Caveat Vendor

9th Circuit Affirms that Taco Bell is Not Vicariously Liable for TCPA Violations

July 14, 2014

Matt Gibson

Shortly before the Independence Day weekend, the U.S. Court of Appeals for the Ninth Circuit released its unpublished decision in Thomas v. Taco Bell, in which it affirmed the district court’s determination that the restaurateur was not vicariously liable for a franchisee association’s alleged violations of the Telephone Consumer Protection Act (TCPA).

In 2005, the Chicago Area Taco Bell Local Owners Advertising Association (the Association), whose members included 11 Taco Bell franchisees and Taco Bell itself, retained an advertising agency to organize a contest promotion of Nachos Bell Grande.  The promotion included a text message element, and so the advertising agency hired a vendor to manage the logistics of sending the text messages.  Thomas purportedly received an unauthorized text on her mobile phone advertising the Taco Bell product, and she subsequently sued Taco Bell under the TCPA.

In its order dismissing the case, the district court found that Thomas had failed to establish that the Association, the advertising agency, or the third-party vendor acted as Taco Bell’s agent.  The lower court found that, absent agency, Taco Bell could not be held vicariously liable for TCPA violations resulting from the campaign.  The Ninth Circuit affirmed the district court’s decision and agreed with its agency analysis.

The Ninth Circuit then went on to note that the FCC has established a slightly broader analysis for vicarious liability under the TCPA in its 2013 Declaratory Ruling in DISH Network.  In DISH Network, the FCC stated that it does “not believe it is appropriate to limit vicarious liability to the circumstances of classical agency” and indicated that it also would be appropriate to assess vicarious liability under principles of apparent authority and ratification.

Expanding upon the district court’s analysis in order fully to apply the FCC’s analytical framework from DISH Network, the Ninth Circuit determined that Thomas still failed to establish that Taco Bell was vicariously liable for the Association’s alleged TCPA violations.  According to the appellate panel, Thomas did not to demonstrate that she had relied “on any apparent authority with which Taco Bell Corp. allegedly cloaked the [] Association,” the advertising agency or the vendor.  On the issue of ratification, the appeals court noted that a party’s subsequent ratification of an originally unauthorized tort requires an underlying principal-agent relationship, which, as the district court found, was not present.

The Ninth Circuit’s ruling in Taco Bell  is an unpublished ruling and is not binding precedent.   However, as one of the few appellate decisions that addresses the FCC’s DISH Network ruling on vicarious liability, Taco Bell still will likely provide guidance to future trial courts wrestling with claims of vicarious liability under the TCPA.
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