Telephone Consumer Protection Act ("TCPA") class action lawsuits are booming, and plaintiffs are commonly seeking tens, if not hundreds, of millions of dollars in damages. These cases often arise out of a marketing campaign that allegedly made a large number of autodialed or pre-recorded telephone calls and/or sent many text messages. Because the TCPA sets statutory damages at $500 to $1,500 per unlawful call or text, the aggregate financial exposure can be crippling (as an example, on February 26th Life Time Fitness agreed to pay up to $15 million to end TCPA suits). Of corresponding concern, plaintiffs may overreach and sue every entity conceivably connected to these marketing campaigns.

For the company that is one or more steps removed from the marketing campaign, the best strategy to get the case dismissed may be to show that the entity that sent the texts or made the calls was not the company's agent. A typical example of this scenario is when a company provides a marketing list to a third party, which then makes the unwanted phone calls or sends the texts. Because direct liability is limited to the actual caller or sender of the texts, vicarious liability is the primary battlefield. And, while the scope of vicarious liability under the TCPA has been uncertain, courts are beginning to define the limits with increasing certainty and consistency. Indeed, the Ninth Circuit was one of the first appeals courts to address this issue, and district courts are largely following its lead. One recent example is Thomas v. Taco Bell Corp., in which the Ninth Circuit affirmed dismissal of a TCPA claim for failure to establish vicarious liability at the summary judgment phase.

Under this line of cases, TCPA vicarious liability is limited to principles of traditional agency, apparent authority, and ratification. Principally, to establish a traditional agency theory, a plaintiff must show that the defendant "controlled or had the right to control [the actual sender] and, more specifically, the manner and means of the text message campaign" (as quoted from the above Taco Bell case). To establish an apparent authority theory, plaintiff must show that the defendant said or did something "'on which [plaintiff] reasonably relied.'" And, to establish a ratification theory, plaintiff must show the affirmance of a prior act done by another, and that the affirmance was made with knowledge of the material facts about the act. Plaintiff must also establish the prerequisite existence of a "'principal-agent relationship,'" as "'ratification can have no meaning without it.'"

Now that the law is taking shape, discovery must form the foundation for a lack of liability defense. For example, depose the actual sender of the calls or texts to establish a disconnect between the sender and the defendant, analyze your internal records to establish such a disconnect, and hire an expert with experience in the telecommunications industry to forensically analyze data from third-party telephone companies (including call records and customer identifying information) to establish a disconnect.

Key Take-Aways

If you are named in a TCPA lawsuit and are removed from the underlying marketing campaign, it is important to understand the staggering financial exposure and the available defenses. You must then develop a litigation and discovery strategy designed to exit the case as soon as practicable.