In 2017, security company Monitronics International Inc., agreed to pay $28 million to settle a Telephone Consumer Protection Act (TCPA) class-action lawsuit alleging the company made automated telemarketing calls to phone numbers listed on the national Do Not Call Registry (DNCR) and to consumers who had not provided their consent.
The case, known as In re: Monitronics International Inc. Telephone Consumer Protection Act Litigation, Case No. 1:13-md-02493, in the U.S. District Court for the Northern District of West Virginia, resolved dozens of similar proposed class actions against Monitronics which were previously consolidated in federal court.
Those eligible for the class action settlement were class members who, since May 18, 2007, received a telemarketing call from agents of Monitronics on a residential or cell phone using an automated telephone dialing system or pre-recorded voice, or two or more calls within a 12-month period to a residential number listed on the national DNCR. Typically, when a litigation is settled, all claims are resolved with finality, releases are exchanged, and the parties walk away equally happy – or often, equally unhappy; however, in a class action, some litigants who would otherwise be eligible for the class, elect not to join the class. Those litigants are free to pursue their claims independently of the class and need not accept the settlement agreed to by the class.
Of course, like most things in life, there are advantages and disadvantages to opting out of a class action. On the one hand, individual plaintiffs have more control over the conduct of the litigation and may be able to yield a greater individual recovery. On the other hand, individual plaintiffs do not have the leverage of a class and may endure substantially higher expenses than class members in the pursuit of the claims.
In the Monitronics case, approximately 30 individuals opted out of the class. In April, 2019, the remaining individual plaintiffs survived a major hurdle – when the presiding federal judge declined to release Monitronics from the individual claims. In particular, the court denied Monitronics’ motion for summary judgment – finding that significant questions existed as to whether Monitronics was vicariously liable for the telemarketing campaign waged by its agents. Monitronics argued that it was entitled to dismissal because there was no evidence that it had directed the retailers to place the calls on its behalf or that it had any control over these telemarketing activities. The court disagreed – suggesting that whether Monitronics was actually aware of and supported the retailers’ conduct was an open question for trial.
“The substantial evidence of Monitronics’ control over its dealers’ sales tactics – including the provision of scripts, leads and contracts the dealers had to use to sell Monitronics’ services, as well as required pricing structures and extensive sales training – confirms that the dealers acted as Monitronics’ agents, making it a jury issue whether Monitronics is vicariously liable for their telemarketing violations,” the court concluded.
Breaking Down the Judgment
The two significant factors in the decision were:
1. The control Monitronics allegedly exercised over its agents; and
2. The company’s response to the many consumer complaints between 2009 and 2012 about the telemarketing activities.
Additionally, the court expressed concern that 26.5 million calls were placed to potential Monitronics customers before Monitronics hired outside counsel in 2012 to address consumer complaints. “A jury could find that by ignoring the repeated notice it had of these violations, Monitronics impliedly authorized the unlawful calls,” the court ruled. The court also rejected Monitronics argument that it was not a “seller” under the TCPA. While the agents had the option to keep the alarm monitoring contracts they were attempting to sell, they could only do so after offering them to Monitronics. Consequently, the court found that the agents telemarketing “increased the flow of consumers” to Monitronics and that the company benefited from the allegedly illegal telemarketing.
In fairness to Monitronics, the denial of its summary judgment motion does not mean that it is liable or that the individual plaintiffs will prevail; in fact, the company may very well have viable defenses and it should be afforded the opportunity to defend itself at trial.
Class actions are tricky and so is the TCPA. Individual plaintiffs can opt out of the class and cause problems for big companies, as it has with Monitronics.
Additionally, hiring other companies to conduct marketing for your company is a double-edged sword – you may benefit from the flow of new customers, but you also may bear liability for the conduct of those companies, particularly if you are on notice of improper conduct and do nothing to address it.
Hiring skilled and responsible counsel at an early stage of any meaningful consumer complaint – particularly where the TCPA can be invoked – is a critical step and ultimately could result in a substantial savings to any company at risk of litigation in this area.
Timothy J. Pastore, Esq., is a Partner in the New York office of Montgomery McCracken Walker & Rhoads LLP (www.mmwr.com), where he is Vice-Chair of the Litigation Department. Before entering private practice, Mr. Pastore was an officer and Judge Advocate General (JAG) in the U.S. Air Force and a Special Assistant U.S. Attorney with the U.S. Department of Justice. Reach him at (212) 551-7707 or by e-mail at [email protected].