JOHN PRESTON BAILEY, District Judge.
Pending before this Court are Defendant UTC Fire & Security Americas Corporation, Inc.'s Motion for Summary Judgment [Doc. 735] and Defendant Honeywell's Motion for Summary Judgment [Doc. 761]. Both motions have been fully briefed and are ripe for decision.
Defendants UTC Fire and Security Americas Corporation, Inc. ("UTC") and Honeywell International, Inc. ("Honeywell") seek summary judgment on the issue of liability in this multi-district litigation case, consisting of, at this time, 30 cases.
All cases are filed seeking damages under the Telephone Consumer Protection Act, 47 U.S.C. §§ 227(b) and (c). These cases contain allegations that UTC and/or Honeywell are vicariously liable for calls made in violation of the Act. There are no allegations that UTC or Honeywell actually placed the telemarketing calls.
Rule 56(e) of the Federal Rules of Civil Procedure provides that "an opposing party may not rely merely on allegations or denials in its own pleading; rather, its response must-by affidavits or as otherwise provided in this rule—set out specific facts showing a genuine issue for trial. If the opposing party does not so respond, summary judgment should, if appropriate, be entered against that party."
Rule 56 further provides that summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c); see
Additionally, the party opposing summary judgment "must do more than simply show that there is some metaphysical doubt as to the material facts."
"The TCPA was enacted in response to `[v]oluminous consumer complaints about abuses of telephone technology.'
"The unanimous decision in
"The TCPA is a remedial statute and thus entitled to a broad construction. See, e.g.,
Movants do not dispute that there can be vicarious liability on the part of a seller under the TCPA, nor could they.
"In
The FCC opined that "a seller cannot avoid liability simply by delegating placing the call to a third-party. The FCC determined that `while a seller does not generally "initiate" calls made through a third-party telemarketer within the meaning of the TCPA, it nonetheless may be held vicariously liable under federal common law principles of agency for violations of [ ] section 227(b)... that are committed by third-party telemarketers.' See
The FCC also stated:
"Even if
In this case, however, the parties have agreed that the FCC determination is entitled to
The plaintiffs do not contend that either movant is directly liable, nor could they. "The FCC's ruling in
28 F.C.C. Rcd. at 6582, ¶ 24."
"Direct liability under the TCPA, however, applies only to entities that `initiate' the telemarketing calls. See
The FCC concluded in
While there can be no direct liability on the part of a seller, "a seller may be liable for violations by its representatives under a broad range of agency principles, including not only formal agency, but also principles of apparent authority and ratification."
"The classical definition of `agency' contemplates `the fiduciary relationship that arises when one person (a "principal") manifests assent to another person (an "agent") that the agent shall act on the principal's behalf and subject to the principal's control." Potential liability under general agency-related principles extends beyond classical agency, however. A principal may be liable in circumstances where a third party has apparent (if not actual) authority. Such `[a]pparent authority holds a principal accountable for the results of third-party beliefs about an actor's authority to act as an agent when the belief is reasonable and is traceable to a manifestation of the principal.' Other principles of agency law may support liability in particular cases. For example, a seller may be liable for the acts of another under traditional agency principles if it ratifies those acts by knowingly accepting their benefits. Such ratification may occur `through conduct justifiable only on the assumption that the person consents to be bound by the act's legal consequences."
"An entity may be held vicariously liable for violations of the TCPA `under a broad range of agency principles, including not only formal agency, but also principles of apparent authority and ratification.'
While the plaintiffs argue that the issue of agency is not susceptible to resolution by summary judgment, "vicarious liability, like any other issue of fact, may be adjudicated summarily only where the evidence would not permit a reasonable jury to find for the nonmoving party. See
With respect to actual agency, Judge Stamp noted in
This is consistent with the Restatement (Third) of Agency § 1.01, which requires that the agent must be subject to the principal's control.
In their effort to demonstrate actual agency, the plaintiffs cite to a number of facts. These include the fact that the movants may have permitted the persons who purchased from the movants to represent that they are authorized representatives, that telemarketing scripts were provided to the dealers, that the dealers were big players in the business whose loyalty the movants sought to maintain, and that the movants did not move swiftly enough to stop the illegal calling when it came to their attention.
The plaintiffs also describe what they call the "home security sales model." The "model" has three components, each of which plays a critical role in their efforts to sell their products: a manufacturer that provides the home security equipment, a monitoring company that provides monitoring services, and dealers that install the systems. Honeywell and UTC are the manufacturers that provide the home security equipment, defendant Monitronics provides the monitoring service, and defendants such as ISI and VMS are Monitronics authorized dealers that install the systems.
Authorized dealers like ISI and VMS call consumers like plaintiffs and pitch a security system package that consists of a "free" alarm system and a multi-year home security monitoring contract with monthly payments. Monitronics pays the dealer for each monitoring contract and retains a security interest in the dealer's assets to protect against unpaid charges by consumers. The authorized dealer pays Honeywell or UTC a negotiated amount for each home security "kit." The dealers pocket the difference between the revenue from Monitronics and the amount they pay for the kits.
In evaluating these arguments, two things must be kept in mind. First, while in-person telemarketing calls may be harassing to the consumer, they do not violate the TCPA. It is only when the calls are "robo-calls" or are made to persons on the do-not-call list that the calls violate the Act. Accordingly, assisting a party in setting up telemarketing centers or providing scripts for in-person calls is not evidence of agency.
Second, "a distributor of goods for resale is normally not treated as an agent of the manufacturer. Restatement of the Law of Agency, 2d § 14J (1957) (`One who receives goods from another for resale to a third person is not thereby the other's agent in the transaction.');
There are three cases which this Court finds particularly instructive. The first of these is
In
1. The agreement between the parties specifically stated that Calumet was not the agent of Caterpillar;
2. Calumet purchases equipment from caterpillar and others to resell, with the prices calculated based upon the quantity of goods purchased. Caterpillar has no say in the prices that Calumet charges to its customers;
3. "Caterpillar has no interest, financial or otherwise, in Calumet, nor does it share in the revenue, profits or losses of Calumet, much less does it have the authority to exercise any control over the day to day operations of Calumet. The only exceptions are that: (1) Calumet is required to `maintain a suitable place or places of business at the points shown in Exhibit A [of the agreement] to provide adequate sources of products and mechanical service for the products in the service territory [set forth]. . .. The location of any additional places of business and the relocation or abandonment of any existing places of business may only be made with the consent of [Caterpillar];' and (2) if Calumet violates any provision of agreement, such as by failing to live up to its `parts and service responsibilities and performance,' Caterpillar has reserved the right to terminate the agreement. As part of its contract, Caterpillar reimburses Calumet for warranty work performed on the Caterpillar units, as well as providing that representatives from Calumet must visit those who purchase Caterpillar products from time to time. 69 F.3d at 1330.
The Seventh Circuit affirmed a finding of no agency. In doing so, the Court stated:
1. the mere existence of a formal licensing or dealership agreement will not create an agency relationship in the absence of evidence that the principal is exercising control over the details of the purported agent's work;
2. "the mere express denial of an agency relationship is not itself determinative of the matter. The true test in such a situation is how much control the principal has over the alleged agent and the intent and functioning of the parties."
3.
4. The Restatement (Second) of Agency § 14J provides that "[O]ne who receives goods from another for resale to a third person is not thereby the other's agent in the transaction; whether he is an agent for this purpose or is himself a buyer depends upon whether the parties agree that his duty is to act primarily for the benefit of one delivering the goods to him or is to act primarily for his own benefit;
5. Although Calumet is allowed to use Caterpillar's name and trademark in its advertisements, the mere fact that Calumet uses Caterpillar's name does not render it an agent of Caterpillar, just as every bar which advertises that they sell a particular brand of beer is not the agent of the brewery whose name they advertise;
6. "Like an actual agency relationship, an apparent agency is also initiated by a manifestation of the principal."
The second case which this Court finds instructive is
1. UTCFSA sells its equipment, including the Interlogix and GE branded equipment, to independent distributors and dealers, who then resell that equipment to other businesses or consumer end-users. UTCFSA's security equipment can be mixed and matched with other manufacturer's equipment by these resellers, who can put together a complete security system package for the ultimate customers-consumer end-users. UTCFSA provides a Return and Warranty Policy to a distributor or dealer to whom it sells GE or Interlogix-branded security equipment, but this warranty only applies for those who directly purchase from UTCFSA, not consumer end-users. UTCFSA's profits result from the sale of the security equipment to its distributors and dealers.
2. Thousands of downstream, independent businesses sell UTCFSA's security equipment. These resellers may sell UTCFSA's equipment alongside competitor brands, such as Honeywell. The resellers who sell to consumers set their own prices for the security equipment, often offering the equipment free of charge to consumers who sign up for monthly monitoring services.
3. UTCFSA does engage in its own marketing, but that marketing is limited to business to business marketing, targeted to reach UTCFSA's distributors and dealers. UTCFSA does not market or promote its security equipment to consumer end-users. UTCFSA does not approve, write, or review sales or telemarketing scripts used by dealers in their own marketing or sales. UTCFSA requires its distributors and dealers to comply with all local, state, and federal laws in their marketing, promotion, and resale of UTCFSA-made security equipment.
4. UTCFSA owns the Interlogix brand and has a license from GE Trademark Licensing, Inc., pursuant to which it is able to grant limited licensing rights to use the GE trademark and logo to resellers for the purpose of reselling GE-branded security equipment. UTCFSA also has an "authorized dealer" program, whereby authorized dealers are granted a limited license to identify themselves as "[Company Name], An Authorized GE Security Dealer," or as "[Company Name], An Authorized Interlogix Dealer." Authorized dealers also have a limited license to use certain GE and/or Interlogix logos and trademarks in their advertising and marketing materials, in accordance with their agreements with UTCFSA. Authorized dealers are not permitted to market as or "on behalf of" GE or Interlogix.
5. The parties agree that UTCFSA did not itself initiate the calls to Plaintiffs (see RGD ¶ 37), thus precluding a claim on a direct liability theory; however, Plaintiffs argue UTCFSA is vicariously liable for the calls made in violation of section 227(b)(1). The question of vicarious liability is the sole issue before the Court on summary judgment.
6. Although section 227(b) of the UTCFSA does not explicitly provide for recovery under a vicarious liability theory, the Federal Communications Commission ("FCC"), in a recent 2013 declaratory ruling, interpreted section 227(b) to include liability for sellers under common law vicarious liability principles, including the principles of apparent authority and ratification.
7. Though the reasoning is somewhat circular, the implication of the FCC's declaratory ruling is that the definition of a "seller" depends on whether the person or entity making the allegedly illegal calls was an agent of the alleged seller. Even though UTCFSA is technically a "manufacturer" of security equipment that sells to distributors and third-party dealers rather than directly to the consumer, UTCFSA could also be a "seller" under the TCPA if it turns out it has an applicable agency relationship with the entities that made the calls to Plaintiffs in this case. Thus, UTCFSA's vicarious liability, and its possible designation as a "seller," turns on the agency principles the FCC espoused in its declaratory ruling.
8. "An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal's manifestations to the agent, that the principal wishes the agent so to act." [Restatement (Third) of Agency] § 2.01. The traditional agency test requires establishing: "(1) a manifestation by the principal that the agent shall act for him; (2) that the agent has accepted the undertaking; and (3) that there is an understanding between the parties that the principal is to be in control of the undertaking."
9. Here, the only evidence that UTCFSA has control of the sales tactics of its third-party distributors and/or authorized dealers is that it licenses the use of the GE and Interlogix trademark to its authorized dealers. As part of the licensing agreements, UTCFSA restricts the use of the GE and Interlogix trademark and logo, and grants authorized dealers a limited license to identify themselves simply as "An Authorized GE Security Dealer" or "An Authorized Interlogix Dealer" in their marketing materials. Authorized dealers cannot market "as" or "on behalf of" GE or Interlogix. UTCFSA also requires its distributors and dealers to comply with all local, state, and federal laws in their marketing and sales tactics. Taking all of these facts together in the light most favorable to Plaintiffs, the evidence does not support a finding that UTCFSA exercises control over the actual marketing of the security equipment after it is sold to distributors and dealers.
10. Similarly, Plaintiffs have not shown that a reasonable jury could find that authorized dealers acted with apparent authority on behalf of UTCFSA. "Apparent authority is the power held by an agent or other actor to affect a principal's legal relations with third parties when a third party reasonably believes the actor has authority to act on behalf of the principal and that belief is traceable to the principal's manifestations." Restatement (Third) of Agency § 2.03 (2006). Apparent authority "cannot be established merely by showing that [the alleged agent] claimed authority or purported to exercise it."
11. Here, the only arguable "manifestation" UTCFSA made was to SOAS and its other authorized dealers-giving these dealers a limited license to declare themselves authorized dealers of GE Security and/or Interlogix. However, this manifestation was between UTCFSA and SOAS, not between UTCFSA and consumer end-users such as Plaintiffs. It is undisputed that UTCFSA does not market to end-users; it only sells and markets to dealers and distributors of its equipment, who then package and resell that equipment to consumers. Thus, UTCFSA did not make (or cause to make) any direct communications to end-users such that they might think a reseller or dealer was acting on UTCFSA's behalf.
12. As observed in
Here, the Plaintiffs have not produced any evidence from which one could trace their belief as to SOAS's apparent authority to UTCFSA's conduct or statements.
13. As for ratification, on the undisputed facts before the Court, the Defendant would be entitled to summary judgment. "Although a principal is liable when it ratifies an originally unauthorized tort, the principal-agent relationship is still a requisite, and ratification can have no meaning without it."
The third case which this Cout finds instructive is
2. Johansen argues that personal jurisdiction is proper based on a ratification theory. In short, he argues that Lead House or One Planet violated the TCPA through Ohio-based telemarketing calls to numbers on the Do Not Call Registry; that HomeAdvisor knowingly benefited from those violations (or, at the very least, turned a blind eye to them); and that, as a result, HomeAdvisor should be subject to suit in Ohio.
3. As explained below, there are two problems with Johansen's ratification argument. First, HomeAdvisor submitted two unrefuted declarations showing that Lead House, who made the offending calls, was not acting or purporting to act as HomeAdvisor's agent, as required for ratification Restatement (Third) of Agency, § 4.03 (2006) ("Acts That May Be Ratified"). Second, HomeAdvisor's declarations show that the company neither knew nor should have known that Lead House violated the TCPA when HomeAdvisor accepted Johansen's sales lead, as also required for ratification. Id. § 4.06 ("Knowledge Requisite to Ratification"). Both problems prove fatal to Johansen's ratification theory and to his assertion that personal jurisdiction over HomeAdvisor is proper.
4. In TCPA cases, the Sixth Circuit looks to the Restatement of Agency to determine whether vicarious liability should be imposed.
5. Under the Restatement, "[r]atification is 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) (2006). A person may ratify an act of another by "manifesting assent that the act shall affect the person's legal relations" or by "conduct that justifies a reasonable assumption that the person so consents." Id. § 4.01(2). The Restatement imposes a critical restriction on what type of acts may be ratified, however. Under the Restatement, a person may ratify an act only "if the actor acted or purported to act as an agent on the person's behalf." Id. § 4.03. As the commentary explains, "[w]hen an actor is not an agent and does not purport to be one, the agency-law doctrine of ratification is not a basis on which another person may become subject to the legal consequences of the actor's conduct." Id. § 4.03 cmt. b (emphasis added). This requirement "limits the range of ratifiable acts to those done by an actor who is an agent or who is not an agent but pretends to be." Id. § 4.01 cmt. b (citing Restatement (Third) of Agency, § 4.03).
6. As several courts have explained, "[a]lthough a principal is liable when it ratifies an originally unauthorized tort," such as a TCPA violation, "the principal-agent relationship is still a requisite, and ratification can have no meaning without it." E.g.,
Finally, in
After application of the above cases to the facts of this case, this Court holds that the evidence advanced in this case is wholly insufficient to permit the plaintiffs to continue against the movants.
First, the fact that entities were permitted to hold themselves out as authorized dealers or some similar description is insufficient to hold the moving defendants in this case liable. This Court is well aware that in so ruling, I am rejecting the prior decision of this Court in this case. In
The plaintiffs also contend that the efforts to retain ISI and VMS as customers demonstrate agency. This Court cannot agree. If VMS and ISI were subject to the control of the movants there would be no need to woo their business.
There is no evidence whatsoever that VMS and ISI were acting primarily for the movants' benefit, rather than their own gain. In fact, ISI representatives testified that ISI was acting for its own benefit.
There is no evidence that the moving companies turned a blind eye when they learned of improper and illegal telephone calls. The earliest notice that Honeywell appears to have received of calls placed by or for ISI which violated the TCPA would have been after late April, 2012, when two TCPA suits were filed. There is no indication in the record as to when Honeywell was served with the complaints in these cases.
It must be noted that on August 30, 2012, Keith Baird of Honeywell wrote to ISI Alarms and said, "You stated you can provide documentation confirming you are no longer using the marketing firm in question. Please provide this information asap."
The email also contained a copy of a prior email from Honeywell's legal counsel stating "We really need to nail this company down. You said that they would give us written documentation that would prove that they are no longer working with this company. I understand that they claim that VMS may be using their name, not sure if they are aware of this website, but if not you should share with them AT THE SAME TIME AS YOU TELL THEM WE MUST HAVE PROOF THAT THEY ARE NOT WORKING WITH THIS COMPANY ANY LONGER."
These emails indicate that there were prior communications which may not be reflected in the exhibits provided to the Court.
On September 14, 2012, a Honeywell representative again emailed ISI asking "could you please provide feedback on the two requests listed below?
These emails were marked "high importance."
In fact, it appears that the offending calls made using Honeywell's name were made not by ISI, but by a company retained by ISI known as Data Guru.
With respect to UTC, there is little documentation of calls that violate the TCPA, but several emails reference additional training to be provided by UTC to its authorized dealers called "telemarketing ethics" and "telemarketing standards for dealers."
This Court also does not believe that the plaintiffs should receive additional time to conduct discovery. It would appear that the plaintiffs have been dilatory in failing to pursue the further deposition of UTC they now claim they need. See, e.g.,
There appears to be no issue that all documents and written discovery requested by plaintiffs were provided by the movants. Plaintiffs appear to have made no attempt to reschedule the additional 30(b)(6) deposition that they now claim is necessary, despite having over three months to do so between June 8, 2016, when the stay was lifted [Doc. 660], and the date their Opposition was due. Plaintiffs did not ask for an additional 30(b)(6) deposition after UTC indicated in its June 2016 brief on the
For the reasons stated above, Defendant UTC Fire & Security Americas Corporation, Inc.'s Motion for Summary Judgment [Doc. 735] and Defendant Honeywell's Motion for Summary Judgment [Doc. 761] are
It is so
The Clerk is directed to transmit copies of this Order to all counsel of record herein.