Highlighting the intersection between government contracts, communications privacy, and class action litigation, the United States Supreme Court recently received a petition for a writ of certiorari asking it to rule on whether derivative sovereign immunity should be extended to a government contractor’s violation of the Telephone Consumer Protection Act (TCPA).  The Petitioner, Campbell-Ewald Co., was responsible for the distribution of an unsolicited recruitment text message on behalf of the United States Navy and is now the defendant in a class action suit.  In September 2014, the Ninth Circuit ruled that derivative immunity was not available to Campbell-Ewald, explaining that the doctrine should be narrowly applied to only certain limited scenarios.

By way of background, Campbell-Ewald began sending the text messages in 2006 through a subcontractor, MindMatic LLC.  (Neither MindMatic nor the U.S. Navy are parties to the suit).  The contract with the Navy called for the messages to be sent only to individuals within a target demographic that had “opted-in.”  However, one of the recipients of the text messages was Jose Gomes, who had not opted-in to receive such messages.  Gomes subsequently filed a class action suit against Campbell-Ewald alleging violations of the TCPA.

The TCPA generally prohibits using “automated telephone dialing systems” or prerecorded voice messages to call, inter alia, mobile telephone numbers absent an emergency or the “prior express consent” of the called party.  The Federal Communications Commission and some courts have found that the statute covers text messages as well as voice calls.

Campbell-Ewald, arguing that it was performing a “critical mission” on behalf of and under contract with a government agency, sought to have the case dismissed.  The district court agreed, finding that Campbell-Ewald was immune from liability under the doctrine of derivative sovereign immunity.  But the Ninth Circuit overturned that decision, holding that the doctrine should be applied narrowly to the context of property damage resulting from public works projects.  In its Petition, Campbell-Ewald argues that the Ninth Circuit’s decision is not only at odds with decisions from other appellate circuits, which have extended the doctrine more broadly, but also “erodes a bedrock protection” for contractors that carry out governmental functions through validly delegated authority.

In addition, Campbell-Ewald has also asked the Court to review whether a declined offer of complete relief moots a case and removes it from judicial power of the courts under Article III.  Some courts have found that an unaccepted offer to fully satisfy a plaintiff obviates the case because there is no longer a controversy between the parties.  The Ninth Circuit however, does not follow that line of cases, and Campbell-Ewald has petitioned the Supreme Court to settle the split among the circuits.

This case keenly illustrates the importance of complying with the TCPA even when operating pursuant to a contract with a governmental entity.  The private right of action under the TCPA allows for $500 in damages per incident, which can be trebled in cases of willful or knowing violations.  In a class action suit such as this, where there may be hundreds of thousands of potential violations, the stakes are obviously very high.

The authors wish to thank Dave Crawford in our Washington, D.C. office for his assistance in preparing this article.