On June 5, 2017, Judge Sue E. Myerscough awarded the U.S. Department of Justice, the Federal Trade Commission (“FTC”), and the states of California, Illinois, and North Carolina $280 million in damages after concluding Dish Network (“Dish”) was responsible for millions of “do-not-call” violations over years of “careless and reckless conduct.” See https://www.ftc.gov/system/files/documents/cases/dish_ilc_309cv3073_fact.pdf#page=451.
After noting that statutory damages of more than $8.1 billion was disproportionate and unreasonable, she concluded that 20 percent of Dish’s 2016 after tax profits of $1.4 billion is “appropriate and constitutionally proportionate, reasonable, and consistent with due process.”
The amount of damages involved here is obviously eye-popping, but Dish’s course of conduct cited by the judge shows to me that this award could have been avoided by due diligence dating back a decade with regard to supervision of agents and subagents by active compliance departments and vigilant follow-up on complaints actually received regarding those agents’ behavior by Dish.
Any complaint you receive regardless of how ludicrous should be investigated, as where there is “smoke” there may be “fire”. Even if the complaint turns out to be erroneous or without merit, the fact of active investigation and records of that investigation shows due diligence regarding your own activity and that of your agents. So, if you have investigated complaints received, a strong record of compliance exists even for complaints which slipped through, either by error or intentionally.
If the complaint shows some merit, you should correct the activity, and if the agent or subagent refuses or continues with the behavior despite direction, you must cease doing business with that entity or you could be held liable under FTC, Federal Communication Commission, or state law.
One standard of liability plaintiffs and regulators can seek to impose is “strict liability”, i.e. you are responsible, no matter what, for the actions of your agents. This is unlikely to be the standard applied by a court if you have the active compliance regime in place that I described above.
An alternative standard of liability is “accomplice liability” as discussed in the Telemarketing Sales Rule which imposes liability if a business “knows, has reason to know, or consciously avoids knowing” of the wrongdoing of its business partner. I refer to this as the “ostrich rule” in that a business cannot put its head in the sand to avoid knowing of its business partners’ illegal acts.
If you have an active compliance policy and department, investigate complaints and keep a record of taking corrective action as needed, you can be protected from the illegal acts of business partners.
The Judge in this case ruled that Dish did not.
Please do not hesitate to contact me if you have questions about these compliance measures or about this case.