The Ninth Circuit has ruled that payday lenders and two marketing companies were not liable under the Telephone Consumer Protection Act by virtue of working with a lead generator that utilized automated dialing equipment to disseminate text messages.
Here, the lender had separate agreements with a marketing company (LeadPile) that purchased/sold leads from a third-party marketing company (Click Media). Click Media, in turn, acquired leads from a publisher, AC Referral.
The plaintiff filed a class action against the lenders, LeadPile and Click Media, alleging that they were vicariously liable for AC Referral’s alleged TCPA violations because they ratified such conduct.
Importantly, while Click Media and AC Referral had a contract, the lenders and LeadPile did not and represented that they did not even know who AC Referral was. Click Media asserted that it was unaware of AC Referral’s alleged TCPA violations.
While recognizing that vicarious liability exists in TCPA matters, it determined that the plaintiff did not allege all of the necessary elements and that there was no issue of fact with respect to ratification of AC Referral’s telemarketing activities, notwithstanding defendants’ acceptance of benefits and failure to vet compliance.
“It is undisputed that AC Referral did not enter into a contract with any of the lenders or with LeadPile,” the court held. “It is also undisputed that AC Referral did not communicate with or even know of the lenders or LeadPile before the lawsuit was filed. Because AC Referral was neither an agent nor a purported agent of the lenders or LeadPile, AC Referral’s actions do not qualify as ratifiable acts. Accordingly, the lenders and LeadPile cannot be held vicariously liable for AC Referral’s unlawful text messages under a ratification theory.”
With respect to Click Media, the court ruled that despite their contractual relationship, “[a]lthough AC Referral was an agent of Click Media, [plaintiff] presented no evidence that Click Media had actual knowledge that AC Referral was sending text messages in violation of TCPA.” “Nor is there any basis to infer that Click Media assumed the risk of lack of knowledge, because [plaintiff] did not present evidence that Click Media ‘had knowledge of facts that would have led a reasonable person to investigate further,’ but ratified AC Referral’s acts anyway without investigation.”
“The knowledge that an agent is engaged in an otherwise commonplace marketing activity is not the sort of red flag that would lead a reasonable person to investigate whether the agent was engaging in unlawful activities,” the court said. “Because Click Media had no ‘knowledge of facts that would have led a reasonable person to investigate further,’ Click Media cannot be deemed to have ratified AC Referral’s actions and therefore is not vicariously liable.”
Click here, to read the full opinion.
Contact the author if you are interested in learning more about the design and implementation of compliant lead generation protocols, or if you are the subject of a state or federal regulatory investigation.
Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements. You can find him on Twitter at FTC Defense Attorney.
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