FCC: Sellers May Be Vicariously Liable For Third-Party Telemarketing Activities

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By Paul Barbagallo

A seller of goods and services is not directly liable for a violation of the Telephone Consumer Protection Act of 1991 unless it “initiates” a call, but may be held “vicariously liable” under federal common law agency principles for a violation of the act by a third-party telemarketer, the Federal Communications Commission has ruled (Joint Petition Filed by DISH Network, LLC, et al. for Declaratory Ruling Concerning the Telephone Consumer Protection Act (TCPA) Rules, FCC, FCC 13-54, 05/09/13).

The decision addresses three petitions for declaratory ruling on issues concerning the Telephone Consumer Protection Act that have arisen in two ongoing federal court lawsuits, Charvat v. EchoStar Satellite, LLC, S.D. Ohio, No. 2:07-cv-01000-JDH-MRA, 2010 WL 5392875, and United States, et al. v. Dish Network, LLC, C.D. Ill., No. 3:09-cv-03073; http://www.bloomberglaw.com/public/document/United_States_of_America_et_al_v_Dish_Network_LLC_Docket_No_309cv/5. On appeal, the U.S. Court of Appeals for the Sixth Circuit had ruled that the matter should be referred to the FCC under the doctrine of primary jurisdiction (Charvat v. EchoStar Satellite, LLC, 6th Cir., No. 09-4525, 12/30/10).

In the first of the two cases, Charvat, a consumer named Philip Charvat sued EchoStar Satellite LLC in 2007 (the satellite television service operations now provided by Dish Network Corp.) in the U.S. District Court for the Southern District of Ohio claiming that telemarketers for EchoStar had called his home 30 times in violation of the TCPA--27 prerecorded, and three by live operators. According to the suit, Charvat's requests to be placed on the callers' do-not-call list, however, went unheeded.

In U.S. v. Dish, the United States--on behalf of the Federal Trade Commission and the attorneys general of California, Illinois, North Carolina, and Ohio--sued Dish in 2009 in the U.S. District Court for the Central District of Illinois seeking damages and injunctive relief for alleged violations of both federal and state telemarketing laws. Among other things, the government contends that DISH, through its authorized dealers, had made unlawful prerecorded calls and live calls to telephone numbers on the national do-not-call registry.

In February 2011, Dish, the U.S. government, and the states of California, Illinois, North Carolina, and Ohio filed a joint petition seeking an FCC ruling on the prerecorded and do-not-call provisions of the TCPA and the commission's implementing regulations to determine whether they create liability for a seller, such as Dish, as a result of unlawful telemarketing calls made by the seller's third-party retailers.

The agency's decision centers on an interpretation of two provisions of the TCPA in particular--sections 227(b) and 227(c), which address prerecorded telemarketing calls and consumers' privacy rights.

“Under our current rules and administrative precedent interpreting and implementing sections 227(b) and 227(c), we do not think that an action taken for the benefit of a seller by a third-party retailer, without more, is sufficient to trigger the liability of a seller under section either section 227(c) or section 227(b),” the agency wrote. “However, we see no reason that a seller should not be liable under those provisions for calls made by a third-party telemarketer when it has authorized that telemarketer to market its goods or services. In that circumstance, the seller has the ability, through its authorization, to oversee the conduct of its telemarketers, even if that power to supervise is unexercised.”

Pai Dissents in Part

In a statement dissenting in part from the decision, Republican FCC Commissioner Ajit Pai said that while he agrees with the general findings, he has reservations about how the majority defined the scope of third-party liability.

“I find implausible as a matter of statutory construction the declaratory ruling's insistence on one and only one standard of third-party liability for both prerecorded call violations (governed by section 227(b)) and do-not-call violations (governed by section 227(c)),” Pai wrote.

“Although administratively convenient, this one-size-fits-all approach gives short shrift to the divergent language of these two provisions. I believe instead that sections 227(b) and 227(c) embrace different approaches to third-party liability. Under section 227(b), sellers should be held vicariously liable under federal common-law agency principles for TCPA violations committed by third-party telemarketers. By contrast, under section 227(c), third-party liability exists whenever a telemarketer initiates a call on a seller's behalf, even if that telemarketer is not under the seller's control.”

The order was adopted April 17, but not released until May 9.

For the text of the FCC order, visit http://www.fcc.gov/document/dish-network-et-al-petition-declaratory-ruling-re-tcpa-rules.