MIRACULOUS TCPA WIN!: Cruise Ship Company Gets the Last Laugh As Contract Terms Come to the Rescue– But Watch Out!

Everyday TCPAWorld puts a smile on my face, but at this moment I am positively beaming in a head shaking “I can’t believe it” sort of way.

We’ve been following the saga of Royal Sea Cruises and its TCPA battle in McCurley for over a year now.

TCPAWorld.com readers know that the certification decision in McCurley was an extremely unusual and important one because it allowed a huge TCPA class to be certified despite the fact that consent had come from myriad different online portals (with different disclosures) on a theory that some unascertainable portion of those webform submissions were actually fraudulent “fake leads.”

As I reported just last week, in fact, McCurley was such a big case that it has single-handedly created an entire universe of new TCPA class action suits against purchased-lead callers. While these cases absolutely should not be certifiable– whether or not any particular webform submission was actually submitted by a consumer is plainly an individualized issue– McCurley seemingly gave these cases legs.

Well on Friday those legs just got cut off. And stay with me because you’re going to want to know all about this one.

There was a second piece to the case that was largely overlooked in earlier stages of the litigation. Specifically, Royal Seas did not actually make any of the calls at issue itself. Rather it contracted with third party call centers who made calls, again based upon leads purchased from any number of website operators. These leads were called by the call centers–unaffiliated third party companies–who would then warm transfer consumers to Royal Seas if they expressed genuine interest in the product.

This is a very common model in lead generation/aggregation circles. The caller contracts with a third-party to provide valid leads and the third-party works a network of affiliates for leads, which it then calls purportedly on behalf of the seller (and sometimes on behalf of numerous sellers in a single or multiple verticals.)

Despite the fact that Royal Seas had not actually made any calls, Plaintiffs sued it on the theory that the calls were made on its behalf and that it was–therefore–liable for the calls on a vicarious liability theory. Well in McCurley v. Royal Sea Cruises, Case No. 17-cv-00986-BAS-AGS, 2021 U.S. Dist. LEXIS 17619 (S.D. Cal. Jan. 28, 2021) the Court disagreed and found that the cruise ship company was never actually liable for the calls to begin with.

Why not?

Well primarily because of contract terms with the call center vendors requiring that Royal Seas would only purchase leads obtained with consent. As the Court characterized these terms in the decision the contracts “requir[ed] that any leads be from individuals who had consented to be called.” From this rather mundane clause, the Court extrapolates that none of the calls made to class members were made with actual authority. That is, since class members–by (poor) definition necessarily received calls without consent, none of the calls to class members could have been made with actual authority.

Pause.

Think about that for a second. There is no question that the vendor had the actual authority to make phone calls of the type that were allegedly made to the Plaintiff on behalf of Royal Seas. But Royal Seas is not liable here merely because it contracted to only purchase consented leads. That’s sort of like a trucking company disclaiming liability for a traffic accident because its driver’s contracted not to crash their semis into oncoming station wagons. I mean… it can’t be that easy can it?

Well, yes it can apparently.

Framing the issue differently, “control” for agency purposes is most often looked at through the lens of the ability to dictate the means and manner of a third-party’s operations. Things like, whether Royal Seas told the third-party call centers who often to call and when and how. Stuff like that.

But the McCurley MSJ decision boils control down to a single issue– did the contract contemplate that the call centers could make illegal calls: yes or no.

So, under McCurley the issue is really whether contracts gave callers the actual authority to violate the law rather than the actual authority to make calls. That’s a really interesting ruling–even in the Ninth Circuit where vicarious liability rules are notoriously tight.

But things get even better for callers here.  The Court goes on to reject a ratification defense because the call centers never gave up their argument that all of their calls were–in fact–made with consent. Whereas the Plaintiffs argued that the disclosures were manufactured and fraudulent leads, the call centers never conceded that. From the Court’s perspective, then, Royal Seas never had actual knowledge that calls were being made without consent.

Pause again.

This seems to suggest that a seller can never “ratify” a TCPA case unless and until a caller acting on its behalf concedes that its calls were unlawful. I gotta tell you, I don’t think that’s right and the McCurley court goes on to explain its reasoning a bit in a “good news/bad news” story for Defendants.

Here’s what the court says:

What is noticeably missing from Plaintiffs argument is that Royal Seas ever received information from any of the individuals who were transferred that they had not consented to be called.

Get it?

McCurley holds, in essence, that where a caller claims its calls are legal a seller can only be liable if the folks screened by the caller get through to the seller and then announce that they never consented to begin with.

This is obviously good for sellers because it means that so long as callers don’t pass through “fakers”–i.e. manufactured lawsuit folks who pretend to be interested in a product merely to set up a lawsuit–to sellers they cannot be liable for calls made based upon the original webform consent being invalid. (NOTE: the CALL CENTERS can still be liable for those calls though.)

But there is bad news here as well. I’m not going to discuss it publicly but if the McCurley reasoning is adopted there’s a paradigm shift here that a Plaintiff should be able to leverage to make your head hurt really bad. Call me to discuss how to avoid it.

Back to the good news–and HERE is some really good news– the Court found that a lack of “verification” (i.e. auditing) is insufficient to constitute willful blindness. For sellers looking to hire call centers– and for platforms that are taking on new clients that make calls– the McCurley ruling suggests that upfront diligence plus good contract terms is all that is needed to avoid vicarious liability:

Royal Seas specifically contracted with Prospect for leads that had consented to be called. Royal Seas also looked at a sampling of the websites to make sure the opt-in language was sufficient. In the absence of any evidence that this opt-in language was not being used or that Prospect was not conducting itself as it contracted to do, Plaintiffs simply cannot prove that Royal Seas ratified any violation by willful ignorance.

How great is that?

So there you have it. Royal Seas was beaten up and put through the ringer in this one–its counsel was even sanctioned in furtherance of the defense–but in the end, something simple like good contract language was all that was needed to defeat the claim (eventually.)

Take aways here:

1. Sellers looking to work with call centers should certainly have stout and clear language disclaiming agency or control and clearly delineating that all services must be supplied in conformity with the law and that only leads complying with the TCPA will be purchased;

2. Sellers should perform upfront validation and review of the call center’s practices to assure basic conformance with the TCPA and the contract terms;

3. Sellers (and platforms?) are seemingly under no continued obligation to vet or audit the call center’s practices, assuming the contract terms prevent changes and assuming the seller (and platform?) is not informed of misconduct by the caller.

Now remember, McCurley is just one district court level decision–so don’t get carrier away thinking you’re 100% safe now folks. And just as it was at the certification stage, the case seems to be a bit of an outlier on vicarious liability issues here on summary judgment. So tread carefully.

Still, every TCPA defense lawyer–and every inhouse lawyer that deals with consent issues and has responsibility for vendor contract review- should take note of this one. Tell a friend. Or 7.

BTW– go re-watch that old Unprecedented episode with Paronich now. It takes on a whole new vibe. Like I could see the future or something.

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