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Lushe v. Verengo Inc.

United States District Court, C.D. California

February 2, 2015

Shahar Lushe
v.
Verengo Inc

Attorneys for Plaintiffs: Not Present.

Attorneys for Defendants: Not Present.

Honorable ANDRÉ BIROTTE JR.

CIVIL MINUTES - GENERAL

Proceedings: [In Chambers] Order DENYING Motion Seeking Permission for Interlocutory Appeal, or in the Alternative, for Reconsideration

Before the Court is Defendant Verengo, Inc.'s (" Defendant") Motion Seeking Permission for Interlocutory Appeal, or in the Alternative, for Reconsideration (" Motion, " docket no. 89). Plaintiffs Shahar Lushe and William Youngblood (" Plaintiffs") filed an Opposition and Defendant filed a Reply. The Court previously took the Motion under submission. For the following reasons, the Court DENIES the Motion.

I. FACTUAL AND PROCEDURAL BACKGROUND

On October 22, 2014, the Court issued an Order denying Defendant's Motion for Summary Judgment. See Order, docket no. 78. That Order sets forth the background of this case in detail, so the Court will not repeat that material. The Court incorporates that Order herein by reference.

Defendant now moves for permission to seek interlocutory appeal of two decisions the Court rendered in the Order, or, in the alternative, for reconsideration of one of the decisions. At issue are the Court's determinations that Plaintiffs claims for violation of the Telephone Consumer Privacy Act (" TCPA"), 47 U.S.C. § 227 et seq., insofar as they are premised on a classical theory of agency or apparent agency, survived the Motion. Defendant now contends that the legal standards for establishing both kinds of agency are unsettled and asks the Court to certify those aspects of the Order for interlocutory review. Alternatively, Defendant seeks reconsideration of the Court's ruling on apparent authority. Defendant contends that a Ninth Circuit case issued after the briefing on the summary judgment motion closed establishes that detrimental reliance is an element of apparent authority, and that Plaintiff has no evidence of apparent authority, so that theory of liability fails.

II. DISCUSSION

A. Legal Standard for Certifying an Order for Interlocutory Review

The Court is authorized to certify interlocutory orders for appeal when the order (1) " involves a controlling question of law"; (2) " as to which there is substantial ground for difference of opinion"; and (3) when " an immediate appeal from the order may materially advance the ultimate termination of the litigation." 28 U.S.C. § 1292(b).

B. Interlocutory Review of the Court's Decision on Classical Agency Is Not Warranted.

Defendant has not demonstrated that there is a substantial ground for difference concerning the legal standard for classical agency. The plain language of the TCPA assigns civil liability to the party who " makes" a call. See, e.g., 47 U.S.C. § 227(b)(1)(A) (" It shall be unlawful for any person within the United States . . . to make any call . . ."). There is no dispute that federal common law principles of agency apply such that sellers like Defendant who did not make calls themselves may be held liable for calls their agents make for them. In the Matter of the Joint Petition Filed by Dish Network, LLC, et al., 28 F.C.C. Rcd. 6574, 6574 (2013) (a seller that itself has not made a call within the meaning of the TCPA " nonetheless may be held vicariously liable under federal common law principles of agency for violations . . . that are committed by third-party telemarketers.') Nor does Defendant challenge that " [p]otential liability under general agency-related principles extend beyond classical agency" to include liability based upon apparent authority and ratification. Id. at 6587. All of this suggests that the standard for classical agency under the TCPA is no different from the federal common law standard applied in any other context, which is the standard this court applied.

Despite the foregoing, Defendant contends that what comprises a classical agency relationship in the context of the TCPA is unclear or undecided. Defendant contends that cases in the Ninth Circuit and the Eleventh Circuit differ, such that there is substantial ground for difference of opinion. The Court has reviewed the cases Defendant points to and finds that they do not establish a substantial ground for difference of opinion.

In the Order, the Court stated that to establish classical agency, Plaintiffs must show " that the party designated as principal has the right to control the party designated as agent." Restatement (Third) of Agency § 1.02 cmt. d (2006). The Court also stated in agreement that, as applied to alleged TCPA violations, one court has characterized the control necessary to establish agency as being " control [over or] the right to control . . . the manner and means of the [marketing] campaign [the telemarketer] conducted." See Thomas v. Taco Bell Corp., 879 F.Supp.2d 1079, 1084 (C.D. Cal. 2012) aff'd, 582 F.App'x 678, 679 (9th Cir. 2014) (agreeing " with the district judge's analysis of the evidence under the standard he applied").

Defendant contends that Mais v. Gulf Coast Collection Bureau, Inc., 944 F.Supp.2d 1226 (S.D. Fla. 2013) rev'd in part, 768 F.3d 1110 (11th Cir. 2014) and Palm Beach Golf Ctr.-Boca, Inc. v. Sarris, 981 F.Supp.2d 1239, 1244 (S.D. Fla. 2013) rev'd and remanded, 771 F.3d 1274 (11th Cir. 2014), applied a different standard for classical agency under the TCPA. This is not persuasive.

In Mais, the Court noted several times that whether one party exercised control over the other is the primary factor determining whether an agency relationship existed. See Mais, 944 F.Supp.2d at 1243-44. And, after applying that standard to the evidence in the case, the Court concluded that the plaintiff could not establish agency because the telemarketer " made all of the key decisions creating liability under the TCPA all on its own; [the defendants] did not control the relevant aspects of [the telemarketer's] conduct or procedures, and, accordingly, cannot be held vicariously liable." Mais, 944 F.Supp.2d at 1245. The Court simply disagrees with Defendant's assertion that the language " key decisions creating liability" and " relevant aspects of . . . conduct" from Mais is significantly different from " control [over or] the right to control . . . the manner and means of the [marketing] campaign [the telemarketer] conducted" in Thomas . Both statements clearly turn on the seller's ability to control aspects of the telemarketing campaign. That the Courts used slightly different words to express the same concept does not establish a substantial basis for a difference of opinion.

Nor does either the district court order or the Eleventh Circuit decision in Palm Beach Golf aid Defendant. Palm Beach Golf involved a violation of the TCPA's junk fax prohibition. The district court stated that because " the TCPA prohibits only faxes of certain content--that is, advertisements--from being sent, " the plaintiff had to demonstrate that the defendant " controlled the fax content" in order to establish vicarious liability. Palm Beach Golf, 981 F.Supp.2d at 1251. The court found that Plaintiff's claim failed because " Plaintiff cannot demonstrate that Defendant controlled the content of the fax allegedly sent by [the telemarketer], which is an essential element of its vicarious liability claim under the TCPA." Id. at 1252. Defendant contends that this language establishes a more demanding test for vicarious liability than what this Court employed.

Defendant does not clearly explain the difference between the standard the Palm Beach Golf court employed and that used by this court: both standards require the defendant to control relevant aspects of the campaign. To the extent various courts use language that is more specific, that seems to arise more from the facts of the case and does not reflect different standards.

In any event, the Eleventh Circuit reversed the district court's grant of summary judgment. See Palm Beach Golf Ctr.-Boca, Inc. v. Sarris, 771 F.3d 1274 (11th Cir. 2014). The Circuit rejected the district court's determination that " a person who did not physically transmit a fax, but rather directed a third party to do so, could be held liable under the TCPA only vicariously under federal common law principles." Palm Beach Golf, 771 F.3d at 1283-84. Rather, in light of an FCC letter addressing this very issue in the junk-fax context (and expressly not in the phone call context), the Court found that " a person whose services are advertised in an unsolicited fax transmission, and on whose behalf the fax is transmitted, may be held liable directly under the TCPA's ban on the sending of junk faxes." Id. at 1284 (emphasis added). Thus, the district court did not have to reach the issue of vicarious liability because a seller can be held directly liable for junk faxes sent on its behalf. Because the plaintiff did not need to establish vicarious liability, the district court's discussion of that issue was superfluous. Therefore, to the extent the district court's discussion may suggest a more demanding standard (this Court is not persuaded that it does), the Eleventh Circuit's reversal undermines its persuasive value.

Finally, the Court is not persuaded by Defendant's argument that the evidence it relied upon to find that classical agency was a triable issue is less like the " control" required for classical agency, and more like the broader category of evidence the Eleventh Circuit found was sufficient satisfy " on behalf of" a triable issue for purposes of direct liability for junk faxes. Rather, as set forth in the Order, there is evidence that Defendant had control over elements of the telemarketing campaign, and did not merely hire someone else to execute the campaign " on its behalf."

Defendant has not shown that there is a substantial ground for difference of opinion concerning the standard for establishing classical agency under the TCPA. This is dispositive of Defendant's § 1292(b) Motion concerning classical agency, so the Court will not reach the other two elements of the Motion.

C. Interlocutory Review of the Court's Decision on Apparent Authority Is Not Warranted.

Nor does the Court find that there is a substantial ground for difference of opinion as to whether detrimental reliance is an element of apparent authority. The October 22 Order makes following statement of the law on establishing apparent authority:

" Apparent authority arises from the principal's manifestations to a third party that supplies a reasonable basis for that party to believe that the principal has authorized the alleged agent to do the act in question." N.L.R.B. v. Dist. Council of Iron Workers of the State of Cal. & Vicinity, 124 F.3d 1094, 1099 (9th Cir. 1997). " [T]he ostensible authority of an agent cannot be based solely upon the agent's conduct." C.A.R. Transp. Brokerage Co., Inc. v. Darden Restaurants, Inc., 213 F.3d 474, 480 (9th Cir. 2000). The third party's belief must not only be reasonable, but also " traceable" to the principal's manifestations. See Restatement (Third) of Agency § 2.03 (2006).

The foregoing does not include detrimental reliance as an element. Nothing that Defendant has pointed to persuades the Court that agency cannot be established by apparent authority unless a third party detrimentally relied, or that there is a " substantial" ground for difference of opinion on this issue.

Defendant argues that Big B Auto. Warehouse Distributors, Inc. v. Coop. Computing, Inc., No. SC 00-2602, 2000 WL 1677948 (N.D. Cal. Nov. 1, 2000) supports its position that detrimental reliance is an element of apparent authority, but Defendant completely misreads the case. Instead of stating, as Defendant claims, that the California doctrine of ostensible authority and the Restatement's doctrine of apparent authority are alike in that both require a showing of detrimental reliance, the case says the exact opposite -- that they differ on this element and, by implication, that it is not necessary for apparent authority: " 'Ostensible authority' is similar to the Restatement's doctrine of 'apparent authority, ' however, ostensible authority requires the elements of estoppel, i.e., detrimental reliance. See generally 2 Witkin, Summary of California Law § 76 (comparing California's ostensible authority with Restatement's apparent authority doctrine)." See Big B Auto. Warehouse, 2000 WL 1677948 *3 fn. 7. Big B. Auto. therefore undermines Defendant's position.

Defendant also relies on Thomas v. Taco Bell Corp., 582 F.App'x 678 (9th Cir. 2014), an unpublished Ninth Circuit opinion. Under Ninth Circuit Rule 36-3, this unpublished decision is not precedent. It therefore has limited value in the present analysis. Nevertheless, the Court will explain why it is not persuasive.

In Thomas, the Ninth Circuit affirmed the district court's dismissal[1] of a TCPA claim premised on an apparent authority theory. The Circuit stated that apparent authority

[Apparent authority] can only 'be established by proof of something said or done by the [alleged principal], on which [the plaintiff] reasonably relied.' NLRB v. Dist. Council of Iron Workers of Cal. & Vicinity, 124 F.3d 1094, 1099 (9th Cir.1997); Restatement (Second) of Agency § 265 cmt. a (1958) ('Apparent authority exists only as to those to whom the principal has manifested that an agent is authorized. There is, therefore, tort liability only if such a manifestation and its execution by the apparent agent results in harm.' (internal citations omitted)).

Thomas, 582 F.App'x at 679. The Court then concluded that " Thomas has not shown that she reasonably relied, much less to her detriment, on any apparent authority" granted by Taco Bell. Id. But neither NLRB nor the Restatement in fact state that detrimental reliance is required to establish apparent authority.

It is not clear why, in Thomas, the Ninth Circuit cited § 265 of the Restatement (Second) of Agency as stating the elements necessary to establish apparent authority. This is because § 265 is in the chapter regarding a principal's tort liability to third persons, so, accordingly, it states only that tort liability will attach to the principal only if the agent's execution of his apparent authority results in harm . Stating that tort liability flows from the agent to the principal only when the agent's authorized acts result in harm only explains how torts work; it does not speak to how to establish agency by apparent authority in the first instance. Thus, read closely, § 265 does not require detrimental reliance as an element necessary to establish apparent authority. Indeed, the section of the Restatement (Second) of Agency that does address " Creation of [Apparent] Authority, " § 26, does not include detrimental reliance as an element. See Restatement (Second) of Agency § 26 (1958) (stating, " Except for the execution of instruments under seal or for the performance of transactions required by statute to be authorized in a particular way, authority to do an act can be created by written or spoken words or other conduct of the principal which, reasonably interpreted, causes the agent to believe that the principal desires him so to act on the principal's account."). The Court therefore cannot read the Restatement (Second) of Agency (1958) as stating that detrimental reliance is necessary to establish agency by apparent authority.

That the Ninth Circuit relied on the Restatement (Second) of Agency from 1958 is puzzling for another reason: a more recent edition, the Restatement (Third) of Agency, was issued in 2006, and it makes clear that reliance is not necessary to establish apparent authority. The Restatement (Third) defines apparent authority as " the power held by an agent or other actor to affect a principal's legal relations with third parties when a third party reasonably believes the actor has authority to act on behalf of the principal and that belief is traceable to the principal's manifestations." Restatement (Third) Of Agency § 2.03 Apparent Authority (2006). The Restatement (Third) also explains that apparent authority " is created by a person's manifestation that another has authority to act with legal consequences for the person who makes the manifestation, when a third party reasonably believes the actor to be authorized and the belief is traceable to the manifestation." Restatement (Third) Of Agency § 3.03 Creation of Apparent Authority (2006) (emphasis added). The foregoing sections touching on how to establish agency by apparent authority do not include detrimental reliance.

Indeed, comment e to § 2.03 expressly states that detrimental reliance is not necessary to establish apparent authority: " [t]o establish that an agent acted with apparent authority, it is not necessary for the plaintiff to establish that the principal's manifestation induced the plaintiff to make a detrimental change in position, in contrast to the showing required by the estoppel doctrines stated in § § 2.05, 2.06, 3.02, and 4.08." It further explains that those cases stating that apparent authority requires " reliance" by the plaintiff " do not articulate what specifically must be shown." Restatement (Third) of Agency § 2.03 cmt e (2006). The comment goes on to suggest that insofar as some cases discuss reliance, that may be because a plaintiff's reliance helps establish that the plaintiff believed that the manifestation of agency was true. Similarly, insofar as some cases indicate that reliance is a required element, that may be because the underlying substantive cause of action -- such as fraud -- has reliance as an element. Id. But, this does not mean that reliance is an element required to establish agency by apparent authority.[2]

That this distinction is significant is well-illustrated by TCPA cases. A person violates the TCPA by making calls or sending faxes that the statute prohibits. Such TCPA claims are not conventional torts because they do not have harm as an element, nor are they contract causes of action. They are purely creatures of statute. The statute does not require the recipient of the call or fax to do anything in response to the prohibited call or fax to state a claim. Thus, for the Court to require a TCPA plaintiff to show some kind of " detrimental reliance" for purposes of establishing agency by apparent authority is nonsensical, and would be to insert into the statute an element that is not there. Indeed, as a TCPA claim is neither a conventional tort claim nor a contract claim, the concepts of detrimental reliance are inapt. To the extent some kind of estoppel comes into play, it is in the sense that the putative principal is estopped from denying an agency relationship if it manifested to the plaintiff that the putative agent had authority to act. However, that the agent may be estopped from denying an agency relationship because the plaintiff accepted its prior manifestations of agency is not the same as requiring the plaintiff " to make a detrimental change in position."

Thomas also cites NLRB v. Dist. Council of Iron Workers of Cal. & Vicinity, 124 F.3d 1094 (9th Cir.1997) for the proposition that apparent authority " can only 'be established by proof of something said or done by the [alleged principal], on which [the plaintiff] reasonably relied.'" NLRB, 124 F.3d at, 1099. NLRB concerned a union negotiator's authority to negotiate a collective bargaining agreement on behalf of the union. The union argued that it was not bound by the collective bargaining agreement because it was negotiated by a negotiator who had no authority to bind the union because he represented a different local. The employer argued that the union was bound by the agreement because the negotiator had the apparent authority to negotiate for the union. Reading the opinion, it becomes clear that the Court found that the employer did not " reasonably rel[y]" because " it would have been unreasonable for [the employer] to believe that [the other local's negotiator] was authorized by the District Council to negotiate binding agreements for [the union]." Id. at 1101. Thus, in NLRB, " reasonable reliance" refers to the reasonableness of the third party's acceptance of the principal's manifestation of agency, and not to some detrimental change in position. Thus, NLRB does not support Defendant's position that, to establish agency by apparent authority, a TCPA plaintiff must show some kind of detrimental reliance; rather the Court required only that the third party's acceptance of the principal's manifestations of authority be reasonable.

Because Thomas is neither binding nor well-reasoned in light of the authority it cites, the Court accords it little weight in determining whether there is a substantial basis for difference of opinion about whether a TCPA plaintiff must show detrimental reliance to establish agency by apparent authority.

Defendant also relies on the district court order in Palm Beach Golf Ctr.-Boca, In2015c. v. Sarris, but as discussed above, that case was reversed on appeal so it is of little persuasive value. Furthermore, the district court's order relied on Florida agency law, further diminishing its persuasive value.

For the foregoing reasons, the Court maintains the determination implicit in its October 22 Order that a TCPA plaintiff need not show detrimental reliance to establish agency by apparent authority. The Court also finds that, although the case law might be somewhat muddled on this issue, there is at bottom no " substantial" ground for difference of opinion. This is dispositive of Defendant's § 1292(b) Motion concerning establishing agency by apparent authority, so the Court will not reach the other two elements of the Motion.

D. The Motion for Reconsideration is Denied.

In light of the above discussion, the Court DENIES Defendant's Motion for Reconsideration of the Order's denial of Defendant's Motion for Summary Judgment on Plaintiffs' theory of agency by apparent authority.

III. CONCLUSION

For the foregoing reasons, the Court DENIES Defendant's Motion in its entirety.

IT IS SO ORDERED.


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