United States v. DISH Network L.L.C.

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 17-3111
UNITED STATES OF AMERICA, et al.,
Plaintiffs-Appellees,
v.
DISH NETWORK L.L.C.,
Defendant-Appellant.
____________________
Appeal from the United States District Court
for the Central District of Illinois.
No. 09-3073 — Sue E. Myerscough, Judge.
____________________
ARGUED SEPTEMBER 17, 2018 — DECIDED MARCH 26, 2020
____________________
Before EASTERBROOK, KANNE, and BRENNAN, Circuit Judg-
es.
EASTERBROOK, Circuit Judge. After a bench trial that lasted
five weeks and produced 475 typed pages of findings, a dis-
trict judge concluded that DISH Network and its agents
commi]ed more than 65 million violations of telemarketing
statutes and regulations. 256 F. Supp. 3d 810 (C.D. Ill. 2017)
(183 printed pages). The penalty: $280 million. DISH does
2 No. 17-3111
not challenge any finding of fact. This simplifies the appel-
late task, but legal issues remain.
DISH sold its satellite TV service through its own staff
plus third parties. These fell into three categories. DISH
hired “telemarketing vendors” to conduct campaigns on its
behalf. It used thousands of “full service retailers” that sold,
installed, and serviced satellite gear and service in their are-
as. Finally, it had some 50 “order-entry retailers”, which
used phones to sell nationwide. The order-entry retailers
took orders from customers and entered them directly into
DISH’s computer system. DISH was responsible for in-
stalling the necessary equipment and received payments
from the customers, remi]ing to the order-entry retailers a
commission for each new customer. This appeal concerns
the acts of DISH and four order-entry retailers: Dish TV
Now, Star Satellite, JSR, and Satellite Systems Network.
The United States, California, North Carolina, Illinois,
and Ohio filed suit against DISH, alleging violations of fed-
eral and state laws. The district court found that DISH and
its agents violated the Telemarketing Sales Rule, 16 C.F.R.
§310 (propagated under 15 U.S.C. §45, part of the Federal
Trade Commission Act), the Telephone Consumer Protection
Act, 47 U.S.C. §227, and related state laws. The appeal con-
cerns the extent to which DISH had to coordinate do-not-call
lists with and among these retailers or was otherwise re-
sponsible for their acts. The Telemarketing Sales Rule pro-
hibits (i) calls to people who placed their names on the Na-
tional Do Not Call Registry, (ii) calls to people who placed
their names on a vendor’s internal do-not-call list, and (iii)
“abandoned” calls (so named because a system that fails to
put the consumer in contact with a live person within two
No. 17-3111 3
seconds of the call connecting is deemed “abandoned”). See
16 C.F.R. §310.4(b)(1)(iii)(B), (A), and (b)(1)(iv). Those prohi-
bitions give rise to most of the issues.
The district judge found that DISH caused violations of
the Rule by engaging other entities to sell its service. As a
fallback, the judge concluded that the order-entry retailers
were DISH’s agents, which made DISH responsible whenev-
er any of these retailers called a person on any other retail-
er’s do-not-call list (or on DISH’s own). The district judge
added that DISH was liable for having provided substantial
assistance to one order-entry retailer, Star Satellite, in mak-
ing abandoned calls. The judge found that DISH itself placed
calls that violated the Rule. In addition, the district court
deemed DISH liable for the order-entry retailers’ violations
of the state statutes. The Telephone Consumer Protection
Act, §227(b)(1)(B), (c), and some state laws, which the district
court’s opinion collects, prohibit many prerecorded calls and
calls to persons on the FTC’s do-not-call registry.
We start with DISH’s challenge to the district court’s con-
clusion that it caused violations of statutes and regulations
just by hiring others to sell its services. One provision in the
Rule makes it unlawful for a seller to “cause a telemarketer
to engage in” violations. 16 C.F.R. §310.4(b). Neither the reg-
ulation nor any judicial decision addresses what “cause”
means. Plaintiffs maintain, and the district court found, that
“cause” occurs whenever an act plays any role in the chain of
acts leading to a violation. On this understanding the very
existence of DISH “causes” all violations by anyone who, in
the absence of satellite TV, would be in some other line of
work. DISH maintains, to the contrary, that “cause” means
“proximate cause,” a phrase that excludes some effects that
4 No. 17-3111
are remote from the violation. See Hemi Group, LLC v. New
York City, 559 U.S. 1 (2010) (applying a proximate-cause ap-
proach to civil RICO).
We are skeptical about both approaches. To engage a
contractor is to cause calls, but not necessarily violations, and
it is violations that the Rule prohibits a seller from causing. It
may be that some retailers will make forbidden calls, but
others will exceed the speed limit when driving, violate the
minimum wage laws, or steal customers’ funds. Would it
make sense to say that DISH caused those offenses just by
trying to sell TV service? The central question should be
“cause what?” rather than “cause” in the abstract. This is a
distinction that has been tackled for other bodies of law. For
example, recovering damages for a violation of the securities
law depends on establishing that the fraud caused a loss, not
just caused the transaction in which a loss occurred. See, e.g.,
Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc.,
552 U.S. 148 (2008); Dura Pharmaceuticals, Inc. v. Broudo, 544
U.S. 336 (2005). The plaintiffs do not argue, and the district
judge did not find, that DISH “caused” all violations in this
sense, as opposed to causing efforts to sell its services.
We need not come to a conclusion about the meaning of
“cause”, however, because the district court also found that
the order-entry retailers were DISH’s agents, making DISH
liable for their acts as a ma]er of state agency law. Liability
in favor of the state plaintiffs depends on the agency finding:
the state statutes and rules do not have a clause parallel to 16
C.F.R. §310.4(b), so we cannot avoid deciding whether the
order-entry retailers were DISH’s agents. If we agree with
the district judge that they were, that resolves most issues of
liability under both state and federal law. The debate about
No. 17-3111 5
“cause” would be dispositive only if we were to reject the
district judge’s agency ruling.
And DISH’s decision not to contest any of the district
judge’s findings of fact greatly simplifies this analysis, be-
cause the existence of an agency relation is a question of fact.
As with many factual issues the outcome depends on the
application of legal rules to facts—in legal jargon agency is a
“mixed question of law and fact”—but that does not open
the subject to the sort of plenary review available to ques-
tions of law. See, e.g., Pullman-Standard v. Swint, 456 U.S. 273(1982) (the existence of “discrimination” is a question of fact
even though the decision depends on legal rules).
We have held that existence of an agency relation is a
question of fact reviewed for clear error. See SpiH v. Proven
Winners North America, LLC, 759 F.3d 724, 732 (7th Cir. 2014);
Moriarty v. Glueckert Funeral Home, Ltd., 155 F.3d 859, 864 (7th
Cir. 1998). These decisions accord with the Supreme Court’s
view, most recently expressed in U.S. Bank, N.A. v. Village at
Lakeridge, LLC, 138 S. Ct. 960, 967–68 (2018), that deferential
rather than “legal” appellate review is appropriate when
case-specific factual considerations dominate. See also
Monasky v. Taglieri, 140 S. Ct. 719, 730 (2020).
DISH maintains that the district court legally erred when
it interpreted the contract between the order-entry retailers
and DISH. Interpretation presents a legal question in the ab-
sence of extrinsic evidence, of which there is none, but this
does not assist DISH because the district judge got it right.
The contract asserts that it does not create an agency rela-
tion, but parties cannot by ukase negate agency if the rela-
tion the contract creates is substantively one of agency. Re-
statement (Third) of Agency §1.02 (2006).
6 No. 17-3111
This contract (materially identical for all order-entry re-
tailers) gave DISH the right to control their performance.
Section 7.3 requires that “Retailer shall comply with all
Business Rules”. Section 1.6 provides a definition: “‘Business
Rule[]’ means any term, requirement, condition, condition
precedent, process or procedure associated with a Promo-
tional Program or otherwise identified as a Business Rule by
[DISH] … [DISH] has the right to modify any Business Rule
at any time and from time to time in its sole and absolute
discretion for any reason or no reason, upon notice to Retail-
er.” These provisions gave DISH complete control over the
order-entry retailers’ performance. What’s more, these re-
tailers acted directly for DISH, entering orders into DISH’s
system; they did not have their own inventory and were not
resellers of any kind. Under normal principles, they were
DISH’s agents notwithstanding the contractual disclaimer.
Next in line: is DISH liable as a principal for failing to en-
sure that it and all of its agents shared a single internal do-
not-call list? The relevant portion of the Telemarketing Sales
Rule, 16 C.F.R. §310.4(b)(1)(iii)(A), forbids calling a person
who “previously has stated that he or she does not wish to
receive an outbound telephone call made by or on behalf of
the seller whose goods or services are being offered”. Be-
cause the order-entry retailers were DISH’s agents, DISH
and the order-entry retailers were collectively one “seller
whose goods or services are being offered”. This meant that
they had to act collectively; otherwise any household could
receive endless calls peddling DISH’s service, as long as each
came from a different order-entry retailer. (The calls from
the order-entry retailers were made within the scope of their
agency; we need not consider whether coordination is re-
No. 17-3111 7
quired when someone who is not acting as a traditional
agent places a call.)
The same analysis applies to the Ohio statute. It makes li-
able any party who either directly or as a result of a third
party acting on its behalf engaged in unfair, deceptive, and
unconscionable consumer sales practices. Ohio Rev. Code
§§ 1345.02(A), 1345.03(A). Calling people on internal do-not-
call lists violates this rule, and as with the Telemarketing
Sales Rule, the order-entry retailers were the sort of agents
required to coordinate lists with DISH. The order-entry re-
tailers were acting on behalf of DISH for this purpose.
DISH contends that, if it is liable for failure to coordinate
the do-not-call lists, this is a continuing violation whose
penalty is capped by 15 U.S.C. §45(m)(1)(C): “In the case of a
violation through continuing failure to comply with a rule or
with [subsection (a)(1)], each day of continuance of such
failure shall be treated as a separate violation”. The district
court disagreed with this contention and treated each call,
rather than each day, as a violation. The Supreme Court has
not yet examined this provision, nor has any court of ap-
peals in a published opinion. The Court has held that a simi-
lar provision, §45(l), allows the government to seek a daily
penalty for a continuing violation of a consent order to not
acquire other bakeries (the defendant acquired a bakery and
retained it). United States v. ITT Continental Baking Co., 420
U.S. 223 (1975). That conclusion offers limited aid for our
situation, as it’s not clear whether a failure to coordinate lists
is at all like a failure to divest a bakery.
Let us return to the text of the Rule. It prohibits sellers
from “causing” a telemarketer to initiate “any outbound tel-
ephone call to a person” who “previously has stated that he
8 No. 17-3111
or she does not wish to receive an outbound telephone call
made by or on behalf of the seller whose goods or services
are being offered”. 16 C.F.R. §310.4(b)(1)(iii)(A). This tells us
that the violation is the call, not the failure to coordinate in-
ternal do-not-call lists. Lack of coordination may lead to for-
bidden calls, but the absence of coordination is not itself a
legal wrong. As long as sellers do not call people who have
asked not to be called, they have satisfied their legal obliga-
tion. This implies that “such failure” in §45(m)(1)(C) refers to
each call. A call that lasted multiple days would count as one
violation per day; otherwise there is one violation per call.
Cf. National Railroad Passenger Corp. v. Morgan, 536 U.S. 101(2002) (distinguishing between discrete violations of Title VII
of the Civil Rights Act and continuous “hostile work envi-
ronment” violations). No one has sought enhanced penalties
for multi-day calls, and because the call is the violation
§45(m)(1)(C) does not cut down liability to one penalty per
day.
Some of the order-entry retailers’ calls were wrongful in-
dependent of the list-coordination issue. These include calls
to people on the National Do Not Call Registry, calls to peo-
ple on the order-entry retailers’ own internal lists, and aban-
doned calls, as well as some calls that violated state though
not federal rules. The norm of agency is that a principal is
liable for the wrongful acts of the agent taken within the
scope of the agency—that is, the authority to complete the
task assigned by the principal. See Restatement (Third) of
Agency §7.08. A principal that learns of illegal behavior
commi]ed by its agents, chooses to do nothing, and contin-
ues to receive the gains, is liable for the agent’s acts. See
NECA-IBEW Rockford Local Union 364 Health & Welfare Fund
v. A & A Drug Co., 736 F.3d 1054, 1059 (7th Cir. 2013).
No. 17-3111 9
The order-entry retailers were authorized to sell DISH’s
service by phone nationwide. In exercising that authority the
order-entry retailers violated the prohibitions mentioned in
the preceding paragraph, and the district court found that
DISH knew about these retailers’ wrongful acts (a factual
finding not challenged on appeal). This is enough to make
DISH liable as the principal.
Its primary argument against liability is that the contracts
told the order-entry retailers to follow all applicable laws.
DISH points to Bridgeview Health Care Center, Ltd. v. Clark,
816 F.3d 935 (7th Cir. 2016), as support for its position that
such an instruction averts liability. In Bridgeview a small
business explicitly told a marketing firm to send unsolicited
fax ads to about 100 entities around Terre Haute. The firm
sent, in addition to the local faxes, more than 4,500 faxes to
businesses around Indiana and surrounding states without
the small business’s knowledge or permission. We held that
the small business was liable for the 100 authorized faxes but
not for the unauthorized ones.
Bridgeview does not stand for the proposition that generic
instructions to follow the law immunize a principal from li-
ability resulting from its agent’s illegal acts, taken within the
scope of authority. Instead it shows that acts outside of an
agent’s authority do not generate liability for the principal.
The faxes were not unauthorized because they were illegal
(the authorized faxes were also illegal). They were unauthor-
ized because the principal did not give the agent authority to
send them and lacked any knowledge of the agent’s unau-
thorized actions. We added that the extra faxes did not ben-
efit the small business, which did not sell its products out-
10 No. 17-3111
side of Terre Haute. Principals are not liable for acts that
gratify an agent’s desires at the principals’ expense.
DISH’s agents, by contrast, acted within their authority
to sell TV service using phone calls, and those acts benefi]ed
DISH. The district court found that DISH knew what the or-
der-entry retailers were doing. That is enough for DISH to be
liable for the order-entry retailers’ illegal calls under those
federal and state laws that extend beyond the failure to co-
ordinate internal do-not-call lists.
We have one remaining question of liability. The district
court found DISH liable under §310.3(b) of the Telemarket-
ing Sales Rule for “substantially assisting” Star Satellite in
making abandoned calls. This effectively means that the dis-
trict court held DISH liable twice per abandoned call: once
for making the call (through an agent) and once for assisting
that agent. Then the district court declined to count the calls
twice in calculating the penalty, so it is not clear why DISH
bothers to protest.
To the extent that the “substantial assistance” finding
affected the district court’s exercise of discretion in selecting
the penalty, however, the finding may ma]er—and it was
mistaken. Section 310.3(b) says: “It is a deceptive telemarket-
ing act or practice and a violation of this Rule for a person to
provide substantial assistance or support to any seller or tel-
emarketer when that person knows or consciously avoids
knowing that the seller or telemarketer is engaged in any act
or practice that violates [other provisions of the Rule].”
While DISH is a “person” as defined in §310.2 of the Rule,
context shows that the sort of “person” to which this prohi-
bition applies is one that assists a “seller” or “telemarketer.”
Yet DISH is the seller for this purpose; as the principal to the
No. 17-3111 11
order-entry retailers, it is treated as the seller for all of their
calls.
Section 310.3 does not create liability for assisting oneself.
Such liability is possible in theory: Employee A could assist
Employee B of the same entity to make a wrongful call.
Longstanding principles require treating the employer and
its employees as one entity, however. Copperweld Corp. v. In-
dependence Tube Corp., 467 U.S. 752 (1984). When an entity is
vicariously responsible for another’s acts (as a corporation is
vicariously for the acts of its employees, and DISH is vicari-
ously responsible for the acts of the order-entry retailers), it
makes li]le sense to treat the entity as assisting itself. It
would take clearer language than §310.3(b) to support such a
conclusion. The district court therefore should not have held
DISH liable for “substantially assisting” its own agents.
We move to DISH’s statutory defenses. Liability is possi-
ble under 15 U.S.C. §45(m)(1)(A) only if a violator of regula-
tions promulgated under the Federal Trade Commission Act
(such as the Telemarketing Sales Rule) has either “actual
knowledge or knowledge fairly implied on the basis of ob-
jective circumstances that such act is unfair or deceptive and
is prohibited by such rule.” DISH contends that it cannot be
liable under this standard for three reasons. First, it did not
know of each individual call placed by the order-entry re-
tailers (a mistake of fact). Second, it did not know that it
would be liable for the actions of the order-entry retailers
(another mistake of fact, given our holding that agency is a
factual ma]er). Third, it did not know that it lacked an “es-
tablished business relationship” with customers who had
stopped paying their bills before DISH disconnected their
service (a mistake of law).
12 No. 17-3111
The mistake-of-fact defense is weak. The knowledge of
the agent is imputed to the principal. As the district court
found, the order-entry retailers knew that they were making
millions of calls, and they were making those calls to gain
customers for DISH. Therefore, DISH knew of the calls as
well. Restatement (Third) of Agency §5.03; National Production
Workers Union Insurance Trust v. Cigna Corp., 665 F.3d 897,
903 (7th Cir. 2011). And DISH’s failure to understand this
rule of agency law—that is, its mistaken belief that a dis-
claimer in the contract could avoid liability—does not pro-
vide a defense under this statutory language.
Can a party avoid liability under the Federal Trade Com-
mission Act for a mistake of law? Traditionally, ignorance of
the law is no excuse. But §45(m)(1)(A) includes a variation on
an ignorance-of-the-law defense; a business can be liable on-
ly if it either knew that the act was unlawful or if it should
have known the act was unlawful (“knowledge fairly im-
plied”). See Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich
L.P.A., 559 U.S. 573, 583–84 (2010). See also United States v.
National Financial Services, Inc., 98 F.3d 131, 139 (4th Cir.
1996).
But the state of DISH’s knowledge is yet another factual
question, and DISH has not challenged any finding of fact.
The district court found that DISH had at least implied
knowledge that the order-entry retailers were its agents and
therefore would be liable for their actions. The district court
concluded that DISH knew that it had control over the or-
der-entry retailers and knew, too, that they were making un-
lawful calls. That was enough for DISH to be aware that it
could be liable. A large national corporation with the ability
No. 17-3111 13
to hire sophisticated counsel is deemed to know basic prin-
ciples of agency law.
Still, DISH argues, it did not know the legal definition of
an “established business relationship” under 16 C.F.R.
§310.2(q)(1). A business can call a customer with whom it
has an “established business relationship” without regard to
the National Do Not Call Registry or its internal do-not-call
lists. 16 C.F.R. §310.4. An “established business relationship”
depends on “the consumer’s purchase, rental, or lease of the
seller’s goods or services or a financial transaction between
the consumer and seller, within the eighteen (18) months
immediately preceding the date of a telemarketing call”. 16
C.F.R. §310.2(q)(1). DISH asserts that the regulation treats a
business relation as “established” through the last date a
product was delivered. DISH points to this comment, which
accompanied the Rule:
The amended [Telemarketing Sales] Rule allows for an 18-month
time limit where there has been a purchase, rental or lease, or
other financial transaction between the customer and seller. The
18-month time limit for an “established business relationship”
based on a purchase, lease, rental, or financial transaction runs
from the date of the last payment or transaction, not from the
first payment. In instances where consumers pay in advance for
future services (e.g., purchase a two-year magazine subscription
or health club membership), the seller may claim the exemption
for 18 months from the last payment or shipment of the product.
68 Fed. Reg. 4361, 4593 (Jan. 29, 2003). DISH contends that
this entitled it to start the 18-month period on the date it dis-
connected a customer’s service, even if that date came after
the customer’s subscription expired for lack of payment. The
district court, by contrast, used the customer’s final payment
as the start of the 18-month window.
14 No. 17-3111
We agree with the district court: the Rule shows that
DISH needed to use the last date of payment. The text of the
Rule starts the 18-month clock from the date a consumer
purchases, rents, or leases the seller’s goods or services. This
makes 18 months from the last payment the terminal date.
The contrary statement in the Federal Register (if it really is
contrary) does not purport to interpret any of the Rule’s text.
An agency’s reasonable interpretation of ambiguous regula-
tions may be entitled to deference. Kisor v. Wilkie, 139 S. Ct.
2400 (2019). But this Rule is not ambiguous. To the extent
that the Federal Trade Commission’s comments are incon-
sistent with the Rule’s text, the text prevails.
Finally, we move to damages.
DISH argues that the federal and state telemarketing
laws violate the Due Process Clause of the Fifth Amendment
because they fail to provide notice of potentially whopping
penalties. This argument supposes that government must
provide some notice on top of the statutes and rules them-
selves, but why? There’s nothing ambiguous about them. If
there is a problem, it isn’t lack of notice.
DISH’s other constitutional contention is that the maxi-
mum penalties allowed by the Telemarketing Sales Rule, the
Telephone Consumer Protection Act, and the related state
laws, substantively violate the Due Process Clause because
they are too high. The maximum penalty is $10,000 per vio-
lation. Multiply this by the 66 million violations the district
judge found and you get $660 billion. That’s a huge number,
but it is not possible to evaluate it separately from the penal-
ty per violation, which is a normal number for an intentional
wrong. Legislatures have “a wide latitude of discretion” to
set civil penalties. St. Louis, Iron Mountain & Southern Ry. v.
No. 17-3111 15
Williams, 251 U.S. 63, 66 (1919). Someone whose maximum
penalty reaches the mesosphere only because the number of
violations reaches the stratosphere can’t complain about the
consequences of its own extensive misconduct.
A complaint about how the district judge exercised her
discretion could in principle fare be]er. An award of $660
billion for the conduct in which DISH engaged would be
impossible to justify—though a court of appeals could say
that without reaching any constitutional argument. (Pruden-
tial arguments, such as a contention that a judge abused her
discretion, come ahead of constitutional points. See, e.g.,
New York City Transit Authority v. Beazer, 440 U.S. 568, 582
(1979).) But the district court did not award $660 billion or
anything close to it. The award is $280 million, closer to $4
than to $10,000 per improper call. This could be a constitu-
tional problem only if a combination of compensatory and
punitive damages adding to $4 violated the Due Process
Clause. Yet if an unwanted call causes even $1 of harm, the
“punitive” multiplier (around 3) likely comes within the
Constitution’s limit. See State Farm Mutual Auto Insurance Co.
v. Campbell, 538 U.S. 408, 425 (2003) (questioning whether a
punitive damages multiplier beyond nine can satisfy the
Due Process Clause).
Still, as we have mentioned, statutory questions and an
evaluation of the judge’s use of discretion must precede any
constitutional decision. The Federal Trade Commission Act
requires that “[i]n determining the amount of such a civil
penalty, the court shall take into account the degree of cul-
pability, any history of prior such conduct, ability to pay,
effect on ability to continue to do business, and such other
ma]ers as justice may require.” 15 U.S.C. §45(m)(1)(C). The
16 No. 17-3111
Telephone Consumer Protection Act does not include a pro-
vision that a court should consider a violator’s ability to pay.
One of the state statutes (Cal. Bus. & Prof. Code §17206) in-
structs courts to consider the violator’s ability to pay, but the
others do not. Yet the district court based the penalty entire-
ly on DISH’s ability to pay, se]ing it at 20% of a year’s
profits. That’s a problem, especially under statutes that do
not include ability to pay as even a permissible factor.
Normally the legal system bases civil damages and pen-
alties on harm done, not on the depth of the wrongdoer’s
pocket. Legislatures can change this norm, and two of the
statutes underlying this penalty permit consideration of
wealth—though none permits it to be the sole factor. It is
hard for us to see a justification, even under these two stat-
utes, for starting from the defendant’s wealth rather than
harm. We appreciate that the district judge tried to ensure
that the penalty was within a constitutionally allowable
range, but the best way to do this is to start from harm rather
than wealth, then add an appropriate multiplier, after the
fashion of the antitrust laws (treble damages) or admiralty
(double damages), to reflect the fact that many violations are
not caught and penalized. See, e.g., Exxon Shipping Co. v.
Baker, 554 U.S. 471 (2008) (admiralty); Reiter v. Sonotone Corp.,
442 U.S. 330 (1979) (antitrust); Beard v. Wexford Health Sources,
Inc., 900 F.3d 951, 956 (7th Cir. 2018); Zazú Designs v. L’Oréal,
S.A., 979 F.2d 499, 505–06 (7th Cir. 1992).
The judgment of the district court is affirmed, except for
its holding that DISH is liable for “substantially assisting”
Star Satellite and its measure of damages. With respect to
those ma]ers, the judgment is vacated, and the case is re-
manded for further proceedings consistent with this opinion.