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Ninth Circuit Affirms That Company Is Not Vicariously Liable Under The TCPA

Aug 31, 2017 | Topic: Class Actions

For the vast majority of people, telemarketing calls have become a fact of life.  And for the vast majority of corporations, defending class action lawsuits pursuant to the Telephone Consumer Protection Act (“TCPA”) has become a fact of life.  One murky issue that litigants in these class actions have to resolve is that of vicarious liability.  Thanks to a recent Ninth Circuit decision affirming summary judgment in favor of a car warranty company who relied on independent telemarketers, the contours of vicarious liability are becoming clearer. 

Royal Administration Services, Inc. (“Royal”) was sued by plaintiffs for the unwanted solicitation calls made by All American Auto Protection, Inc. (“AAAP”)—a vendor that sold Royal’s vehicle service contracts (“VSCs”).  The district court granted summary judgment, ruling that Royal could not be held vicariously liable for the calls made by AAAP.  The question on appeal was therefore not whether the TCPA had been violated; but rather, whether the district court had appropriately granted summary judgment in Royal’s favor.  To orient its de novo review of the district court’s decision, the Ninth Circuit pointed to its prior finding in Gomez v. Campbell-Ewald Co., 768 F.3d 871, 878 (9th Cir. 2014) that “a defendant may be held vicariously liable for TCPA violations where the plaintiff establishes an agency relationship, as defined by federal common law, between the defendant and a third-party caller.”  To determine whether an agency relationship existed between Royal and AAAP, such that vicarious liability could attach to Royal, the Ninth Circuit analyzed the relationship under ten guiding factors.

Some factors seemed to hold more sway than others in the Ninth Circuit’s finding that AAAP was not an agent of Royal, but merely an independent contractor.  AAAP did not exclusively sell VSCs on behalf of Royal, so on any given call, AAAP first pitched the customer on the very concept of an extended warranty, or VSC.  It was only after the customer agreed to purchase a VSC that a VSC specific to Royal came into the picture.  Accordingly, the Ninth Circuit noted that Royal did not have control over the AAAP calls until the point at which a Royal VSC was pitched (if that point even came to pass).  Notably, there is no evidence that any of the calls at bar involved the attempt to sell a Royal VSC in particular.

Another fact, which appeared to heavily influence the Ninth Circuit in its decision, was the basis for compensation—AAAP was paid by commission, as opposed to the time worked per telemarketer.  Of further significance was the fact that Royal did not provide AAAP with as many tools or instrumentalities as AAAP had to provide for itself, including the phones, computers and office space.  Lastly, although Royal provided a script, it did not directly supervise the calls made by AAAP telemarketers.  In effect, it appears that under certain circumstances, liability under the TCPA can be contracted out to a third party if the third party is the independent contractor (and not agent) making such telemarketing calls.