Personal jurisdiction in TCPA lawsuits - looking at Born v. Celtic Mktg. LLC
- Peter Schneider
- Jul 10
- 7 min read
Many telemarketing cases involve pulling defendants from out of your jurisdiction into your local court.
In the ninth circuit, one of the influential cases on TCPA jurisdiction is Born v. Celtic Mktg. LLC, No. 8:19-cv-01950-JLS-ADS, 2020 U.S. Dist. LEXIS 89220 (C.D. Cal. May 20, 2020) and this is in the same line of cases as our analysis of Jones v. Royal Admin. Servs., 866 F.3d 1100 (9th Cir. 2017). As usual lets start with the basic facts of the case. Born was a resident of Wisconsin, and he alleged to receive a telemarketing call from a Wisconsin area code phone number.
Born filed suit, alleging that a Celtic Marketing LLC d/b/a VAD sold "vehicle Protection Contracts" ("VPCs") administered by Sunpath Limited Corp, with Northcoast Warranty Services Inc as the obligor. Sunpath and Northcoast were Delaware corporations with their principal places of business in Massachusetts and Ohio respectively.
VAD was a Nevada LLC with a principal place of business in California. Born sued in California, a state with general jurisdiction over VAD, but Sunpath and Northcoast filed a motion to dismiss making the argument that California did not have general or specific jurisdiction over them. The court eventually agreed with Sunpath and Northcoast.
Born didn't know who the caller was selling VPCs for, so he stayed on the line and bought one to see who was behind the call. After the sale, VAD sent Born documentation identifying Sunpath's and Northcoast's role in the VPC.
In the lawsuit, Born alleged that Northcoast and Sunpath contracted with VAD, creating a relationship whereby VAD served as the other defendants' sales representative, authorized to solicit customers and sell vehicle protection plans administered by Sunpath and issued by Northcoast. In reponse, Northcoast gave the Royal Admin Servs defense:
Northcoast Secretary Barry Moses explains that Northcoast authorizes independent, non-exclusive sellers of automobile service contracts to sell its protection plans. Northcoast provides those independent sellers with no compensation and "does not . . . control, direct, or manage the marketing practices of any" third-party seller. Sunpath President Andrew Garcia has provided a declaration to a substantially similar effect, noting that corporations such as VAD are non-exclusive sellers of policies administered by Sunpath who receive no remuneration from Sunpath. Further, he clarifies that: (1) "SunPath has no role or involvement in the telemarketing companies' representatives' selection of [which protection plan, among available alternatives] to sell" to a prospective customer; (2) "SunPath has no oversight or control over what the telemarketing representatives say;" and, (3) "[t]he marketing operations of [companies like VAD], including how they obtain leads and what scripts they use, are created and maintained entirely by the telemarketing companies."
Northcoast claimed that they had no more special a relationship with VAD than Walmart has with hotdog vendors buying inventory in their store.
While the Jones analysis and opinion was directed at the relationship between AAAP and Royal, the Born case illustrates a typical jurisdiction analysis in the ninth circuit. A court is going to look at several factors:
Purposeful Availment
Jurisdiction analysis will always look at purposeful availment.
"The purposeful availment requirement ensures that a nonresident defendant will not be haled into court based upon 'random, fortuitous or attenuated' contacts with the forum state." . . . The phrase "purposeful availment" includes both purposeful availment and purposeful direction, which are distinct concepts . . . While a purposeful availment analysis is used in suits sounding in contract, a purposeful direction analysis is used in suits sounding in tort . . . Claims for violation of the TCPA sound squarely in tort and require application of the purposeful direction analysis.
This is a long winded way of asking, did either Northcoast or Sunpath direct their activities at California? Just to make it more confusing, the purposeful availment test has three prongs:
The Ninth Circuit "evaluate[s] purposeful direction under the three-part 'effects' test traceable to the Supreme Court's decision in Calder v. Jones, 465 U.S. 783, 104 S. Ct. 1482, 79 L. Ed. 2d 804 (1984)." Under this test, "the defendant allegedly [must] have (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state." In Walden v. Fiore, the Supreme Court emphasized that under the Calder effects test, "[t]he proper question is not where the plaintiff experienced a particular injury or effect but whether the defendant's conduct connects him to the forum in a meaningful way." In other words, in tort actions, while conducting the minimum contacts inquiry, the Court is to focus on "the relationship among the defendant, the forum, and the litigation." "And it is the defendant, not the plaintiff or third parties, who must create contacts with the forum State."
This analysis didn't really go well for Born. His lone telemarketing call came to him in Wisconsin, to his phone with a Wisconsin area code, from a Wisconsin area code.
They weren't registered in California or have their principle place of business in California, so general jurisdiction is probably out. And in a result commonly accepted in jurisdiction analysis, courts don't usually consider hiring another entity in the forum state as sufficient contacts to be drug into the forum state, and that is what happened here.
In light of (1) the nature of the conduct pleaded in this matter—an unsolicited call made to Wisconsin by or at the direction of VAD, a California corporation, and (2) the declarations of Northcoast and Sunpath executives decisively disavowing any involvement in the marketing practices of VAD, Born has failed to make a prima facie showing that either Northcoast or Sunpath has purposefully directed its activities towards the California forum.
Born tried an agency argument that didn't work
Born argued that VAD was the agent of Northcoast and Sunpath to try a vicarious liability theory. I didn't pull his brief, but whatever he tried fell short on right of control.
"under any standard for finding an agency relationship, the [principal] must have the right to substantially control its [agent's] activities."
This means that either Born didn't allege ratification, or the court improperly applied [or more likely omitted] discussing a ratification analysis because ratification bypasses the right of control argument.
Born made his life much harder than it needed to be by suing in California instead of in Wisconsin. Wisconsin was probably the only jurisdiction he had a hope of hooking all the defendants in one court under a ratification theory.
Hooking Northcoast and Sunpath under a ratification theory would still be an uphill battle, see Kristensen v. Credit Payment Servs., 879 F.3d 1010 (9th Cir. 2018):
The Restatement (Third) of Agency defines "ratification" as "the affirmance of a prior act done by another, whereby the act is given effect as if done by an agent acting with actual authority." Restatement (Third) of Agency § 4.01(1). "Ratification does not occur unless . . . the act is ratifiable as stated in § 4.03." An act is ratifiable "if the actor acted or purported to act as an agent on the person's behalf." Therefore, "[w]hen an actor is not an agent and does not purport to be one," the doctrine of ratification does not apply. Even if a principal ratifies an agent's act, "[t]he principal is not bound by a ratification made without knowledge of material facts about the agent's act unless the principal chose to ratify with awareness that such knowledge was lacking." A principal has assumed the risk of lack of knowledge if "the principal is shown to have had knowledge of facts that would have led a reasonable person to investigate further, but the principal ratified without further investigation." For instance, if a principal knows that a chandelier has been removed from an old building but ratifies its agent's acquisition of the chandelier without inspecting it, the principal has assumed the risk that the chandelier may require expensive rewiring. Similarly, if a principal receives a letter from a customer stating it is increasing its order due to a new return policy and improved product quality, and the principal ratifies the contract with the customer even though it knows there is no new return policy or improved product quality, the principal assumes the risk that its agent made misrepresentations to the customer.
In telemarketing cases there generally two ways to show the principal had knowledge of facts that would have led a reasonable person to investigate further, but the principal ratified without further investigation. One example is McCurley v. Royal Seas Cruises, Inc., No. 21-55099, 2022 U.S. App. LEXIS 9079 (9th Cir. Apr. 5, 2022), where frankly the plaintiff got lucky. An investigation and an expert witness built the case that Royal Seas knew or should have know something was rotten in its lead generation vendor:
Royal Seas also knew that it received 2.1 million warm-transferred calls from Prospects between January 2017 and June 2018. Royal Seas knew that TCPA compliance required each call to be to an individual who had previously "agreed" to be called by Royal Seas by clicking "next" after submitting personal contact information and seeing a consent box on websites such as www.diabeteshealth.info and www.yourautohealthlifeinsurance.com. Royal Seas knew that the calls Prospects placed to individuals who had allegedly consented by checking forms on the website www.diabeteshealth.info generated 80,081 warm transfers to Royal Seas in 2017. The plaintiffs submitted expert testimony that this number of transfers, which was only a subset of the calls Prospects placed, from this lead-generation website during this period is implausible at best.
The second method is to inform the principal yourself about the unwanted phone calls, and then if they don't stop you have a ratification argument.
Are telemarketers bothering you in Washington or Oregon? I handle TCPA lawsuits in both states and may be able to help. If you're considering action against illegal robocalls or Do Not Call list violations, reach out for a legal consultation.
📞 Call: 206-800-6000 / 971-800-6000
📧 Email: peter@nwdebtresolution.com
Note: The opinions in this blog belong to me (Peter Schneider) and do not count as legal advice. If you’re considering suing over illegal robocalls or Do Not Call violations, please contact me for a legal consultation.
Comments