A new federal court decision provides important guidance to nonprofits and their vendors in using automatic dialers to place fundraising calls.  On September 21, Judge Matthew Leitman of the United States District Court for the Eastern District of Michigan granted summary judgment in favor of Defendant DialAmerica Marketing, Inc. (“DialAmerica”), a telemarketer making calls on behalf of a nonprofit organization, in a class action alleging violations of the Telephone Consumer Protection Act.  The TCPA’s telemarketing restrictions provide an exemption for calls placed “on behalf oftax-exempt nonprofit organizations” in certain circumstances.  Judge Leitman ruled that although the TCPA applies to telemarketers donating a percentage of their sales to charities, the TCPA does not apply when the nonprofit bills customers directly and has more control over the operation.

Plaintiff Geraldine Wengle sued DialAmerica in a purported class action lawsuit filed in February 2014 for DialAmerica’s calls placed on behalf of the nonprofit Special Olympics of Michigan.  Wengle had signed up for the national “Do Not Call” registry, and alleged that DialAmerica made multiple phone calls to her using an automatic dialer and including a prerecorded message soliciting her to buy magazine subscriptions on behalf of the Special Olympics.  Wengle claimed that this call violated the TCPA and Michigan’s Home Solicitation Sales Act, and that the nonprofit exemption to the TCPA did not apply “merely because a tax-exempt nonprofit organization is involved.”

In 2005, DialAmerica unsuccessfully petitioned the Federal Communications Commission to exempt its previous magazine sales program in which 12.5 percent of the proceeds were donated to the Special Olympics.  However, Judge Leitman ruled in this case that the revised program, unlike its predecessor, was exempt because the Special Olympics had control over the telemarketing prompts and received payments directly before passing money to the telemarketer.  As such, the consumer entered into a contract with the nonprofit rather than the telemarketer, thus qualifying for the TCPA’s nonprofit exemption, on which basis Judge Leitman granted summary judgment for DialAmerica.  “Because so much of the content of DialAmerica’s calls to consumers is provided by and is about [the Special Olympics of Michigan], DialAmerica is not delivering its ‘own commercial message’ when it solicits customers on DialAmerica’s behalf,” Judge Leitman decided.

Troutman Sanders LLP has unique industry-leading expertise with the TCPA, with experience gained trying TCPA cases to verdict and advising Fortune 50 companies regarding their compliance strategies.  We will continue to monitor regulatory and judicial interpretation of the TCPA following this ruling in order to identify and advise on potential risks.