The recent decision of the U.S. Court of Appeals for the Fourth Circuit affirming the district court's judgment imposing more than $61 million in damages against Dish Network for its vendor's violations of the Telephone Consumer Protection Act (TCPA) serves as a reminder that companies can be held liable for consumer protection law violations committed by third-party vendors—and underscores the importance of maintaining strong vendor oversight.
In 2017, a North Carolina federal district court jury found Dish liable for violations of the TCPA because its vendor initiated more than 50,000 calls to about 18,000 consumers whose telephone numbers appeared on the National Do-Not-Call Registry. The jury awarded damages of $400 per call, totaling nearly $20.5 million. After the trial, the judge trebled the damages to $1,200 per call—more than $61 million total—because she found the violations to be willful and knowing. Prior to the trial, the district court had certified a class that included all persons whose numbers were on the Registry for at least 30 days and had received two calls in a single year. (See our prior alert for a discussion of the district court proceedings.)
On appeal, Dish argued that Article III of the Constitution barred the trial court from certifying the class because many of the class members were uninjured by the violations and therefore lacked standing. Applying the U.S. Supreme Court's Spokeo decision, the Fourth Circuit concluded that the alleged TCPA violations were sufficient to satisfy Article III's injury-in-fact requirement. In the Fourth Circuit's view, Dish's argument that a plaintiff's alleged harm had to rise to a level that would support a common law tort action "is nothing more than an attempt to dismember the TCPA, converting a simple remedial scheme into a fact-intensive quarrel over how long a party was on the line or how irritated it felt when the phone rang."
The Fourth Circuit also rejected Dish's arguments challenging the district court's class certification, including its argument that because the plaintiff was allowed to sue on behalf of all people who "received" calls at numbers on the National Do-Not-Call Registry during the class period, the class included a large number of people with no TCPA claim. More specifically, Dish claimed that only telephone subscribers, meaning individuals who are responsible for payment of the telephone bill, can assert a private right of action for calls made to numbers on the Registry. The Fourth Circuit determined that "the text, purpose, and history [of the TCPA] all cut against reading the statute as protecting only subscribers."
Dish also challenged the jury's finding that it was liable for its vendor's conduct. Observing that the TCPA's plain language contemplates that a company can be liable for calls made on its behalf and that common law agency principles could be assumed to apply, the Fourth Circuit found there was considerable evidence supporting an agency relationship between Dish and the vendor. Such evidence included contract provisions giving Dish broad authority over the vendor's business, including what technology it used and what records it kept, and authority given to the vendor to use Dish's name and logo in carrying out its services. It also found sufficient evidence for a jury to reasonably conclude that the vendor was acting pursuant to its authority when it made the calls at issue, such as testimony that Dish was aware of the vendor's legal violations, took no meaningful action to ensure compliance, and profited from the vendor's actions.
The Fourth Circuit was dismissive of Dish's argument that its contract with the vendor, which defined the vendor's relationship as an independent contractor, should outweigh other evidence of agency. Citing the rule that parties cannot avoid the legal obligations of agency simply by contracting them away, the Fourth Circuit stated that "if the parties want the benefits of an independent contractor relationship, they have to actually have one. Dish wanted to exercise extensive control over [the vendor's] conduct without taking responsibility for that conduct, and that is what the law does not permit." The court also found unpersuasive Dish's argument that it was unreasonable for the jury to conclude that the improper calls were made within the scope of the vendor's authority as Dish's agent because Dish "occasionally instructed [the vendor] to follow the law." According to the Fourth Circuit, the evidence showed that Dish failed to respond to concerns about the vendor's TCPA compliance "in any serious way and was profiting handsomely from [the vendor's] sales tactics."
Finally, the Fourth Circuit rejected Dish's challenge to the district court's finding that its violations were knowing and willful, concluding that such finding rested on "solid evidence." The district court had relied on two rationales for its finding. The first was that a principal can be liable for the willful acts of its agent committed within the scope of the agent's authority. The Fourth Circuit found "ample" evidentiary support for the finding that the vendor's conduct was within the scope of its authority as Dish's agent and that its violations were willful. The district court's second rationale was that, without regard to agency, a company can be liable for engaging in willful and knowing conduct if its actions demonstrate indifference to ongoing violations and a conscious disregard for compliance with the law. The Fourth Circuit also found ample evidentiary support for the finding that Dish's own conduct was willful, such as Dish's failure to improve its business practices in response to numerous lawsuits and enforcement actions for telemarketing activities and the "half-hearted way" it responded to consumer complaints.