On September 22, 2015, a federal judge sitting in the Eastern District of Michigan granted summary judgment and dismissed a complaint filed against DialAmerica Marketing, Inc. (“DialAmerica”), alleging that the telemarketer violated the Telephone Consumer Protection Act (“TCPA”). After reviewing the matter, the Court found that DialAmerica’s Professional Fundraising Program falls under the TCPA’s exemption for calls placed “on behalf of” a “tax-exempt nonprofit organization” (the “Nonprofit Exemption”). In issuing its ruling, the Court relied on a statement by the Federal Communications Commission (the “FCC”) confirming that “calls made by a for-profit telemarketer hired to solicit the purchase of goods or services or donations on behalf of a tax-exempt nonprofit organization are exempted from the rules on telephone solicitation.” The Court ultimately held that because DialAmerica placed calls on behalf of the Special Olympics of Michigan (“SOMI”), a nonprofit organization, DialAmerica’s Professional Fundraising Program qualifies for the Nonprofit Exemption under the TCPA.

How did DialAmerica qualify for the Nonprofit Exemption to the TCPA?

DialAmerica Program Qualifies for Nonprofit Exemption Under TCPA

Under DialAmerica’s Professional Fundraising Program, the for-profit telemarketer placed calls on behalf of SOMI, offering discounted magazine subscriptions, the proceeds of which SOMI received a percentage of as a charitable contribution. If the consumer agreed to the purchase, it entered into a contractual relationship with SOMI, not DialAmerica. Additionally, if the consumer ordered a magazine subscription, payment was sent directly to, and received by, SOMI. Thereafter, SOMI would send the proceeds to DialAmerica, which DialAmerica would use to pay itself and the magazine publisher, thereafter transferring the remaining proceeds back to SOMI. SOMI also reviewed and approved all scripts, and consumers were given the option to simply make a charitable donation without ordering a magazine subscription.

The Court noted that the FCC had declined to find a previous DialAmerica program exempt under the TCPA because:

If . . . a for-profit organization is delivering its own commercial message as part of a telemarketing campaign (i.e., encouraging the purchase or rental of, or investment in, property, goods, or services), even if accompanied by a donation to a charitable organization . . . that call is not by or on behalf of a tax-exempt nonprofit organization. . . . [A] seller that calls to advertise a product and states that a portion of the proceeds will go to a charitable cause . . . must still comply with the TCPA rules on commercial calls.

The Court also looked to a 2005 FCC Order, in which the FCC stated:

In circumstances where telephone calls are initiated by a for-profit entity to offer its own . . . products for sale – even if a tax-exempt nonprofit will receive a portion of the sale’s proceeds – such calls are telephone solicitations as defined by the TCPA. We distinguish these types of calls from those initiated, directed and controlled by a tax-exempt nonprofit for its own fundraising purposes.

The Court’s decision that DialAmerica’s program qualifies under the Nonprofit Exemption was based, largely, on its decision that DialAmerica acted as SOMI’s agent in placing the subject calls. Based on SOMI’s control over the telemarketing scripts, and the fact that consumers enter into a relationship with SOMI, and not DialAmerica, pursuant to the Professional Fundraising Program, the Court ultimately held that “DialAmerica acts for SOMI’s benefit, in SOMI’s interest, and as SOMI’s common-law agent. Thus, DialAmerica calls ‘on behalf of’ SOMI when it makes telephone solicitations pursuant to the [Professional Fundraising Program]. Its phone calls to [plaintiff] therefore qualify for the Nonprofit Exemption.”

Protect Yourself

The plaintiff in the Michigan action argued that DialAmerica’s program does not qualify for the exemption because “DialAmerica uses those calls to deliver ‘its own commercial message.’” Specifically, the plaintiff argued that the Nonprofit Exemption does not apply “given that DialAmerica is actually selling magazine subscriptions that benefit for-profit publishers and only tangentially benefit the charity.” However, the Court rejected this bright line rule, observing that “the Nonprofit Exemption ‘contains no language of limitation indicating that it is only applicable to non-commercial calls. It does not distinguish between calls made on behalf of nonprofits based on the substance of the call.’”