Charles Jones v. Royal Administration Services , 866 F.3d 1100 ( 2017 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHARLES A. JONES; JOSH WATSON, No. 15-17328
on behalf of themselves and all
similarly situated persons, D.C. No.
Plaintiffs-Appellants, 3:14-cv-00199-
LRH-WGC
v.
ROYAL ADMINISTRATION SERVICES, OPINION
INC.,
Defendant-Appellee,
and
ALL AMERICAN AUTO PROTECTION,
INC.; HAROUT PAMBUCKCHYAN;
RAFFI SADEJYAN; JASON GARCIA,
Defendants.
Appeal from the United States District Court
for the District of Nevada
Larry R. Hicks, District Judge, Presiding
Argued and Submitted June 15, 2017
San Francisco, California
Filed August 9, 2017
2 JONES V. ROYAL ADMIN. SVCS.
Before: Mary M. Schroeder, D. Michael Fisher,* and
N. Randy Smith, Circuit Judges.
Opinion by Judge N.R. Smith
SUMMARY**
Telephone Consumer Protection Act
The panel affirmed the district court’s grant of summary
judgment in favor of the defendant in an action under the
Telephone Consumer Protection Act.
The panel held that Royal Administration Services, Inc.,
could not be held vicariously liable under the TCPA for
several phone calls made by telemarketers employed by All
American Auto Protection, Inc., because the telemarketers
were independent contractors and therefore did not act as
Royal’s agents, as defined by federal common law.
*
The Honorable D. Michael Fisher, United States Circuit Judge for
the U.S. Court of Appeals for the Third Circuit, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
JONES V. ROYAL ADMIN. SVCS. 3
COUNSEL
Matthew Righetti (argued), John Glugoski, and Michael
Righetti, Righetti Glugoski P.C., San Francisco, California,
for Plaintiffs-Appellants.
Richard I. Dreitzer (argued) and Donald P. Paradiso, Wilson
Elser Moskowitz Edelman & Dicker LLP, Las Vegas,
Nevada, for Defendant-Appellee.
OPINION
N.R. SMITH, Circuit Judge:
Charles Jones and Josh Watson seek to hold Royal
Administration Services, Inc. (“Royal”) vicariously liable for
several telephone calls made in violation of the Telephone
Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, by
telemarketers employed by All American Auto Protection,
Inc. (“AAAP”). Royal can only be held vicariously liable for
these calls if the telemarketers were acting as its agents, as
defined by federal common law, when the calls were placed.
To determine whether the AAAP telemarketers were Royal’s
agents or independent contractors, we apply the ten non-
exhaustive factors set forth in the Restatement (Second) Of
Agency § 220(2) (1958). Schmidt v. Burlington N. & Santa
Fe Ry. Co., 605 F.3d 686, 690 (9th Cir. 2010). After an
assessment of these factors, we find AAAP’s telemarketers
were acting as independent contractors rather than as Royal’s
agents. Therefore, Royal cannot be held vicariously liable for
these telephone calls. Accordingly, the district court properly
granted summary judgment in Royal’s favor.
4 JONES V. ROYAL ADMIN. SVCS.
I.
Royal sells vehicle service contracts (“VSC”). A VSC “is
a promise to perform (or pay for) certain repairs or services
[on an automobile].” Auto Service Contracts and
Warranties, Fed. Trade Comm’n: Consumer Info.,
https://www.consumer.ftc.gov/articles/0054-auto-service-
contracts-and-warranties (last updated August 2012). A VSC
is “[s]ometimes called an ‘extended warranty.’” Id. Royal
sells its VSCs through automobile dealers and through
“marketing vendors.” These marketing vendors sell Royal’s
VSCs “through direct mail or telemarketing.” Royal sells
VSCs through about 20 different marketing vendors.
AAAP sold VSCs for many companies like Royal through
telemarketing. When an AAAP telemarketer placed a call, he
or she would first “sell the concept of . . . a vehicle service
contract” to the consumer. Then, during the phone call, the
telemarketer would pick a particular service plan from one of
their many vendors to sell to the consumer, based on the
make, model, and mileage of the consumer’s car, and the
price and benefits in which the consumer expressed interest.
In October 2011, Royal entered into a marketing
agreement with AAAP.1 The agreement between Royal and
AAAP contained authorized sales and marketing
methodologies with which AAAP was required to comply.
The agreement “[e]xpressly excluded from these
methodologies . . . any act or omission that violates
applicable state or Federal law, including but not limited to
‘robo-calling.’”
1
At the time AAAP was operating as Precise Enterprises, LLC.
JONES V. ROYAL ADMIN. SVCS. 5
Royal assigned Clayton Churchill to be the “agent of
record” for the AAAP account. Churchill provided training
to AAAP’s employees at AAAP’s call center in Azusa,
California. During this training, he provided information
about Royal’s VSCs, claim structure, coverage, pricing, and
customer service. Royal’s president, Richard McCabe,
visited the call center with Churchill about a dozen times
from 2011 to 2014. During these visits, AAAP’s officials
(Harout Pambuchchyan, Raffi Sadejyan, and Jason Garcia)2
provided assurances that the telemarketers were “dialing
customers one at a time” and that they were “compl[ying]
with the Do Not Call list.”
Appellants are individuals living in Reno, Nevada, whose
cellular telephone numbers are registered on the national do-
not-call registry. Jones asserts that he received four calls on
his cellular telephone from AAAP in March 2014. During
one of these calls, Jones spoke to Charlie Fort, who offered
to sell Jones a VSC called the “Diamond New Car” protection
plan. Jones was then transferred to Samuel Morris, who
confirmed that he was calling from AAAP. Watson asserts
that he received four calls to his cellular telephone from
AAAP in April and May of 2014. Jones and Watson believe
AAAP placed the calls using an “automatic telephone dialing
system.”
In April 2014, Jones filed a class-action law suit against
AAAP, Pambuckchyan, Sadejyan, and Garcia, asserting one
claim for violation of the TCPA. AAAP was originally
represented by counsel and filed an answer and a motion to
2
It is not clear from the record what positions these three individuals
held at AAAP. They have been called officers, directors, employees, and
principals in both the record and briefs.
6 JONES V. ROYAL ADMIN. SVCS.
dismiss. However, AAAP’s attorneys all moved to withdraw
after AAAP terminated “its attorneys due to an anticipated
bankruptcy action by [AAAP].” The district court granted the
motions to withdraw. On January 8, 2015, after the district
court and AAAP’s former attorneys had repeatedly advised
the company that it was “obligat[ed] to defend this action
through licensed counsel,” the district court entered default
against AAAP, because it had failed to “otherwise defend”
this action.
Thereafter, the district court granted Jones leave to file an
amended complaint. In the First Amended Complaint, Jones
added Watson as a plaintiff and Royal as a defendant. The
First Amended Complaint asserted that Royal was vicariously
liable for AAAP’s calls that were made in violation of the
TCPA and the federal regulations implementing the TCPA.
On June 17, 2015, Royal filed a motion for summary
judgment. On November 24, 2015, the district court granted
the motion and entered judgment in favor of Royal. This
appeal followed.
II.
The Ninth Circuit reviews de novo a district court’s grant
of summary judgment. Pavoni v. Chrysler Grp., LLC,
789 F.3d 1095, 1098 (9th Cir. 2015). In analyzing a motion
for summary judgment, the panel must “must determine
whether there are any genuine issues of material fact and
whether the district court correctly applied the relevant
substantive law.” Id. (quoting Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986)). Within this
analysis, the panel must “[v]iew[] the evidence ‘as a whole’
and ‘in the light most favorable to the party opposing the
motion.’” Id. (quoting Matsushita, 475 U.S. at 587). “An
JONES V. ROYAL ADMIN. SVCS. 7
issue of material fact is genuine ‘if the evidence is such that
a reasonable jury could return a verdict for the nonmoving
party.’” Id. (quoting Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986)).
III.
The TCPA makes it unlawful for a person,
to make any call (other than a call made for
emergency purposes or made with the prior
express consent of the called party) using any
automatic telephone dialing system or an
artificial or prerecorded voice
...
to any telephone number assigned to a . . .
cellular telephone service . . . or any service
for which the called party is charged for the
call . . . .
47 U.S.C. § 227(b)(1)(A)(iii). One of the parties to the call
(either the caller or the recipient) must be “within the United
States.” § 227(b)(1). The TCPA also directed the Federal
Communications Commission (“FCC”) to “prescribe
regulations to implement methods and procedures for
protecting the privacy rights [of consumers].” § 227(c)(2).
The TCPA gives consumers “who ha[ve] received more than
one telephone call within any 12-month period by or on
behalf of the same entity in violation of the[se] regulations”
a private right of action. § 227(c)(5). The regulations
implementing the TCPA prohibit, among other things, a
“person or entity” from “initiat[ing] any telephone solicitation
8 JONES V. ROYAL ADMIN. SVCS.
to . . . [a] residential telephone subscriber who has registered
his or her telephone number on the national do-not-call
registry.” 47 C.F.R. § 64.1200(c)(2).
Royal does not challenge whether there is sufficient
evidence in the record to create a genuine issue of material
fact as to whether AAAP’s telemarketers violated the TCPA
and its implementing regulations. Rather, Royal disputes
whether it can be held vicariously liable for AAAP’s calls.
We have previously clarified that “a defendant may be
held vicariously liable for TCPA violations where the
plaintiff establishes an agency relationship, as defined by
federal common law, between the defendant and a third-party
caller.” Gomez v. Campbell-Ewald Co., 768 F.3d 871, 878
(9th Cir. 2014), aff’d sub nom. Campbell-Ewald Co. v.
Gomez, 136 S. Ct. 663, 674 (2016) (“[U]nder federal
common-law principles of agency, there is vicarious liability
for TCPA violations.”). “Agency is the fiduciary relationship
that arises when one person (a ‘principal’) manifests assent to
another person (an ‘agent’) that the agent shall act on the
principal’s behalf and subject to the principal’s control, and
the agent manifests assent or otherwise consents so to act.”
Mavrix Photographs, LLC v. LiveJournal, Inc., 853 F.3d
1020, 1029 (9th Cir. 2017) (quoting Restatement (Third) Of
Agency § 1.01 (Am. Law Inst. 2006)). “For an agency
relationship to exist, an agent must have authority to act on
behalf of the principal and ‘[t]he person represented [must
have] a right to control the actions of the agent.’” Id.
(quoting Restatement (Third) Of Agency § 1.01 cmt. c). One
theory of agency, actual authority, “arises through ‘the
principal’s assent that the agent take action on the principal’s
JONES V. ROYAL ADMIN. SVCS. 9
behalf.’”3 Id. (quoting Restatement (Third) Of Agency
§ 3.01). “An agent acts with actual authority when, at the
time of taking action that has legal consequences for the
principal, the agent reasonably believes, in accordance with
the principal’s manifestations to the agent, that the principal
wishes the agent so to act.” Restatement (Third) Of Agency
§ 2.01.
Significantly, “[n]ot all relationships in which one person
provides services to another satisfy the definition of agency.”
Id. § 1.01. An individual acting as an “independent
contractor,” rather than an agent, does not have the traditional
agency relationship with the principal necessary for vicarious
liability. See United States v. Bonds, 608 F.3d 495, 505–06
(9th Cir. 2010). Generally, a principal is not vicariously
liable for the actions of an independent contractor, because
the principal does not have sufficient control over an
independent contractor. Id.; see also Mavrix Photographs,
853 F.3d at 1030 (citing Hollingsworth v. Perry, — U.S. —,
133 S. Ct. 2652, 2657–58 (2013)); Bonds, 608 F.3d at 505
(holding that, in determining whether an agency relationship
exists, “a court will look to the totality of the circumstances,
but the ‘essential ingredient . . . is the extent of control
exercised by the employer’”).
Keeping in mind that the “extent of control exercised by
the [principal]” is the “essential ingredient,” Bonds, 608 F.3d
at 505, we adopt the following ten factors as relevant to the
3
The district court analyzed whether Royal could be vicariously liable
under three different agency theories: actual authority, apparent authority,
and ratification. On appeal, Appellants assert that they are only pursuing
an actual authority theory, and have waived any argument under the other
two theories. Accordingly, we address only actual authority.
10 JONES V. ROYAL ADMIN. SVCS.
determination of whether an individual providing services for
a principal is an agent or an independent contractor:
1) the control exerted by the employer,
2) whether the one employed is engaged in a
distinct occupation, 3) whether the work is
normally done under the supervision of an
employer, 4) the skill required, 5) whether the
employer supplies tools and instrumentalities
[and the place of work], 6) the length of time
employed, 7) whether payment is by time or
by the job, 8) whether the work is in the
regular business of the employer, 9) the
subjective intent of the parties, and
10) whether the employer is or is not in
business.
Id. at 504 (citing Restatement (Second) Of Agency § 220(2)
(1958)). These factors are not exhaustive, but they guide our
analysis here. See Cmty. for Creative Non-Violence v. Reid,
490 U.S. 730, 751 (1989) (citing Restatement (Second) Of
Agency § 220(2) and listing additional factors, none of which
“is determinative,” that should be considering in deciding
“whether a hired party is an employee under the general
common law of agency”). Applying these factors, we find
AAAP and its telemarketers were not acting as Royal’s
agents when they placed the calls at issue in this case.
First, we acknowledge that Royal exercised some amount
of control over AAAP. AAAP was required to keep records
of its interactions with consumers who purchased Royal
VSCs, give Royal weekly reports on VSC sales, and provide
notice of requests to cancel Royal VSCs. AAAP was also
required to implement security measures to protect consumer
JONES V. ROYAL ADMIN. SVCS. 11
information, collect payments on behalf of Royal, and obtain
Royal’s approval before using sales literature to assist in the
sale of Royal VSCs. Moreover, AAAP was only permitted to
use the “scripts and materials” Royal approved and had to
comply with the “guidelines and procedures” Royal provided
when selling Royal products. These guidelines and
procedures generally required AAAP to “operate in
accordance with laws and regulations” and refrain from
making “false and misleading” representations. In fact, Royal
suspended its relationship with AAAP on one occasion after
it suspected AAAP telemarketers were violating Royal’s
standards and procedures. However, Royal did not have the
right to control the hours the telemarketers worked nor did it
set quotas for the number of calls or sales the telemarketers
had to make. See N.L.R.B. v. United Ins. Co. of Am., 390 U.S.
254, 258 (1968) (finding the fact that individuals “perform
their work primarily away from the company’s offices and fix
their own hours of work and work days” showed principal
had less control and supported independent contractor status).
Thus, Royal had only limited control of AAAP’s
telemarketers.
Significantly, Royal did not have any control of a
telemarketer’s call until the telemarketer decided to pitch a
Royal VSC to the consumer. AAAP sold VSCs for multiple
companies (all of whom, presumably, had their own standards
and procedures AAAP telemarketers were required to comply
with). When an AAAP telemarketer reached a consumer,
they first had to sell the consumer on the idea of a VSC.
Royal did not have control over this sales pitch. Only after
the consumer was sold on the idea of a VSC, would an AAAP
telemarketer pitch a specific VSC. If this specific VSC was
a Royal VSC, then Royal controlled the “scripts and
materials” the telemarketer was permitted to use in the sale.
12 JONES V. ROYAL ADMIN. SVCS.
An AAAP telemarketer pitched a VSC to Appellants during
only one call at issue in this case. During that call, a
telemarketer attempted to sell a “Diamond New Car”
protection plan—a plan not sold by Royal through AAAP.
Thus, there is no evidence that AAAP telemarketers ever tried
to sell Royal VSCs to Appellants. Accordingly, Royal never
specifically controlled any part of any of the calls at issue in
this case.
Second, AAAP was an independent business, separate and
apart from Royal, see id. at 258–59 (finding relevant whether
individuals “operate[d] their own independent businesses” or
“perform[ed] functions that are an essential part of the
company’s normal operations”), and it was engaged in the
“distinct occupation” of selling VSCs through telemarketing,
as demonstrated by the fact that it “had many different clients
and offered [the same] services to others during the same
period,” see Bonds, 608 F.3d at 505.; cf. Alexander v. FedEx
Ground Package Sys., Inc., 765 F.3d 981, 995 (9th Cir. 2014)
(applying California law, which considers nearly identical
factors). Thus, this factor strongly suggests AAAP’s
telemarketers were independent contractors rather than
employees.
Third, the calls made by AAAP’s telemarketers were not
normally done under the supervision of Royal. Churchill
provided some training and oversight at AAAP’s Azusa call
center, and Richard McCabe, Royal’s president, visited the
call center about a dozen times over the course of three years.
However, as evidenced above, a Royal employee did not
directly supervise AAAP’s calls. Therefore, this factor also
favors finding AAAP’s telemarketers were independent
contractors.
JONES V. ROYAL ADMIN. SVCS. 13
As to the fourth factor, the record does not contain any
evidence regarding the skill required to place the calls or sell
a VSC. Therefore, we do not consider this factor in our
analysis.
Fifth, Royal provided AAAP with some “tools and
instrumentalities” necessary to complete the sales. For
example, Royal provided the contracts that were to be sold
and gave AAAP access to their “on-line Contract quote
manager.” Royal also trained the AAAP telemarketers in
how to sell Royal contracts. On the other hand, AAAP
provided far more tools and instrumentalities, including its
own phones, computers, furniture, and office space. In
addition, if AAAP wanted any “brochures [or] other sales
literature,” it had to develop and manufacture them itself.
Thus, AAAP supplied most of the “tools and
instrumentalities,” further supporting a finding of
independent contractor status. See Reid, 490 U.S. at 752.
Sixth, the original contract was in effect for only one year,
with each party retaining the ability to cancel the contract at
any time on 30 days notice. Ultimately, AAAP sold VSCs
for Royal for three years, from October 2011 until October
2014. Three years is not a particularly short period of time,
but the limited nature of the original contract shows there was
a “contemplated end to the . . . relationship.” See Ruiz v.
Affinity Logistics Corp., 754 F.3d 1093, 1105 (9th Cir. 2014).
The designated impermanency of the relationship supports a
finding of independent contractor status. See N.L.R.B.,
390 U.S. at 259 (finding relevant that individuals had “a
permanent working arrangement with the company under
which they may continue as long as their performance is
satisfactory”); Bartels v. Birmingham, 332 U.S. 126, 130
(1947).
14 JONES V. ROYAL ADMIN. SVCS.
Seventh, AAAP was paid a commission for each sale,
rather than for the time the telemarketers worked. This is a
strong indicator that the telemarketers were independent
contractors. See Ruiz, 754 F.3d at 1104–05; Bonds, 608 F.3d
at 505.
Eighth, Royal specifically contracted out all its direct
sales to many different vendors and car dealerships instead of
hiring its own employees to sell its VSCs. However, Royal
is in the business of selling VSCs; accordingly, AAAP’s sales
are a regular part of Royal’s business. Thus, this factor tends
to favor finding an agency relationship. See Ruiz, 754 F.3d
at 1105.
As to the ninth factor, the record does not clearly
evidence the subjective intent of the parties. Nevertheless,
the fact that AAAP sold VSCs for multiple companies
indicates that AAAP’s intent was to have its telemarketers
operate as independent contractors for many different
companies. See Dumas v. Gommerman, 865 F.2d 1093, 1105
(9th Cir. 1989) (finding relevant “whether the artist works for
several buyers at a time, or exclusively for one”).
Tenth, and finally, Royal is a business, which favors
finding an agency relationship.
Taking these factors into account, it is clear that AAAP’s
telemarketers were independent contractors rather than
agents. AAAP was its own independent business that sold
VSCs for multiple companies without the direct supervision
of a Royal employee. AAAP provided its own equipment, set
its own hours, and only received payment if one of its
telemarketers actually made a sale. Finally, although Royal
had some control over AAAP’s telemarketers, it did not
JONES V. ROYAL ADMIN. SVCS. 15
specifically control the calls at issue in this case, because the
telemarketers never attempted to sell a Royal VSC during
those calls. Because AAAP’s telemarketers were
independent contractors, rather than Royal’s agents, Royal
cannot be held vicariously liable for any calls the
telemarketers made in violation of the TCPA.
IV.
The district court correctly applied the relevant
substantive law to the undisputed facts when it concluded that
the AAAP telemarketers were not acting as Royal’s agents
when they placed the calls and, accordingly, that Royal could
not be held vicariously liable for the calls. Because Royal
cannot be held vicariously liable for the calls, it was proper
for the district court to grant Royal’s motion for summary
judgment.
AFFIRMED.