Assessing Vicarious TCPA Liability: Your Telemarketing Contracts Matter

By Richard NewmanAugust 28, 2017

Vicarious liability is a doctrine that imposes responsibility upon one person/entity for the failure of another, with whom the person/entity has a special relationship.  The doctrine plays an important role in Telephone Consumer Protection Act litigation.

In Jones v. Royal Admin. Servs., Inc., the Ninth Circuit Court of Appeals recently affirmed that traditional agency principles apply when considering whether a telemarketing vendor acted as product/service provider’s authorized agent for purposes of TCPA liability.

In Jones, plaintiffs named the provider as a defendant.  In doing so, plaintiffs claimed that the telemarketer acted as the provider’s agent because the provider had “actual authority” over the telemarketer.  Plaintiffs alleged that the provider, therefore, was vicariously liable for its agent’s telemarketing calls.

The provider’s position was that it was not vicarious liable for the unlawful telemarketing calls because the telemarketer was an independent contractor – not its agent.

In ruling on behalf of the provider, the Ninth Circuit noted that “not all relationships in which one person provides services to another satisfy the definition of agency” and that “[an] individual acting as an ‘independent contractor,’ rather than an agent, does not have the traditional agency relationship with the principal necessary for vicarious liability.”

The extent of control that a provider actually exercises over third-parties that provide call transfers or data is of critical importance. 

Key factors that courts will consider when evaluating whether a provider may be responsible for the actions/omissions of a third-party lead generator include, without limitation:

  • Whether a lead generator is required to maintain records of its interactions with consumers that purchase the applicable products/services;
  • Whether a lead generator is required to provide regular reports on sales and/or cancellation requests;
  • Whether a lead generator is only permitted to utilize the scripts and materials provided/approved by a provider;
  • Whether a lead generator is required to comply with a provider’s guidelines and procedures;
  • Whether a provider trains the telemarketers;
  • Whether the marketing contract reflects an impermanent relationship sufficient to support a finding of independent contractor status;
  • Whether a lead generator provides its own tools, instrumentalities, equipment and place of work;
  • Whether a lead generator sets its own hours and only receives payment if telemarketers actually make a sale;
  • Whether the work is typically performed under supervision;
  • The skill required;
  • The degree of control that a provider exercises over the actual calls at issue; and
  • The subjective intent of the parties.

Takeaway:  The extent of control exercised by a provider over telemarketers and the calls at issue is an essential ingredient in assessing the existence of an agency relationship.  Relationships with third-party call transferors and data sources should take the foregoing factors into account.  Marketing contracts should be examined and deliberately drafted with a forward looking approach in order to minimize vicarious liability exposure and maximize the number of available defenses in the event that the actions of a lead generator result in litigation.

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