By Andrew C. Glass, Gregory N. Blase, Roger L. Smerage, and Matthew T. Houston
A Michigan federal district court recently rejected a theory of vicarious liability under the Telephone Consumer Protection Act, 47 U.S.C. § 227 (“TCPA”). In Kern v. VIP Travel Services, the court concluded that the plaintiffs failed to state a claim against hotel chains for calls independent travel agents allegedly made to generate reservations at the hotels. See generally Op., Kern v. VIP Travel Servs., Case No. 1:16-cv-00008 (W.D. Mich. May 10, 2017). Accordingly, the court dismissed the putative class action.
As previously discussed here, applying the FCC’s interpretation of the TCPA, many courts have recognized that the TCPA generally imposes direct liability only on the party initiating a call, rather than on a party on whose behalf the call is initiated. Yet, a party on whose behalf a call is initiated may face a TCPA claim of vicarious liability pursuant to “federal common law rules of agency” under certain circumstances.
In Kern, the plaintiffs alleged that various hotel chains violated the TCPA when third-party travel agents placed telemarketing calls to the plaintiffs’ cell phones in an attempt to have the plaintiffs make a reservation with the hotels. The plaintiffs asserted that their cell phone numbers were registered on the national do-not-call registry and that they had not consented to the telemarketing calls. The plaintiffs advanced the theory that the hotels were vicariously liable for the acts of the travel agents, where the hotels (1) benefited from the calls due to reservations being made, (2) provided call scripts to the travel agents, (3) shared computer database reservation information with the travel agents, and (4) allowed the agents to include links to the hotels’ websites on the agents’ own websites.
The court rejected the plaintiffs’ theory. While recognizing that the TCPA may allow for vicarious liability, the court reasoned that the hotels could be liable only if the travel agents placed the alleged telephone calls as an agent of the hotels within the scope of their actual or apparent authority, or if the hotels ratified the travel agents actions. Yet, the plaintiffs’ complaint contained no allegation indicating that the travel agents had actual authority to place a call on behalf of the hotels. In fact, due to that deficiency, the plaintiffs moved to amend their complaint to add another hotel as a defendant because it had a contract with the travel agents. Nevertheless, the court denied the motion to amend, ruling that the mere existence of a contract did not provide a basis for finding that actual authority existed. The court also noted that the contract (1) classified the travel agents as independent contractors over which the hotel had no control, and (2) required the travel agents to comply with all applicable laws, such as the TCPA.
Additionally, the court concluded that the travel agents had no apparent authority where the plaintiffs’ complaint lacked allegations that the hotels gave the travel agents “detailed” pricing, service, or customer information or the ability to manipulate the hotels’ computer or reservation systems. Rather, the travel agents lacked authority to use the hotels’ “names, trademarks, or service marks.” The court reasoned that, even though the hotels’ names were listed on the travel agents’ websites, it was “not clear” why the hotels were named as defendants when there were more than fifty other entities listed on the websites as well.
Finally, the court held that there was no ratification by one of the hotels because the plaintiffs never made a reservation with that hotel such that there was nothing to ratify, and because the complaint failed to plead any facts demonstrating that the hotels were aware of the travel agents’ allegedly unlawful calls, much less that the hotels “knowingly” accepted benefits (i.e., reservations) resulting from the alleged calls. Rather, the court concluded that “an action taken for the benefit of a seller by a third-party retailer, without more, is [not] sufficient to trigger the liability of a seller under section either section 227(c) or section 227(b).”
Thus, the court dismissed the plaintiffs’ complaint against the hotels, concluding that the plaintiffs’ complaint failed to state a claim for vicarious liability under the TCPA.
The Kern court’s opinion reiterates the general rule that, to prove a TCPA claim under the theory of vicarious liability, a plaintiff must be able to demonstrate more than a mere nexus between a defendant and the alleged caller. Mere use of or references to the party’s name, website, products, or similar items do not provide a basis for vicarious liability where the alleged caller was not acting within the scope of any actual or apparent authority on behalf of the defendant. Rather, actual evidence of an agency relationship is required to establish vicarious liability under the TCPA, and courts are increasingly willing to dismiss unsupported claims of vicarious liability.