Franchisor not liable for franchisee's robocalls

FranCast Series

As a result of consumer complaints about unsolicited automatic recorded phone calls, Congress and various state legislatures have enacted laws – the federal one called the Telephone Consumer Protection Act (TCPA) – designed to protect consumers from such communications. 

 

After the enactment of these laws, there has been an explosion of lawsuits (many of them filed as class actions) by individuals against companies that engage in this practice, popularly dubbed “robocalling.”  Several of these lawsuits have been directed at franchisors whose franchisees engaged in this activity. 

 

In a recent decision from the Western District of Washington, the federal court refused to find liability under the state statute against the franchisor whose franchisee had arranged for these calls to be made.

 

The claims

 

In Carolyn Anderson v. Domino’s Pizza, Inc., et al., the plaintiff alleged that Domino’s franchisee Four Our Families, Inc. (FOFI), placed numerous calls to her and others in violation of the Washington State version of the TCPA.  The plaintiff asserted that each of the calls contained a pre-recorded message identifying the sender as “Domino’s Pizza” without prior consent of the recipients and that the calls were designed to prompt the recipients to place orders.

 

The arguments

 

Domino’s argued that these robocalls were made by one of its franchisees, who hired a telemarketing firm (Call-Em-All) to make the actual calls, and that Domino’s (the franchisor) was not liable.

 

In response, the plaintiff argued that Domino’s should be responsible for those robocalls because:

  • Domino’s had sponsored a national franchise convention in 2009 in which it allowed Call-Em-All to advertise its automated calling business.
  • Following the franchise convention, Call-Em-All’s Domino’s-related business increased from a few franchisees to about 50.
  • Domino’s requires franchisees to use the “PULSE” system, a software platform that takes and tracks orders and stores phone numbers. The franchisee used this system to make the calls at issue.
  • The Domino’s franchise agreement states that “you agree to participate in all national and local and regional advertising and promotions as we determine to be appropriate for the benefit of Domino’s System.”
  • According to the plaintiff, Domino’s has an extremely broad right to control advertising and marketing decisions, including robocalling campaigns. 
     

The Washington State statute

 

The Washington version of the TCPA provides that “no person may use an automatic dialing and announcing device for purposes of commercial solicitation.”  The term “commercial solicitation” is defined as “the unsolicited initiation of a telephone conversation for the purpose of encouraging a person to purchase property, goods or services.”  The statute defines an “automatic dialing and announcing device” as a device that “automatically dials telephone numbers and plays a recorded message once a connection is made.” 

 

In enacting the law, the Washington legislature found that the use of auto-dialing and announcing devices, among other things, deprives consumers of the opportunity to immediately question a seller about the veracity of their claims and subjects consumers to unwarranted invasions of their privacy.

 

The ruling

 

In moving for summary judgment, the franchisee claimed that it did not violate the statute because the statute applies only to communications that “initiate a telephone conversation” and the calls involved did not allow an option for the recipient to connect to a live operator or person. 

 

The court reviewed prior case law decided under the statute and concluded that a commercial call that asked the recipient to call back, and a call that requested action by the recipient, constituted a conversation in violation of the statute.  Applying that rationale to the calls at issue which requested action from the recipient – namely, to return the call and purchase pizza – the court concluded that if unsolicited, the calls would violate the statute.  The court thus denied the franchisee’s motion for summary judgment.

 

However, the court reached a different conclusion with respect to Domino’s motion for summary judgment.  Domino’s argued that there was no evidence that it directed or controlled any local advertising, or specifically, the telephone calls at issue.  The court agreed.

 

The court pointed out that the Washington act bars “the use [of] an automatic dialing and announcing device for purposes of commercial solicitation.”  The court then noted:

 

Unlike the Federal Telephone Consumer Protection Act, 47 U.S.C. §227 et seq. (“TCPA”), WADAD [the Washington Act] does not impute liability to all entities “on whose behalf” calls were made.  WADAD plainly imputes liability to those who use an ADAD [automatic dialing and announcing device] for commercial solicitation.

 

Based on this, the court concluded that, to survive summary judgment, the plaintiff had to show that Domino’s “used, whether by direct use or by agency though [its franchisees],” an automatic dialing and announcing device.

 

The court reasoned that none of the following facts compelled the conclusion that Domino’s was complicit in the alleged illegal calling:

 

(1)   The fact that it required franchisees to use the PULSE system was not enough, because that system could be used to initiate solicited telephone conversations, which would be permissible.

 

(2)   The fact that Domino’s required franchisees to participate in marketing campaigns does not mean that any franchisee’s illegal use of an ADAD is imputed to the franchisor.

 

(3)   The fact that Domino’s benefitted from the calls does not make it liable.

 

Accordingly, the court granted Domino’s motion for summary judgment.

 

Significance of the decision for franchisors

 

While the court’s analysis of the Washington statute provides some protection for franchisors, the court’s extraneous reference (which we lawyers call “dicta”) to the phrase “on whose behalf” in the federal TCPA raises the issue of whether unsolicited calls by franchisees will be construed to be “on behalf of” their franchisor.  We do not believe that is the intent of that phrase, but that will be the issue that courts will need to address when they are faced with TCPA claims against franchisors for the actions of their franchisees.

 

While we were not involved in this case, we have defended franchisors against various TCPA claims in other cases.  If you have any questions about this decision or any TCPA issue, please contact Barry Heller.