Antitrust Law Daily Wrap Up, PRIVACY—E.D. Mich.: Telemarketer’s fundraising calls, made “on behalf” of Special Olympics of Michigan, qualified for TCPA nonprofit exemption, (Sep 24, 2015)

By Michael Menzhuber, J.D., LL.M.

A motion for summary judgment to dismiss an individual’s claim that a for-profit telemarketing company violated the Telephone Consumer Protection Act (TCPA) by making calls to her, at least one of which was prerecorded, after she had registered her home phone number with the National Do Not Call Registry, was granted by the federal district court in Detroit. The court determined that the calls were placed “on behalf” of a tax-exempt nonprofit organization, the Special Olympics of Michigan (SOMI), and were, therefore, covered by the TCPA’s non-profit exemption (Wengle v. DialAmerica Marketing, Inc., September 22, 2015, Leitman, M.)

Background. After registering her home telephone number with the National Do Not Call Directory, Geraldine Wengle received calls from DialAmerica Marketing, Inc., a for-profit telemarketing company that frequently worked as a professional fundraiser for charitable organizations. The calls, which were made pursuant to a fundraising campaign for SOMI, requested Wengle to purchase magazines with the proceeds going to SOMI, or, if she didn’t want to purchase any magazines, to make a direct donation to SOMI.

Under the SOMI-DialAmerica Program, which operated pursuant to Dial America’s Professional Fundraising Plan (PFP), SOMI had considerable control over the solicitation process, including telemarketing script approval. Also, all monies donated went directly to SOMI and SOMI, not DialAmerica, retained the established business relationship with the consumer.

Wengle filed an action which alleged that DialAmerica violated the TCPA by making calls to her, at least one of which was prerecorded, after she had registered her home phone number with the National Do Not Call Registry. Dial America filed a summary judgment motion to dismiss on the grounds that the calls to Wengle fell within the TCPA’s nonprofit exemption because they were placed “on behalf” of SOMI, which was tax-exempt nonprofit organization.

Nonprofit Exemption. For purposes of the TCPA, and its implementing regulations, a “telephone solicitation” is defined as “the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services, which is transmitted to any person.” However, under the TCPA’s nonprofit exemption, a call placed “by or on behalf of a tax-exempt nonprofit organization” is not a “telephone solicitation.”

While it did not appear that any court had considered whether a telephone solicitation made pursuant to a program like the SOMI-DialAmerica Program qualified for the TCPA’s nonprofit exemption, the court noted the three most relevant authorities, the Federal Communications Commission’s (FCC’s): (1) 2003 FCC Order; (2) 2005 FCC Order; and (3) 2013 declaratory ruling interpreting the phrase “on behalf of” as used in the TCPA.

The 2003 FCC Order confirmed that “calls made by a for-profit telemarketer to solicit the purchase of good or services or donations on behalf of a tax-exempt nonprofit organization are exempted from the rules on telephone solicitation.” The FCC order also recognized the critical support that for-profit fundraisers provide to nonprofit entities and explained that the TCPA was not intended to prevent for-profit fundraisers from making calls on behalf of nonprofits.

The 2005 FCC Order addressed certain issues raised in petitions for reconsideration of the 2003 FCC Order, one of which was from DialAmerica. In declining DialAmerica’s request to reconsider the portion of the 2003 FCC Order in which it held that the nonprofit exemption did not apply to calls made under DialAmerica’s Sponsor Program (the fundraising program prior to the PFP), the FCC reaffirmed that the it did not apply to for-profit companies that call to encourage the purchase of goods and services, yet donate some of the proceeds to a nonprofit organization.

In its 2013 declaratory ruling, the FCC addressed the phrase “on behalf of”. In doing so, it concluded that “on behalf of” incorporates “a broad range of agency principles, including not only formal agency, but all principles of apparent authority and ratification.”

SOMI-DialAmerica Program. The court determined that DialAmerica’s calls fell within the TCPA’s nonprofit exemption because the calls were “for the benefit of” and “on behalf of” SOMI. The court concluded that: (1) the parties’ contract expressly provided that SOMI had engaged DialAmerica to sell magazines on SOMI’s behalf; (2) DialAmerica began every call by explaining that it was a professional telemarking fundraiser calling “for” SOMI; (3) SOMI had the right to assert control over, and had asserted control over, the content of the telemarketing script; (4) customers received an invoice, as well as a letter of appreciation, from SOMI; and (5) customers deposited there magazine payments and donations into a bank account that SOMI owned and controlled.

Wengle argued that: (1) the SOMI-DialAmerica Program was no different than DialAmerica’s prior Sponsor Program which, according to the FCC, did not qualify for the TCPA nonprofit exemption; (2) SOMI neither initiated nor had control over the calls; and (3) DialAmerica used these calls to deliver “its own commercial message.” The court disagreed because: (1) unlike the Sponsor Program, the SOMI-DialAmerica Program gave SOMI substantial control over the content of the message, the resulting business relationship was between the consumer and SOMI, payments was made directly to SOMI, and donations were directly paid to SOMI; (2) SOMI specifically engaged DialAmerica to initiate fundraising calls on its behalf; and (3) a review of the telemarketing script showed that DialAmerica was not delivering its own message.

The case is No. 14-cv-10644.

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

Companies: DialAmericaMarketing, Inc.

Cases: Privacy MichiganNews