Contract Terms Protect Seller From Marketer’s TCPA Violations

TCPA Connect

A contract prohibiting Telephone Consumer Protection Act (TCPA) violations protected a seller when its marketer allegedly ran afoul of the statute, according to a decision from a Tennessee federal district court.

In 2019, Robin Black received a call to her cellphone that she alleged violated the TCPA, both because the call allegedly was made with an automatic telephone dialing system (ATDS) and because her number was on the National Do Not Call Registry.

The call was placed by Vehicle Activation Department (VAD). The voice on the call offered to sell Black a vehicle service contract (VSC), which she claims she agreed to purchase only in order to ascertain who was responsible for the call.

When Black received an email containing documentation for her VSC, she purportedly learned it was administrated by SunPath. Black then canceled her purchase and filed suit against VAD and SunPath for alleged violations of the TCPA.

Black argued that SunPath held a level of control over VAD through its contract, the Call Center Marketing Agreement (CCMA), such that SunPath should be treated as responsible for the actions of VAD personnel. The CCMA granted VAD “authority to solicit customers” for SunPath’s products, pursuant to certain restrictions.

Specifically, the contract required VAD to agree at all times to SunPath’s written Standards of Conduct, which mandated that VAD would “operate in accordance with laws and regulations of the Federal Trade Commission, the Federal Communications Commission, the Federal Reserve Board, the United States Postal Service and all other applicable federal, state and local regulations and laws” and to “follow all state and federal do not call laws.” The standards also specifically forbade VAD from using an ATDS.

SunPath moved for summary judgment, arguing that it was not responsible for calls made by VAD. U.S. District Court Judge Aleta A. Trauger agreed, granting the motion.

In considering whether SunPath and VAD had a formal agency relationship or VAD had actual authority to act on SunPath’s behalf, the court held Black had not uncovered any inculpatory behind-the-scenes communications where the two agreed that VAD would, or even might, engage in prohibited calling on SunPath’s behalf.

Instead, Black premised her argument on the terms of the CCMA—even though the contract, on its face, included an express commitment by VAD not to commit such actions.

“The CCMA unambiguously states that SunPath did not wish for VAD to violate the TCPA,” the court wrote. “It is difficult, therefore, to see how the CCMA could support a finding of actual authority to commit the underlying calls to Black, even if it might support a limited finding of agency for some other purpose, such as making the underlying sales.”

While it was theoretically possible for SunPath to have made statements that superficially appeared to authorize only lawful actions on its behalf while impliedly authorizing unlawful ones under the table, Black needed actual, ultimately admissible evidence at the summary judgment stage, Judge Trauger noted.

“By relying on the formal contract between the parties, without any additional evidence of a broader, implicit understanding between SunPath and VAD, Black has placed herself in the difficult position of trying to establish authority to perform an act based on an agreement that clearly and emphatically forbids that act under any circumstances,” the court said.

Even provisions of the CCMA granting SunPath rights that could be referred to as supervisory in nature (such as the right to dictate standards of conduct and receive information about VAD’s efforts) were insufficient to establish liability based on actual authority, the court found.

As for apparent authority, Black admitted that the identity of the originator of the products being sold through the underlying telemarketing was concealed from her until after she made a purchase.

“SunPath did not – and indeed had no opportunity to – manifest an agency relationship to Black prior to or during the underlying calls; it just sent her information after the purchase was completed,” Judge Trauger said.

That left only ratification as a possible avenue to SunPath’s liability to Black. She argued that SunPath accepted VAD’s sale to her, which meant it accepted the benefit of VAD’s call. But the court determined that the acceptance of a wrongfully obtained sale was not necessarily knowing and was therefore insufficient to support ratification.

As Black failed to identify evidence sufficient to support actual authorization, some manifestation of authority and/or post-ratification of the proscribed action, Judge Trauger granted summary judgment to SunPath.

To read the memorandum and order in Black v. SunPath Ltd. click here.

Why it matters: The SunPath case serves as a reminder that contractual provisions with vendors prohibiting TCPA violations can provide important safeguards against a finding of vicarious liability.



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