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Ninth Circuit Rejects TCPA Vicarious-Liability Claim Against Taco Bell

Franchise and Distribution Law Alert Aaron C. Schepler

Vicarious liability is a recurring issue in franchise litigation. The plaintiffs’ bar continues to be aggressive in its attempts to hold franchisors responsible for the alleged torts and other wrongful acts of their franchisees. But a recent decision by the Ninth Circuit, Thomas v. Taco Bell Corp., No. 12-56458, 2014 WL 2959160 (9th Cir. Jul. 2, 2014), makes it clear that holding franchisors responsible for franchisees’ violations of the Telephone Consumer Protection Act (“TCPA”) can sometimes be a difficult hurdle to clear.

In Thomas, the plaintiff allegedly received a text message, which was sent as part of a promotion conducted by the Chicago Area Taco Bell Local Owners Advertising Association (the “Association”). In 2005, the Association and its advertising agency, ESW Partners, LLC (“ESW”), sponsored a local sweepstakes promotion for the Nachos Bell Grande product. As part of that promotion, ESW hired ipsh!net, Inc. (“Ipsh”), which ultimately sent the text messages at issue. Thomas, on behalf of herself and those similarly situated, filed a putative class-action lawsuit against Taco Bell Corp. (“Taco Bell”) and others, asserting that these sweepstakes-related texts violated the TCPA.

The TCPA makes it unlawful for a person, except in certain limited circumstances, “to make any call [or send any text message] (other than … with the prior express consent of the called party) using any automatic telephone dialing system … to any telephone number assigned to a … cellular telephone service ….” 47 U.S.C. § 227(b)(1)(A)(iii). The plain language of the TCPA assigns civil liability to the party who “makes” a call or text message. Nevertheless, ordinary principles of vicarious liability apply to TCPA claims. Therefore, persons other than the actual “maker” of a call (or the actual sender of a text message) can be held liable under certain circumstances.

In this case, Thomas conceded that Taco Bell didn’t actually send the text message she received. Instead, she argued that Taco Bell should be deemed vicariously liable for the acts of those who did — namely, the Association, ESW, and Ipsh. In order to succeed, Thomas was required to prove that these entities acted as Taco Bell’s agent. She could make this showing by, for example, demonstrating that Taco Bell “controlled or had the right to control [these entities] and, more specifically, the manner and means of the text message campaign they conducted.”

Here, the district court ruled — and the Ninth Circuit agreed — that the evidence of agency was lacking:

Ms. Thomas did not present any evidence to the Court that Taco Bell directed or supervised the manner and means of the text message campaign conducted by the Association and its two agents, ESW and Ipsh. She presented no evidence to the Court that Taco Bell created or developed the text message. Nor did she present any evidence to the Court that Taco Bell played any role in the decision to distribute the message by way of a blast text. All of this control over the manner and means of the text message campaign was exercised by the Association, ESW, and Ipsh, and Ms. Thomas has not presented any evidence to the Court demonstrating that Taco Bell controlled the actions of these entities with respect to the campaign. Taco Bell, simply put, had nothing to do with it.

Thomas v. Taco Bell Corp., 879 F.Supp.2d 1079, 1085 (C.D. Cal. 2012), aff’d 2014 WL 2959160 (9th Cir. Jul. 2, 2014). The Ninth Circuit also rejected Thomas’ other potential theories of vicarious liability: apparent agency and ratification.

The Thomas decision thus indicates that holding a franchisor vicariously liable under the TCPA is possible only if there is evidence showing that the franchisor played an active role in orchestrating the allegedly unlawful calls/texts. In Thomas, Taco Bell purportedly knew of and tacitly approved the use of text messages as a part of the campaign, and a division of the company authorized the release of advertising funds to pay for it. Yet, those facts were not enough to show that the Association, the ad agency, or the vendor were Taco Bell’s “agents” for purposes of a TCPA claim.

But like all cases where claims of vicarious liability are made, the result depends heavily on the unique facts of each case. For that reason, vicarious-liability claims against franchisors — particularly in the TCPA arena — are likely to continue well into the foreseeable future.

For more information, please contact Aaron Schepler at (602) 229-5263 / aaron.schepler@quarles.com, or your Quarles & Brady attorney.