CONTRACTS RULE: Another Court Holds Seller Cannot Be Liable for Marketer’s TCPA Violations Where the Contract Prohibits the Conduct

I wrote not long ago about a miraculous escape by a cruise line that seemed to be facing certain TCPA death. Despite the fact that tens of millions of unwanted calls were placed to pitch the cruise line’s goods, the contract between it and the marketing company specified that the marketer could not sell its products illegally. That, alone, it seemed was sufficient to defeat a finding of vicarious liability. (The win was reserved on appeal on a finding that the cruise company perhaps should have known the calls were illegal, however.)

Many Plaintiffs lawyers have taken issue with that–Adrian Bacon being just one–and certainly not every decision is in accord. Just ask DirecTV.

Adrian Bacon discussing false lead cases on Deserve to Win (ep. 4). For more great content be sure to follow our INCREDIBLE You Tube channel. 

But a new case out this week follows the logic that contracts can protect product sellers, even where their marketers violate the law making calls seemingly on their behalf.

In Black v. Sunpath, 2022 WL 4241270 (M.D. Tenn. Sept. 14, 2022) the court granted summary judgment to SunPath on calls made by a downstream marketer.

In Black the contract between SunPath and the marketer clearly stated that the marketer would not violate the TCPA. Yet the Plaintiff did not have any evidence of control aside from the contract itself. And since the contract directly refuted the ability to violate the TCPA, the Court had little trouble finding Sunpath was not liable for the calls.

Importantly, this is true although the Defendant did have certain rights of control over the caller:

Black points to provisions of the CCMA granting SunPath rights that could broadly be referred to as supervisory in nature: the right to receive information about VAD’s efforts, the right to dictate standards of conduct, and the right to terminate the agreement and, in effect, “fire” VAD as a seller of SunPath products. Black, however, has not identified any Sixth Circuit authority that would permit the court to conclude that those relatively limited rights are sufficient to establish liability based on actual authority, in spite of directly-on-point contractual provisions forbidding the underlying actions.

So even though the seller could control aspects of the marketer’s behavior the TCPA warranties still protected the seller.

Pretty cool, no?

The court goes on to give a FANTASTIC ratification assessment, concluding that since SunPath did not know the illegal calls were being made it could not have knowingly accepted the benefit of illegal conduct and ratified the sale. Moreover when the plaintiff sought to rescind her contract SunPath allowed it do so. Hence it did not stand on the illegal calls as basis to collect money.

All in all Black is a fantastic case, in line with other cases holding contract terms thwart vicarious liability in the purchase-lead setting. Nonetheless, this line of cases is NOT the only line of cases out there. Some courts vehemently disagree.

So while Black is another data point in yet another split TCPAWord landscape, it is still a big and important win for sellers to keep in mind and learn from.

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