Last week, the United States District Court for the Central District of California entered an order granting summary judgment in favor of manufacturer UTC Fire & Security Americas Corporation, Inc. (“UTCFSA”) and dismissed a putative Telephone Consumer Protection Act (“TCPA”) class action pending against it. The plaintiff sought to hold UTCFSA liable for the alleged TCPA violations of a distributor that had purchased products from the manufacturer. The plaintiff argued that vicarious TCPA liability should flow from the distributor to the manufacturer. In rejecting this argument, the Court’s summary judgment opinion provides a valuable road map for manufacturers seeking to protect themselves from being held vicariously liable for the TCPA violations of their distributors.

Can a manufacturer be liable for the TCPA violations of a distributor?

Manufacturer Not Vicariously Liable for Distributor’s Alleged TCPA Violations

In the action, the two named plaintiffs allegedly received solicitation calls for the purchase of home security systems manufactured by UTCFSA. Although UTCFSA manufactures home security devices, it has never sold its products directly to consumers. Instead, UTCFSA markets its home security products to third-party distributors, who then resell the products to end-user consumers for their own profit, along with products manufactured by other entities. One particular distributor allegedly placed autodialed telemarketing calls to the named plaintiffs’ cellular phones without obtaining the requisite prior express consent to do so.

After reviewing the positions of the parties, the Court determined that UTCFSA could only be liable under the TCPA if it were a “seller” as defined by the statute, and the distributor was determined to be its agent. The plaintiffs argued that the UTCFSA trademark license granted to distributors demonstrated actual agency authority. However, the Court rejected this argument, noting that while authorized dealers do obtain a trademark license, “the contracts between UTCFSA and its authorized dealers indicates that the parties agree that the authorized dealers are independent contractors, and that the dealers ‘shall have no right or authority to assume or create any obligation or responsibility, express or implied, on behalf of, or in the name of [UTCFSA], or to legally bind [UTCFSA] in any manner whatsoever.” The Court also rejected any claims of apparent authority, primarily because UTCFSA did not directly market to end-user consumers and the distributor’s telephone call “did not include a statement that [it] was an ‘Authorized [UTCFSA] Dealer,’ a representative or agent of UTCFSA, or any other language that would lead the listener to reasonably believe that the caller was acting on behalf of UTCFSA.”

Protect Yourself

We recently blogged about a roofing company that was held vicariously liable in the amount of $22 million for the TCPA violations of its marketer. As courts throughout the country wrestle with the standard for vicarious liability under the TCPA, the Central District of California decision provides guidance to manufacturers who seek to protect themselves from being found vicariously liable for the alleged violations of their distributors.