Promoters often hire digital marketers to assist them with promotional campaigns. In today’s day, that often means using a text messaging platform to send out promotional messages for the campaign. Seems like everyone does it, including promoters used by colleges and universities to recruit prospective students. Everyone seems to do it, but not all prospective students want these text messages, including those that send the recipient to a website owned by the promoter that compares top schools.
That leads us to a non-precedential ruling by the Third Circuit Court of Appeals affirming a district court judgment finding that the digital marketer had to indemnify the promoter for the legal expenses in defending a TCPA claim brought by the disgruntled student. In Vazquez v. Triad Media Solutions, Inc., No. 19-1124, 2019 U.S. App. LEXIS 37060 (3rd Cir. Dec. 16, 2019), a media company that worked with colleges and universities to recruit prospective students retained a digital marketing services company. The services agreement had an indemnity provision in which the digital marketer promised to indemnify the media company “against all claims, actions, liabilities, losses, expenses, damages, and costs (including, without limitation, reasonable attorneys’ fees) that may at any time be incurred by
[the media company]
by reason of any claims, suits or proceedings . . . arising from any violation of . . . the TCPA, or any other laws, rules and regulations governing deceptive trade practices and online or telephonic marketing or advertising [.]”
According to the court, a year into the deal, the plaintiff, a prospective student, received a single SMS text message that allegedly linked to a website owned and operated by the media company. She was “displeased” and filed a putative class action suit against the media company (later amended to join the digital marketer) alleging that the text message violated the TCPA. The media company lawyered up and demanded that the digital marketer assume the defense and provide indemnification under the agreement. The digital marketer accepted with a reservation of rights and entered into a joint defense agreement. The case was eventually settled by the digital marketer and had all claims against the media company dismissed. So you would think that all was well and everyone could go home. Nope.
The media company wanted the digital marketer to pay the lawyers’ bills incurred before the claims were dismissed and for certain work after the dismissal. The parties could not agree and this case was brought under the agreement to recover the lawyer’s fees under the indemnity provision of the agreement. Notably, there was no mention of insurance. After cross-motions for summary judgment, the district court granted the media company’s motion, although it reduced the attorney fee claim.
The digital marketer appealed, but the district court’s order was affirmed. In affirming, the circuit court—which did not decide whether the messaging platform used by the digital marketer was an automatic telephone dialing system under the TCPA—interpreted the services agreement under New York law and held that “the best reading of the Agreement requires [the digital marketer] to indemnify [the media company] for claims stemming from a text message advertising” the media company’s “CompareTopSchools” campaign. The court found that the broad language of the indemnification clause applied “without a clear showing that [the digital marketer] sent the text message in question.”
Consider this point. There was a factual dispute about whether the text message came from the digital marketer’s platform. Nevertheless, the indemnification clause in the agreement was so broad that the digital marketer was responsible for the media company’s expenses even if that factual issue was unresolved at the time of the settlement. Moreover, held the court, the digital marketer had to indemnify the media company “even without a proven TCPA violation.” That’s because the indemnification provision applies to costs incurred “by reason of any claims, suits or proceedings . . . arising from any violation of . . . the TCPA.” The court agreed with the media company that claims, suits and proceedings all describe pre-judgment events.
What this case shows is that digital marketers that enter into service contracts with broad indemnification provisions may have to indemnify their counter-parties based on allegations of a TCPA violation and not a court finding that a TCPA violation actually exists.