Antitrust Law Daily Wrap Up, PRIVACY—N.D.W. Va.: Home security companies may be liable for TCPA violations committed in calls made on their behalf, (Aug 16, 2013)

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

Pursuant to an FCC declaratory ruling, two home security companies for which a third company had placed telephone calls could be held liable for TCPA violations committed on their behalf, even though they did not physically place the calls themselves, the federal district court in Clarksburg, West Virginia has ruled (Mey v. Monitronics International, Inc., August 14, 2013, Keeley, I.). The court also found denial of the companies’ motions for partial summary judgment would have been appropriate in any case, due to the plaintiff’s inability to conduct discovery as to whether the companies had ratified the actions of the third company.

Diana Mey alleged that Versatile Marketing Solutions, Inc. (VMS) placed telephone calls on behalf of Monitronics International, Inc. and UTC Fire and Security Americas Corp., Inc. to her number nineteen times between November 16, 2009 and July 11, 2011, even though Mey had registered her name on the national Do Not Call Registry. Mey asserted that these calls violated the TCPA.

On January 31, 2012, Monitronics and UTC filed motions for summary judgment, contending that they were not liable because VMS had physically placed the calls, not them. The court stayed the case pending a Federal Communications Commission ruling on the extent to which a party may be liable for calls made “on behalf of” them under Section 227(c)(5) of the TCPA. In its present decision, the court considered the effect of the FCC’s May 9, 2013 ruling on the case.

The court explained that Section 227(c)(5) of the TCPA permits “[a] person who has received more than one telephone call within any 12-month period by or on behalf of the same entity in violation of the regulations prescribed” in the statute may bring an action as specified in the Section. Section 64.1200(c)(2) of Title 47 of the Code of Federal Regulations prohibits any “person or entity” from “initiat[ing] any telephone solicitation” to a person who had registered his or her number on the national do-not-call registry, while Section 64.1200(f)(9) defines a “seller” as a “person or entity on whose behalf a telephone call or message is initiated.”

The court noted that the courts in early TCPA cases applied varying approaches to “on behalf of” liability, with some courts relying on state laws, and others applying “a more general agency analysis.” In its declaratory ruling, the FCC concluded that, “while a seller does not generally ‘initiate’ calls made through a third-party telemarketer within the meaning of the TCPA, it nonetheless may be held vicariously liable under federal common law principles of agency for violations of either section 227(b) or section 227(c) that are committed by third-party telemarketers.” However, the court noted that “on behalf of” liability did not require a formal agency relationship, according to the FCC; instead, a plaintiff “could also use principles of ratification and apparent authority to establish the seller’s vicarious liability for the illegal acts of a third-party telemarketer.”

Applying the FCC’s ruling to the present case, the court concluded that it was “patently clear” that Mey had met her burden of showing that VMS acted “on behalf of” Monitronics and UTC. The fact that Monitronics and UTC both had agreements with VMS permitting “it to hold itself out as an ‘authorized dealer’” of their products could alone “lead a reasonable finder of fact to conclude that UTC and Monitronics cloaked VMS with the apparent authority to act on their behalf,” according to the court.

The court rejected the defendants’ contention that the declaratory ruling exceeded the FCC’s power to interpret the TCPA. Since the Sixth Circuit, in concluding that the issue should be referred to the FCC, had concluded that the phrase “on behalf of” is ambiguous (Charvat v. EchoStar Satellite, LLC, 630 F.3d 459 (6th Cir. 2010)), the “question for the court [was] whether the FCC’s answer [was] based on a permissible construction of the TCPA.” UTC and Monitronics had provided no support for the proposition that the FCC’s ruling was “based on an impermissible construction of the TCPA,” and “the FCC’s conclusion that ‘on behalf of’ liability embraces federal common law principles of agency is quite sensible,” according to the court. Moreover, the court observed that “the apparent authority theory has long been the settled rule in the federal system.”

The court also declined to follow the defendants’ argument that they were manufacturers and not “sellers” for TCPA purposes, and were thus immune from liability for VMS’s actions. The court noted that the FCC’s definition of “seller” comprised “a person or entity on whose behalf a telephone call or message is initiated.” Therefore, “the determination of whether an entity is a ‘seller’ turns on whether a telephone solicitation is made on its behalf.”

The court also noted that it could have denied the defendants’ motions because the court’s limited discovery order had not permitted Mey to discover “facts essential to justify her opposition to the defendants’ motions on a theory of ratification.” Federal Rule of Civil Procedure 56(d) allowed a court to defer consideration of a motion or deny it “if a movant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition.” Here, Mey had submitted an affidavit stating that, due to the limited scope of discovery, Mey had been unable to obtain specific types of information related to the ratification theory of vicarious liability. Therefore, since May had “offered specific reasons why she could not present facts to oppose the motions for partial summary judgment, the court conclude[d] that denial of the pending motions [was] warranted.”

The case is Civil Action No. 5:11CV90.

Attorneys: Edward A. Broderick (Law Offices of Edward R. Broderick) for Diana Mey. Benjamen S. Dyer (Culp & Dyer, LLP) for Monitronics International, Inc. Christina S. Terek (Spilman Thomas & Battle PLLC) for Versatile Marketing Solutions, Inc. Gordon H. Copland (Steptoe & Johnson, PLLC) for UTC Fire & Security Americas Corp., Inc.

Companies: Monitronics International, Inc.; Versatile Marketing Solutions, Inc.; UTC Fire and Security Americas Corp., Inc.

Cases: Privacy WestVirginiaNews