FCC Rules Sellers May Be Vicariously Liable for Third-Party Telemarketers’ Violations of Telephone Consumer Protection Act

by Ropes & Gray LLP

The Federal Communications Commission (“FCC”) recently declared that sellers of products and services can be held vicariously liable for actions of third-party telemarketers that violate the Telephone Consumer Protection Act of 1991 (“TCPA”). In an order released on May 9, 2013, the FCC opined that, if a seller authorizes an independent contractor to market its goods or services, and the contractor uses pre-recorded “robocalls” or calls consumers listed on the national “do-not-call” registry, the seller can be held liable for the independent contractor’s actions even if the seller does not exercise direct supervision over those telemarketing activities. This ruling is significant in potentially broadening the exposure that producers of goods and services may have to class-action litigation and other enforcement actions when third-party telemarketers violate the TCPA.

Additionally, the ruling echoes recent regulatory trends making organizations legally responsible for the actions of third-party service providers that they select or have the authority to supervise if the provider violates consumer privacy. Examples include the Red Flags Rule issued last month by the Securities and Exchange Commission and the Commodity Futures Trading Commission, as well as the Federal Trade Commission’s modifications to the Children’s Online Privacy Protection Act at the end of last year.

The FCC order arose out of two federal court actions, each alleging violations of sections 227(b) and 227(c) of the TCPA. Under section 227(b), it is unlawful for any person to “initiate any telephone call to any residential telephone line using an artificial or prerecorded voice without the express consent of the called party.” These prerecorded marketing messages are commonly known as “robocalls.” Section 227(c) authorizes the FCC to create a national “do-not-call” registry that consumers can use to put telemarketers on notice that they do not wish to receive telephone solicitations, and FCC regulations make clear that initiating a solicitation to an individual on the registry is not permitted. The TCPA states that these provisions may be enforced by the FCC and the state Attorneys General, and consumers are also permitted to bring a private action for damages and injunctive relief premised on a single violation of section 227(b) or more than one violation of section 227(c) “by or on behalf of” a company within a 12-month period.

In the first of the federal court actions related to the FCC order, Phillip Charvat filed suit in federal district court in Ohio, asserting that telemarketers for EchoStar had made numerous robocalls and live calls in violation of the TCPA; see Charvat v. EchoStar Satellite, LLC. EchoStar, which delivers DISH Network (“DISH”) brand programming, countered that it could not be vicariously liable for the telemarketers’ actions because the telemarketers were independent contractors, not agents, under Ohio’s state-law definition of agency. While the district court found in EchoStar’s favor at the summary judgment stage, on appeal, the Sixth Circuit referred the action to the FCC to determine when and how sellers could be vicariously liable for telemarketers’ actions in the TCPA context.

Meanwhile, the United States had filed suit under the TCPA against DISH in an Illinois federal district court on behalf of the Federal Trade Commission and the Attorneys General of California, Illinois, North Carolina, and Ohio. As in Charvat, DISH’s telemarketers had marketed DISH using prerecorded calls and calls to numbers on the “do-not-call” registry. The district court stayed the matter in view of the Sixth Circuit’s referral in Charvat, and the court directed the parties to file an administrative complaint with the FCC. Accordingly, in early 2011, all parties involved in both actions filed petitions seeking FCC rulings interpreting the prerecorded and do-not-call provisions of the TCPA to determine whether they create liability for a seller as a result of telemarketing calls made by third-party retailers.

The FCC focused on construing sections 227(b) (the prohibition on prerecorded messages) and 227(c) (concerning the “do-not-call” registry) and concluded that sellers could be held vicariously liable for telemarketers’ unlawful calls under federal common law principles of agency. According to the FCC, vicarious liability could derive from (1) a formal agency relationship, in which the seller manifests assent to a telemarketer that it should act on its behalf and subject to its control; (2) principles of apparent authority, for example, when the consumer reasonably believes because of some manifestation by the seller that the telemarketer has authority to act on the seller’s behalf; or (3) principles of ratification, for example, when the seller knowingly accepts the benefits of the telemarketer’s unlawful activities.

Notably, the order leaves open the possibility that this liability standard will be further expanded in the future, at least for “do-not-call” violations. The FCC order observes that only section 227(c) empowers private citizens to sue for violations made “on behalf of” a company. In this instance, the FCC declined to treat sections 227(b) and 227(c) differently because of this textual variance, noting that creating such a distinction would be inappropriate for a declaratory ruling. However, the FCC noted that future FCC interpretations and regulations could broaden the liability standard for section 227(c) on the basis of the “on behalf of” language.

Businesses that have telemarketing relationships should review their current policies in light of the FCC’s order. The order states that the following factors may be probative of an agency relationship and may expose the seller to vicarious liability for a telemarketer’s unlawful actions:

  • the telemarketer’s level of access to a seller’s information and systems;
  • the telemarketer’s ability to enter data into the seller’s systems;
  • the telemarketer’s authority to use the seller’s trade name and trademark or service mark; and
  • any seller review of the telemarketer’s scripts.

According to the order, a seller will also be vicariously liable if it has authorized the telemarketer to act on its behalf and knows, or reasonably should have known, that the telemarketer was violating the TCPA and failed to intervene. On the other hand, the order suggests that sellers can avoid vicarious liability by exercising reasonable diligence in selecting and monitoring telemarketers and by including indemnification clauses in their contracts with telemarketing entities.

For more information regarding the FCC’s decision and its potential impact, please contact a member of our leading privacy and data security team, including Doug Meal, Mark Szpak, Jim DeGraw, and David McIntosh.

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.

© Ropes & Gray LLP | Attorney Advertising

Written by:

Ropes & Gray LLP

Ropes & Gray LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.