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Krakauer v. Dish Network L.L.C.

United States District Court, M.D. North Carolina

May 22, 2017

THOMAS H. KRAKAUER, Plaintiff,
v.
DISH NETWORK L.L.C., Defendant.

          MEMORANDUM OPINION AND ORDER

          Catherine C. Eagles, District Judge.

         Satellite Systems Network, an agent of the defendant Dish Network, made more than 50, 000 telemarketing calls on behalf of Dish to phone numbers on the National Do Not Call Registry in 2010 and 2011. These calls violated the Telephone Consumer Protection Act. Despite knowing that SSN had a history of TCPA violations and was calling lists of numbers that it had not “scrubbed” against the Registry, Dish allowed SSN to continue to make telemarketing calls to sell Dish services. While Dish promised forty-six state attorneys general in 2009 that it would enforce TCPA compliance by its marketers, Dish did nothing to monitor, much less enforce, SSN's compliance with telemarketing laws. When it learned of SSN's noncompliance, Dish repeatedly looked the other way.

         Consistent with the jury's verdict that these calls violated the TCPA and that SSN was Dish's agent, the Court finds that SSN and Dish willfully and knowingly violated the TCPA. The Court further concludes that it is appropriate to treble the damages against Dish under 47 U.S.C. § 227(c)(5).

         I. BACKGROUND

         Congress enacted the TCPA to curb abusive telemarketing practices that threatened consumer privacy. See Mims v. Arrow Fin. Servs., LLC, 565 U.S. 368, 372 (2012). Among other things, the TCPA prohibits telemarketers from repeatedly calling people who list their phone numbers on the National Do Not Call Registry. Hannabury v. Hilton Grand Vacations Co., 174 F.Supp.3d 768, 771 (W.D.N.Y. 2016). See generally Mainstream Mktg. Servs., Inc. v. FTC, 358 F.3d 1228, 1234 (10th Cir. 2004) (“The national do-not-call registry is a list containing the personal telephone numbers of telephone subscribers who have voluntarily indicated that they do not wish to receive unsolicited calls from commercial telemarketers.”). People may register land-line and wireless numbers on the Registry. Danehy v. Time Warner Cable Enters., No. 5:14-CV-133, 2015 WL 5534094, at *4 (E.D. N.C. Aug. 6, 2015) (Gates, Mag. J.), adopted by 2015 WL 5534285 (E.D. N.C. Sept. 18, 2015).

         The TCPA creates a private right of action for injunctive and monetary relief for any “person who has received more than one telephone call within any 12-month period by or on behalf of the same entity in violation of the [TCPA] regulations.” 47 U.S.C. § 227(c)(5); see Hannabury, 174 F.Supp.3d at 771-72. The protections of the TCPA related to the Registry only apply to residential numbers; calls to businesses on the Registry are not actionable under § 227(c). See 47 C.F.R. § 64.1200(c)(2) & (d) (referring to “residential” subscribers).

         The TCPA is a strict liability statute and so it does not require any intent for liability. Alea London Ltd. v. Am. Home Servs., Inc., 638 F.3d 768, 776 (11th Cir. 2011). Treble damages, however, are available for violations that occur “willfully or knowingly.” Id.

         In 2003, Dr. Thomas Krakauer, the plaintiff and class representative, registered his residential number on the Registry. Trial Tr. Jan. 11, 2017, Doc. 302 at 9:17-10:2 (testimony of Dr. Krakauer).[1] Beginning in May 2009 and over the next two years, SSN called Dr. Krakauer numerous times in an effort to sell him Dish satellite television programming and related services. See Id. at 12:3-:7, 17:22-18:5; Trial Tr. Jan. 13, Doc. 304 at 107:2-:22 (testimony of Anya Verkhovskaya). The calls continued even after Dr. Krakauer complained to Dish about SSN's sales tactics and after Dish placed Dr. Krakauer on its internal do-not-call list and told SSN to do the same. See PX[2] 15 at 7980-81, 8005.

         Dr. Krakauer sued Dish in 2014, alleging that calls to him and others violated the TCPA and that Dish was liable as SSN's principal. Doc. 1; see Doc. 81 at 7. He sought injunctive and monetary relief on behalf of a class of all persons whose numbers were on the Registry but who nonetheless received multiple telemarketing calls from SSN to promote Dish between May 1, 2010, and August 1, 2011.[3] Doc. 1 at pp. 10-11; see Doc. 47 at 1. After a class was certified, Doc. 111, and summary judgment was largely denied, Doc. 113, the matter was tried to the jury in January 2017. See Minute Entry 01/10/2017. The Court heard the evidence about willfulness at the same time. See Doc. 222 at p. 6.

         Issues of agency, liability, and damages were submitted to the jury. On the agency issue, the jury was instructed that the plaintiffs must prove two things by the greater weight of the evidence in order to reach an affirmative answer: first, that SSN was Dish's agent, and second, that SSN acted in the course and scope of that agency when it made the calls at issue. Doc. 293 at 4-5. The jury was instructed only on actual authority, including implied actual authority by consent or acquiescence. Id. at 6-7.[4]The jury answered the agency issue in favor of the plaintiffs, finding that SSN acted as Dish's agent when it made the calls at issue. Doc. 292.

         On the second issue, the plaintiffs had to prove four things by a preponderance of the evidence: first, that the numbers of the class members were listed on the Registry at the time of the call; second, that after the number had been listed for at least thirty days, SSN called the number at least twice during any twelve-month period and made a telephone solicitation on behalf of Dish; third, that the calls were received; and fourth, that the numbers were residential at the time of the call. Doc. 293 at 8. The jury answered this liability question in favor of plaintiffs for all of the calls. Doc. 292.

         On the third issue, the plaintiffs asked for statutory damages and did not seek actual damages. These statutory damages are limited to no more than $500 per violative call. 47 U.S.C. § 227(c)(5)(B). The jury awarded $400 for each call. Doc. 292.

         After the verdict, the parties submitted written closing arguments on willfulness. Docs. 308, 312, 313, 317. Having considered those briefs and all of the evidence, the Court now enters these findings of fact[5] and conclusions of law as to whether the violations were willful and knowing.

         II. FACTS

         A. Overview

         Dish Network is a satellite television provider that often uses third-party marketers to get new customers.[6] Dish had contractual arrangements with these marketers, many of whom, including SSN, solicited new customers for Dish through telemarketing calls. SSN was an “Order Entry Retailer” with direct access to Dish's computer system. The OE Retailers collectively generated hundreds of millions of dollars a year in revenue for Dish.

         Dish's contract with SSN gave it virtually unlimited rights to monitor and control SSN's telemarketing. In a settlement agreement with dozens of state attorneys general in 2009, Dish confirmed that it had this power over all of its marketers.

         On paper, Dish was committed to monitoring its marketers' compliance with telemarketing laws and investigating complaints of violations. In reality, however, Dish repeatedly looked the other way when SSN violated the telemarketing laws and when SSN disregarded contractual duties related to compliance. Dish received numerous complaints about SSN between 2004 and 2010 and was aware of three lawsuits against SSN over its telemarketing calls that resulted in monetary damages and injunctive relief. Dish knew in May 2009 that SSN was not scrubbing all its call lists against the Registry; it knew even earlier that SSN was not maintaining call records. When Dish received complaints about SSN and other marketers, the Dish compliance department did nothing except attempt to identify the marketer that made the call and, in the few cases when the marketer was identified, refer the complaint to the marketer. SSN, for its part, sent all complaints it received to Dish and “wait[ed] for Dish to tell [us] what to do.” When individuals complained, Dish disclaimed responsibility for the acts of its marketers, including SSN, and made no effort to determine whether SSN was complying with telemarketing laws, much less to enforce such compliance.

         B. The Relationship Between Dish and SSN

         Dish's relationship with SSN dates to 2001, when it first signed an agreement to have SSN market Dish services to new customers. DX 84. Around that time, SSN marketed for both Dish and DirecTV, a Dish competitor. See, e.g., Dep. Tr. of Bahar “Sophie” Tehranchi, [7] Doc. 327 at 72:16-73:12; Trial Tr. Jan. 11, Doc. 302 at 205:7-:9 (testimony of Amir Ahmed). In May 2004, Dish made SSN one of its forty-five OE Retailers. See Trial Tr. Jan. 11, Doc. 302 at 60:2-61:14 (Ahmed testimony). As an OE Retailer, SSN could log directly into Dish's ordering system and enroll new customers in Dish services. Id. at 60:10-:18. Around 2005, DirecTV terminated SSN and stopped using them as a marketer. See Tehranchi Dep., Doc. 327 at 72:16-:22; Trial Tr. Jan. 12, Doc. 303 at 52:13-:21, 55:6-:8 (testimony of Reji Musso).

         Dish's contract with SSN[8] characterized SSN as an independent contractor. JX 1 at ¶ 11. Dish did not own SSN or direct its day-to-day operations. Trial Tr. Jan. 11, Doc. 302 at 228:20-229:8 (Ahmed testimony). SSN was a separate business entity with its own payroll and management. See Id. at 227:4-:14. In practice, Dish did not tell SSN who to market to or require it to do any specific type of marketing, like telemarketing. Id. at 226:12-:25; see also Trial Tr. Jan. 13, Doc. 304 at 167:9-:12 (testimony of James DeFranco).

         Dish did allow SSN to hold itself out as a Dish authorized representative, and SSN could initiate the sales process on Dish's behalf. See Trial Tr. Jan. 11, Doc. 302 at 60:2-:18 (Ahmed testimony); Trial Tr. Jan. 12, Doc. 303 at 24:21-25:5 (Musso testimony); JX 1 at ¶ 2.1. Dish paid SSN on a weekly basis for each new customer that SSN signed up for Dish services, once those services were activated. Trial Tr. Jan. 12, Doc. 303 at 23:25-24:12 (Musso testimony). During 2010 and 2011, all of SSN's revenue came from payments from Dish for signing up new Dish customers. See Tehranchi Dep., Doc. 327 at 121:17-:20.

         The terms of the contract between Dish and SSN showed that Dish had the power to exercise complete control over SSN's telemarketing and sales calls. The contract required SSN to “take all actions and refrain from taking any action, as requested by [Dish] in connection with the marketing” of Dish services. JX 1 at ¶ 7.3. Dish had absolute control over the type and cost of programming packages that SSN could market. See Id. at ¶¶ 4-5. All the internal records SSN created while conducting marketing on behalf of Dish were “the sole and exclusive property” of Dish, even after the Dish-SSN agreement ended. JX 1 at ¶ 7.4. SSN was required to “continuously and actively” promote Dish's products, and failure to do so was grounds for termination. Id. at ¶¶ 2.3, 10.4. Dish had absolute discretion to change SSN's compensation at any time. Id. at ¶ 6.1.1; Trial Tr. Jan. 11, Doc. 302 at 114:5-:16 (Ahmed testimony). While SSN bought bulk customer data to develop lists of people to call on behalf of Dish, Dish controlled the companies from which SSN could buy this data. See Tehranchi Dep., Doc. 327 at 55:5-:14.

         The contract also gave Dish nearly unlimited power to impose additional requirements on SSN via “business rules.” Dish could issue these business rules to SSN at any time, for any reason, merely by sending an email or fax. JX 1 at ¶ 1.7. If SSN failed to follow a business rule, Dish could terminate the contract. See Id. at ¶ 10.3.

         Via these business rules, Dish imposed several requirements related to TCPA compliance. E.g., DX 1 at 7; DX 2; DX 3 at 47. Dish required that marketers maintain records of the telemarketing calls they made. E.g., DX 2. Dish could require SSN to submit sales scripts to Dish for pre-approval, and Dish monitored sales calls to be sure SSN was offering Dish services on terms authorized by Dish. See Tehranchi Dep., Doc. 327 at 66:7-67:1, 67:13-68:5 (discussing script submitted to Dish and referring to PX 22); PX 22; PX 15 at 7991, 8055 (notice that Dish would monitor SSN's calls). Beginning in October 2008, Dish required that all marketers “scrub” their call lists of numbers on the Registry and maintain scrubbing records, using a service from another business, PossibleNow. DX 5. When Dish traced a complaint to a marketer, it routinely asked for the date that SSN had scrubbed the number. E.g., PX 15 at 7988.

         In 2010, the OE Retailers as a whole enrolled over a million new Dish customers per year. Trial Tr. Jan. 11, Doc. 302 at 89:12-:17 (Ahmed testimony); see PX 89 at 14. The average customer pays Dish about $80 per month, see Trial Tr. Jan. 13, Doc. 304 at 193:25-194:2 (DeFranco testimony), meaning that the new customers enrolled by OE Retailers created in the ballpark of $960 million in new annual Dish revenue per year. Neither Dish nor the plaintiffs offered evidence of the specific number of activations that resulted from SSN's sales calls or of Dish's net sales or profits from those new customers, though SSN appears to have produced only a small percentage of Dish's activations. Trial Tr. Jan. 11, Doc. 302 at 199:14-:18 (testimony by Mr. Ahmed that SSN accounted for “less than one-tenth of a percent” of Dish's 2011 budget for new customers); Trial Tr. Jan. 13, Doc. 304 at 177:15-:20 (similar testimony by Mr. DeFranco).

         C. History of Complaints and Lawsuits

         From early on in the relationship with Dish, SSN's telemarketing was a recurring source of TCPA complaints and compliance problems. Dish received TCPA complaints about SSN numerous times: about illegal prerecorded calls in 2005; violations of do-not-call lists in 2009 and 2010; and other, unspecified complaints in 2005, 2006, and 2008. See, e.g., PX 15 at 7988, 8005, 8006, 8035, 8037, 8046; PX 52.

         In addition to the specific complaints in the record, Dish managers themselves repeatedly characterized SSN as a compliance problem. In July 2004, Amir Ahmed, Dish's national sales manager, told others at Dish that he was “hearing a lot of complaints on [SSN] on telemarketing calls to customers.” PX 503 at 1. Just a few months later, however, Mr. Ahmed told a subordinate to recruit SSN to sell more of their products and less of DirecTV's, noting that he “[n]eed[s] activations” and had gotten “additional economics” for SSN, despite “issues related to sales.” PX 656 at 1. About a year later, in September 2005, Dish's corporate counsel acknowledged in an internal email that SSN was a problem:

We know that SSN is using autodialers and automessages. [SSN's owner] has been warned time and again . . . that these activities could violate the law. Last time, Teranchi [sic] blamed a “rogue employee, ” who he claimed was terminated, but the activities continue. . . . SSN is a problem because we know what he is doing . . . .

         PX 194 at 1.

         Dish was also aware that telemarketing by SSN and its predecessor was the target of legal action. In 2004, Florida fined Vitana, a d/b/a of SSN, see Trial Tr. Jan. 11, Doc. 302 at 164:15-:18 (Ahmed testimony), for telemarketing to people on Florida's do-not-call registry, and a Florida court issued a permanent injunction. PX 191. In March 2005, the North Carolina Attorney General settled a lawsuit against SSN with a permanent injunction enjoining SSN from using prerecorded calls and from calling people in North Carolina on the National Do Not Call Registry. PX 186.[9] In 2006, after the manager of Dish's compliance office learned of the two injunctions, see, e.g., PX 15 at 8002, she did not do any follow-up investigation on or monitoring of SSN and “didn't have any reason to be concerned” because she purportedly believed SSN ...


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