In a suit with massive implications for companies employing independent contractors to make marketing calls, brought by state attorneys general, the Federal Trade Commission and the Department of Justice against Dish Network, an Illinois federal court judge ordered a record total of $280 million in penalties for violations of the Telephone Consumer Protection Act (TCPA), the Telemarketing Sales Rule and state law.
The government entities claimed Dish initiated—or caused a telemarketer to initiate—outbound calls to phone numbers on the National Do Not Call Registry, violated the TSR’s prohibition on abandoned calls, and assisted and facilitated telemarketers when it knew (or consciously avoided knowing) that the telemarketer was engaged in violations of the law. Dish markets its satellite television programming through telemarketing vendors it contracts with as well as authorized dealers or retailers. So while Dish made some of these calls itself, many were made by Dish’s third-party retailers without Dish’s awareness. Despite Dish’s lack of knowledge and participation, the court found Dish liable for all the calls based on agency. Even though Dish asserted that the third parties intentionally hid their telemarketing efforts, consumers could still be led to believe the third parties were acting on Dish’s directions. The dispositive distinction for the court seemed to be that Dish could exercise control over those third parties if it desired, even though Dish did not actually exercise that control.
“Dish created a situation in which unscrupulous sales persons used illegal practices to sell Dish Network programming any way they could,” U.S. District Court Judge Sue E. Myerscough wrote in a 475-page decision. “The plaintiffs have established that Dish, its telemarketing vendors, and its order entry retailers violated the applicable do-not-call laws millions and millions of times.” According to the court, the company cared about “one factor, the ability to generate activations,” and “cared about very little else,” resulting in more than 66 million violations of the Do Not Call, entity-specific and abandoned call provision of the TSR, not to mention violations of the TCPA and multiple state laws.
The total penalties include a $168 million civil penalty owed to the federal government, with the remaining $112 million to be divided between California, Illinois, North Carolina and Ohio.
Writing that “Dish’s plea of poverty borders on the preposterous,” Judge Myerscough said the penalty was reasonable in light of the company’s actions. “[T]he injury to consumers, the disregard for the law, and the steadfast refusal to accept responsibility require a significant and substantial monetary award,” the court said. “Dish’s denial of responsibility and lack of regard for consumers are deeply disturbing and support the inference that it is reasonably likely that Dish will allow future illegal calls absent government pressure.”
To that end, the order also features injunctive relief, prohibiting Dish, whether acting directly or indirectly through its telemarketers or retailers, from future violations of the TSR. The company must be able to demonstrate that it and its primary retailers—defined as those with more than 600 activations or who use an automated telephone dialing system—are fully compliant with the TSR. If Dish or the retailers are unable to satisfy this requirement, then the company will be barred from conducting any outbound telemarketing calls for a two-year period and/or accepting any orders from its primary retailers.
In addition, the order mandates that Dish hire a telemarketing compliance expert to prepare a plan to ensure that the company and its primary retailers continue to comply with telemarketing laws generally, as well as with the specifics imposed by the injunction. The order also permits the plaintiffs to make ex parte applications for court approval of unannounced inspections of any Dish (or primary retailer) facility or records. All outbound telemarketing call records must be retained and transmitted to the government on a semiannual basis along with other documentation of telemarketing compliance.
To read the order in United States v. Dish Network, click here.
Why it matters: This decision illustrates the potentially massive impact that third-party affiliates and employees can have on a company. Ginormous penalties aside, this case is an important reminder that vicarious liability is alive and well under the TCPA. And even if you have not authorized, or even know about, specific actions, you could still face liability if the conduct is within the scope of an employee or agent’s authority. Moreover, the compliance requirements in the order show that federal and state agencies, as well as the courts, care not only about money, but also about ensuring future compliance. The compliance requirements imposed are also steps every company should take before engaging in telephonic marketing.