No Authority: Court Dismisses TCPA Claim Against Seller at Pleadings Stage For Lack of Allegations Respecting Control Over Marketer

Here’s a tale as old as time.

A company wants to sell something. The company hires another company to market the thing the company wants to sell. The marketer does something illegal and gets sued. Is the company liable for the illegal thing the marketer did?

TCPA law is—for once—in accord with the general body of vicarious liability jurisprudence in this setting. Specifically, the company can be liable if it has given the markter actual authority to engage in the conduct at issue, has expressed to third-parties impacted by the marketer’s conduct that the marketer is empowered to act as it has, or ratifies (that is accepts the benefit of an illegal act with full knowledge) the conduct of the marketer.

As with so much else in the TCPA, however, precisely how these principles are applied turns—to some degree—on the jurisdiction and the specific court where the Defendant is being sued. The Ninth Circuit, for instance, has a particularly high standard for proof of agency—requiring at least a right to control the specific injury-causing conduct.

Consider Pascal v. Agentra, Case No. 19-cv-02418-DMR, 2019 U.S. Dist. LEXIS 179359 (N.D. Cal. Oct. 16, 2019). There the court granted a Defendant’s motion to dismiss a TCPA claim for lack of sufficient agency allegations. In addressing the issue the Court identified the standard three paths for vicarious liability: i) actual authority; ii) apparent authority; or iii) ratification. After reviewing the complaint the court found allegations lacking to sustain a finding under any theory.

As to actual authority the Court refined a rule that to demonstrate actual authority in a TCPA suit Plaintiff must allege facts showing that the seller “controlled or had the right to control” the marketer;  that the seller “manifest[ed] assent” to their right to control the marketer; and that the seller either communicated a direction to the marketer to engage in robocalls or that the robocalls were “consistent with” the seller’s “general statement of what [the marketer] supposed to do.” Rather than include such robust allegations, the Complaint at issue in Pascal alleged only that the seller Defendant hired the marketer to “call thousands of phones at a time using an artificial or prerecorded voice message” and agreed to accept the benefit of those calls. But merely hiring a marketer to make calls is not the same thing as having a right to control how those calls are placed. As such the Court determined the allegations insufficient to establish actual authority. (TCPAWorld note: there are actually two kinds of actual authority recognized in the case law—express and implied. Pascal does not address implied actual authority but…keep it in mind.)

As to apparent authority the Court reminds that  “[a]pparent authority [only] arises from the principal’s manifestations to a third party that supplies a reasonable basis for that party to believe that the principal has authorized the alleged agent to do the act in question.” As with most TCPA cases, the complaint in Pascal was devoid of any mention of the seller directly advising consumers that the marketer was empowered to make illegal phone calls on its behalf. (Indeed, an apparent authority theory will rarely, if ever, carry the day in a TCPA suit.)

That leaves ratification. Interestingly, the Court departs from the Ninth Circuit’s recent Henderson ruling and concludes that ratification requires the existence of an agency relationship. Since no agency relationship was shown in the Complaint ratification was not possible, at least in the view of the Pascal court. Here proceed with caution, however. As the Ninth Circuit recently held—rather directly— “Ratification May Create An Agency Relationship When None Existed Before.” See Henderson v. United Student Aid Funds, Inc., 918 F. 3d 1068 (9th Cir. 2019). So while the Ninth Circuit maintains a high bar for actual authority liability, it has a somewhat lower standard than other circuits when assessing ratification. Still, however, the seller must know, or have plain reason to know, of actual statutory violations by the marketer and yet accept benefit before it can be held vicarious liable for those actions.

Happy Thursday TCPAWorld.

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