Willful blindness when it comes to the Telephone Consumer Protection Act (TCPA) could cost companies millions in statutory damages and penalties. Dish Network has been ordered in two cases to pay a total of $341 million based on its failure to prevent TCPA violations committed by its marketing agents. The cases illustrate the factors that courts may consider in determining what level of culpability is appropriate for ignoring TCPA violations, even in the absence of direct knowledge.

In Krakauer v. Dish Network LLC, 14-333 (M.D.N.C. May 22, 2017), the court rejected Dish Network’s claims that it sufficiently supervised its marketing agent, Satellite Systems Network (SSN), to prevent SSN from making unsolicited calls to consumers. According to the court, treble damages were appropriate because (1) SSN knowingly violated the statute, and (2) Dish Network turned a blind eye to SSN’s TCPA violations. The ruling contributes to the uncertainty regarding when courts will find a TCPA violation to be willful and thus subject to treble damages.

In US v. Dish Network, LLC, No. 09-3073 (C.D. Ill. June 5, 2017), the court found that a mathematical calculation of statutory damages would be disproportionate and unreasonable, and therefore did not award treble damages. The court did find, however, that a large civil penalty was appropriate after considering the degree of Dish Network’s culpability, its history of prior conduct, its ability to pay and other circumstances.

The TCPA provides for $500 in statutory damages per violation. Courts have discretion to award treble damages for willing or knowing violations. In recent cases, courts have applied varying standards to determine whether conduct is willful and thus subject to treble damages. Some courts have required that the defendant have direct knowledge of calls made and knowledge that the calls violate the TCPA. For example, in Lary v. Trinity Phys. Fin. & Ins. Servs., 780 F.3d 1101 (11th Cir. 2015), the court found that it was not enough to require only that the alleged violator know that it was engaging in the conduct; instead the violator must also know that the conduct violates the TCPA, “[otherwise] the statute would have almost no room for violations that are not willful or knowing.” The Lary court also noted that the defendants in that case could not be responsible for treble damages under the TCPA’s willful and knowing requirement since the defendants had “used a third party to send out advertisements, which suggests that [the defendants] might have had no knowledge that [the plaintiff] received a particular fax.” See also Harris v. World Fin. Network Nat’l Bank, 867 F. Supp. 2d 888, 895 (E.D. Mich. 2012) (observing that an overbroad application of willfulness “would significantly diminish the statute’s distinction between violations that do not require an intent, and those willful and knowing violations that Congress intended to punish more severely.”); Brown v. Enter. Recovery Sys., Inc., 2013 WL 4506582, at *9 (Tex. App. Aug. 22, 2013) (“But to recover treble damages, the Browns had to show that ERS knew of the TCPA’s requirements and that it knew or should have known that its actions violated the Act.”).

In some cases, however, courts have stated that treble damages could be awarded where there was only intent to perform the conduct at issue, regardless of whether the defendant knew that the conduct violated the TCPA. In Clark v. Red Rose, Mentor M.C. No. 04CVF-150, 2004 WL 1146679 (May 3, 2004), a consumer brought an action against Red Rose claiming that the company sent her unsolicited fax advertisements. The court awarded treble damages and noted that, as defined in the Federal Communications Act, “the term ‘willfully’ merely means that ‘the defendant acted voluntarily, and under its own free will, and regardless whether the defendant knew that it was acting in violation of the statute.’” Regarding the “knowing” standard, the court explained that “‘[k]nowingly’ may not be held to mean that the defendant must know that its acts were a violation of the law, since this would conflict with the long-established legal principle that ignorance of the law is no excuse.” See also American Home Servs., Inc. v. A Fast Sign Co., Inc., 747 S.E.2d 205, 208-209 (Ga. App. 2013) (“AHS admitted that it hired Sunbelt to send advertising faxes on its behalf. This is sufficient to make the violation ‘willful’ within the meaning of the statute.”).

Dish Network, a telecommunications service provider, was sued in 2014 in a class action after its marketing agent, SSN, was accused of making more than 50,000 telemarketing calls on Dish’s behalf to numbers on the National Do-Not-Call Registry. The lead plaintiff, Dr. Thomas Krakauer, sought injunctive and monetary relief on behalf of himself and others who had allegedly received the calls. Following trial, the jury found Dish Network liable and awarded $20.5 million in damages. The parties then submitted closing arguments to the court on whether the TCPA violations were willful for purposes of treble damages, which was the subject of the court’s May 22 opinion.

The court held that Dish Network willfully and knowingly violated the TCPA and trebled the damages award to $61 million. Although SSN made the calls, the court reasoned that Dish, as the principal, was vicariously liable. The court also explained that certain aggravating factors justified the award of treble damages. First, Dish Network failed to monitor SSN’s calling practices, ignored SSN’s many TCPA violations over the years, and “repeatedly looked the other way.” Second, and even more damaging, the court was convinced that Dish Network “did not care whether SSN complied with the law or not” and that Dish Network’s TCPA compliance policy was “decidedly two-faced,” allowing Dish Network to monitor TCPA compliance while Dish Network failed to do so.

Dish Network is expected to appeal the district court’s ruling to the US Court of Appeals for the Fourth Circuit, especially considering the inconsistent standards for awarding treble damages and Dish Network’s position that the company did all it could to ensure SSN was in compliance with the TCPA. In the meantime, the ruling adds more concern for defendants on the possibility of treble damages and creates another big-dollar TCPA headline.

Unlike the court in Krakauer, the district court judge in US v. Dish Network, LLC, No. 09-3073 (C.D. Ill. June 5, 2017) decided against statutory damages, which the court found unreasonable and disproportionately high given that such damages totaled in the billions of dollars. The court, therefore, did not consider treble damages. Instead, the court awarded a $280 million civil penalty, citing Dish’s culpability, its history of prior conduct, its ability to pay and other circumstances. The court found that culpability was “significant” because the programs were run in a “reckless” manner. According to the court, “Dish [Network] had on-going problems complying with Do-Not-Call Laws…and understood the potential penalties for Do-Not-Call Law violations could be substantial,” and yet the problems persisted over many years. Similar to Krakauer, the court was troubled that Dish Network seemed to make little effort to comply with the TCPA, noting, for example, that Dish Network “hired Order Entry Retailers based on one factor, the ability to generate activations” and that “Dish [Network] cared about very little else,” including complying with Do-Not-Call laws.

Companies concerned about avoiding potential TCPA exposure should be aware of the factors that some courts have considered in deciding what level of damages and/or penalties are appropriate:

  • Whether the violations were isolated or a pattern and practice over time
  • The extent to which the defendant participated in the alleged violations, or was aware of the conduct and allowed it to continue
  • Whether there are sufficient business processes to respond to consumer complaints regarding unsolicited calls
  • Efforts to maintain current call records and lists that are up-to-date and in compliance with both in-house and national Do-Not-Call lists
  • The degree to which the defendant performed due diligence in hiring contractors and other agents to ensure TCPA compliance
  • Whether the defendant knew the conduct was unlawful

The TCPA continues to create significant litigation risk for any company that communicates with customers or potential customers by phone, text or fax. Although the potential for treble damages and heavy civil penalties heightens the risk, efforts to put strong compliance procedures in place can not only reduce the risk of lawsuits, but also reduce the risk of treble damages in the event of litigation.