On May 10, 2017, the United States District Court for the Western District of Michigan granted the multiple motions to dismiss of hotel chains AM Resorts, LP and Newport Hospitality, LLC (collectively, “Resorts”) in a Telephone Consumer Protection Act (“TCPA”) lawsuit. The TCPA makes it unlawful to make a call using an “automatic telephone dialing system or an artificial or prerecorded voice . . . to any telephone number assigned to a . . . cellular telephone service.” Additionally, Federal Communications Commission (“FCC”) regulations prohibit initiating a telephone solicitation to a residential telephone subscriber who has put her telephone number on the national do-not-call registry.
The plaintiffs alleged that VIP Travel Services and United Shuttle Alliance Transportation Corp. (collectively, “USA”) made dozens of calls to the plaintiffs’ cell phone numbers, which are on the do-not-call registry. When the plaintiffs answered the calls, they claimed that they heard an automated voice tell them they had won a vacation. The automated voice gave the plaintiffs the option to press 1 to reach a human and schedule a vacation. USA’s website listed various hotels, including hotels owned by the Resorts, and one of the plaintiffs made reservations to stay at some of the Resorts’ hotels. The plaintiffs alleged that USA’s automated calls violated the TCPA and that the Resorts were vicariously liable for TCPA violations.
An entity can be found vicariously liable for TCPA violations under federal common law agency theories, including actual authority, apparent authority, and ratification. Regarding actual authority, the court determined that there was “nothing in the complaint [that] permit[ed] a reasonable inference that the Resorts had the right to control USA, or gave actual authority to USA to make automated telephone calls in violation of the TCPA.”
The plaintiffs’ apparent authority theory also failed. A plaintiff can demonstrate apparent authority by showing that “the seller allow[ed] the outside sales entity access to . . . detailed information regarding the nature and pricing of the seller’s products and services or to the seller’s customer information.” According to the court, however, “there [we]re no well-pleaded allegations that the Resorts gave USA access to detailed information about the Resorts’ pricing, services, or customer information, or gave USA the ability to enter consumer information into the Resorts’ systems.” It was not enough that USA knew the prices associated with staying at the Resorts’ hotels and was able to determine whether rooms were available at the Resorts’ hotels.
The plaintiffs’ ratification theory fared no better. The plaintiffs alleged that the Resorts ratified USA’s actions by accepting reservations that were unlawfully obtained. The court, however, recognized that an entity is not bound by a ratification if it was made without knowledge of the material facts of the alleged agent’s conduct. The court found that ratifying reservations (by accepting them) was not the same as ratifying the alleged conduct that led to the reservation. Additionally, the court concluded that there were not even “allegations from which to infer that the Resorts had sufficient knowledge of USA’s allegedly unlawful telephone calls that would have led a reasonable person to investigate USA’s actions further.”
A copy of the court’s decision is available by clicking here.