In a novel ruling, the Ninth Circuit expressly adopted an opinion from the Federal Communications Commission, finding the potential for vicarious liability under the Telephone Consumer Protection Act.  In Thomas v. Taco Bell Corp., No. 12-56458 (unpublished), the Ninth Circuit affirmed a lower court’s holding that Taco Bell was not vicariously liable under the TCPA for a purportedly unlawful text message campaign conducted by a group of Chicago-area Taco Bell owners.  In so ruling, however, the Ninth Circuit specifically applied theories of vicarious liability to the TCPA, demonstrating that a corporation can be held responsible for the acts of its agents based on proper pleading and proof.

In Thomas, the Chicago Area Taco Bell Local Owners Advertising Association (hereinafter referred to as the “Chicago owners”) allegedly sent an unauthorized text message to 17,000 consumers, asking them to vote for their favorite Nacho Bell Grande menu item variety.  This conduct could result in more than $8.5 million in liability under the TCPA’s statutory penalties.  Plaintiff’s counsel asserted that Taco Bell funded the text message campaign through an advertising division, which had sole control over the form and content of the message.  The lower court declined to find vicarious liability, stating that there was no evidence that Taco Bell controlled or had the right to control the agents or the manner and means of the text message campaign.  The court determined that the actual sender of the message was a third-party service provider, which acted at the direction of the Chicago owners’ advertising agency.

In a unanimous ruling, the Ninth Circuit upheld the lower court’s finding, but specifically stated that vicarious liability can provide the basis for a TCPA violation.  Citing a 2013 declaratory ruling from the FCC in In re Dish Network, LLC, the Ninth Circuit expanded the scope of potential agency liability beyond traditional principles:  “[T]he FCC observed in its declaratory ruling … that it does ‘not believe it is appropriate to limit vicarious liability to the circumstances of classical agency (involving actual seller, or right to control, of the telemarketing call) … .  Principles of apparent authority and ratification may also provide a basis for vicarious seller liability for violations of [the TCPA].’”  Applying this standard, the Ninth Circuit found there was no vicarious liability because there was no showing that the plaintiff reasonably relied on any apparent authority of Taco Bell by which it cloaked the Chicago owners, and Taco Bell did not ratify the text message.

The Thomas decision impacts TCPA jurisprudence in two important ways:  First, it demonstrates that the FCC’s declaratory rulings concerning the TCPA may be specifically cited and adopted by courts as governing law.  Second, it reaffirms the importance of maintaining strict corporate separation in agency or franchise situations.  Taco Bell avoided tens of millions of dollars in potential “deep pocket” TCPA liability by maintaining corporate separation through physical separation (none of the entities responsible for the campaign acted as agents of Taco Bell); and apparent separation (the Chicago owners were not acting on Taco Bell’s behalf, and Taco Bell did not control them or approve their actions).