Third Circuit Restricts Corporate Officer Liability under Telephone Consumer Protection Act

Adrienne C. Rogove

In a recent precedential opinion in City Select Auto Sales, Inc. v. David Randall Associates, Inc., 885 F.3d 154 (3d Cir. 2018), the United States Court of Appeals for the Third Circuit affirmed a judgment by the United States District Court for the District of New Jersey following a jury verdict dismissing a case brought under the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, against the president and co-owner of David Randall Associates, Inc. (“DRA”). DRA was a commercial roofing company. Raymond Miley (“Miley”) was its president and a majority shareholder. DRA hired Business to Business Solutions (“Business Solutions”) to fax unsolicited advertisements to thousands of fax numbers. City Select was the recipient of some of these faxes.

Under the TCPA, it is “unlawful for any person…to use any telephone facsimile machine…or other device to send, to a telephone facsimile machine, an unsolicited advertisement.” 47 U.S.C. § 227(b)(1)(C) (emphasis added). The Federal Communications Commission has defined “sender” as the person “on whose behalf [the faxes] are transmitted.” 10 FCC Rcd. 12391, 12407 (1995). Here, City Select argued that the “on whose behalf” language was meant to place liability on the author or originator of the relevant faxes, and therefore, Miley, as the author or originator of the faxes, was a “sender” under the TCPA.

A DRA employee testified at trial that Miley directed her to contact Business Solutions about its services; that Miley reviewed proposed advertisements, authorized payment, and was the decision maker in approving the content, quantity, timing, and targeting of the fax transmissions. It was stipulated before the jury that Miley was in charge of DRA’s marketing and advertising, he instructed his employee to investigate Business Solution’s fax services, and that the employee sent information to Business Solutions to fax on DRA’s behalf. Miley did not create the advertisement, review his employee’s communications relating to the fax advertisements, communicate with Business Solutions, or authorize any of the conduct at issue in the case.

Summary judgment was granted in favor of City Select and against DRA in the amount of $22,405,000. However, the jury found that Miley had no personal liability. City Select moved for a new trial, arguing that the District Court erred in instructing the jury. In this regard, the jury interrogatory asked whether Miley had direct, personal participation in the alleged misconduct at a level of involvement that was “significant.” The jury answered that question in the negative. City Select’s motion for a new trial was denied, and it appealed to the Third Circuit.

The Third Circuit observed that “there is a real question as to whether Miley can be held liable under the statute at all.” 885 F.3d at 159. The Court noted that to the extent Miley planned and executed a fax advertising campaign, he did so in his corporate capacity, not in his personal capacity. Therefore, the “question is not whether Miley was an ‘author’ of unsolicited faxes in the colloquial sense, but whether Congress and the FCC intended that we look behind the corporate form and impose personal liability on officers who act on the corporation’s behalf rather than their own.” Id. In examining whether the jury instruction was improper, the Third Circuit noted that the District Court properly relied on longstanding consensus among district courts that corporate officer liability under the TCPA is defined by federal common law rather than by the text of the statute. The TCPA is silent on whether there can be personal liability for corporate acts under the Act. The Third Circuit expressly rejected the notion that Congressional silence indicates an intent to allow or impose personal liability in these circumstances. Id. at 161.

Notwithstanding its skepticism about officer liability, the Third Circuit “assume[d] without deciding that Miley may be held liable for David Randall’s TCPA violations under a personal-participation theory.” Id. However, in affirming the judgment of the District Court, the Third Circuit found no reversible error in the jury instructions. City Select argued that the jury instruction constituted reversible error because it required the jury to find that Miley’s involvement was “significant,” that he exercised “active oversight,” and that he had “knowledge that he was directly participating in, or authorizing, the fax advertising.” The Third Circuit found that the District Court’s instructions did not misstate the applicable law. Specifically, (1) the instructions were descriptions of what constitutes a “significant” level of involvement, not a higher burden of proof; (2) the word “significant” was tied to the requirement that the corporate officer exercise “active oversight of, or control over, the conduct” that violated the Act, and was not merely tangential, routine, passive, or ministerial; (3) that other courts have not used the word “significant” does not mean that the jury instructions were contrary to those decisions; and (4) the instructions did not erroneously add an element of proof regarding a defendant’s state of mind. Id. at 162. As to this last reason, requiring a finding that the officer had “knowledge” that he was directly participating in or authorizing the fax advertising was simply part of proving direct participation. Id.

Companies in New Jersey should be aware of the limitations on corporate officer liability under the TCPA. While not entirely eliminating any basis on which a corporate officer could be held personally liable under the TCPA, the Third Circuit in City Select definitively restricted the availability of individual officer liability for TCPA violations.

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