The U.S. Court of Appeals for the Ninth Circuit recently affirmed the dismissal of alleged violations of the federal Telephone Consumer Protection Act (“TCPA”) by a business in connection with its national marketing campaign through its ad agency that contracted with the telemarketer. The Ninth Circuit held that, based on the evidence, the business could not be held vicariously liable for the alleged TCPA violations because it did not control the telemarketer, openly authorize the telemarketer’s actions, or ratify the telemarketer’s actions.
A copy of this opinion is available at: http://cdn.ca9.uscourts.gov/datastore/memoranda/2014/07/02/12-56458.pdf
An association of businesses (“Association”) sponsored a local sweepstakes promotion through its advertising agency (“Advertising Agency”). As part of the promotion, the Advertising Agency hired a separate provider of text-message based services (“Telemarketer”) which sent text messages regarding the promotion to consumers. One consumer who received a text message sued a business-member of the Association (“Business”) under the TCPA.
As you may recall, the TCPA provides that “[i]t shall be unlawful for any person … to make any call … using any automatic telephone dialing system or an artificial or prerecorded voice … to any … cellular telephone service.” 47 U.S.C. § 227(b)(1)(A)(iii). A defendant can be held liable under the TCPA either for its own actions (direct liability) and, under limited circumstances, can be held vicariously liable for the actions of others.
As you may also recall, a recent FCC ruling held that it is not “appropriate to limit vicarious liability to the circumstances of classical agency (involving actual seller, or right to control, of the telemarketing call) … Principles of apparent authority and ratification may also provide a basis for vicarious seller liability for violations of section 227(b).” In re DISH Network, LLC, 28 F.C.C. Rcd. At 6574, 6590 n.124.
The Ninth Circuit rejected that the consumer’s argument that the Business could be directly liable under the TCPA because the text messages were sent by the Telemarketer retained by the Advertising Agency. The Ninth Circuit noted that the consumer had “not presented any evidence … demonstrating that [the business] controlled the actions of the[] entities with respect to the campaign.”
The Ninth Circuit held that the Business could be vicariously liable under the circumstances of classical agency. However, the Ninth Circuit rejected that either the principle of apparent authority or the principle of ratification could provide a basis for vicarious liability of the Business.
With respect to the principle of apparent authority, the Ninth Circuit explained that apparent authority can only “be established by proof of something said or done by the [alleged principal], on which [the plaintiff] reasonably relied … Apparent authority exists only as to those whom the principal has manifested that an agent is authorized. There is, therefore, tort liability only if such a manifestation and its execution by the apparent agent results in harm.”
The Ninth Circuit held that the Business could not be vicariously liable for having extended any apparent authority because the consumer had “not shown that she had reasonably relied, much less to her detriment, on any apparent authority with which [the Business] allegedly cloaked the [Association], [the Advertising Agency], or [the Telemarketer].”
With respect to the principle of ratification, the Ninth Circuit noted, “[a]lthough a principal is liable when it ratifies an originally unauthorized tort, the principal-agent relationship is still a requisite, and ratification can have no meaning without it.” citing Batzel v. Smith, 333 F.3d 1018, 1036 (9th Cir. 2003) (footnote omitted). The Ninth Circuit found that the Business could not have ratified the text messages because the Telemarketer was not an agent of the business.
Accordingly, the Ninth Circuit affirmed the lower court’s dismissal of the action.
Eric Tsai
McGinnis Wutscher Beiramee LLP
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