Executive off the Hook in $22M TCPA Action

TCPA Connect

In City Select Auto Sales, Inc. v. David Randall Associates, Inc. et al., the U.S. Court of Appeals, Third Circuit has affirmed an opinion from the U.S. District Court, District of New Jersey that a corporate executive was not liable under the Telephone Consumer Protection Act (TCPA) for allegedly playing a role in the sending of thousands of unsolicited fax ads.

City Select Auto Sales (City Select) sued David Randall Associates Inc. (David Randall) and its president and co-owner Raymond Miley (Miley), accusing the defendants of violating the TCPA by sending unsolicited fax transmissions. The faxes were sent in early 2006 after David Randall hired a company called Business to Business Solutions (Business Solutions) to fax ads for the Pennsylvania-based commercial roofing company to thousands of fax numbers.

After discovery, the parties moved for summary judgment. The New Jersey district court denied all the motions except for City Select’s against David Randall and entered judgment against the company in the amount of $22,405,000. The case proceeded to trial on the question of Miley’s personal liability under the TCPA, with mixed evidence presented.

The office manager testified that Miley first suggested the fax ad campaign and instructed her to contact Business Solutions. She also said Miley reviewed proposed advertisements, authorized payments and generally acted as the “ultimate decision-maker” in approving the content, quantity, timing and targeting of the transmissions.

However, on cross-examination, the office manager admitted she had no actual recollection of the fax campaigns or Miley’s involvement in them and her testimony was based on “[t]he way things worked” in the office. In his own testimony, Miley stated that he did not create the ads sent by Business Solutions or communicate with the company. Nor did he authorize any of the conduct at issue in the case, Miley told jurors.

The parties squabbled over the appropriate jury instructions, with the district court ultimately directing jurors that in order to find Miley liable, they needed to find that he “had a significant level of personal involvement in the fax transmissions,” exercised “active oversight” and had “knowledge that he [was] directly participating in or authorizing the fax advertising.”

The jury absolved Miley of any personal liability. City Select moved for a new trial, arguing that the district court erred with regard to the jury instructions. The district court denied the motion and the plaintiff appealed to the Third Circuit, which issued its decision in March 2018.

“As an initial matter, we note that there is a real question as to whether Miley can be held liable under the statute at all,” the panel began, questioning City Select’s position that Miley was a “sender” pursuant to the TCPA because he qualified as an “author or originator” of the relevant faxes.

“To the extent Miley planned and executed a fax campaign, he did so in his corporate capacity rather than his personal one,” the panel explained. “The question is not whether Miley was an ‘author’ of unsolicited faxes in the colloquial sense, but whether Congress and the FCC intended that we look behind the corporate form and impose personal liability on officers who act on the corporation’s behalf rather than their own.”

Although doubtful Congress intended as much in cases like that against Miley, the Third Circuit elected to table the issue for the time being. “[W]e are reluctant to decide such an important question when it was neither litigated in the District Court nor fully briefed and argued on appeal,” the panel wrote. “Accordingly, we will assume without deciding that Miley may be held liable for David Randall’s TCPA violations under a personal-participation theory.”

The panel then affirmed the judgment of the district court, finding no reversible error in the jury instructions.

Assuming that personal participation liability is in fact available under the TCPA, a corporation’s officer may be personally liable under the statute if he had direct, personal participation in or personally authorized the conduct found to have violated the statute and was not merely tangentially involved, the panel said.

“The District Court’s instructions did not misstate the applicable law,” the court said. The statement that liability for an officer “must be founded upon his active oversight of, or control over, the conduct that violated the TCPA, rather than merely tangential involvement” was “simply concrete descriptions of what constitutes a ‘significant’ level of involvement, and the word ‘significant’ did not impose a higher burden of proof.”

Just because other courts have not used the word “significant” does not mean that the district court’s instructions were contrary to other decisions, the panel added. “Indeed, the use of the word ‘significant’ is consistent with cases that have held that corporate officers can be personally liable when they ‘actively oversaw and directed th[e] conduct.”

The panel also dismissed City Select’s argument that the district court added an element of proof regarding the defendant’s state of mind. “Requiring a finding that the defendant-officer had ‘knowledge that he [was] directly participating in or authorizing the fax advertising,’ was simply part of proving direct participation,” the court wrote. “An officer could not have directly and personally participated in a fax advertising campaign without having knowledge of his actions. Accordingly, the District Court did not err in instructing the jury.”

In a footnote, the Third Circuit added that even assuming the district court erred in instructing the jury, “any error was harmless because it is ‘highly probable that the error did not contribute to the judgment.’” As the district court noted, the office manager’s and Miley’s “testimonies differed in significant ways. In finding in favor of Miley, the jury necessarily rejected [the office manager’s] testimony.”

To read the opinion in City Select Auto Sales, Inc. v. David Randall Associates, Inc., click here.

Why it matters: While the Third Circuit declined to expressly decide whether the defendant could be personally liable for his actions on behalf of David Randall, the panel was doubtful Congress intended that courts look beyond the corporate form in TCPA cases, noting that the U.S. Code “abounds” with examples of Congress expressly authorizing personal-participation liability or something like it and neglected to do so in the TCPA. With regard to the jury instructions, the panel found the district court did not misstate the applicable law, affirming the verdict finding Miley not liable.



pursuant to New York DR 2-101(f)

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