Outsourcing telemarketing to a third party may raise your risk profile. That appears to be the lesson from a recent discovery ruling in Mey v. Monitronics International, Inc., et al, highlighting the burgeoning legal exposure for companies that outsource telemarketing services.
Minitronics is a home security company that engaged a small army of independent contractors—styled “authorized dealers”—to sell its products and services through a nationwide telemarketing campaign. According to the half-dozen class-action lawsuits that sprang up in response, many of these contractors violated the Telephone Consumer Protection Act by, among other things, placing calls to numbers on the Do Not Call registry.
The cases have all been funneled to the Northern District of West Virginia by the multidistrict litigation panel. Mey is the oldest case of the lot.
In Mey, Minitronics argued that it could not be liable for its independent contractors’ alleged violations of the TCPA. But the court rejected that argument, looking to a recent FCC ruling that recognized, for the first time, that common law principles of agency can lead to vicarious liability for TCPA violations. The court allowed additional discovery from Minitronics to see whether it knew of, and ratified, its dealer’s wayward ways.
That’s when things got even more interesting. The plaintiff demanded discovery related to all of Minitronic’s authorized dealers, not just the one dealer (known as VMS) that supposedly harmed her and the putative class. In particular, the plaintiff asked Minitronics to disclose consumer complaints made against any of its authorized dealers. Minitronics refused, arguing that actions of other authorized dealers were not relevant to its potential vicarious liability for the actions of VMS. Plaintiff moved to compel.
Magistrate Judge Kaull granted the motion to compel. The trove of information as to all dealer complaints was discoverable, he reasoned, not just because it may contain nuggets about VMS, but also because it might show that Minitronics “responded differently to other dealers accused of violating the TCPA than [it] did to VMS.” The comparison was relevant to whether Minitronics ratified VMS’s conduct, the court suggested, because it might show that Minitronics took more aggressive steps to stop other dealers’ violations of the TCPA than it did for VMS.
Given the apparent scope of Minitronic’s nationwide telemarketing campaign, discovery of this magnitude is likely to be both onerous and expensive. Even if Minitronics can ultimately avoid vicarious liability, it’s now subject to being second guessed for how it dealt with each and every subcontractor.
Companies that outsource their telemarketing should take notice. The new prospect of vicarious liability not only increases the risk of drawing (and potentially losing) a TCPA lawsuit—it also seems to open the door for more costly and probing discovery practice.