Thanks to the doctrine of derivative sovereign immunity, a defendant was absolved of liability in a Telephone Consumer Protection Act (TCPA) class action by the Fourth Circuit in Cunningham v. General Dynamics Information Technology, Inc. in April 2018.
General Dynamics Information Technology (GDIT) was hired to assist the Centers for Medicare & Medicaid Services (CMS) to explain health insurance options under the Affordable Care Act (ACA) to consumers. Pursuant to its contract with CMS, GDIT made phone calls from Jan. 1, 2015, through May 16, 2016, to inform individuals about their ability to buy health insurance through the health insurance exchanges created by the ACA.
In accordance with this instruction, CMS authorized GDIT to use an autodialer to make the calls and provided a script and a list of phone numbers for each call. One of the lists directed GDIT to call Craig Cunningham’s cellphone. When Cunningham did not pick up, GDIT left a prerecorded 30-second message:
“Hello! This is an important message from HealthCare.gov. The deadline to enroll in a 2016 health insurance plan is coming soon. You may be able to qualify for financial help to make health insurance more affordable. With financial help, most people can find plans for $75 or less per month. Visit HealthCare.gov today to see how much you can save. If you have questions, you can call the Health Insurance Marketplace to talk to a trained enrollment specialist at 1-800-318-2596. That’s 1-800-318-2596. Don’t forget—the deadline to enroll is Tuesday, December 15. If you’ve already taken action and have 2016 health coverage, please ignore this message. Thank you! Goodbye.”
Cunningham filed suit, alleging the autodialed, prerecorded phone call from GDIT advertising the commercial availability of health insurance without his prior consent violated the TCPA.
GDIT moved to dismiss the action for lack of subject matter jurisdiction on the grounds that it was immune from suit under the doctrine of derivative sovereign liability set forth in Yearsley v. W.A. Ross Construction Co., a 1940 Supreme Court opinion. Yearsley holds that agents of the sovereign are also sometimes protected from liability for carrying out the sovereign’s will as part of the government’s “unquestioned need to delegate governmental functions.”
Under Yearsley, a government contractor is not subject to suit if (1) the government authorized the contractor’s actions and (2) the government “validly conferred” that authorization, meaning it acted within its constitutional power.
A district court judge sided with GDIT, and the Fourth Circuit affirmed.
The Fourth Circuit panel rejected Cunningham’s argument that Yearsley is limited to claims arising under state law, finding nothing in the decision or its progeny that suggested such a limitation. The Supreme Court itself has addressed Yearsley in relation to the TCPA, the federal statute at issue, the court noted. “Consequently, we hold that the Yearsley doctrine applies to claims arising under federal law.”
The panel was not persuaded by the plaintiff’s contention that GDIT failed to satisfy either of the two prongs required under Yearsley. First, CMS contracted with GDIT to carry out its ACA mandate and the contract required GDIT to call individuals about health insurance options. “Quite plainly, GDIT performed exactly as CMS directed: GDIT called the number CMS instructed GDIT to call, on the prescribed day, and followed CMS’s provided script when leaving the message,” the panel wrote.
Cunningham’s argument that the contract also required GDIT to follow applicable laws, and that by failing to independently obtain prior consent from each name on the list it violated that requirement, was equally “unavailing,” the court said.
“There is no indication that GDIT was authorized to contact these individuals other than to place the automated call, and GDIT was not permitted to deviate from the script provided,” the court wrote. “Deposition testimony from [the CMS Contracting Officer Representative] confirmed that CMS did not direct GDIT to obtain consent from the individuals on the call lists CMS provided, did not direct GDIT to investigate the numbers provided and did not expect GDIT to obtain consent before making the calls. Therefore, we conclude that GDIT did not violate the contract by failing to independently obtain consent to make the phone call CMS instructed it to make.”
Turning to the second prong of Yearsley, the panel found that CMS “validly conferred” the authorization for GDIT to make the call to the plaintiff and that the issue of whether GDIT obtained prior consent from Cunningham misinterpreted the question.
“The purpose of Yearsley immunity is to prevent a government contractor from facing liability for an alleged violation of law, and thus, it cannot be that an alleged violation of law per se precludes Yearsley immunity,” the court said. “Consequently, we reject Cunningham’s overinclusive interpretation of what constitutes a ‘valid conferral’ of authority under this prong. We conclude that the government validly conferred the authorization for GDIT to make this phone call, satisfying step two of the Yearsley immunity analysis.”
The Fourth Circuit affirmed dismissal of the action.
To read the opinion in Cunningham v. General Dynamics Information Technology, Inc., click here.
Why it matters: The Fourth Circuit’s decision allows government contractors to breathe easier, as the court had little difficulty in applying the two-part derivative sovereign immunity doctrine to GDIT. The defendant’s contract with CMS authorized GDIT’s call to the plaintiff and an alleged violation of the TCPA did not per se preclude Yearsley immunity, the panel found. The decision is in line with those of a growing number of courts that have recognized that parties who make calls on behalf of the government—provided there is sufficient government oversight—are not subject to TCPA liability.