On December 12, 2014, an Illinois federal judge found Dish Network LLC liable for participating in millions of unwanted telemarketing sales calls, where Dish Network could be subject to penalties exceeding $1 billion. Specifically, the District Court for the Central District of Illinois issued an opinion in United States of America v. Dish Network LLC on the parties' cross-motions for summary judgment, finding that Dish is potentially liable for millions of outbound telemarketing calls, and determined that Dish was not entitled to a safe harbor defense for such calls. In addition, the court granted partial summary judgment for almost 50 million prerecorded outbound telemarketing calls, finding that they constituted "illegally abandoned calls." In so doing, the court made a number of findings that could have far-reaching implications for businesses that conduct telemarketing campaigns. The court's lengthy opinion serves as an important reminder, if any is needed given the recent spate of significant and expensive class action settlements, of the high risks associated with the federal and state telemarketing restrictions.
Relevant Facts:
During the applicable period, Dish contracted with thousands of companies to market its products and services (Retailers). In August of 2010, for example, Dish contracted with approximately 7,500 Retailers, although that number had been reduced to about 4,500 by 2013. Dish entered into an agreement with each Retailer, which, among other things, stated that the Retailer was "solely responsible for its compliance" with all state and federal regulations. The agreement further stated that the Retailers were independent contractors, and could not represent that they were agents of Dish.
Various Retailers used autodialers to make calls, which the court defined as "a computer controlled device capable of making hundreds of thousands of phone calls in a single day." In addition, Dish used a software application called "Predictive Dialer" to generate call lists. According to a Dish representative, the Dialer compared telephone numbers on potential calling lists to the DNC Registry, Dish's internal DNC list, and the state DNC lists. The Dish representative also testified that the Dialer compared potential numbers against a list of wireless telephone numbers. Numbers on the DNC or wireless lists were removed from the calling lists - "scrubbed" - except call campaigns directed to customers with whom Dish had an "established business relationship" were only scrubbed against the internal DNC list.
Retailers made a significant number of calls to market and sell Dish's products and services. Between May and August 2004, for example, a third-party contractor placed more than 6.6 million prerecorded telemarketing calls for Dish TV Now that were answered by a person and where a recorded sales message was played. Between July 30, 2005, and November 26, 2005, a separate Retailer made more than 43 million answered, prerecorded calls for Star Satellite, selling Dish products and services.
The United States of America, and the states of California, Illinois, North Carolina and Ohio (Plaintiff States) have asserted that Dish violated the Telemarketing Consumer Fraud and Abuse Prevention Act and the Telemarketing Sales Rule (TSR), the Telephone Consumer Protection Act (TCPA) and various state laws by calling persons who had indicated that they did not wish to receive telemarketing calls, and by making calls using a prerecorded message.
One of the principal defenses raised by Dish was the contention that it enjoyed the benefit of a safe harbor for callers who had employed reasonable procedures to comply with the TSR and TCPA. The court found Dish's contention insufficient because Dish, according the court, had a "hodgepodge" of compliance policies, but failed to have comprehensive written procedures governing its processes to comply with the TSR and TCPA, including written policies governing how it selected or eliminated numbers to be called or scrubbed against DNC lists. The court said: "a reasonable effort . . . requires evidence that the seller has taken steps to comply with every element of the safe harbor defense. The safe harbor defense requires written procedures and documentation." In other words, Dish's defense failed on summary judgment because it lacked sufficient paperwork in its file documenting its compliance policies and procedures.
Important Findings:
In considering the cross-motions, the court reached a number of other important findings:
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The TSR does not require proof that the number called was placed on the DNC registry by the person who received the call. The court found that the TSR does not require that the call be made to the person who registered the number, and that a call to any number on the registry may constitute a violation.
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The fact that a call is not completed is not a defense; the TSR prohibits "initiating an improper telemarketing call." Thus, the court found that Dish bears potential liability for incomplete calls.
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Dish is responsible for the calls made by the third-party Retailers. Dish engaged the Retailers to perform telemarketing services, and the Retailers initiated calls to numbers on the DNC registry. The court found Dish's argument that it did not "cause" the Retailers to initiate such calls unpersuasive. The court followed its prior jurisprudence, and adopted the FTC's interpretation that a seller "causes" telemarketing activity by "retaining the telemarketer and authorizing the telemarketer to market the seller's products and services."
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Calls to a number on Dish's internal DNC list is "proof that Dish initiated a telemarketing call to a person who told Dish not to call." The court used the evidence from Dish's internal DNC list against it, and to contravene Dish's argument that the National DNC registry is inaccurate. Because the court found that Dish called people whose numbers were listed on its internal list, it found that the United States had established its prima facie case with respect to those calls. Moreover, the court put Dish in a Catch-22 with respect to its list. The court found that Dish had to properly maintain the list in order to be considered for a safe harbor defense, but the list otherwise demonstrated violations of the TSR based on calls placed to the numbers on the list. If Dish argued, however, that its list was inaccurate, then it would violate the TSR in its entirety, which requires that a seller institute procedures for maintaining a list of persons making DNC requests.
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Section 310.4(b)(1)(iii)(A) imposes an obligation on a seller to honor a consumer DNC statement if the consumer makes the statement to the seller or a telemarketer with an agency relationship to the seller. On this basis, the court found that an issue of fact existed as to whether Dish had an agency relationship with the Retailers.
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Dish's decision to scrub wireless numbers to comply with the TCPA could harm it with respect to the TSR. Although the court recognized that "Dish's decision to scrub wireless numbers is understandable" under the TCPA, it also stated that this fact could lead to enhanced liability based on an increased number of calls to "residential telephone subscribers" under the DNC laws.
Implications for Businesses:
The Dish case is a reminder of the potentially massive exposure that businesses face under the telemarketing laws, and the necessity for vigilant compliance with state and federal calling restrictions. Among other things, under the Dish decision businesses should have documented and rigorous Do-Not-Call policies, and should retain documentation of compliance. Moreover, Dish highlights the importance of restricting and monitoring calling activities of third-party vendors, and cautions that agreements that attempt to create a separate, or agency relationship, may not insulate the business from violations committed by the vendor.
Ironically, this case exposes Catch-22s for companies who use vendors. Dish's efforts to scrub cell phone numbers in order to comply with the TCPA may lead to heightened liability under the DNC laws if a determination is made that most of the calls were placed to residential numbers. Residential numbers are covered by the DNC requirements, where many cell phone numbers are not. Likewise, Dish's attempt to maintain an internal DNC list could later be used as prima facie evidence against it if third-party retailers selling Dish's services placed calls to numbers on the internal list. Finally, Dish's efforts to ensure that its business partners and vendors complied with the TCPA were used against it in the decision, showing that Dish was exercising control and therefore should be liable for the violations of law by these entities.
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