• Hold the Phone: Judge Holds Dish Network on the Line for Tens of Millions of Calls, but Leaves Silver Lining for TCPA Defendants
  • February 25, 2015 | Authors: David S. Almeida; Mark S. Eisen
  • Law Firm: Sheppard, Mullin, Richter & Hampton LLP - Chicago Office
  • On December 12, 2014, Judge Sue E. Myerscough issued an epic 238-page order granting in part and denying in part cross summary judgment motions filed in United States of America, et al. v. Dish Network, L.L.C. (“Dish Network”). United States v. Dish Network, L.L.C., No. 09-3073, 2014 WL 7013223 (C.D. Ill. Dec. 12, 2014). Despite finding that Dish was liable for over 50 million phone calls, there was a silver lining for both Dish and future TCPA defendants.

    By way of brief background, Dish Network has been pending in the United States District Court for the Central District of Illinois since 2009. The United States, in addition to the states of California, Illinois, North Carolina, and Ohio, instituted this action pursuant to the Telemarketing Consumer Fraud and Abuse Prevention Act and the Telephone Consumer Protection Act for (1) calls Dish made or caused to be made to numbers on the National Do-Not-Call Registry; (2) calls Dish made or caused to be made to persons who had previously stated he or she did not want to receive calls; (3) calls Dish abandoned or caused to be abandoned by failing to connect the call to a sales representative within the required amount of time; (4) substantially assisting telemarketers despite knowing they improperly abandoned calls; and (5) calls Dish made or caused to be made using prerecorded voices. The state plaintiffs also brought claims pursuant to analogous state statutes and certain unfair business practices laws. At issue are the telemarketing practices of Dish and its alleged agents reaching back to the early 2000’s, involving tens of millions of phone calls.

    Even before the December 12, 2014 Order, this action attained notoriety for what became known as the Dish Network FCC ruling. In the case’s relative infancy, on February 4, 2011, the Court ordered the parties to jointly file an administrative complaint with the FCC seeking the FCC’s interpretation of the phrase “on behalf of” as that phrase is used in the TCPA. United States v. DISH Network, L.L.C., No. 09-3073, 2011 WL 475067 (C.D. Ill. Feb. 4, 2011). On May 9, 2013, the FCC issued its oft-cited Declaratory Ruling In the Matter of the Joint Petition Filed by Dish Network, LLC, the United States of Am., & the States of California, Illinois. N. Carolina, & Ohio for Declaratory Ruling Concerning the Tel. Consumer Prot. Act (TCPA) Rules, 28 F.C.C. Rcd. 6574 (2013) construing that very phrase. In short, the FCC found that “that while a seller does not generally ‘initiate’ calls made through a third-party telemarketer within the meaning of the TCPA and its corresponding regulations, it nonetheless may be held vicariously liable under federal common law principles of agency for violations of either section 227(b) or section 227(c) that are committed by third-party telemarketers.”

    Dish promptly appealed the FCC’s May 9, 2013 Order. More specifically, Dish Network appealed two paragraphs of the FCC’s Order wherein the FCC provided “guidance” to federal courts as to how the common law of agency might be applied to TCPA cases, and examples of evidence that might suffice to establish vicarious liability. In a brief, but procedurally interesting opinion, the Circuit held that (1) it only has jurisdiction to review “final” FCC Orders, and (2) because the two paragraphs of “guidance” were just that—nonbinding guidance—the Court had no jurisdiction to review it. Dish Network, L.L.C. v. Fed. Commc’ns Comm’n, 552 F. App’x 1 (D.C. Cir. 2014).

    While the parties detoured through the FCC and DC Circuit, the district court case trucked along, eventually reaching a crescendo of sorts on December 12, 2014. Judge Myerscough, amid her 238-page order, had some bad news for Dish: as a matter of law, it was liable for over 50 million illegal telemarketing calls made by Dish or on its behalf. There was, however, a silver lining, both for Dish and future TCPA defendants. While the Court held Dish liable for certain of its dozen or so telemarketing vendors, it only found Dish liable for the telemarketing vendors with which Dish admitted it was in an express agency relationship. Regarding the majority of Dish’s telemarketers, the Court strictly applied the FCC’s May 9, 2013 Order. Specifically, looking at express agency, apparent authority, and ratification, the Court found that issues of fact—and, with regard to the latter two, “significant problems of proof”—existed.

    Regarding express agency, the Court applied the “right to control” test from the Restatement Third of Agency, and looked to the contracts governing the relationship between Dish and its agents and the relationship as it existed in practice. The Court held that “Dish . . . did not control all aspects of the Retailers’ activities. In many cases, Dish did not approve advertising, telemarketing scripts or calling lists.”

    Regarding apparent authority, the Court again turned to the Restatement Third of Agency and found that apparent authority exists only where “the third party . . . reasonably believe[s] the purported agent has the authority to act for the principal and that belief must be traceable to the principal.” The Court found that Plaintiffs got nowhere near their burden in establishing apparent authority. Specifically, the Court held that “the Plaintiffs have presented almost no evidence on what the recipients of the Retailers’ telemarketing calls reasonably believed” nor did the Plaintiffs present evidence “that the call recipients’ reasonable beliefs [were] traceable to some manifestations by Dish.”

    And regarding ratification, the Court again utilized the Restatement Third of Agency and found ratification requires affirmance of a prior act and that “the actor act[] or purport[] to act as an agent on the person’s behalf.” Just as with apparent authority, the Court held that Plaintiffs’ ratification theory suffered from fundamental evidentiary defects: (1) the only acts Dish could logically have ratified were the acceptance of completed sales, but most of the telemarketing calls did not result in sales, and (2) there was no evidence that the telemarketers represented themselves as agents of Dish on the telemarketing calls.

    Considering the overwhelming number of TCPA cases predicated on vicarious liability theories, the Court’s holdings in this regard should bring a measured sigh of relief. Indeed, on the heels of the Ninth Circuit’s similar analysis of, and conclusions regarding, vicarious liability in Thomas v. Taco Bell Corp., 582 F. App’x 678 (9th Cir. 2014), summary judgment case law indicates that proving vicarious liability for the acts of third party vendors is extremely difficult.