Proving TCPA damages through ratification

I discussed in this recent article about the relationship between Telemarketers who initiate the calls by which Sellers try to sell you stuff. Generally to hold the Seller responsible for the acts of the Telemarketer you need to employ an agency theory of liability.

The legal principle of ratification is often useful in telephone consumer protection act litigation because rarely will a Seller give a Telemarketer authority to break telemarketing law in writing, but most telemarketing is rooted in illegal calls so a prepared TCPA plaintiff can often hook a Seller. Our instruction today comes from Ninth Circuit case Kristensen v. Credit Payment Srvcs. Inc., 879 F.3d 1010 (9th Cir. 2018).

Kristensen v Credit Payment Services.pdf

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In Kristensen, the plaintiff received a text message from AC Referral, and the plaintiff sued three payday lenders arguing that they ratified the unlawful text messages. The relationship between the payday lenders and AC Referral was complex:

The [payday] lenders entered into separate agreements with LeadPile LLC, a company that buys and sells customer leads. In order to obtain leads, LeadPile in turn contracted with Click Media, LLC. Click Media uses leads from thousands of “publishers” who generate leads. If these leads lead to loans, the loan providers pay Click Media and Click Media pays the publishers, like AC Referral, a portion of that fee. Click Media and AC Referral entered into a contract that contemplated using text messages as one method of generating leads, and stated that AC Referral must comply with the TCPA. AC Referral had no contact with LeadPile, Enova, Pioneer Services, or Credit Payment Services; its representatives had not even heard of these companies before the lawsuit was filed.

This is ultimately going to be Kristensen's undoing with the ratification argument. The payday lenders could argue they had no idea what AC Referral was doing with illegal telemarketing calls, so they could not have ratified something they knew nothing about.

Lack of knowledge can't be willful

“[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.” Id. § 4.01 cmt b. 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.”

The payday lenders got away in this case because they plausibly alleged they didn't know about the illegal calls.

Nor did Kristensen raise a genuine issue of material fact as to whether Click Media ratified AC Referral’s unlawful text messages. Although AC Referral was an agent of Click Media, Kristensen presented no evidence that Click Media had actual knowledge that AC Referral was sending text messages in violation of TCPA. Nor is there any basis to infer that Click Media assumed the risk of lack of knowledge, because Kristensen did not present evidence that Click Media “had knowledge of facts that would have led a reasonable person to investigate further,” but ratified AC Referral’s acts anyway without investigation.

The Ninth Circuit just gave the smart TCPA plaintiff instructions - notify the upstream Sellers / Telemarketers about the calls in violation of the TCPA that would have led a reasonable person to investigate further. Some plaintiffs probably don't do this because they don't know, and others might not, thinking the calls will stop before they have collected sufficient evidence to win in court, but my experience says a message about illegal calls often won't get any attention at all because the whole industry is based on illegal calls. Your email or letter is telling them something they already know and it won't cause panic. It will probably be ignored. Often you can sue a telemarketer and they will still call you!

And when your case does go to court, you may have something few other plaintiffs do - an airtight case of ratification. If you are in the ninth circuit, a very worthwhile read is a 2022 Ninth Circuit Court of Appeals case McCurley v. Royal Seas Cruises, Inc., 2022 U.S. App. LEXIS 9079, 2022 WL 1012471. I'll point out a few things.

First, if your complaint doesn't allege ratification, all is not lost.

The plaintiffs did not waive their vicarious liability arguments based on a failure to specifically allege them in the consolidated complaint. To avoid waiver by failing to plead an issue, plaintiffs may "make known during discovery their intention to pursue recovery on the . . . theory omitted from their complaints." Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000). Royal Seas had ample notice of, and opportunity to develop facts about, the actual and apparent authority and the ratification theories the plaintiffs asserted. Notice of these theories came from the plaintiffs' class certification motion filed in July 2018 and the district court's class certification order issued in March 2019, both long before discovery closed in February 2020. The plaintiffs also presented arguments on apparent authority and ratification in their motion for summary judgment [the court found this to be key since they did not put these theories in their complaint]. We hold, however, that the plaintiffs did waive an actual authority theory of vicarious liability by failing to assert it either in their pleadings or at summary judgment. [So don't take this as a license to omit the these theories of vicarious liability from your pleadings, but use them in the event that you did]

The trial court dismissed the lawsuit saying the plaintiffs had not sufficiently alleged Royal Seas ratified the illegal calls of their telemarketers because Royal Seas had not directly hired the the telemarketers, but the Ninth Circuit reversed, basically saying there was plenty of evidence to support the allegation that Royal Seas knew or should have known 2.1 million warm-transferred calls didn't come from these junk opt in sites.

there is a material dispute of fact as to whether Royal Seas ratified Prospects's acts. Royal Seas had knowledge of facts that would have led it to investigate Prospects's lead-generation activities to determine if it was calling only consenting individuals, but instead accepted leads generated by Prospects's calls with scant investigation. Royal Seas knew that Prospects placed calls using prerecorded voices, a prima facie violation of the TCPA. 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 [*7] 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 expert testimony also addressed several other websites responsible for generating the 2.1 million transfers, such as www.123FreeTravel.com, and concluded that the volume of traffic to these sites, much less the number of leads from consenting individuals that could be reasonably harvested from them, was very low.

Ratification requires some evidence that the seller knew or should have known about the illegal calls. It is best to notify them yourself in some way so you have something specific to point to showing they should have know.

Do you have a question or a telemarketing, debt collection, or bankruptcy case that would make a great blog article? We might even review your pro-se complaint or motion in a blog post. Email peter@nwdebtresolution.com and/or nathen@nwdebtresolution.com and we may answer it for everyone!

Are telemarketers harassing you in Washington, Oregon, or Montana? My Washington State TCPA plaintiff law practice can help, just give us a call at 206-800-6000 or email peter@nwdebtresolution.com.

The thoughts, opinions and musings of this blog are those of Peter Schneider, a consumer advocate and Washington State plaintiff's TCPA attorney at Northwest Debt Resolution, LLC. They are just that, his thoughts, opinions and musings and should be treated as such. They are not legal advice. If you are looking to file a lawsuit for TCPA violations and unwanted calls please contact me for a consultation.

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