The U.S. Court of Appeals for the Ninth Circuit recently affirmed a trial court’s judgment in favor of several lender defendants in a putative TCPA class action, ruling that the defendants could not be vicariously liable under the TCPA for a promoter’s text messages because the promoter was either not the defendants’ agent or the defendants did not have knowledge concerning material facts about the agent’s unlawful activities.
In so ruling, the Ninth Circuit held that mere knowledge that an agent is engaged in an otherwise commonplace marketing activity, such as text message marketing, would not lead a reasonable person to investigate whether the agent was engaging in unlawful activities relating to the text messaging.
A copy of this opinion is available at: Link to Opinion.
As you may recall, the federal Telephone Consumer Protection Act (TCPA) makes it “unlawful for any person within the United States, or any person outside the United States if the recipient is within the United States: (A) to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system . . . (iii) to any . . . cellular telephone service.” 47 U.S.C. § 227(b)(1)(A)(iii).
The Federal Communications Commission (FCC), pursuant to its rulemaking authority under the TCPA, has ruled that “[c]alls placed by an agent of the telemarketer are treated as if the telemarketer itself placed the call,” In re Rules & Regulations Implementing the TCPA of 1991, 10 FCC Rcd. 12391, 12397 (1995), and has construed actions under the TCPA “to incorporate federal common law agency principles of vicarious liability,” In re Joint Petition Filed by Dish Network, LLC, 28 FCC Rcd. 6574, 6584 (2013).
On Dec. 6, 2011, the plaintiff received an allegedly unwanted marketing text message from the promoter. The promoter had entered into an agreement with a lead generating company to provide leads for three lenders.
The plaintiff did not respond to the promoter’s text message or click on the link contained in the text message. Instead, the promoter filed a putative class action against the promoter, the lead generation company, and the three lenders. The plaintiff alleged that the lenders and the lead generation company were vicariously liable under the TCPA for the promoter’s text messages.
The trial court granted summary judgment in favor of the lenders and the lead generating company. The trial court rejected the plaintiff’s argument that the lenders and the lead generating company had ratified the promoter’s texting campaign by accepting leads while knowing that the promoter had used texts to generate those leads. The plaintiff appealed.
On appeal, the plaintiff argued that the lenders and the lead generating company had ratified the promoter’s unlawful texting by accepting the benefits of the text messages while unreasonably failing to investigate the promoter’s texting methods.
The Ninth Circuit first noted that the FCC had relied on the Restatement (Third) of Agency as the federal common law of agency. And, the Restatement defines “ratification” as “the affirmance of a prior act done by another, whereby the act is given effect as if done by an agent acting with actual authority.” Restatement (Third) of Agency § 4.01(1). “Ratification does not occur unless . . . the act is ratifiable as stated in § 4.03.” Id. § 4.01(3)(a). An act is ratifiable “if the actor acted or purported to act as an agent on the person’s behalf.” Id. § 4.03.
The Ninth Circuit also noted that even if a principal ratifies an agent’s act, “[t]he principal is not bound by a ratification made without knowledge of material facts about the agent’s act unless the principal chose to ratify with awareness that such knowledge was lacking.” Id. § 4.01 cmt b.
The Ninth Circuit then rejected the plaintiff’s argument that the lenders could be vicariously liable for the promoter’s text messages because the promoter had not entered into any contracts with the lenders, had not communicated with the lenders, and did not even know of the lenders’ involvement prior to the plaintiff’s lawsuit.
The Ninth Circuit also affirmed the trial court’s rejection of the plaintiff’s claims against the lead generating company. The Ninth Circuit found that the plaintiff had not produced any evidence that the lead generating company had actual knowledge that the promoter had sent text messages in violation of the TCPA. In addition, the Ninth Circuit determined that the plaintiff had not offered any basis to infer that the promoter had assumed the risk of lack of knowledge, and did not present any evidence that the lead generating company “had knowledge of facts that would have led a reasonable person to investigate further,” but ratified the promoter’s acts anyway without investigation. Id. § 4.06 cmt. d.
In so ruling, the Ninth Circuit also rejected the plaintiff’s contention that a reasonable person would investigate whether an agent was involved in unlawful activities merely because the agent was engaged in text message marketing.