An outside marketing firm’s use of an autodialer to send text messages to consumers without their consent may trigger vicarious liability under the Telephone Consumer Protection Act (TCPA) for the company that hired the marketing firm, a federal judge in California has ruled.

The decision in In re Jiffy Lube International, Inc., Text Spam Litigation, issued on
March 8, 2012, highlights the need for companies that use third-party marketing firms to consult with counsel regarding the steps they can take to reduce the risk of vicarious liability for the marketing firm’s TCPA violations, including appropriate contractual protections.

The TCPA prohibits use of an autodialer to make a non-emergency call to a cell phone unless the call is “made with the prior express consent of the called party.” Relying on Ninth Circuit authority that “implicitly accepted” vicarious liability for TCPA violations and other supporting case law, the Southern District of California court refused to dismiss a TCPA class action filed against a Jiffy Lube franchisee based on the text messages sent by its marketing firm.

The district court found that the franchisee “can be held liable even if it did not physically send the messages at issue.”

It also found that, to survive a motion to dismiss, the complaint did not have to provide specifics about how much control or information the franchisee had as to the marketing firm’s use of an autodialer. According to the court, the plaintiffs’ allegation that the franchisee “directed” the transmissions and “engaged” the marketing firm provided “sufficient detail and plausible factual allegations regarding [the franchisee’s] ultimate control to meet the federal pleading standard.”

The district court refused to take judicial notice of invoices submitted by the franchisee to show that, by providing their telephone numbers to the franchisee on the invoices when they received oil changes, the plaintiffs had consented to the text messages. In addition to observing that the invoices were not alleged in the complaint or relied on by the plaintiffs, the court commented that it was “not persuaded” the plaintiffs’ provision of their telephone numbers constituted “prior express consent” to the text messages.

The district court rejected the franchisee’s argument that the TCPA violated the First Amendment of the U.S. Constitution by restricting the use of smartphones or personal computers with the capacity to function as autodialers. The franchisee also failed in its attempt to compel arbitration with one of the plaintiffs based on a provision in that plaintiff’s invoice providing for mandatory arbitration of “any disputes, controversies or claims” between the franchisee and the plaintiff. The court was unwilling to find that the plaintiff’s TCPA claim was a dispute that “arises out of or relates to” the contract contained in the invoice.

We continue to see a high volume of class actions against companies alleging TCPA violations. In part, this is because penalties are draconian. Violations can yield damages equal to a minimum of the greater of $500 or actual damages per violation, triple damages for willful violations, and unlimited class action liability.

Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs).

In addition to having vast experience in defending all manner of TCPA lawsuits, the group has counseled a number of clients on establishing auto-dialing and monitoring protocols. (For more on significant TCPA case developments, see our June 2011 legal alert.)

The group also produces the CFPB Monitor, a blog that focuses exclusively on important Consumer Financial Protection Bureau developments. To subscribe, use the link provided to the right.

For more information, please contact Practice Leader Alan S. Kaplinsky, 215.864.8544 or kaplinsky@ballardspahr.com; Practice Leader Jeremy T. Rosenblum, 215.864.8505 or rosenblum@ballardspahr.com; John L. Culhane, Jr., 215.864.8535 or culhane@ballardspahr.com; Barbara S. Mishkin, 215.864.8528 or mishkinb@ballardspahr.com; or Mark J. Furletti, 215.864.8138 or furlettim@ballardspahr.com.

 


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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.