Antitrust Law Daily Wrap Up, ADVERTISING—8thCir: Debt Collection Company Not Liable for Advertising E-Mails, (May 29, 2013)

By Tobias J. Gillett, J.D., LL.M.

A debt collection business was not liable under RICO, the Computer Fraud and Abuse Act, and an Iowa anti-spam statute for e-mails advertising its services allegedly sent by one of its salespeople, because the district court properly credited the testimony of the business’s principals over that of the plaintiffs and because the salesman was an independent contractor for whose actions the business could not be held vicariously liable, the U.S. Court of Appeals in St. Louis has ruled (Kramer v. Cash Link Systems, May 28, 2013, Colloton, S.).

Robert Kramer owned and operated CIS Internet Services, an Iowa Internet service provider. Kramer alleged that between 2001 and 2003 the provider was flooded with spam e-mails that interfered with the ability of CIS customers to access the Internet, many of them advertising services of National Credit Systems (NCS), a debt collection company.

Kramer filed suit against NCS, asserting that the e-mails violated federal RICO, the federal Computer Fraud and Abuse Act, and an Iowa anti-spam statute. At trial, Kramer and his former attorney, Pete Wellborn, testified that they contacted an NCS salesman, William Stolars, and an NCS shareholder, Chris Rehkow, both of whom allegedly admitted that Stolars had sent the e-mails. However, Rehkow denied having spoken with the plaintiffs. NCS’s other shareholder, Lynn Goldberg, testified that NCS’s sales force, including Stolars, consisted of independent contractors, not employees. Goldberg and Rehkow both testified that they neither sent the e-mails nor authorized anyone to send them.

The district court granted judgment to NCS, finding the testimony of NCS’s principals to be more credible than that of Kramer and Wellborn, and that NCS could not be liable even if Stolars sent the e-mails, because he was an independent contractor. Kramer appealed.

Testimony. The court of appeals upheld the district court’s decision to credit the testimony of NCS’s principals over that of Kramer and Wellborn. Although the e-mails contained advertisements similar to those used elsewhere online by NCS, and contained a valid e-mail address, that evidence did not contradict the principals’ testimony because “anyone could have composed the e-mails by copying and pasting text from NCS’s website or its other advertisements.”

Further, the district court found Rehkow’s statements in a phone call to Kramer that “he could not understand how anything like this could happen” and that “cis.net was not on their list” were “more akin to a denial” than an admission. Kramer had allegedly memorialized the conversation in an e-mail, which the district court concluded “deserve[d] less weight than if it were notes handwritten or prepared at the precise time” of the phone call. The district court also found that Kramer “exaggerated” his testimony, provided testimony that was “not always consistent with the content of the documentary evidence,” and “gave guarded and unpersuasive answers” about certain of his activities. The court of appeals determined that the district court’s findings did not constitute clear error.

Independent contractor. The appeals court also upheld the district court’s conclusion that Stolars was an independent contractor, rather than an employee, and therefore NCS could not be held vicariously liable for his actions. Although NCS equipped its salespeople with “a lengthy sales manual with specific directions about how to sell NCS’s services,” and Rehkow testified that he called the salespeople five times a week, Kramer did not show that the salespeople were “obliged to follow the manual or to accept Rehkow’s advice.” Moreover, Rehkow also testified that the salespeople “could market pretty much any way they wanted to,” and could choose how long they worked and whether they worked from home or the office.

Some other factors, such as Stolar’s payment by commission and responsibility for his own taxes and insurance, pointed to independent contractor status, while others, such as marketing materials provided by NCS, the lack of particular skills other than those taught by NCS, and the integral nature of the work performed by the salespeople, pointed to employee status. However, the “primary consideration” was “the hiring party’s control over the means of performance,” and “the weight of the evidence taken as a whole establishes an independent contractor arrangement,” in the court’s view.

The case is No. 12-1956.

Attorneys: David M. Pillers (Pillers & Richmond) for Robert W. Kramer, III. Michael James Burdette (Burdette Law Firm) for National Credit Systems, Inc.

Companies: CIS Internet Services; National Credit Systems, Inc.

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