Opinion ID: 3009507
Heading Depth: 4
Heading Rank: 4

Heading: AT&T's final secondary liability argument

Text: Finally, AT&T appears to argue that Winback should be liable as a matter of law for the torts of its sales representatives, regardless of whether they are agents and regardless of whether they acted with apparent authority. AT&T continually refers in its brief to the inequities of the district court's decision. But the law it cites to support this broad theory of secondary liability exists in copyright cases.21 The 20 . When a plaintiff relies on apparent authority, it also must establish that the third party relied on the agency relationship in making its purchasing decision. Sears Mortgage Corp., 634 A.2d at 82. In this regard, Winback argues that the representatives held themselves out as AT&T and not as Winback. The district court held that [t]he proofs before the Court are extremely unclear as to whether or not the sales representatives hold themselves out to be [Winback] in making the solicitations or whether or not [Winback] knowingly permits its name to be used in the course of solicitations without qualification from the representatives that they are independent marketing agencies engaged to sell and promote the Winback program on behalf of [Winback]. Winback, 851 F. Supp. at 628 n.5. Because these questions are crucial in this case -- in order to determine not only reliance, but also the extent to which the principal held the representatives out to the public as its alter ego -- the district court may wish to hear additional evidence upon remand. 21 . Along with citing the copyright cases, AT&T points to the Seventh Circuit Court of Appeals' decision in First Nat'l Bank of Cicero v. Lewco Sec. Corp., 860 F.2d 1407 (7th Cir. 1988). AT&T argues in its brief: As one Court said, where the principal cannot embrace a transaction except through the acts of an unsupervised agent, the principal Court of Appeals for the Seventh Circuit has summed up the law in these cases as follows: [A] defendant is vicariously liable for copyright infringement if it has 'the right and ability to supervise the infringing activity and also has a direct financial interest in such activities.' Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159, 1162 (2d Cir. 1971); F.E.L. Publications, Ltd. v. National Conf. of Catholic Bishops, 466 F. Supp. 1034, 1040 (N.D. Ill. 1978); see also Dreamland Ball Room, Inc. v. Shapiro, Bernstein & Co., 36 F.2d 354, 355 (7th Cir. 1929) (owner of dance hall liable for copyright violations by band hired to entertain paying customers); Famous Music (..continued) must accept the consequences of the agent's misconduct because it was the principal who allowed the agent to operate without accountability. Courts have found an agent to be a sole actor for his principal when 'the whole procedure . . . was entrusted by [the principal] to the initiation and execution of the agent . . .' AT&T brief at 30 (quoting Cicero, 860 F.2d at 1417-18). AT&T continues: Yet that is exactly what Winback has done here. Indeed, it is difficult to imagine a situation where a representative shoulders responsibility more completely for the promotional marketing of its principal than a Winback representative, for Winback's agents are entrusted with the entire marketing responsibility for Winback. AT&T brief at 30. AT&T fails to mention that the court's holding was predicated on a finding that the agent was an adverse agent. See Cicero, 860 F.2d at 1417 (Where an adverse agent is also the sole representative of the principal in the transaction in question, the principal may . . . be charged with the agent's knowledge.) (citing 3 W. Fletcher, Corporations § 827 at 153-62 (1975)). The court explained that [t]he adverse agent exception . . . comes into play where the agent's interests are shown to be adverse to those of his principal. Id. AT&T does not even attempt to argue that Winback's representatives were adverse agents; therefore, AT&T's reliance on Cicero is misplaced. Corp. v. Bay State Harness Horse Racing & Breeding Ass'n, 554 F.2d 1213, 1215 (1st Cir. 1977) (owner of racetrack liable for copyright violations by company hired to supply music over public address system). The purpose of the doctrine is to prevent an entity that profits from infringement from hiding behind undercapitalized 'dummy' operations when the copyright owner eventually sues. Shapiro, Bernstein, 316 F.2d at 309. Hard Rock Cafe, 955 F.2d at 1150. AT&T's theory would go well beyond agency theory, for it would not rely on situations where the agent is acting on behalf of the principal or as the principal's alter ego. AT&T's argument -- which attempts to have secondary liability under the Lanham Act parallel secondary liability under the copyright laws -- is remarkable in light of the fact that the Supreme Court has rejected precisely this argument. The Court explicitly has held that secondary liability for trademark infringement must be drawn more narrowly than secondary liability for copyright infringement. Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 439 n.19, 104 S.Ct. 774, 787 n.19 (1984). The Court made that statement while observing the 'fundamental differences between copyright law and trademark law.' Id. (internal quotation and citations omitted). To adopt AT&T's argument would entail ignoring the Supreme Court's warning, and would require us to base secondary liability on a theory that goes beyond any common law doctrine of vicarious liability.22 We decline to do so. 22 . AT&T also argues that Winback should be held liable under the joint tortfeasor test enunciated in Hard Rock Cafe. In that case, the Court of Appeals for the Seventh Circuit held that