Gomez v. Campbell-Ewald Company: The Ninth Circuit Holds that a Marketing Consultant Can Be Vicariou

October 7, 2014 by Isaac J. Colunga, Partner

Gomez v. Campbell-Ewald Company: The Ninth Circuit Holds That A Marketing Consultant Can Be Vicariously Liable for Its Subcontractor’s TCPA Violations.  Consultants Should Make Sure They’re Indemnified.  

On September 19, 2014 the Ninth Circuit in Gomez v. Campbell-Ewald Co., 2014 WL 4654478,  found that marketing consultants are not insulated from liability under the Telephone Consumer Protection Act (TCPA) even if they outsource a merchant’s calling campaign to a subcontractor.  In Gomez the United States Navy contracted with a marketing consultant, Campbell-Ewald, to develop and initiate a multimedia recruiting campaign.  Sending targeted text messages to potential recruits was part of the campaign.  Campbell-Ewald subcontracted the text messaging to a company called, Mindmatics.  Mindmatics agreed to send texts on behalf of the Navy to recruits that consented to receive unsolicited texts.  The plaintiff Gomez received one of the Navy’s texts, but, as it turned out, he had not provided the required consent.  
Gomez sued Campbell-Ewald for violating Section 227(b)(1)(A)(iii) of the TCPA, which prohibits merchants from using automated telephone dialing systems to send unsolicited text messages to cell phones without consent.  In defending the suit, Campbell-Ewald pointed out, first, that it did not send the text message, and second, that it was not the merchant whose goods or services were being promoted in the text.  It was essentially a “middleman consultant,” said Campbell-Ewald, which could not be held liable under the TCPA.  The district court agreed.  The Ninth Circuit reversed.
As to Campbell-Ewald’s first point, the Ninth Circuit adopted an expansive approach to vicarious liability under the TCPA, explaining that even though Campbell-Ewald didn’t send the text messages, it still could be vicariously liable if an agency relationship existed between it and the sender, Mindmatics.  The fact that Campbell-Ewald did not send the text was not a complete defense.  The Ninth Circuit stressed that the FCC and other federal courts already have acknowledged that “[c]alls placed by an agent of the telemarketer are treated as if the telemarketer itself placed the call.”  Under this construct, vicarious liability could be imposed under common law agency principles for violations committed by third-party telemarketers that the defendant hires.  Applicable agency principles could include formal agency, and also principles of apparent authority and ratification. 
This prompted Campbell-Ewald to raise its second point – it was not the merchant.  According to Campbell-Ewald, under a 2013 FCC ruling only “merchants,” whose goods or services are being promoted by the telemarketing campaign, were subject to vicarious liability under the TCPA.  The Ninth Circuit disagreed, commenting that it was unclear why a third-party marketing consultant should not be subject to vicarious liability.  In fact, the Ninth Circuit explained that “[a]s a matter of policy it seems more important to subject the consultant to the consequences of [the] TCPA infraction,” since “[a]fter all, a merchant presumably hires a consultant in part due to its expertise in marketing norms.”  In the end, Campbell-Ewald was not exempt from liability simply because it did not send the fax or because it was not the merchant on whose behalf the fax was sent.
In light of this decision, marketing consultants as well as companies that outsource calling and text campaigns should review their current outsourcing agreements to ensure that they are properly indemnified for their subcontractor’s TCPA liability.  They should do the same for their merchant agreements.  They should also be mindful of the common law agency principles that govern their agreements, and if possible limit their own supervisory and day-to-day control over the subcontractor, expressly renounce any agency relationship, and perhaps insert provisions by which a court could find that the relationship did not rise to the level of principal/agent.  Maintaining a minimal role in sending text messages may not be enough after Gomez.         
Isaac J. Colunga has extensive experience in the TCPA and its corresponding regulations.  He actively defends companies against class actions in federal courts nationwide stemming from fax advertisements, autodialed calls and texts to cell phones, and calls to registrants on the national Do Not Call list.  He can be reached at 312-726-1567 or isaac.colunga@icemiller.com.        

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