Its one of the most common TCPA lawsuits out there: a lead buyer is sued based upon purported misconduct by a lead seller. And we know some Plaintiff’s lawyers–like the Wolf of TCPAWorld (Anthony Paronich) seem to specialize in bringing these sorts of suits.
While caution is always to be urged in the leads-purchase world–and great organizations like LeadsCouncil are critical to setting standards and keeping folks aligned on best practices–the case of Schick v. Caliber Home Loans, Case No. 20-cv-00617-VC, 2021 U.S. Dist. LEXIS 176765 (N.D. Cal. September 14, 2021) suggests that upstream risk can be managed with proper contract terms.
In Schick we see a very common fact pattern presented: a mortgage lender contracts with a lead generator for warm transfer leads of customers wanting mortgage products. The lead generator was contractually required to comply with the law and only supply TCPA consented leads. The generator also promised not to work with any subcontractors to supply the leads.
The lead generator (NexLevel) apparently didn’t keep its word and went ahead and worked with a sub (Driving Force) to generate leads for Caliber, even though it wasn’t supposed to. Driving Force also promised NexLevel that it would only supply consented leads but it broke its word too (allegedly). Specifically, Driving Force allegedly made calls to consumers without consent and then sold those leads to NexLevel who, in turn, sold them to Caliber.
Plaintiff then sued Caliber and NexLevel for the calls made by Driving Force under the TCPA.
Well since the Caliber didn’t even know about DF, Caliber couldn’t be held liable under a typical agency theory or even an apparent authority argument. Instead the Plaintiff tried for a “ratification” theory–which essentially means that Caliber accepted leads from NexLevel even though it knew NexLevel could not be trusted. In support of this showing Plaintiff argued that Calber knew NexLevel had supplied test leads where a consumer promptly requested a DNC, suggesting NexLevel couldn’t even survive a pilot without sending along fake leads.
Nonetheless, Caliber did not just turn a blind eye to that conduct: ” rather than blindly accept leads running afoul of the TCPA, Caliber prodded NexLevel about its TCPA compliance, promptly demanded a pause in lead generation, and canceled its contract with NexLevel altogether soon thereafter.”
So because Caliber parted ways with NexLevel after it failed to deliver good leads the Court looked favorably on Caliber as a good actor that was likely duped by a less-than-honest lead partner. Notice, however, that Caliber was very aggressive in dealing with its leads vendor–it paused generation at the first sign of trouble and then parted ways shortly thereafter. The lead gen space is a rough and tumble world, and the Courts require a near zero-tolerance policy for lead buyers–so generators/sellers need to keep that in mind.
In a twist, however, NexLevel was also dismissed from the lawsuit. Despite its alleged role in facilitating the improper upstream-behavior by DF the court found that it too was protected by contract. NexLevel did not control DF and DF was supposed to supply only valid leads. And since NexLevel too cut off DF as soon as DF’s bad behavior was noticed the Court refused to find that NexLevel had ratified the conduct of DF.
A few take aways here:
- TCPA cases are rampant in the lead industry;
- Buyers need to keep in mind that their lead partners may not be 100% honest and need to cut ties immediately upon any sort of misconduct being detected;
- Even intermediary generators can be sued in these cases and they too must protect themselves by cutting ties with partners that violate the law;
- Contract terms are increasingly important and limiting vendors to only supply valid leads–and aligning practices to assure that vendors that violate those terms are cut off–is critical;
- Be sure to attend my critical panel at LeadsCon next month! (More to come on that)
Keep winning TCPAWorld.