 F.3d 154, 159 (3d Cir. 2018).  Noting that there are many “examples of Congress expressly authorizing personal-participation liability,” the court doubted that Congressional silence in the TCPA indicated an intent to include personal-participation liability.  Id. at 160-61; Arwa Chiropractic, P.C. v. Med-Care Diabetic & Med. Supplies, Inc., 961 F.3d 942, 947 (7th Cir. 2020) (“The personal-participation standard has been criticized as resting on the challenged assumption that traditional forms of common-law liability remain available under federal statutes by default.”).

Ultimately, the Black court declined to follow what it characterized as “dicta” in the Seventh Circuit’s Arwa decision regarding the continuing viability of common-law liability under federal statutes.  2022 WL 169652, at *3.  Instead, it found that an “officer’s decision that the call should be made is effectively the act of making it.”  Id. at *4.  Thus, because the plaintiff plausibly alleged that the defendants “provided the call lists, scripts, and equipment necessary to make the calls and directed that the calls be made,” the theory of personal liability was “well within the statutory terms.”  Id.

This case demonstrates the unsettled question of personal liability when an officer causes a corporation to engage in conduct governed by the TCPA.  “[U]nlike the aiding and abetting liability at issue in Central Bank of Denver . . . [t]he TCPA imposes liability on ‘persons’ who ‘make any call.’”  Id. at *4.  And, unlike common-law aiding and abetting, “the officer is exercising their corporate and supervisory authority to cause an action to occur.”  Id.

Thus, on the one hand, a corporate officer may not be liable for the corporation’s TCPA violations merely by virtue of being an officer.  But, on the other hand, an officer who personally authorizes or participates in a TCPA violation may be liable even though the officer is acting on behalf of the corporation.  Accordingly, courts must grapple with the level of individual participation that occurs when an officer or director personally authorizes or directs conduct that violates the TCPA.