Antitrust Law Daily Wrap Up, PRIVACY—9th Cir.: U.S. Navy marketing consultant not immune from TCPA claims, (Sep 22, 2014)

By Greg Hammond, J.D.

A marketing consulting company for the U.S. Navy will once again face a class action claim that it violated the Telephone Consumer Protection Act (TCPA) by allowing a third-party vendor to send unsolicited text messages. The lower court’s decision, granting summary judgment to the consulting company, was reversed and remanded by the U.S. Court of Appeals in San Francisco, which determined that a defendant may be vicariously liable under the TCPA and the defendant in this case was not entitled to derivative sovereign immunity (Gomez v. Campbell-Ewald Co., September 19, 2014, Benavides, F.).

Background. The U.S. Navy contracted with marketing consultant Campbell-Ewald Company, to create and implement a multimedia recruiting campaign, targeting young adults between the ages of 18 and 24. The Navy allowed Campbell-Ewald to send text messages to cell phone users that consented to such solicitation. However, the text messaging campaign was partially outsourced for the creation of a phone number list and for physically transmitting the messages. Jose Gomez received an allegedly unsolicited text message in 2006, when he was 40 years old. He filed a putative class action, alleging that Campbell-Ewald violated the TCPA by sending unsolicited text messages. The lower court granted Campbell-Ewald summary judgment, finding that the company was “immune from liability under the doctrine of derivative sovereign immunity,” and Gomez appealed.

TCPA claim. On appeal, Campbell-Ewald argued that: (1) the TCPA claims were mooted by Gomez’s refusal to accept a settlement offer; (2) the TCPA’s applicability to text messages is unconstitutional under First Amendment principles; (3) it cannot be liable because it outsourced the dialing and did not actually make any calls on behalf of the Navy; and (4) it is immune under the doctrine of derivative sovereign immunity.

The appellate court disagreed with all of Campbell-Ewald’s arguments, first finding that an unaccepted settlement offer alone is insufficient to moot a consumer’s claim. Further, because the settlement offer was rejected prior to Gomez’s motion for class certification, both the personal and class TCPA claims were still live controversies. Second, the court determined that there was no evidence that the government’s interest in privacy ends at “the home,” and the nature of cell phones renders the restriction of unsolicited text messaging, under the TCPA, necessary to ensure privacy. Despite Campbell-Ewald’s arguments to the contrary, the government speech doctrine was immaterial to the present dispute, in which Gomez is challenging the regulation of a particular means of communication, not advocating for viewpoint neutrality.

Third, the court concluded that Campbell-Ewald may be vicariously liable for messages sent by the company it outsourced text messaging responsibilities to, as the statute is silent as to the issue, and the court was therefore required to presume that Congress intended to apply traditional standards of vicarious liability. Campbell-Ewald even conceded that a merchant can be held liable for outsourced telemarketing, and the court noted that “it is unclear why a third-party marketing consultant shouldn’t be subject to that same liability.” Finally, the court found that the doctrine of derivative sovereign immunity does not apply in this case, as Gomez’s claims do not implicate a constitutional “promise to compensate” injured plaintiffs; Congress has expressly created a federal cause of action affording individuals, such as Gomez, standing to seek compensation for violations of the TCPA; and there is sufficient evidence that the text messages were contrary to the Navy’s policy permitting texts only to persons who had opted in to receive them. The lower court’s order of summary judgment was thus vacated and remanded.

The case number is 13-55486.

Attorneys: Evan M. Meyers (McGuire Law, P.C.), Michael J. McMorrow (McMorrow Law, P.C.), and David C. Parisi (Parisi & Havens LLP) for Jose Gomez. Laura A. Wytsma, Michael L. Mallow, Christine M. Reilly, and Meredith J. Siller (Loeb & Loeb LLP) for Campbell-Ewald Co.

Companies: Campbell-Ewald Co.

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