Hello TCPA World, I couldn’t think of a better way to get the ball rolling here than to build off of a previous post made by the one and only Czar. As you all know, I’m new to the inner-workings of the TCPA. But, I can tell you that one of the first concepts that popped in my head when reviewing the scope of the TCPA was it’s potential of being a snowball effect for large company’s with large marketing networks – a minor shortcoming in a large company’s TCPA compliance could snowball into an absolute avalanche of legal troubles.

In Hossfeld v. Allstate, the court ordered Allstate to turn over to Plaintiff its entire DNC list, which, for TCPA attorneys, is the equivalent of opening pandora’s box (or as the Czar put it in his previous post, “Huge. Terrifying. Huge. Terrifying. Huge. Terrifying.”) Okay, I think I’ve painted the picture, let’s give a basic recap:

• Allstate has a large marketing network – it pays numerous third-party marketing companies to directly reach out to consumers and sell the necessary commodity of insurance.

• Because Allstate has this large marketing network, the TCPA requires that it implement and enforce policies and procedures that no further marketing efforts (calls, texts, etc.) are made to a consumer who refuses such efforts (i.e. the classic “please put me on the do not call list”).

• One of Allstate’s many third-party telemarketer’s was Atlantic Telemarketing, who was the call vender for Transfer Kings, the party who ultimately made the call to Plaintiff which initiated the lawsuit in question.

• Notably, Plaintiff was already on Allstate’s DNC at the time it had contracted with Atlantic Telemarketing, which presumably means Atlantic Telemarketing would also have Plaintiff on its DNC. To briefly digress, Transfer Kings had no contractual relationship with Allstate and so it has no contractual obligation to report up to Allstate any additions to its DNC list.

So, here’s where the issue lies – hypothetically as Transfer Kings adds to its DNC, it reports up to Atlantic, who reports up to Allstate, who in turn has to report all of those additions “downstream” to its entire marketing network. This down and upstream reporting is more or less the TCPA’s “policies and procedures” requirement for any company using third-party marketers. Ultimately, reviewing a company’s “policies and procedures” to determine whether they are sufficient will not make a TCPA case, but if a Plaintiff can show non-compliance with or the absence of sufficient policies and procedures, there are going to be issues.

You might be asking how this could be proven. Well, the court in this Hossfeld case ordered Allstate to turn over its internal DNC list (UPDATE – Allstate had to turn it over!). Armed with Allstate’s internal DNC list, all Plaintiff would have to do is show there is a difference between Allstate’s DNC and Atlantic’s DNC to illustrate a lack of the necessary “policies and procedures” required under the TCPA.

BIGGEST UPDATE – After cross-referencing Allstate’s internal DNC with that of Atlantic’s, it was found that Allstate’s internal DNC was short by more than 115,000 numbers. That means Allstate faces exposure of at least $57,500,000.00 owing to a potential procedure gap—and that’s if only one call were placed to each number. Notably, the Plaintiff has now filed for summary judgement as to liability and willful violations under the TCPA (the court has not made any ruling on Plaintiffs motion) meaning that over $150,000,000.00 in exposure is possible here—in a case involving only a single lead source!

MORAL OF THE STORY – (1) companies with large marketing networks need to perform their due diligence on the third-party telemarketers with whom they do business with (see if they have a reputation of “subbing” out the marketing work to outside marketers); (2) if you’re going to contract with a third-party telemarketer, make sure to include contractual provisions obligating compliance with your “policies and procedures” (upstream reporting) and representations of the third-party telemarketer to the effect that they do not and will not use outside telemarketing affiliates or subsidiaries; and (3) most importantly, be sure that you are requiring all marketing vendors—including those used by any independent sales agents—to scrub against your corporate internal DNC list. Allstate’s (alleged) failure to do so could end up costing the company BIG.

That’s all for now folks, hope you enjoyed the brief update on this truly terrifying case. Remember, it’s summertime and there’s no need to break out any snow gear, avoid a legal avalanche by implementing some of the safeguards above (or just shoot us a call to more thoroughly discuss how to avoid TCPA’s teeth). Thanks guys!

This article was authored by TCPA Contributor Sean Kay.