Locke Lord QuickStudy: FCC Interpretation of Common Law Agency Liability Under the TCPA May Not Be Entitled to Chevron Deference

    Locke Lord Publications
    During the January 13, 2014 oral argument in DISH Network LLC v. FCC, No. 13-1182, the D.C. Circuit signaled that it will likely hold that the Federal Communication Commission’s interpretation of the federal common law of agency for purposes of finding a defendant vicariously liable under the Telephone Consumer Protection Act (TCPA) is not entitled to Chevron deference.

    On May 9, 2013, the FCC issued a declaratory ruling holding that while a seller is not directly liable for calls made by a third-party, a seller can be held vicariously liable under the federal common law of agency. The declaratory ruling supplied several “illustrative examples” of when a defendant may be held liable for the conduct of a third-party telemarketer or call center. In re DISH Network, LLC, 28 FCC Rcd. 6574, ¶ 46 (2013). The FCC opined that apparent authority may be shown through evidence that (i) the seller allows the outside sales entity access to information and systems that normally would be within the seller’s exclusive control; (ii) the outside sales entity had the ability to enter information into the seller’s systems; (iii) the seller gave the outside sales entity the authority to use the seller’s trade name, trademark and service mark; (iv) the seller approved, wrote or reviewed the telemarketing scripts; and (v) the seller knew (or reasonably should have known) that the telemarketer was violating the TCPA on the seller’s behalf, and the seller failed to take effective steps to stop the violations. The FCC went on to suggest that such evidence would shift the burden of proof to the seller to prove that a reasonable person would not assume that the telemarketer was acting as the seller’s authorized agent. Id.

    DISH Network petitioned the U.S. Court of Appeals for the District of Columbia to review the FCC’s declaratory ruling on the narrow grounds that the FCC’s “guidance” regarding the scope and application of common law agency principles should be vacated. DISH Network argued that the discussion of the common law was not entitled to deference under Chevron U.S.A. Inc. v. NRDC, Inc., 467 U.S. 837 (1984), because the opinions were outside the FCC’s expertise and authority. Under Chevron, courts must defer to interpretations of statutes made by those government agencies charged with enforcing them, unless such interpretations are unreasonable. DISH Network argued that while the FCC’s ruling that sellers may be vicariously liable for calls placed by third party telemarketers under general common law agency principles was entitled to deference, the FCC’s interpretation of the federal common law of agency was outside the FCC’s authority and was not entitled to any deference. DISH Network also noted that the FCC’s discussion misstated the common law of agency and that the burden of proof to establish agency is on the plaintiff, not the defendant.

    DISH Network’s concern that courts may give Chevron deference to the FCC’s declaratory ruling is supported by at least two opinions issued since the ruling. In Mey v. Monitronics Int’l, Inc., Case No. 11-cv-90, 2013 WL 4105430 (N.D. W. Va. Aug. 14, 2013) the district court applied the FCC’s ruling to deny defendant’s motion for summary judgment, ruling that by holding the third party out as an “authorized dealer,” a fact finder could conclude that the defendant had cloaked the third party with apparently authority. Id. at **4-5. Similarly, in Savanna Grp., Inc. v. Trynex, Inc., Case No. 10-c-7995, 2013 WL 4734004, at **6-7 (N.D. Ill. Sept. 3, 2013), the court’s decision denying summary judgment for one of the defendants “turn[ed] in part on the factors identified in the [FCC] DISH Network ruling as indicative of apparent authority.”

    In response to DISH Network’s brief, the FCC argued 1) that the illustrative examples in paragraph 46 of its ruling are not subject to review because they are provided only as “guidance” and have no binding effect; and 2) the ruling’s discussion of agency principles is correct. Although the FCC avoided explicitly stating that its interpretation of common law agency was entitled to Chevron deference, the Commission argued that the interpretation was within its statutory authority and was entitled to deference, leaving open the question of what level of deference courts should accord the May 9th Declaratory Ruling.

    The D.C. Court of Appeals heard argument on January 13, 2014. When directly questioned by the panel, the FCC conceded that its discussion about the application of agency principles based on federal common law is not entitled to Chevron deference.

    Based on the FCC’s concession and the tenor of the oral arguments, the D.C. Circuit is expected to soon issue a ruling concluding that because the FCC conceded that its guidance on the common law of agency is not entitled to Chevron deference, there is no actual dispute between DISH Network and the FCC that would give the court jurisdiction. Although it would be a technical victory for the FCC if the May 9th Declaratory Ruling were allowed to stand, the more critical outcome is likely to be an affirmation of the principle that the courts—and not the FCC— are the proper arbiters of vicarious liability in TCPA litigation. The FCC’s inaccurate statements of the common law of agency should not be entitled to any deference from courts in the future.

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