Back in 2017, in an action initiated by the US and a number of states, a district court determined that DISH Network and its agents violated federal and state telemarketing laws and assessed a penalty of $280 million. At issue on appeal, at the Seventh Circuit, was the extent to which DISH would be responsible and liable for the acts of certain of the entities that sold DISH service via the phone, violating the telemarketing laws in doing so. These entities – called the “order-entry retailers” -- took orders from customers and entered them into DISH’s computer system. DISH was responsible for installing the equipment for the customers and received payments directly from them, and then paid a commission to the order-entry retailers for each customer.
The district court found that the order-entry retailers acted as DISH’s agents and that, therefore, DISH was responsible for their acts. The Circuit Court affirmed. Although the contract between the order-entry retailers and DISH provided that no agency relationship was created by the contract, the court found otherwise: “parties cannot by ukase negate agency if the relation the contract contracts is substantively one of agency.” (Editor’s note: I had to look up “ukase” so I’ll save you the trouble. It means “an arbitrary command.” Emphasis in original.) Here, the contract gave DISH the right to control the performance of the entry-order retailers. Further, the Court determined, the retailers acted directly for DISH, entering orders into DISH’s system. They were not resellers and did not have their own inventory to sell.
Having determined that the retailers were DISH’s agents, the Court then addressed whether DISH would be liable as a principal for failing to ensure that it and its agents maintained a single internal do-not-call list, as required by the Telemarketing Sales Rule. (As a reminder, the TSR requires that telemarketers maintain internal do-not-call lists so that anyone who requests not to be called –even if she hasn’t registered her number on the national do-not-call list, which telemarketers must also check – will not be called by that marketer again.) It determined that it would, because to find otherwise would mean that “any household could receive endless calls peddling DISH’s service, as long as each came from a different order-entry retailer.” Although maintaining a centralized list is not in and of itself required by law, DISH’s failure to do so, when multiple agents were acting on their behalf, resulted in violations. Further, the Court stated, “a principal that that learns of illegal behavior committed by its agents, chooses to do nothing, and continues to receive the gains, is liable for the agent’s acts.” Moreover, the fact that DISH told the retailers not to break the law did not obviate its responsibility when they did.
Thus, since the agents (the order-entry retailers) acted within their authority to sell TV service via phone, to DISH's benefit, and DISH knew what the retailers were doing, DISH was liable for the illegal calls. And, just to make sure DISH got the point, the Court added this: “A large national corporation with the ability to hire sophisticated counsel is deemed to know basic principles of agency law.” Ouch.
United States v. DISH Network L.L.C., No. 17-3111 (7th Cir. 2020)