I am just so thrilled to report this news.
The Troutman Firm has just delivered a MASSIVE signature win (and for a very deserving client I might add)– and the ruling has major implications for companies that rely on third-parties to sell their products.
A federal court in Pennsylvania held yesterday–at the pleadings stage– that a Plaintiff lacks standing to sue a service provider that contractually prohibited sellers to engage in telemarketing, even where the seller, in fact, sold the provider’s services using illegal phone calls without its knowledge. And that’s a really big deal.
Before we unpackage this, let’s have some background. As everyone that follows TCPAWorld knows I am a huge advocate of standing and constitutional arguments. This story will help explain why. 🙂
The team BREAKS DOWN the huge win. For more great content be sure to follow our INCREDIBLE YouTube channel!
In the TCPAWorld, most standing arguments focus on the “concrete harm” component of Article III. But there are two related–and equally important–components that complete the standing trifecta: whether the harm is “fairly traceable” to a defendant’s conduct and whether suit against the defendant will result in redress of the harm.
In TCPA cases these two standing prongs are often met–hence the focus on “concrete harm”–but in some instances they will not be. One such instance–as was the case in a suit called Bacarri v. CarGuard–is when a seller is specifically instructed not to engage in the industry-producing conduct at all.
In Bacarri the Defendant was the administrator of vehicle service contracts. Unlike the many scumbag auto warranty companies out there–you know the ones–CarGuard is actually a really good company that seeks to deliver high quality service contracts to consumers and helps to keep people’s cars running. And that’s an important service.
CarGuard is also exceptionally focused on NEVER allowing its name to be tarnished with claims that robocalls are used to sell its products. So unlike many other companies, CarGuard specifically prohibits sellers authorized to sell its products from engaging in any form of telemarketing. Period. Full stop.
In other words, CarGuard is the ultimate TCPAWorld good guy.
Nonetheless, it was recently caught up in a TCPA class action suit brought by the Wolf.
The Wolf’s theory was that CarGuard should be automatically liable, in essence, because it accepted the benefit of the illegal calls. Making matters more difficult, the Wolf alleged that CarGuard instructed the seller to make telemarketing calls–even though that just isn’t true–and otherwise suggested CarGuard knew the calls were taking place.
On a motion to dismiss these allegations would normally have to be accepted as true–even though they were inaccurate. So, in order to get past the allegations and to the true facts the Troutman Firm had to get creative. And that’s where standing principles come into play.
Unlike a 12(b)(6) motion that challenges allegations of a complaint, a 12(b)(1) motion that challenges subject matter jurisdiction can be made as a factual challenge. And while cases have properly recognized that merits based defenses cannot be raised as part of a standing challenge, where the facts show the injury-causing conduct is not fairly traceable to the Defendant in the first instance, a court can –indeed must–accept unchallenged sworn testimony, over the allegations of the complaint, even at the pleadings stage.
So CarGuard–armed with a thoughtful declaration from its CEO–moved to dismiss the case arguing that the conduct of the marketer cannot be “fairly traced” back to it. After all, CarGuard did not instruct the marketer to engage in outbound phone calls–it specifically told it not to make such calls. And it did not knowingly accept the benefit of the calls–it had no idea the calls were placed until after it had already accepted the contracts. So there was no causal connection between anything CarGuard did and the harm Plaintiff suffered.
The Wolf opposed arguing that his allegations established enough to show standing, but the Court disagreed. Recognizing that CarGuard had neutralized the only allegations related to its involvement in the challenged conduct the Court dismissed the complaint entirely:
In response to the evidence Carguard presented to break the factual link between itself and Baccari’s harm, Baccari only provides a lengthy discussion about the law concerning principles of agency, and restates allegations in the complaint. For example, Baccari merely re-asserts that A-List was “contractually require[d]” to use telemarketing practices to reach customers like himself. Because Baccari has not met his burden to produce evidence responding to Carguard’s factual attack, Carguard’s motion for lack of subject matter jurisdiction will be granted, and the Complaint will be dismissed without prejudice.
The Bacarri case is important for a couple of reasons.
First, it represents a huge signature win for the new Troutman Firm. Always great to deliver a really superb, first-in-the-nation result that has far-reaching impact. Its no surprise, of course, since the Czar has delivered numerous first-in-the-nation wins at every firm he’s been with. And notably, although we work with GREAT local counsel–the guys at Fox Rothschild were fantastic in support–the briefing here was done entirely by the TF team, with the incredible Baroness doing the majority of the briefing.
So even with a new firm, the wins just keep on coming. (As you’d expect.)
More broadly, Bacarri demonstrates the limits of liability for companies that are caught up in TCPA cases merely because their products were being sold illegally by third parties who were not authorized to do so. Rather than file a motion to dismiss–which is very challenging in these cases because the allegations of the complaint must be accepted as true–or waiting until summary judgment–which comes only after very expensive discovery takes place in these cases–a standing challenge can be brought right at the outset of the case.
And where a company can point to crystal clear evidence that it did not authorize or permit the calls at issue, there is simply no way to trace the conduct back to the offerer of the product. So the Plaintiff lacks standing to pursue the case. And a well-briefed motion can deliver a stunning and immediate victory.
Keep these critical issues in mind TCPAWorld.
It was a real honor to have had the opportunity to represent CarGuard in this case. Great company. And it was incredibly fun to watch the Baroness earn her first major victory working for me. Here’s to many more great wins together TCPAWorld!!