California Court Enters Summary Judgment Against Plaintiff Who Failed To Prove Vicarious Liability

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A court in the Northern District of California recently granted a defense motion for summary judgment, finding that the defendants were not vicariously liable for a subcontractor’s supposed TCPA violations because the record showed that they had neither given the subcontractor authority to violate the TCPA nor ratified its acts.

In Schick v. Caliber Home Loans, Inc., defendant Caliber hired defendant NextLevel to generate leads for its home loan refinancing business. No. 20-CV-00617-VC, 2021 WL 4166906, at *1 (N.D. Cal. Sept. 14, 2021). Their contract mandated that NextLevel “perform or provide” its services “in full compliance with … all applicable federal, state, and local laws, regulations and ordinances.” Id. The contract further required that NextLevel “not allow any subcontractor … to perform or provide” services “without … prior written consent.” Id. Without Caliber’s consent, in violation of the subcontractor provision, NextLevel hired subcontractor Driving Force to provide leads. Id. After allegedly receiving two calls on a number on the national “Do Not Call” Registry, Plaintiff filed suit and sought to hold the defendants vicariously liable. Id.

The court looked to “‘federal common law agency principles of vicarious liability’ to decide whether to hold [defendants] responsible for its agent’s TCPA violations.” Id. (quoting In re Joint Petition Filed by Dish Network, LLC, 28 FCC Rcd. 6574, 6584 (2013)).

With respect to Caliber, the court noted that the plaintiff did not argue that Driving Force had acted with either actual or apparent authority, given the undisputed evidence showing that Caliber had no knowledge of Driving Force prior to the lawsuit. Id. Plaintiff instead argued that Caliber had ratified Driving Force’s actions. Id. In rejecting that argument, the court noted that for ratification to occur, an actor must be an agent or must purport to be one. Id. The court found that nothing suggested that Driving Force purported to be an agent of Caliber, as Driving Force provided leads to four to six other companies in addition to Caliber. Id. at *2.

The court also found that Caliber did not ratify by accepting the benefits of an agent’s act with either knowledge of a TCPA violation or of facts that would have led to further investigation. Id. The court reasoned that, when Caliber received complaints from customers, it tried to ensure TCPA compliance by instructing NextLevel to stop all leads, and after NextLevel restarted and complaints continued, Caliber cut ties with NextLevel altogether. Id. The court added that had Caliber “outright ignored signs that NextLevel supplied non-compliant leads, there might be a genuine dispute as to liability.” Id. But rather than blindly accept leads that violated the TCPA, Caliber took steps to ensure compliance and cut ties soon after problems persisted. Id.

With respect to NextLevel, plaintiff argued that Driving Force acted with actual authority because NextLevel controlled its operations or, alternatively, that NextLevel ratified Driving Force’s acts. Id. The court explained that to establish actual authority a TCPA plaintiff, in addition to establishing an agency relationship, must show that the principal gave actual authority to make unlawful calls. Id. The court found that plaintiff could point to no evidence showing NextLevel told Driving Force to place calls in violation of the TCPA. Id.

Moreover, the record showed that NextLevel did not exercise sufficient control over Driving Force to establish vicarious liability. Id. Likening the facts of this case to United States v. Geffrard, 87 F.3d 448, 451-52 (11th Cir. 1996), the court found that NextLevel only established “high-level parameters” over Driving Force, including setting some expectations for lead generation, providing instructions to get Driving Force set up to make live transfers to Caliber, and providing feedback on the number and quality of live transfers to Caliber. Id. This, the court found, was insufficient to find that NextLevel controlled or dictated the manner or means of Driving Force’s work. Id. Finally, the court disposed of the ratification argument for the same reason above—once NextLevel received customer complaints, it immediately cut ties with Driving Force. Id. at *3.

The decision is a helpful reminder that defendants should be careful to develop a record regarding efforts to ensure marketers’ compliance with the TCPA and to cut off relationships with such entities upon detection of misconduct. Additionally, it is useful to keep in mind when structuring relationships and drafting contracts between merchants and marketers to include language that requires marketers to provide their services in compliance with all applicable laws.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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