Judgment Entered in Lenders’ Favor on TCPA Unlawful Text Message Claim
The U.S. Court of Appeals for the Ninth Circuit recently entered judgment in favor of three lenders and two marketing company defendants on a claim that they violated the federal Telephone Consumer Protection Act by ratifying an unauthorized text message advertisement sent by a separate, unaffiliated entity, that was not a party to the lawsuit. The Court found that Defendants did not ratify the unaffiliated entity’s actions because: (i) the unaffiliated entity did not contract or communicate with, or even know of, the lenders or the first marketing company prior to the lawsuit; and (ii) the second marketing company, of which the unaffiliated entity was an agent, had no actual knowledge that the entity was sending text messages in violation of the Act, or any knowledge of facts that would have led it to investigate further.
The facts were straightforward. Plaintiff received an unauthorized text message generated as an indirect result of Defendants’ marketing campaigns. The lenders contracted with the first marketing company, which buys leads. The first marketing company, to obtain the leads, contracted with a second marketing company, which provides leads from thousands of lead-generating publishers. The second marketing company, in turn, entered into a contract with the unaffiliated entity that contemplated the use of text messages as one method for generating leads, and required compliance with the Act. The unaffiliated entity, in performing its contract with the second marketing company, purchased lists of consumer phone numbers from other lead generating companies and uploaded them into a program that sent out advertisements. The unaffiliated entity sent Plaintiff the unauthorized text message through this program. The unaffiliated entity had no contract or any communication with the lenders or the first marketing company, and was not even aware of these defendants prior to the lawsuit.
Plaintiff alleged that Defendants violated the Act, which prohibits sending a text message to a cellular phone using an automatic telephone dialing system without prior express consent, based on Defendants’ alleged ratification of the entity’s unlawful texting by accepting the benefits thereof while failing to investigate its texting methods. The Court found that the FCC has ruled that calls placed by a telemarketer’s agent are treated as if placed by the telemarketer itself, and has construed the Act to incorporate federal common law agency principles of vicarious liability. The Court, deferring to the FCC’s construction of the Act, determined that: (i) ratification does not occur unless the act is ratifiable; (ii) an act is ratifiable if the actor acted or purported to act as the principal’s agent; (iii) the principal is not bound by a ratification made without knowledge of material facts about the agent’s acts unless the principal ratified with awareness that such knowledge was lacking; and (iv) the principal assumes the risk of lack of knowledge if shown to have had knowledge of facts that would have led a reasonable person to investigate further, but ratified without doing so.
The Court found that Plaintiff failed to raise a genuine issue of material fact regarding whether Defendants ratified the unaffiliated entity’s unlawful text messaging because: (i) the entity did not contract or communicate with, or even know of, the lenders or the first marketing company prior to the lawsuit (meaning that the unaffiliated entity could not be an agent, or purported agent, of these defendants and that its actions could not qualify as ratifiable acts); and (ii) there was no evidence that the second marketing company had actual knowledge that the entity was sending text messages in violation of the Act, and no basis to infer that it had knowledge of facts that would have led a reasonable person to investigate further (meaning that it could not be bound by any ratification of the unaffiliated entity’s actions). Accordingly, the Court entered judgment in Defendants’ favor.
