June 7, 2016
On May 25, 2016, a federal jury in Utah reached a monumental verdict against an individual and three of his companies, finding that the Defendants committed over 117 million violations of the Telemarketing Sales Rule.
How much could the federal government impose in civil penalties?
Telemarketing Campaign
According to court records filed by the Federal Trade Commission (the “FTC” or “Commission”), Forrest Sandusky Baker III and his three companies – Feature Films for Families, Inc. (“FFF”), Corporations for Character, L.C. (“C4C”) and Family Films of Utah, Inc. (“Family Films”) (collectively, “Defendants”) – operated as a common business enterprise. The Defendants allegedly conducted nationwide campaigns by telephone to sell DVDs and theater tickets to consumers.
FTC Telemarketing Sales Rule Lawsuit
In 2011, the Commission commenced legal action against the Defendants in the U.S. District Court for the District of Utah (Case No. 2:11-cv-00419-RJS-DBP), claiming that they had placed millions of telephone calls in violation of the FTC’s Telemarketing Sales Rule, including:
- Calls making false or deceptive representations;
- Calls made to consumers who registered their telephone numbers on the National Do Not Call Registry;
- Calls made to consumers who made entity-specific do-not-call requests;
- Calls that failed to transmit appropriate caller ID information;
- Calls that failed to make required oral disclosures; and
- Calls that were impermissibly abandoned.
In 2015, the Court determined that the Defendants’ calls amounted to telemarketing, but a jury trial was still necessary to resolve several factual issues.
Jury Verdict
On May 25, 2016, after an eight-day trial, the jury concluded that Defendants had placed tens of millions of telemarketing calls, for a colossal 117,960,989 willful violations of the Telemarketing Sales Rule.
In the next phase of the trial, the Court will determine the scope of the civil penalties and injunctive relief to be imposed upon the Defendants. Because Telemarketing Sales Rule violators are subject to civil penalties of up to $16,000 per violation, the Defendants could potentially be on the hook for over $1.8 trillion. However, it is likely that the FTC will seek civil penalties that are more proportional to the Defendants’ reported financial assets (which are presumably substantially less).
Avoid Telemarketing Liability
The Telemarketing Sales Rule imposes a series of broad regulations on sellers, telemarketers and text message marketers. As the above-referenced case demonstrates, failure to comply with the Telemarketing Sales Rule could be catastrophic for marketing businesses, as well as their owners and officers. To avoid regulatory enforcement and other legal risk, sellers and telemarketers should always consult with an experienced telemarketing attorney before initiating any telemarketing or text message marketing campaign.
If you are interested in learning more about this topic, or if you have been served with legal process relating to your telemarketing practices, please email us at info@kleinmoynihan.com or call us at (212) 246-0900.
The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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