On June 5, 2017, an Illinois federal judge awarded $280 million to the federal government and the states of California, Illinois, North Carolina, and Ohio against Dish Network LLC over violations of numerous federal and state do-not-call laws. The district court’s $280 million penalty constitutes the largest ever for violations of telemarketing laws. In addition, the district court permanently blocked Dish Network from making additional calls in violation of the law.

By way of background, the Federal Trade Commission, pursuant to its investigatory authority, determined that Dish Network violated the FTC’s Telemarketing Sales Rule (“TSR”). The TSR prohibits, among other things: (i) telemarketing calls to phone numbers on the National Do Not Call Registry; (ii) telemarketing calls to persons who have asked a seller not to call them; and (iii) robocalls. The FTC then referred the case to the Department of Justice, which filed suit in 2009. Shortly thereafter, the Attorneys General for California, Illinois, North Carolina, and Ohio joined the suit against Dish Network, according to a press release by the DOJ.

In the litigation before the U.S. District Court for the Central District of Illinois, the DOJ and state Attorneys General argued that Dish Network and its telemarketing vendors violated the TSR by initiating outbound calls to persons’ telephone numbers on the National Do Not Call Registry and by failing to connect outbound calls to a sales representative within two seconds of the call having been answered.

The DOJ and the state Attorneys General additionally claimed that Dish Network and its telemarketing vendors violated the Telephone Consumer Protection Act (“TCPA”) by placing telemarketing solicitation calls to consumers who were registered with the National Do Not Call Registry and by using an artificial or prerecorded voice to deliver a message without the consent of the called party. Separately, the state Attorneys General alleged state law violations based on calls to consumers who were registered with the National Do Not Call Registry.

Nearly nine years later, in United States v. Dish Network LLC, Illinois Central District Judge Sue E. Myerscough ruled against Dish Network. Judge Myerscough’s 475-page Finding of Fact concluded that “the plaintiffs have established that Dish [Network], its telemarketing vendors, and its order entry retailers violated the applicable do-not-call laws millions and millions of times.”

Notably, Judge Myerscough found Dish Network liable for the telemarketing violations of its vendors or call centers that sold Dish Network programming by any means necessary. Judge Myerscough wrote that “Dish [Network’s] reckless decision to use anyone with a call center without any vetting or meaningful supervision demonstrates a disregard for the consuming public.”

Judge Myerscough concluded that the historic $280 million penalty amount was appropriate given that “Dish caused millions and millions of violations of the Do Not Call Laws, and Dish has minimized the significance of its own errors in direct telemarketing and steadfastly denied any responsibility for the actions of its [telemarketing vendors]. The injury to consumers, the disregard for the law, and the steadfast refusal to accept responsibility require a significant and substantial monetary award.”

In addition to the $280 million penalty, Judge Myerscough permanently blocked Dish Network from making additional calls in violation of the law. The injunctive relief set out numerous provisions, including:

  • Requiring Dish to demonstrate that Dish and its Primary Retailers (those with greater than 600 activations or who use an automatic telephone dialing system, or “ATDS”) are fully complying with the Safe Harbor Provisions of the TSR and have made no pre-recorded calls at any time during the five years immediately preceding the effective date of the order. If Dish fails to prove that it meets this requirement, it will be barred from conducting any outbound telemarketing for two years, and if Dish fails to prove that the Primary Retailers meet this requirement, Dish shall be barred from accepting orders from such Primary Retailer for two years.
  • Requiring Dish to hire a telemarketing compliance expert to prepare a plan to ensure that Primary Retailers and Dish continue to comply with the telemarketing laws and the injunction.
  • Allowing the plaintiffs to make ex parte application for court approval of unannounced inspections of any Dish or Primary Retailer facility or records. It also requires Dish to retain and transmit to the plaintiffs, on a semi-annual basis, telemarketing compliance materials, including all outbound telemarketing call records.
  • Prohibiting Dish, whether acting directly or indirectly through Authorized Telemarketers or Retailers, from violating the TSR.

This case is the second in the past three weeks in which Dish Network has faced a significant damages award. As we wrote here, on May 22, 2017, in Krakauer v. Dish Network LLC, Judge Catherine C. Eagles in the Middle District of North Carolina, trebled the jury’s finding of $20.5 million in statutory TCPA damages against Dish Network, awarding a total of over $61 million in damages. In a strongly-worded opinion, the court held that Dish Network knew that one of its vendors, Satellite Systems Network (“SSN”), was continuously violating the law and that Dish Network “repeatedly looked the other way” when it came to SSN’s TCPA compliance failures.

There are two major takeaways to note from the two recent decisions by federal courts in Illinois and North Carolina. First, the Illinois decision demonstrates that state Attorneys General and federal regulators – and not just class action plaintiffs will aggressively pursue companies accused of violating consumer financial services statutes, either directly or through their vendors. Second, from a compliance perspective, Krakauer and United States v. Dish Network underscore the importance for companies operating in highly regulated industries to have rigorous vendor management programs in place since, in both cases, Dish Network was held liable for actions taken by its vendors.