In what is being hailed by the Federal Trade Commission as “a record-setting win for American consumers,” and what should be viewed as a cautionary tale for marketers, satellite TV provider Dish Network (“Dish”) was recently found liable for repeated and willful violations of various federal and state telemarketing laws and ordered to pay 280 million dollars in damages in connection with a long-running lawsuit brought by the FTC, Department of Justice, and various state attorneys general.  This decision comes on the heels of last month’s order in a North Carolina class action lawsuit brought against Dish, awarding damages of 61 million to the class action plaintiffs based on many of the same unlawful practices.  The high monetary awards in both cases, and the additional restrictions imposed on Dish in the government’s lawsuit, highlight just how seriously regulators and courts are taking violations of the telemarketing laws.  In addition to the take-aways listed below, the big lesson from the Dish cases is that marketers who rely on a network of third-party vendors to reach out to new customers and turn a blind eye to those vendors’ compliance with the telemarketing laws do so at their peril –  and at the risk of millions in penalties. 

Background.

Both lawsuits concerned allegations that Dish, or third-party telemarketing vendors engaged by Dish, made millions of calls over the course of several years to individuals whose numbers were listed on the National Do Not Call Registry, individuals who informed Dish or its vendors not to contact them, and made abandoned and pre-recorded telemarketing sales calls.   These calls were largely made in the context of Dish’s business plan to rely heavily on third-party vendors to facilitate initial outreach to new customer prospects, with the goal of rapidly acquiring new customers and increasing Dish’s sales volume.

The Decisions.

Following two separate trials (a bench trial against the government and a jury trial in the class action lawsuit) at which Dish vigorously defended its actions, orders were issued in both cases this past May and early June 2017, finding Dish liable for violations of the telemarketing laws.

In the class action suit, a federal court in North Carolina confirmed the jury’s earlier finding that Dish was liable for its and its agents’ violations of the Telephone Consumer Protection Act (“TCPA”).  The court found that one of its primary agents, Satellite Services Network (“SSN”) had made more than 50,000 telemarketing calls to consumers on behalf of Dish to promote its products and services, despite the fact that such consumers’ phone numbers were on the National Do Not Call Registry. The court further found that Dish (i) knew SSN had a history of TCPA violations and was calling numbers before scrubbing them against the Do Not Call registry or Dish’s own internal registry, (ii) received and largely ignored consumer complaints in connection with such calls; and (iii) failed to monitor or require SSN’s compliance with telemarketing laws.  The Court noted that “when it learned of SSN’s noncompliance, Dish repeatedly looked the other way.”  The jury awarded damages in the amount of $400 per unlawful call identified during the class period, which the Court trebled as a result of Dish’s repeated and willful conduct, resulting in an award of $1,200 per unlawful call, or approximately 61.3 million in total.

In the government suit, the court issued a 475 page order finding Dish liable for violations of the FTC’s Telemarketing Sales Rule (“TSR”), the TCPA and various state statutes, based on (i) Dish having made or allowed third-party telemarketing vendors to make, over tens of millions of calls to individuals whose numbers were listed on the National Do Not Call Registry, or (ii) to individuals who previously said they did not want to receive sales calls from Dish (i.e., those on internal do not call lists maintained by Dish or its third party vendors), (iii) for abandoning calls, and (iv) for using prerecorded sales calls. The Court arrived at a damages award of 280 million dollars, noting in its opinion that, “the injury to consumers, the disregard for the law, and the steadfast refusal to accept responsibility require a significant and substantial monetary award.” In response to Dish’s objections to the large award, the Court stated, “Dish’s plea of poverty borders on the preposterous.”

In addition to the monetary penalties, the Court also imposed various other obligations in an injunctive order issued on the same day:

  • Dish must demonstrate that the company and its “primary retailers” (those entities in 2016 who generated new customer orders on behalf of Dish via automatic dialing equipment) are complying with the Safe Harbor Provisions of the FTC’s Telemarketing Sales Rule and have made no pre-recorded calls during the five years preceding the order’s effective date. If Dish can’t prove that it meets that requirement, it will be barred from conducting any outbound telemarketing for two years, and if Dish fails to prove that the Primary Retailers meet that requirement, Dish will be barred from accepting orders from such Primary Retailer for two years.
  • Dish must hire a telemarketing compliance expert to prepare a plan to ensure that the company and its primary retailers are honoring telemarketing laws and the Court’s order.
  • The federal and state plaintiffs can ask the Court to approve unannounced inspections of the facilities and records of Dish or its primary retailers. In addition, for a ten-year period, twice a year Dish must send telemarketing compliance material to the federal and state plaintiffs, including all outbound telemarketing call records, all telemarketing complaints, and any internal emails discussing telemarketing.
  • Whether acting directly or through authorized telemarketers or retailers, Dish is prohibited from violating the TSR and TCPA.
  • Dish is subject to record-keeping and other compliance requirements for 20 years after the effective date of the order.

The take-aways.

  • Marketers should perform due diligence on all agents that will be making telemarketing calls on their behalf.
  • Marketers should devote resources to monitoring its agents and enforcing compliance with the telemarketing laws.
  • Marketers should not ignore consumer complaints. They should be investigated and proper actions (which may include the termination of certain agent/retailer relationships) should be taken to address any alleged violations of the telemarketing laws.
  • Marketers should be aware that courts may impose penalties that exceed what parties may agree to in a settlement. As the FTC pointed out in its own press release on the Dish judgment, the Court found Dish’s argument that civil penalties were significantly lower in prior telemarketing cases that settled to be completely irrelevant to its damages award.
  • TCPA cases are not going away! Interested federal and state regulators, along with an active TCPA class action bar, continue to devote resources to these cases and will only be bolstered by these latest decisions.