On March 21, 2016, the United States Court of Appeals for the Seventh Circuit affirmed a trial court ruling that found a principal of a small Indiana company liable for some, but not all, of its marketing company’s violations of the Telephone Consumer Protection Act (“TCPA”). The principal, Jerry Clark (“Clark”), owns Indiana-based Affordable Digital Hearing. Clark retained the marketing company Business to Business Solutions (“B2B”) to send 100 fax advertisements to businesses within the local community. However, B2B, on its own, faxed 6,000 unsolicited advertisements to businesses in three separate states. The class representative plaintiff, a business located outside of the local community that B2B was directed to advertise in, will not itself recover damages from Clark. However, as a result of the class action, a small portion of the certified class will receive the proceeds of the $16,000 judgment entered against Clark.

Why Did the Seventh Circuit Limit Agency Liability Under the TCPA?

Seventh Circuit Finds Only Limited Agency Liability under the TCPA

The facts at issue were relatively undisputed. In June 2006, B2B contacted Clark and encouraged him to send advertisements via telecopier. Although Clark initially declined, during a follow up call, Clark agreed to retain B2B for a limited trial campaign. Clark expressly instructed B2B to only send 100 faxes to local businesses within a 20-mile radius of Terre Haute, Indiana (where Clark’s company is located). Instead, B2B sent thousands of faxes beyond the instructed 20-mile radius of Terre Haute. The district court found Clark liable for all of the faxes that B2B sent to businesses within the instructed 20-mile radius of Terre Haute. However, the district court also found that Clark was not liable for any faxes sent beyond his original instruction, including the fax sent to the class representative plaintiff.

The Court of Appeals affirmed, ruling that Clark’s relationship with B2B did not fit squarely within the three recognized categories of agency relationships (express actual authority, implied actual authority and apparent authority). The Court found that “B2B made an independent decision to blast faxes across multiple state lines,” and held that “the trial court did not err in concluding that Clark was not liable for faxes sent outside the 20-mile radius on which he expressly instructed B2B.”

Protect Yourself

Almost two years ago, we blogged about the Federal Communications Commission’s decision that absolute liability applies under the TCPA for unsolicited fax marketing. Here, however, in reaching its ruling in the underlying action, the Seventh Circuit pointed out that, “the trial court correctly rejected strict liability by recognizing that it would lead to ‘absurd results.’” This decision would seem to represent a more nuanced application of TCPA agency liability by U.S. courts.