The law surrounding vicarious liability under the Telephone Consumer Protection Act continues to develop. On July 20, 2015 in the matter of Kristensen v. Credit Payment Servs., Inc., the U.S. District Court for the District of Nevada held that lenders and lead sellers were not liable for unsolicited text messages sent by a marketing firm, absent evidence they knew the messages were unsolicited.
The Telephone Consumer Protection Act (TCPA), with limited exception, requires prior express written consent for certain telemarketing calls or text messages, specifically, autodialed and pre-recorded calls to mobile phones, and pre-recorded residential calls. In Kristensen, a small handful of lenders purchased sales leads from defendant Leadpile LLP. Leadpile, in turn, purchased leads from defendant Click Media LLC.
Click Media contracted with non-party marketer AC Referral Systems LLC, which actually sent text messages to leads that it purchased and which operated a website that ultimately redirected responders to the lenders' websites. AC Referral sent approximately 100,000 text messages to leads, including plaintiff Kristensen. Although Click Media's contract with AC Referral required that all recipients had consented to receiving text message advertisements, Kristensen and others allege that they had not consented.
As a result, Kristensen brought class claims against Click Media, Leadpile and the lenders for TCPA violations. Plaintiff claimed that each entity was vicariously liable for AC Referral's text messages. The defendants moved for summary judgment.
The court found that the lenders and lead sellers up-stream from AC Referral were not vicariously liable under the TCPA. It rejected Kristensen’s argument that the defendants each ratified AC Referral's text messaging by knowingly accepting the benefits of its campaign, finding that there was no evidence that the defendants knew or should have known that AC referral used an ATDS to send unsolicited messages. While Lead Pile expressed some suspicion about Click Media's business, the court said, the suspicion related solely to profit sharing, not the generation of leads.
Conscious ignorance of AC Referral’s practices, the court added, could not lead to vicarious liability in the absence of reasonable red flags. A contrary finding would lead to the inappropriate imposition of a strict liability contractual standard.
The court also rejected Kristensen’s theory that the defendants were vicariously liable because AC Referral had apparent authority to act on their behalf. In doing so, the court held that apparent authority does not apply without a manifestation that would be visible to third parties. Merely performing a service related to another's business is not sufficient to create apparent authority.
Lastly, by refusing to apply the doctrine to TCPA violations, the court rejected Kristensen’s attempt to utilize a copyright theory of “control and benefit” liability for declining to use a right to stop infringing activity. Regardless, the court stated that none of the defendants had any control over AC Referral's business practices.
Judge Andrew P. Gordon said that while agency relationships are generally questions of fact, the recipient could not provide any evidence of an agency-principal relationship between the sender and the chain of companies that led to its hiring.
The significance of the holding that contractors of a marketing company that sent unsolicited text messages are not liable for those messages absent a common law agent-principal relationship is clear. It reaffirms common law agency principles as applied to marketing communications. Specifically, it serves to shield contracting parties for TCPA violations by marketers actually sending text messages if the non-sending parties do not possess actual or constructive knowledge of unlawful practices.
There exists little doubt that courts will continue to define the scope of involvement in telemarketing or texting that will trigger vicarious liability. Consult with an experienced telecommunications and TCPA compliance lawyer for inquiries pertaining to the impact of this decision or the recent FCC Omnibus Declaratory Ruling, or for assistance with deliberately reviewing marketing practices, training processes and third party contracts to ensure compliance with TCPA rules.
It is anticipated that related issues shall be discussed in detail on October 30, 2015 as part of the recently announced Federal Trade Commission workshop aimed at exploring consumer protection issues raised by the practices of the lead generation industry, including what types of lead generation conduct may be unlawful under the FTC Act’s prohibition against unfair or deceptive practices.
Information conveyed in this article is provided for informational purposes only and does not constitute, nor should it be relied upon, as legal advice. No person should act or rely on any information in this article without seeking the advice of an attorney.