The U.S. Court of Appeals, Ninth Circuit recently released an opinion in Jones v. Royal Administration Services on the issue of vicarious liability for telemarketing activity under the Telephone Consumer Protection Act (TCPA), updating a decision that we reported on in a previous issue of TCPA Connect last August.
Royal Administration Services (Royal) sells vehicle service contracts (VSCs)—a promise to perform or pay for certain repairs or services on a car—through automobile dealers and marketing vendors. One of Royal’s 20 different marketing vendors was All American Auto Protection (AAAP), which sold VSCs for many companies.
AAAP’s telemarketers would place a call and first sell a consumer on the concept of a VSC before helping consumers select a particular service plan from one of its vendors. Royal and AAAP entered into an agreement in October 2011. AAAP was authorized to sell Royal VSCs and promised not to violate state or federal law, including the use of illegal robocalls.
Royal assigned to the AAAP account an “agent of record” who provided training to the telemarketers; Royal’s president also visited the call center roughly a dozen times between 2011 and 2014.
In 2014, a pair of Nevada residents whose numbers are registered on the National Do Not Call Registry filed suit against AAAP and related individuals. A default judgment was entered against the company after AAAP’s attorneys withdrew due to an impending bankruptcy.
The plaintiffs then filed an amended complaint naming Royal as a defendant under a theory of vicarious liability. A district court judge granted summary judgment in Royal’s favor, and a panel of the Ninth Circuit affirmed last year. In that decision, the appellate court weighed the ten nonexhaustive factors found in the Restatement (Second) of Agency to find that the telemarketers were acting as independent contractors and not agents of the defendant.
In the amended opinion filed in April 2018, the panel went a step further to find that the telemarketers lacked actual authority to make the allegedly unlawful calls and that Royal did not have enough authority to control the manner and means of AAAP’s telemarketing to hold it vicariously liable.
Beginning with actual authority, the panel explained it is limited to actions “specifically mentioned to be done in a written or oral communication” or “consistent with” a principal’s “general statement of what the agent is supposed to do.”
It was undisputed that the contract between Royal and AAAP expressly prohibited “any act or omission that violates applicable state or Federal law, including but not limited to robo-calling,” and the plaintiffs identified no evidence to contradict this limitation on AAAP’s authority.
“Royal expressly prohibited AAAP from employing these marketing tools,” the panel wrote. “And AAAP’s impecuniosity and unresponsiveness are immaterial to the issue of actual authority. Accordingly, we reject the actual authority theory.”
The panel similarly rejected the plaintiffs’ argument that Royal exercised sufficient control over the “manner and means” of AAAP’s telemarketing work to establish vicarious liability. A defendant is vicariously liable for violations of the TCPA where common-law principles of agency would impose it, the Ninth Circuit said, returning to the ten nonexhaustive factors it considered last year:
1) the control exerted by the employer, 2) whether the one employed is engaged in a distinct occupation, 3) whether the work is normally done under the supervision of an employer, 4) the skill required, 5) whether the employer supplies tools and instrumentalities [and the place of work], 6) the length of time employed, 7) whether payment is by time or by the job, 8) whether the work is in the regular business of the employer, 9) the subjective intent of the parties and 10) whether the employer is or is not in the business.
The “essential ingredient” in determining vicarious liability is the extent of control exercised by the principal, the panel said. Royal exercised “some amount of control,” requiring AAAP to keep records of its interactions with consumers, provide weekly reports on VSC sales, and use only scripts and materials approved by Royal. However, Royal did not have the right to control the hours the telemarketers worked, nor did it set quotas for the number of calls or sales the telemarketers had to make.
“Significantly, Royal did not have any control of a telemarketer’s call until the telemarketer decided to pitch a Royal VSC to the consumer,” the panel said, and AAAP sold VSCs for multiple companies. During the calls cited in the complaint, an AAAP telemarketer pitched a “Diamond New Car” protection plan to the plaintiffs—but that plan was not sold by Royal. “Thus, there is no evidence that AAAP telemarketers ever tried to sell Royal VSCs to Appellants,” the court said. “Accordingly, Royal never specifically controlled any part of any of the calls at issue in this case.”
The rest of the factors did not sway the panel. “Taking these factors into account, it is clear that Royal did not have enough authority to control the AAAP telemarketers’ work to hold Royal vicariously liable as if it were an employer of the AAAP telemarketers,” the Ninth Circuit wrote.
It continued: “AAAP was its own independent business that sold VSCs for multiple companies without the direct supervision of a Royal employee. AAAP provided its own equipment, set its own hours and only received payment if one of its telemarketers actually made a sale. Finally, although Royal had some control over AAAP’s telemarketers, it did not specifically control the calls at issue in this case, because the telemarketers never attempted to sell a Royal VSC during those calls. Because AAAP’s telemarketers were not subject to the requisite level of control, [the plaintiffs] cannot establish vicarious liability under a ‘manner and means’ control theory.”
For a second time, the panel affirmed summary judgment in favor of the defendant.
Why it matters: The Ninth Circuit’s amended opinion affirmed summary judgment in favor of the defendant, this time finding that the telemarketer lacked actual authority to make the allegedly unlawful calls and that the defendant did not have the requisite level of control over the telemarketer to establish vicariously liability. It also shows that while lack of supervision and control may be viewed as a “minus” in the business world, it can be a “plus” in the world of TCPA litigation.