In March 2019, Caliber Home Loans hired NexLevel Direct to generate leads for its home loan refinancing business. Their contract required that NexLevel “perform or provide” its services “in full compliance with … all applicable federal, state, and local laws, regulations and ordinances.”
The contract also mandated that NexLevel “not allow any subcontractor … to perform or provide” services “without … prior written consent.”
Ignoring the subcontractor provision, NexLevel went behind Caliber’s back and hired Driving Force Media to provide the leads without Caliber’s consent. Driving Force twice called Deborah Schick at a number listed on the national Do Not Call Registry (DNCR) in November 2019.
Schick sued Caliber and NexLevel, asserting claims of vicarious liability for the TCPA violations allegedly committed by Driving Force. The defendants moved for summary judgment, arguing that neither gave Driving Force authority to violate the TCPA or ratified its acts.
U.S. District Court Judge Vince Chhabria agreed, granting the motions.
With respect to Caliber, actual or apparent authority was not applicable because the undisputed evidence was that Caliber had no knowledge of Driving Force prior to the lawsuit. Instead, Schick argued that Caliber ratified Driving Force’s actions.
But nothing suggested that Driving Force “pretended and demonstrably assumed to act as” Caliber’s agent, the court said, as the company supplied leads to four to six other companies as well as Caliber, and leads were sold as if in a marketplace.
Further, in response to customer complaints, Caliber attempted to ensure TCPA compliance, Judge Chhabria said.
“When Caliber heard from customers who had been called despite listing their numbers on the Do Not Call registry, it followed up with NexLevel about its TCPA policies,” he wrote. “When complaints continued, Caliber instructed NexLevel to ‘immediately stop all leads.’ And when the problems persisted after NexLevel restarted lead generation, Caliber cut ties with NexLevel altogether.”
The court acknowledged an early exchange between Caliber and NexLevel about a test batch of ten leads, one of which was on the DNCR.
“But this one-off exchange falls short of showing ratification,” Judge Chhabria wrote. “Had Caliber outright ignored signs that NexLevel supplied non-compliant leads, there might be a genuine dispute as to vicarious liability. But rather than blindly accept leads running afoul of the TCPA, Caliber prodded NexLevel about its TCPA compliance, promptly demanded a pause in lead generation, and canceled its contract with NexLevel altogether soon thereafter.”
As for NexLevel’s vicarious liability, Schick told the court that Driving Force acted with actual authority because NexLevel controlled its operation and that NexLevel ratified Driving Force’s acts after the fact.
Judge Chhabria disagreed, ruling that “no reasonable jury could find NexLevel vicariously liable based on the evidence in the record.”
Actual authority requires something more than an agency relationship, he said, such as a general statement of what the agent is supposed to do or a written or oral communication, and Schick could point to no evidence showing that NexLevel told Driving Force to place calls violating the TCPA.
Nor did NexLevel exercise sufficient control over Driving Force to establish vicarious liability. Although NexLevel set some expectations for lead generation—including parameters for the loans Caliber hoped to receive and feedback on the number and quality of live transfers to Caliber—it did not control or dictate the manner or means of Driving Force’s work, the court said.
Ratification also failed with regard to NexLevel, because “just as Caliber cut off its relationship with NexLevel when customer complaints cropped up, NexLevel did the same thing with Driving Force. Indeed, it did so even more promptly,” Judge Chhabria wrote.
The court granted summary judgment in favor of both defendants.
To read the order in Schick v. Caliber Home Loans, Inc., click here.
Why it matters: While claims of vicarious liability under the TCPA present a risk, companies can protect themselves with the use of clear contract terms—as Caliber did—and by quickly responding to consumer complaints, like both Caliber and NexLevel did, terminating relationships when they learned of illegal calls.