Frankfurt Kurnit Klein & Selz

June 23rd, 2017

A Big Phone Bill: Dish Network Telemarketing Violation Verdicts Total Approximately $341 Million

In a cautionary tale for marketers, two courts recently found satellite TV provider Dish Network ("Dish") liable for repeated and willful violations of federal and state telemarketing laws. The verdicts — $280 million to the FTC, Department of Justice, and various state attorneys general, and approximately $61 million to  class action plaintiffs in North Carolina — highlight just how seriously regulators and courts are taking violations of the telemarketing laws. We'll summarize the cases and provide valuable takeaways below. As you'll see, the big lesson is that marketers who rely on third-party telemarketers without ensuring legal compliance do so at their peril.

Background

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

The Decisions

Following two separate trials — one against the government and one against a group of plaintiffs in a class action, at which Dish vigorously defended its actions—orders were issued this past May and early June 2017 finding Dish liable for violations of the telemarketing laws.

In the class action, 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 these 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 about the calls; and (iii) failed to monitor or require SSN's compliance with telemarketing laws. The Court noted that "when [Dish] learned of SSN's noncompliance, Dish repeatedly looked the other way." The jury awarded damages of $400 per unlawful call identified during the class period. To punish what it saw as repeated and willful conduct, the Court tripled this figure, resulting in an award of $1200 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's 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 and 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); (ii) for abandoning calls; and (iii) for using prerecorded sales calls. The Court awarded damages of 280 million dollars, noting 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 addition to the monetary penalties, the Court imposed substantial additional obligations:

• 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 those primary retailers 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 each 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 Takeaways

• Marketers should perform due diligence on all agents that will be making telemarketing calls on their behalf.
   
• Marketers should devote resources to monitoring their agents and enforcing compliance with the telemarketing laws.
   
• Marketers should investigate consumer complaints and take proper actions (which may include the termination of agent/retailer relationships) to address any alleged violations of the telemarketing laws.
   
• 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. Bolstered by these latest decisions, federal and state regulators, along with an active TCPA class action bar, will continue to devote resources to these cases.

We will continue to monitor enforcement of the telemarketing laws. If you have questions about the Dish cases, or about any other advertising or privacy and data security issues, please contact Terri Seligman at (212) 826 5580 or tseligman@fkks.com, or any other member of Frankfurt Kurnit's Advertising and Privacy and Data Security groups.