The Ninth Circuit affirmed summary judgment in favor of five defendants in a class action suit where a non-party, AC Referral, allegedly violated the Telephone Consumer Protection Act (TCPA) when it sent unauthorized commercial text messages to individuals about defendants’ loan services. Three payday lenders had hired LeadPile, a vendor that provides consumer leads, and LeadPile hired Click Media to obtain leads. Click Media then hired AC Referral, a lead generation vendor. The plaintiff argued that the defendants were vicariously liable for AC Referral’s TCPA violations.

The Ninth Circuit rejected the plaintiff’s ratification theory with respect to four of the defendants since AC Referral had no contract with the defendants or the defendants’ representatives, and therefore, AC Referral was neither an agent nor a purported agent of the four defendants. The Ninth Circuit also rejected the plaintiff’s ratification theory as to the fifth defendant, Click Media, even though Click Media had a contractual agency relationship with AC Referral. Notably, the court stated Click Media could not be vicariously liable since the plaintiff failed to provide evidence that Click Media either knew or reasonably should have known that AC Referral was sending text messages in violation of TCPA. As such, the court disagreed with the plaintiff’s argument that a principal has a duty to investigate whether an agent is in fact complying with the TCPA simply because the agent contractually agreed to comply with the TCPA.

TIP: When hiring third party vendors, companies should contractually ensure that vendors comply with the TCPA, including obtaining prior express consent as required. Although contractual language will not provide immunity where a company knows or should have known of TCPA violations, it can help protect advertisers from violations that the advertiser is not aware of.