The pros and cons of naming corporate executives in TCPA lawsuits
- Peter Schneider
- Nov 14, 2024
- 7 min read
Updated: Feb 4
A frustrating result in some of my consumer advocacy work is seeing corporate executives perpetrate frauds and torts, and only the company they work for gets punished. And that is rare enough. I mostly practice in Washington State and our courts try to discourage this behavior by allowing plaintiff's to name corporate officers if they had knowledge or participated in illegal behavior. If a corporate officer participates in wrongful conduct or with knowledge approves of the conduct, then the officer, as well as the corporation, is liable for the penalties. Grayson v. Nordic Constr. Co., 92 Wn. 2d 548, 554 (Wash. 1979).
Lets first look at a few lawsuits demonstrating the the 'how', and then move to the 'why'. The first case is Dawson v. Porch, 2024 WL 4765159 (W.D. Wash. Nov. 13, 2024). 993 named plaintiffs (yes you read that right) sued three corporate executives personally, asking for over 400 million (yes you read that right):
Defendant Marrelli is the co-founder and the Chief Executive Officer (“CEO”) of GoSmith. Defendant Widjaja is the other co-founder of GoSmith and served as its Chief Technology Officer (“CTO”). Porch.com acquired GoSmith in January 2017, at which point Widjaja also became a Vice President of the new parent company. Defendant Matthew Ehrlichman is listed in Washington’s corporate records as a Governor of GoSmith and in California’s corporate records as GoSmith’s CEO. Plaintiffs also allege that Ehrlichman is an officer and/or director of Porch.com.
The three defendants moved to dismiss for a variety of reasons, one being their personal liability. The court refused to dismissed claims of their personal liability (this part of the opinion starts on page 24) and the opinion is instructive for other plaintiffs.
The parties agree that corporate officer liability generally hinges on whether the officer had direct, personal participation in or personally authorized the unlawful conduct at issue. See, e.g., Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1021 (9th Cir. 1985) (“A corporate officer or director is, in general, personally liable for all torts which he authorizes or directs or in which he participates, notwithstanding that he acted as an agent of the corporation and not on his own behalf.”)
The plaintiffs made an argument that didn't works do probably don't hang your hat on this one in your lawsuit:
Plaintiffs allege that Ehrlichman is listed as GoSmith’s Governor in the corporate records of Washington and as the CEO of GoSmith and/or Porch.com in California’s corporate records. They further allege that, in those roles, Ehrlichman was responsible for promulgating policies and procedures that complied with the TCPA and training employees on how to comply with the TCPA. These allegations are little more than an assertion that a corporate officer is responsible for the failures or acts of the corporation based on nothing more than his position, a proposition that has been repeatedly rejected by the courts.
But here is one that did:
Plaintiffs also allege that Ehrlichman “knowingly participated [in], authorized, built, and directed” the unlawful telemarketing scheme at issue. The allegation is not that Ehrlichman placed the violative calls, but that he built the system that violated the TCPA and directed corporate employees to send the messages. These allegations may or may not be true, but they give rise to a reasonable inference that Ehrlichman “initiated” the calls and can be held individually liable for violations of 47 C.F.R. § 64.1200(c) and (d).
A second case is Hoffman v. Logan, No. 81887-2-I, 1 (Wash. Ct. App. Jul. 26, 2021) for those of you in Washington State. It more or less mirrors Dawson above:
Logan's argument ignores that "[i]ndividuals who directly . . . violate the TCPA should not escape liability solely because they are corporate officers" and a corporate officer is deemed to have "made" a call, and thus liable under the TCPA, if the officer "had direct, personal participation in or personally authorized the conduct found to have violated the statute." His argument also ignores that Washington courts extend personal liability to corporate officers who supervised, directed, or approved wrongful business conduct.
A third case is Barton v. Delfgauw. I cite it not for a court opinion but to show what sort of evidence you might elicit in your case to support a claim of a corporate officer's personal involvement. Start at the bottom of page 15.
This motion for summary judgement is a textbook example of how to murder a corporate executive in a deposition. For example in this exchange Delfgauw admits he knows his company is texting people without consent.
Q: What information do you have that I opted in on your web site? A: . . . usually what happens is when someone receives a text message, they just simply reply "Stop," if they don't want to receive another text message, and that usually ends that, if it was not the person who opted in.
In this exchange Delfgauw admits he is choosing not to scrub his calling list against the reassigned number database.
Q: What keeps someone from opting in their neighbor on your websites. A: Because the neighbor usually responds stop or help. ⋮ Q: So do you think that you should be checking to see if telephone numbers have changed hands? A: I believe that when people get a text that they don't want, they reply stop
Delfgauw sets the policy on when to solicit a phone number
Q: Who in your organization is responsible for deciding that an opt-in is sufficiently verified to solicit the phone number. A: Can you actually repeat that. I want to make sure that I answer that right. Q: That's okay. What person in your organization is responsible for deciding that an opt-in is sufficiently verified to solicit the phone number. A: So the developers are put through a scrubbing service called IPQS and if it comes back that that is a legitimate cell phone number, then that is our validation process. Q: Who in your organization set that policy. A: Me.
Delfgauw admits he doesn't filter fake opt ins because it is better for his conversion ratio:
Q: Would a captcha filter out robots that are opting in to educationschoolmatching.com? A: It is my understanding that captchas will do that, yes. I don't know that. I'm not a developer either. Q : So did you make the decision not to use captcha on educationschoolmatching.com? A: THE WITNESS: So to answer the question as to who made the decision. We have historical data that shows that captchas break because they're not perfect. We also have historical data that shows that people get frustrated when they can't figure out the captcha sometimes and since we have tens of thousands of leads a day and never really have this kind of an issue, Mr. Burton, we decided that it was better to have the conversion ratio be better for us and not have the customers who really want to do business with us be frustrated. ⋮ Q: When you say that we made a decision, does that mean that you, Mr. Delfgauw were involved in that decision? A: Yes, I was involved in that decision. Q: Was that decision completely yours to make? A: No. I mean I'm sure I have the final say.
Delfgauw admitted they don't verify opt ins on an individual basis, but "by the statistics of the opt-out rate".
Q: IPQS . . . you said it pings the phone number and what else? A: The email address Q: when you ping it, what are you pinging it for? What are you trying to see? A: . . . let’s say someone put in a fake phone number . . it has to be a real phone number and it has to be a real email address Q: Okay. So it just tells you if the information is real . . . does it give you any information to whether who actually entered the – who or what entered the information? Does IPQS tell you who of what entered the information, real or not? A: No, IPQS does not. Q: What does? . . . what process, if any, do you go through to see if it was legitimately entered into and opted into? A: We go by the statistics of the opt-out rate because most people that don’t want to receive texts just reply “Stop”.
And Delfgauw doesn't scrub his calling list against the do not call registry because it cost a few bucks.
Q: . . . does any one of [your companies] scrub their numbers using a SANS database? A: . . . people have different interpretations of what the SANS database is. Do you mind me asking what your’re referring to? Q: The federal database that – A: For do not call? Q: Yes, sir. Yeah. A: . . . so the – the SANS database – we had a subscription to DNC.com or DNC.org – I can’t remember the name of the company Q: Okay A: But after three years of using it, we realized we didn’t need it because everybody opts in and because everybody opted in, it superseded it, and we just didn’t need to pay for it. Q: Okay A: It was $1,700 a month and we didn’t need it because everybody opts in at our sites
That's the 'how', now the 'why'. Most telemarketers don't have much in the way of assets and if you just sue their company for a sizable amount they are going to be very tempted to shut it down and start a new one. Naming the executives gives you a neck to grab that won't shut down. The smaller the company and the larger the potential judgment the more naming specific executives makes sense.
Like all things, there is a counterpoint. Naming corporate executives can fiercen their resistance but generally they can't do much more than they would do already.
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.
Comments