Antitrust Law Daily Wrap Up, PRIVACY—E.D. Mich.: Telemarketer’s calls on behalf of charity fell within the TCPA nonprofit exemption, (Sep 25, 2015)

By Edward L. Puzzo, J.D.

Calls made by a telemarketing firm were “on behalf of” the Special Olympics of Michigan charity and therefore fell within the nonprofit exemption to the Telephone Consumer Protection Act, the federal district court in Detroit has ruled (Wengle v. DialAmerica Marketing, Inc., September 22, 2015, Leitman, M.).

Plaintiff Geraldine Wengle, who had registered her phone number on the FCC’s National Do-Not-Call Registry, brought a claim against telemarketer DialAmerica, alleging that its 23 unsolicited calls to her during the period of 2009-2012 violated the Telephone Consumer Protection Act (TCPA). DialAmerica responded that it made only two calls to Wengle and that the calls fell within the nonprofit exemption to the TCPA. DialAmerica moved for summary judgment.

DialAmerica frequently works as a professional fundraiser for charitable organizations. In 2005, DialAmerica offered its “Sponsor Program” for charitable fundraising, though which it sold magazine subscriptions and donated a portion—12.5 percent—of the subscription proceeds to the charitable organizations. In 2006, DialAmerica replaced this program with a “Professional Fundraising Program.” Under the newer program, consumer purchases of magazine subscriptions created a contractual relationship between the consumer and the charity, unlike the earlier program that created a contractual relationship between the consumer and DialAmerica.

In 2008, the Special Olympics of Michigan (SOMI), a tax-exempt charitable organization, enlisted DialAmerica to help raise funds for it using its “Professional Fundraising Program.” During the period of 2008-2014, DialAmerica made over 28,000 magazine sales through its program with SOMI, paying SOMI 12.5 percent of the subscription proceeds, and generated nearly 1,200 direct donations, paying SOMI 100 percent of the direct donations, for a total of over $734,000 paid to the charity.

The court noted that in 2003, the FCC, after public comment, confirmed that “calls made by a for-profit telemarketer hired to solicit the purchase of goods or services or donations on behalf of a tax-exempt nonprofit organization are exempted from the rules on telephone solicitation.” The phrase “on behalf of”, incorporating common law agency principles, has been interpreted to mean a call placed “for the benefit of” or “in the interest of” the nonprofit.

Here, the court noted that the contract between SOMI and DialAmerica expressly stated that SOMI had engaged DialAmerica to sell magazine subscriptions on SOMI’s behalf. In its calls, DialAmerica explained that it was fundraising for SOMI. Also, SOMI had the contractual right to control the content of the telemarketing script, and they used this right to tailor the script to current events being conducted by SOMI.

In addition, customers who purchased magazine subscriptions as a result of the telemarketing received their invoice from SOMI, not DialAmerica, and the funds received were deposited into a SOMI-controlled bank account. Finally, the court noted that the program allowed DialAmerica to collect direct donations for SOMI in its calls. One-hundred percent of these donations were deposited into a SOMI-controlled bank account

Based on these factors, the court concluded that under the DialAmerica “Professional Fundraising Program” with SOMI, the calls were “on behalf of” SOMI and thus qualified for the nonprofit exemption to the TCPA. Therefore, the court granted DialAmerica’s Motion for Summary Judgment.

The case is Civil Action No. 14-cv-10644.

Attorneys: Ian B. Lyngklip (Lyngklip & Associates Consumer Law Center, PLC) for Geraldine Wengle. Jeffrey M. Garrod (Orloff Lowenbach Stifelman & Siegel, PA) for DialAmerica Marketing, Inc.

Companies: DialAmerica Marketing, Inc.

Cases: Privacy Advertising MichiganNews