Court Opinion

ID: 6331286
Source: CourtListenerOpinion
Date Created: 2022-04-13 20:01:06.355475+00
Date Added: 2024-06-11T09:23:09.676920
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        APR 5 2022
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

JOHN MCCURLEY; DAN DEFOREST,                    No.    21-55099
individually and on behalf of all others
similarly situated,                             D.C. No.
                                                3:17-cv-00986-BAS-AGS
                Plaintiffs-Appellants,

 v.                                             MEMORANDUM*

ROYAL SEAS CRUISES, INC.,

                Defendant-Appellee.

                   Appeal from the United States District Court
                      for the Southern District of California
                   Cynthia A. Bashant, District Judge, Presiding

                       Argued and Submitted March 8, 2022
                              Pasadena, California

Before: WARDLAW and HURWITZ, Circuit Judges, and ROSENTHAL,**
District Judge.

      Royal Seas Cruises, Inc., hired Prospects DM, Inc., to generate leads and

initiate telephone calls to prospective consumers for cruise packages. The issue for

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The Honorable Lee H. Rosenthal, Chief United States District Judge
for the Southern District of Texas, sitting by designation.
decision is whether Royal Seas is liable under the Telephone Consumer Protection

Act (“TCPA”) for prerecorded voice calls made by Prospects to those, including

plaintiffs John McCurley and Dan Deforest, who had not given prior express consent

to be called. See Van Patten v. Vertical Fitness Grp., LLC, 847 F.3d 1037, 1041

(9th Cir. 2017) (citing 47 U.S.C. § 227(a)(5); id. § 227(b)(1)(A)(iii)) (explaining

TCPA violations). The district court granted summary judgment to Royal Seas. We

have jurisdiction over the plaintiffs’ appeal under 28 U.S.C. § 1291. Reviewing de

novo, Bell v. Wilmott Storage Servs., LLC, 12 F.4th 1065, 1068 (9th Cir. 2021), we

affirm in part and reverse in part.

      1. Waiver. Our “general rule” is that “an issue may not be raised for the first

time on appeal.” United States v. Carlson, 900 F.2d 1346, 1349 (9th Cir. 1990).

Royal Seas argues that the plaintiffs waived their argument that it is vicariously

liable for Prospects’s TCPA violations because the plaintiffs did not allege vicarious

liability in their pleadings. Alternatively, Royal Seas argues that the plaintiffs

waived any arguments about actual and apparent authority because they asserted

only ratification as the basis for vicarious liability in their motion for summary

judgment and in their response to Royal Seas’s cross-motion.

      The plaintiffs did not waive their vicarious liability arguments based on a

failure to specifically allege them in the consolidated complaint. To avoid waiver

by failing to plead an issue, plaintiffs may “make known during discovery their

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intention to pursue recovery on the . . . theory omitted from their complaints.”

Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000). Royal Seas had

ample notice of, and opportunity to develop facts about, the actual and apparent

authority and the ratification theories the plaintiffs asserted. Notice of these theories

came from the plaintiffs’ class certification motion filed in July 2018 and the district

court’s class certification order issued in March 2019, both long before discovery

closed in February 2020. The plaintiffs also presented arguments on apparent

authority and ratification in their motion for summary judgment. We hold, however,

that the plaintiffs did waive an actual authority theory of vicarious liability by failing

to assert it either in their pleadings or at summary judgment. See Padgett v. Wright,

587 F.3d 983, 985 n.2. (9th Cir. 2009) (per curiam). None of the narrow exceptions

to waiver applies. See Carlson, 900 F.2d at 1349.

      2. Nondelegable Duty.          The plaintiffs argue that Royal Seas had a

nondelegable duty under the TCPA to ensure that Prospects had prior express

consent for each call it made to solicit potential customers for Royal Seas.1

      We disagree. The Federal Communications Commission (“FCC”), the agency

responsible for implementing the TCPA, instructs that the relationship between a

      1
        The plaintiffs did not present this argument at summary judgment; however,
because it is a pure question of law, we may address it. Carlson, 900 F.2d at 1349;
see also In re Mercury Interactive Corp. Secs. Litig., 618 F.3d 988, 992 (9th Cir.
2010) (“[W]aiver is a discretionary, not jurisdictional, determination.”).

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seller and a telemarketer should be assessed under federal common law agency

principles. In re Joint Petition Filed by Dish Network, LLC, 28 F.C.C. Rcd. 6574,

6574 (May 9, 2013). Our precedent defers to the FCC’s interpretation that the TCPA

requires vicarious liability, not strict liability. Henderson v. United Student Aid

Funds, Inc., 918 F.3d 1068, 1072 (9th Cir. 2019).           The plaintiffs present no

compelling reason why we should change that position. See Campbell-Ewald Co. v.

Gomez, 577 U.S. 153, 168 (2016).

      3. Vicarious Liability. The plaintiffs also argue that Royal Seas is vicariously

liable for Prospects’s placements of prerecorded voice calls to individuals without

their prior express consent. The plaintiffs rely on apparent authority and ratification.

      “Apparent authority is the power held by an agent or other actor to affect a

principal’s legal relations with third parties when a third party reasonably believes

the actor has authority to act on behalf of the principal and that belief is traceable to

the principal’s manifestations.”      RESTATEMENT (THIRD)        OF   AGENCY § 2.03.

Ratification is “the affirmance of a prior act done by another, whereby the act is

given effect as if done by an agent acting with actual authority.” Id. § 4.01(1). “A

person ratifies an act by (a) manifesting assent that the act shall affect the person’s

legal relations, or (b) conduct that justifies a reasonable assumption that the person

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so consents.” Id. § 4.01(2).2 A principal assumes the risk of lack of knowledge and

may be found willfully ignorant if “the principal is shown to have had knowledge of

facts that would have led a reasonable person to investigate further, but the principal

ratified without further investigation.” Id. § 4.06 cmt. d.

      The record does not support a finding that Prospects had apparent authority

from Royal Seas to call nonconsenting individuals. When Prospects placed calls, it

asked an individual who answered “qualifying questions” about products and

services that ranged from home improvement to medical equipment to leisure

packages, including cruises. Royal Seas approved the scripts used, but no script is

in the record. There is no record evidence of whether, or when, between making the

phone call and transferring the individual answering to a live person at Royal Seas,

Prospects stated that it was calling on behalf of a third party or mentioned “Royal

Seas.” Cf. Salyers v. Metro. Life Ins. Co., 871 F.3d 934, 940–41 (9th Cir. 2017).

There is no basis to find that the person answering a Prospects call would reasonably

believe that Prospects was acting on behalf of Royal Seas before the point of the

transfer. We affirm the district court’s grant of summary judgment in favor of Royal

      2
          An act is ratifiable “if the actor acted or purported to act as an agent on the
person’s behalf.” Id. § 4.03. Although the scope of its agency is in dispute,
Prospects is at least an agent of Royal Seas for the purpose of generating leads. See
Kristensen v. Credit Payment Servs. Inc., 879 F.3d 1010, 1015 (9th Cir. 2018)
(because Click Media contracted with AC Referral to generate leads for prospective
customers, AC Referral was an agent of Click Media for the purpose of the
ratification analysis).

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Seas as to apparent authority.

      But that does not end the inquiry. Drawing reasonable inferences in the light

most favorable to the plaintiffs, Ironhawk Techs., Inc. v. Dropbox, Inc., 2 F.4th 1150,

1159 (9th Cir. 2021), there is a material dispute of fact as to whether Royal Seas

ratified Prospects’s acts. Royal Seas had knowledge of facts that would have led it

to investigate Prospects’s lead-generation activities to determine if it was calling

only consenting individuals, but instead accepted leads generated by Prospects’s

calls with scant investigation. Royal Seas knew that Prospects placed calls using

prerecorded voices, a prima facie violation of the TCPA. Royal Seas also knew that

it received 2.1 million warm-transferred calls from Prospects between January 2017

and June 2018. Royal Seas knew that TCPA compliance required each call to be to

an individual who had previously “agreed” to be called by Royal Seas by clicking

“next” after submitting personal contact information and seeing a consent box on

websites such as www.diabeteshealth.info and www.yourautohealthlifeinsurance-

.com. Royal Seas knew that the calls Prospects placed to individuals who had

allegedly consented by checking forms on the website www.diabeteshealth.info

generated 80,081 warm transfers to Royal Seas in 2017. The plaintiffs submitted

expert testimony that this number of transfers, which was only a subset of the calls

Prospects placed, from this lead-generation website during this period is implausible

at best. The expert testimony also addressed several other websites responsible for

                                          6
generating the 2.1 million transfers, such as www.123FreeTravel.com, and

concluded that the volume of traffic to these sites, much less the number of leads

from consenting individuals that could be reasonably harvested from them, was very

low.

       Royal Seas also knew that of the 560 customers whom Prospects warm-

transferred and who made purchases from Royal Seas, 13 percent had phone

numbers that did not match the customer consent data that Prospects had provided

to Royal Seas, and 31 percent did not have a matching phone number and last name.

The amount of mismatched data in the record cannot all be explained by data-entry

errors or family members with different last names. The number for one of the

named plaintiffs, John McCurley, for example, was associated with the name “Jose

Fernandez.” There is evidence that Royal Seas’s employees knew of the

discrepancies because when they spoke with the transferred customers, because they

addressed the customers by the first name that Prospects provided.

       These facts, in combination with the evidence of widespread TCPA violations

in the cruise industry, would support a finding that Royal Seas knew facts that should

have led it to investigate Prospects’s work for TCPA violations. See Henderson,

918 F.3d at 1076. We reverse the district court’s summary judgment in favor of

Royal Seas as to ratification.

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AFFIRMED in part, REVERSED in part, and REMANDED.   Each party to

bear its own costs.

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