On January 22, 2014, the United States Court of Appeals for the District of Columbia Circuit dismissed Dish Network LLC’s petition for review of a 2013 Declaratory Ruling (“Declaratory Ruling”) by the Federal Communications Commission (FCC), which clarified whether a seller may be held vicariously liable under federal common law principles of agency for violations of Sections 227(b) or 227(c) of the TCPA.
The FCC made its Declaratory Ruling pursuant to primary jurisdiction referrals from two federal courts, including the U.S. Court of Appeals for the Sixth Circuit. In reviewing theDeclaratory Ruling, the D.C. Circuit held that it did not have jurisdiction over the order because it was not a final order and did not determine the rights, obligations, or legal consequences of any party. Significantly, the court noted that the FCC agreed on appeal that the “guidance” in its Declaratory Ruling “has no binding effect on courts,” that it is not entitled to Chevron deference, and that “‘its force is dependent entirely on its power to persuade.’”
The Declaratory Ruling stated that although a seller is not directly liable for calls made by a third party under the TCPA, a seller can be held vicariously liable under the federal common law of agency. The FCC suggested that the seller could be vicariously liable under a broad range of agency principles, such as formal agency, apparent authority, and ratification. It supplied several illustrative examples of when a seller may be held liable. For example, apparent authority could be shown through evidence that:
- the seller allowed the outside sales entity access to information and systems that normally would be within the seller’s exclusive control;
- the outside sales entity could enter customer information into the seller’s systems;
- the seller gave the outside sales entity the authority to use the sellers trade name, trademark, or service mark; and
- the seller approved, wrote or reviewed the outside entity’s telemarketing scripts.
Further, the FCC stated that a seller would be responsible for unauthorized third-party telemarketing conduct that is otherwise authorized to market on the seller’s behalf “if the seller knew (or reasonably should have known) that the telemarketer was violating the TCPA … and the seller failed to take effective steps within its power to force the telemarketer to cease that conduct.”
It was these two paragraphs of “guidance” that were the focus of Dish Network’s petition. The FCC couched the two paragraphs as “guidance” to courts regarding how the common law of agency might apply to TCPA cases. Dish Network argued that the FCC exceeded its authority and acted arbitrarily and capriciously in expressing how the common law of agency might apply in the telemarketing context. It also argued that the FCC’s “guidance” misstated the common law of agency and the respective burden of proof of the plaintiff and the seller. For want of jurisdiction, the D.C. Circuit neither addressed Dish Network’s argument concerning the limits of FCC authority, nor reviewed the legal principles within the FCC’s “guidance.”
As a result, no court will be bound by the FCC “guidance” interpreting when a telemarketer might be acting within the apparent authority for a seller to be liable under TCPA violations. But the “guidance” need not be binding authority, nor entitled to Chevron deference (important for resolving statutory ambiguity), in order to continue to have persuasive authority on a court grappling with thorny issues of vicarious liability in a TCPA class action. Because the D.C. Circuit lacked jurisdiction to review the “guidance” on the merits, courts are free to deem it persuasive authority when questions of agency arise. And because the FCC is the expert agency authorized by Congress to interpret the TCPA and its application to the practices and technology of telemarketers, its interpretations can carry substantial weight with the courts.
The Declaratory Ruling remains virtually the only discussion of “illustrative examples … that may demonstrate that the telemarketer is the seller’s authorized representative with apparent authority to make the seller vicariously liable for the telemarketer’s section 227(b) violations.” Therefore, the continued existence of its “guidance” creates lingering uncertainty for companies caught up in TCPA disputes. Due to the lack of statutory guidance about vicarious liability under the TCPA and the limited amount of case law interpreting apparent authority issues under the TCPA, the FCC guidance will likely be considered by a majority of courts. In fact, shortly after the FCC issued the guidance inMey v. Monitronics Int’l, Inc. and Savanna Grp., Inc. v. Trynex, Inc., the district courts denied defendants’ motions for summary judgment. So whether the FCC had authority to issue the guidance in the first place, or even whether it is an accurate statement of federal agency common law, sellers will not be able to directly challenge the FCC’s guidance following the D.C. Circuit’s judgment, but will have to try to minimize the impact of its persuasive authority under the facts and state agency law in a given case.