Happy Monday TCPAWorld! Queenie back again.
So the Czar did a critically-important article earlier this year about the Mantha decision. There a magistrate judge held that an online consent form is not valid unless it includes a separate E-SIGN verification.
As the Czar explained, that was probably not the proper ruling, and the district court later upheld the Magistrate Judge’s ruling on different grounds. So we don’t really know what’s become of the E-SIGN ruling.
Oddly that’s not what I’m writing about now though.
Recall what happened in the lead funnel in Mantha:
- Fenix Media is based in Bosnia and says it operates the Snappy Auto website.
- A company called Plural bought Mantha’s lead from Fenix;
- Lead Seller purchased the lead from Plural;
- QuoteWizard (who made the calls at issue) purchased it from Lead Seller.
Now QuoteWizard is potentially in a world of hurt as the parties battle over whether the calls it made to class members were illegal. One thing is for sure—however—the Mantha court was not at all impressed with the background on the lead—apparently the information provided to QuoteWizard included an identification number called a “Jornaya LeadiD” that was… not entirely genuine. And Fenix Media was, apparently, pirating the Snappy Auto website so.. bad news.
Anyway, the interesting thing from an in-house perspective is how the cascade of suits spinning out of Mantha are playing out.
Quote Wizard did what you’d expect it to do—it demanded indemnity from the Lead Seller, who sold it the lead.
Whereas most good lead partners (IMO) would acknowledge the responsibility to defend a buyer and hold it harmless where a lead passed through its hands— where it represented and warranted by contract it would do so—Lead Seller (allegedly) did not.
Instead Lead Seller (allegedly) took a fascinating position: it argued that since it did not “originate” the lead it was not required to indemnify QuoteWizard for the Mantha suit.
Hmmm. My eyes are getting big again.
Well QuoteWizard was pretty unsatisfied with that response and filed a complaint in Federal Court in Washington demanding complete defense and indemnity from the Lead Seller.
In the lawsuit Quote Wizard points out that Lead Seller’s indemnification obligations apply “regardless of whether [it] originated the lead itself or purchased the lead from another company, that triggers its indemnification obligations under the Agreement.”
Lead Seller responded to Quote Wizard’s lawsuit by denying it owes Quote Wizard indemnity. So the two parties are fighting it out in Court with discovery closing in August, 2022. (Fascinating side note, Lead Seller refused to publicly identify its ownership and asked the Court to file its required Corporate Disclosures under seal. Per Lead Seller’s attorney: “Members of [company] not already made public have a legitimate concern that they will be subjected to unnecessary attention and annoyance if their identities are revealed publicly.” You don’t see that every day.)
Meanwhile, Lead Seller has now filed its own lawsuit—this one in State Court in New York against Plural. In Lead Seller’s lawsuit it alleges: “The Mantha Action is viable only because Plural sold [Lead Seller] a lead that was not TCPA compliant. The Quotewizard Action is viable only because Plural sold [Lead Seller] a lead that was not TCPA compliant. Each lawsuit is based on the Mantha lead that Plural certified, through its selling the Mantha lead to [Lead Seller] that Mantha had provided his prior express written consent to be contacted.”
Lead Seller goes on to allege:
Plural owes additional indemnity to [Lead Seller] for two categories of leads: A. Leads that lack verifiable TCPA consent and could become part of a class in the Mantha Action where the class period is between October 29, 2015 and the present (“Mantha Putative Class”); and B. All other leads lacking verifiable TCPA consent information that Plural sold to [Lead Seller] from the date six years prior to filing this action through the present (“Additional No Consent Leads Group”).
The [Lead Seller] suit against Plural was just recently filed and no response has been lodged by Plural yet.
The fascinating thing, of course, is to see how a single downstream affiliate—this Bosnian company called Fenix—can get everyone in the funnel in huge trouble.
While QuoteWizard’s fees are not public, it is easy to assume they are well into the six figures by now. No matter what the outcome of the Mantha case, Lead Seller will presumably be on the hook for those. And Plural, in theory, will have to answer to Lead Seller. None of this saves Quote Wizard from having to pay its own fees in the meantime.
And, of course, if Quote Wizard gets hammered in a certified class action—the Wolf of TCPAWorld is on the other side of this one—then those millions, tens of millions, hundreds of millions or billions in potential damages (not sure how many calls are at issue here) would be borne first by Quote Wizard, subject—of course—to downstream contributions by Lead Seller and Plural.
In other words, everyone goes bankrupt.
And while Lead Seller can hide its ownership group from public disclosure—for now—it is unclear whether its principals can shield themselves from potential personal liability for selling the problematic leads. (As TCPAWorld readers know, the TCPA imposes personal liability in many circumstances—but perhaps not in the circumstance of selling problematic leads, which is just one more reason that being a lead buyer is more dangerous than being a lead seller.)
All of this demonstrates several points:
- Lead buyers need to continue to exercise extreme caution and work only with trusted partners. The indemnity agreement Quote Wizard had with the Lead Seller may not be worth the paper it was printed on as the Lead Seller (allegedly) refused to honor its commitments and left QW holding a massive defense bill (and exposure risk);
- Lead sellers need to remember they are not safe from tremendous risk themselves. This is true even where they are not making their own outbound calls or are somewhere “in the middle” of a lead funnel. True Lead Seller isn’t (likely) directly liable to the Plaintiff in Mantha –but it likely will be (if the allegations are true) to Quote Wizard. Same thing with Plural. QW can’t sue them directly. But the Lead Seller can. The liability flows back upstream to the lead source. So everyone in the chain is impacted.
- Everyone in this ecosystem needs to remember that COMPLIANCE MATTERS. Turning a blind eye to who your affiliates are is death. Buying leads from a marketer or aggregator using a mob of offshore or untrackable affiliates is probably a terrible idea.
- Standards are still needed. Assuming the fact presented by the Plaintiff in Mantha are true—and the Court has given them weight so far—why did Plural buy a lead from a Bosnian-pirated website? Why didn’t the Lead Seller catch it when it bought the lead? Who manufactured (if that is what happened) the fake Jornaya? Why didn’t QW catch any of the upstream shenanigans?
As an industry we have to do better. And that’s why I’m here. Be sure to catch my newsletter – Let’s DIG In to Compliance! for more in-house perspective on the digital marketing, lead generation and direct-to-consumer industries.