Robocalls and third-party violations: FCC rules on vicarious liability under the TCPA

by DLA Piper

The Federal Communications Commission recently clarified whether parties on whose behalf telemarketing “robocalls” are made may be liable for third-party violations of the Telephone Consumer Protection Act (TCPA).  

Retailers who did not actually place calls may only be “vicariously” liable and subject to damages for third-party TCPA violations if federal common law principles of agency apply. 

TCPA’s prohibitions on “auto-dialed” calls

The TCPA was enacted to regulate and monitor the use of telemarketing to consumers.  Among other things, Section 227(b) prohibits calls made without consent and using “automatic telephone dialing systems” (as that term is defined by the TCPA).  Section 227(c) makes it unlawful to “initiate any telephone solicitation . . . to any residential telephone subscriber who has registered his or her telephone number on the national do-not-call registry.”  Under both sections, private parties may seek to recover damages and injunctive relief.

The FCC’s recent ruling stems from two suits involving plaintiffs’ claims that retailers were vicariously liable because they hired third parties that allegedly violated the TCPA.  In each case, the respective courts referred the matter to the FCC for clarification and a declaratory ruling.

Applying federal agency principles re vicarious liability

Acknowledging that Sections 277(b) and (c) do not address liability for third-party actions using identical language, the FCC clarified that retailers may be held vicariously liable under either provision only when federal common law agency principles apply.  Vicarious liability, concluded the FCC, may thus only derive from (1) formal agency; (2) apparent authority; or (3) ratification. 

Notably, the FCC explicitly rejected arguments seeking to hold retailers vicariously liable simply because calls were made for the benefit of a retailer, whether or not agency principles would impose liability.  Merely “hav[ing] some role, however minor, in the causal chain that results in the making of a telephone call” – without more – will not subject a retailer to liability for the acts of third parties.

Guidance and examples for retailers

Along with its ruling, the FCC provided guidance and examples of circumstances in which vicarious liability might be found.  These include:

  • Circumstances where a seller “allows [an] outside sales entity access to information and systems that normally would be within the seller’s exclusive control, including: access to detailed information regarding the nature and pricing of the seller’s products and services or to the seller’s customer information” 
  • Allowing an “outside sales entity to enter consumer information into the seller’s sales or customer systems, [and providing the entity with] the authority to use the seller’s trade name, trademark and service mark” and  
  • Situations in which a retailer “knew (or reasonably should have known)” that a third party was violating the TCPA on the retailer’s behalf and failed to act.

The potential implications for companies, whether they are retailers or service vendors, are significant.  It is important therefore, for both retailers and service vendors to review current practices as well as contractual terms and conditions (particularly indemnification clauses) to ensure that all parties are compliant with the TCPA.

The FCC Declaratory Ruling, CG Docket No. 11-50, is available on this page.

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.

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