With the FCC’s recent record fine of $7.5 million against Sprint Corp. for alleged Do-Not-Call violations, the more restrictive prior express written consent rule for marketing calls made to cell phones by an autodialer, and the continuous filing of class action complaints (See TCPA Update for recent filings), it is easy to understand why companies are wary of liability under the Telephone Consumer Protection Act (“TCPA”).  As we’ve discussed previously, general uncertainty around how to interpret certain provisions of the TCPA has resulted in numerous petitions being filed with the FCC.

Although many areas still require clarification, the law around vicarious liability under the TCPA continues to develop.  Most recently, on July 2, 2014, the Ninth Circuit weighed in on Thomas v. Taco Bell Corp. in an unpublished decision that addresses vicarious liability under the TCPA. Let’s take a closer look.

In Thomas v. Taco Bell Corp., the plaintiff alleged that she received a text message sent as part of a marketing campaign conducted by an association of local Chicago-area Taco Bell franchises (the “Association”) in violation of the TCPA.  The Association had engaged an advertising firm that, in turn, hired a vendor to send the text messages.  The Ninth Circuit affirmed the district court’s determination that neither the Association, the advertising firm, nor the vendor that sent the message was an agent of Taco Bell and that Taco Bell was not liable for the text messages under a vicarious liability theory.

The Ninth Circuit agreed with the district court’s analysis of the circumstances under traditional agency principles involving whether Taco Bell controlled, or had the right to control, the calls.  The court also evaluated the case under principles of apparent authority and ratification, which may also provide a basis for vicarious liability under the TCPA.  The court concluded that Taco Bell could not be held liable under the principle of apparent liability because the plaintiff failed to show that she reasonably relied to her detriment on something said or done by Taco Bell.  Further, Taco Bell was not liable under a theory that it somehow ratified or approved the texting because there was no underlying principal-agent relationship between Taco Bell and either the Association, the advertising firm, or the vendor that would enable Taco Bell to ratify the text messages.  Thus, the Ninth Circuit affirmed the dismissal of the case.  The Ninth Circuit’s assessment followed a Declaratory Ruling issued by the FCC in 2013 that addressed vicarious liability.

Although the courts will continue to define what degree of involvement in telemarketing or texting activity triggers vicarious liability, certain types of relationships or involvement may closely connect a company to the acts of a vendor.  For example, whether the company knew (or reasonably should have known) that the vendor engaged in conduct that violated the TCPA yet failed to take effective steps to stop the vendor’s conduct may be found liable for the vendor’s actions.

Plaintiffs that gain evidence of these and other kinds of relationships may place upon a company the burden of demonstrating that the vendor was not acting as the company’s authorized agent.  Conversely, companies that are able to show that they had no actual or apparent control over the vendor’s unlawful activities may be able to defeat a vicarious liability claim.