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Telemarketers gone wild: FTC violations and indecent behavior

After relentlessly calling people on the “Do Not Call List,” Dish Network is being forced to pay $280 million to the U.S. Government and several states, including North Carolina, for its telemarketing tactics.

In the time of landlines when cellphones had not yet taken over, there existed a nuisance persisting since the 1970s that thrived on prospective consumers of the auspicious dinnertime hour.  Upon the arrival of the most opportune moment to shamelessly interrupt the most cherished time of a household’s day, when its members were united in conversation and familial bond, these predators audaciously beckoned their call to lure some helpless individual to an utmost deception disguised by the hollow hope for a familiar voice.  The unfortunate soul that should fall victim to their trap would quickly realize that all hopes were lost because at the other end of the line, which had them hooked by the ear, was a merciless sales representative—or worse, an automated message—ready to make a pitch in exchange for credit card numbers.  Anger ensued and another night ruined, all by the hand of some company’s telemarketing agency.

In efforts to avoid these unsolicited encounters, people installed Caller I.D. devices to better pick and choose what calls to answer.  More recently, many customers have given up their landlines completely, relying entirely on cellphones.  Yet despite such action, telemarketers seem to always find their way back to their targets, like a horsefly incessantly dodging the fatal hand that feeds.

Recognizing the people’s frustration, the U.S. Federal Trade Commission (FTC) launched the National Do Not Call Registry in June 2003, which allows consumers who wish to reduce the amount of telemarketing calls they receive to place their telephone numbers on a list which is supposedly off–limits to telemarketing agencies.  More than 50 million phone numbers were registered before its October 2003 effective date.  The pest had finally been exterminated—or so it seemed.

Dish “did nothing to monitor, much less enforce” SSN’s compliance with telemarketing laws, and it “repeatedly looked the other way” when it learned of SSN’s noncompliance.

A class action suit represented by Charleston, West Virginia firm, Bailey & Glasser, against Dish Network, revealed that one of the company’s dealers, Satellite Systems Network (SSN), was making telemarketing calls to thousands of numbers registered on the Do Not Call list.  The 18,000 class members, led by class representative Dr. Thomas Krakauer of Bahama, North Carolina, alleged that SSN made over 51,000 calls on Dish’s behalf to class members in violation of the Telephone Consumer Protection Act (TCPA).  All 51,000 claims were tried in a single, five–day trial, marking the first and only jury trial for a certified class of consumers alleging Do Not Call violations.

Dish argued that it was too difficult to identify who was on the Do Not Call list and that the plaintiff’s expert misunderstood its records.  For example, Dish submitted sworn statements to the Court that the “DNC” code on its internally kept Do Not Call list did not mean “do not call,” but instead meant that the associated number was a hot sales prospect, and the sales agent who flagged it “DNC” was telling other salespeople not to steal it.

“Dish’s denial of responsibility and lack of regard for consumers are deeply disturbing and support the inference that it is reasonably likely that Dish will allow future illegal calls absent government pressure.”

In her opinion issued just last month, federal Judge Catherine C. Eagles of the Middle District of North Carolina rendered a judgment against Dish Network and awarded the plaintiffs treble damages in the amount of $1,200 per call, totaling approximately $61 million.  Judge Eagles found that SSN was acting as Dish’s agent when it made the illegal calls and rejected Dish’s arguments, stating Dish “did nothing to monitor, much less enforce” SSN’s compliance with telemarketing laws, and it “repeatedly looked the other way” when it learned of SSN’s noncompliance.

In addition to the class action suit led by Dr. Krakauer, North Carolina was also involved in a separate lawsuit against Dish Network initiated by the Federal Trade Commission in 2009.  The FTC, Department of Justice, and the Attorneys General of California, Illinois, Ohio, and North Carolina took the company to court, alleging violations of the TCPA and multiple state laws.  The suit occurred after the company settled with 46 states for allegedly violating Do Not Call rules.  In particular, the plaintiffs claimed Dish made more than 55 million illegal calls to numbers on the Do Not Call list.  After eight years of litigation, a verdict was finally rendered in favor of the plaintiffs in the U.S. District Court for the Central District of Illinois, ordering Dish Network to pay $280 million in penalties.

U.S. District Judge Sue Myerscough, presiding over the matter, required Dish to pay the U.S. Government $168 million and $112 million to the four states with standing, including California, Illinois, Ohio, and North Carolina.  Despite Dish’s pleas of poverty and an inability to pay the large amount, which the Court concluded were on the “borders of preposterous,” Judge Myerscough deemed the judgment fair, ruling that “the injury to consumers, the disregard for the law, and the steadfast refusal to accept responsibility require a significant and substantial monetary award.”  The Court expressed particular concern about the company’s attitude toward people who complained about unwanted calls: “Dish’s denial of responsibility and lack of regard for consumers are deeply disturbing and support the inference that it is reasonably likely that Dish will allow future illegal calls absent government pressure.”

[T]he recent outcomes against Dish Network, a giant in the corporate and telemarketing world, prove that the practice is not without regulation, and that such regulations will be enforced.

In order to prevent Dish’s marketing personnel from reverting to their illegal practices, the Court imposed four notable injunctive provisions.  The first requires Dish to demonstrate that the company and its primary retailers are complying with the Telephone Consumer Protections Act and have made no pre–recorded calls during the five years preceding the order’s effective date.  “If Dish fails to prove that it meets this requirement, it will be barred from conducting any outbound telemarketing for two years, and if Dish fails to prove that the [p]rimary [r]etailers meet this requirement, Dish shall be barred from accepting orders from such [p]rimary [r]etailer for two years.”  Another injunction states that Dish must hire a telemarketing compliance expert to prepare a plan to ensure that the company and its primary retailers are honoring telemarketing laws and the Court’s order.

A third injunctive provision allows the federal and state plaintiffs to ask the Court to approve unannounced inspections of the facilities and records of Dish or its primary retailers.  Finally, twice a year for a ten–year period, Dish must send telemarketing compliance material to the federal and state plaintiffs, including all outbound telemarketing call records.  Whether acting directly or through authorized telemarketers or retailers, Dish is prohibited from violating the TCPA.

Of the $280 million damages award, which marks the largest Do Not Call related penalty ever, North Carolina will receive $18.6 million.  In a news release on the issue, North Carolina Attorney General Josh Stein announced that some of that award will go to North Carolina schools.  “The do–not–call registry was created to prevent this type of aggressive telemarketing,” Attorney General Stein said.  “My office will bring action against companies that try to circumvent these laws and contact people who have signed up for the registry.”

Although telemarketing remains a popular method for companies to solicit consumers, more and more people are beginning to take a stand against the harassment that frequently occurs.  The incessant calls at inconvenient hours that now plague even cellphones perpetuate the annoying reputation telemarketing agencies seem to wear so proudly;  however, the recent outcomes against Dish Network, a giant in the corporate and telemarketing world, prove that the practice is not without regulation, and that such regulations will be enforced.  The first step for those wishing to avoid telemarketers is to add their telephone number to the Do Not Call list, available through the FTC’s website.  For North Carolina and its residents in particular, perhaps the large awards from Dish Network will act as an illumination for other bad–practicing telemarketing agencies, ready to zap upon contact like a horsefly in the night.

Katie King
About Katie King (12 Articles)
Katie King is a third year law student and serves as Managing Editor for the Campbell Law Observer. Originally from Calabash, NC, Katie went to NC State University where she received a Bachelor of Arts in History. During her second year, Katie worked in real estate at Brady Law Firm located in Raleigh, as well as in the Chambers of The Honorable Judge John M. Tyson at the NC Court of Appeals. Her legal interests include corporate law, real property, and estate planning.