Jones v. Royal Administration Services: When a Telemarketer Sells for Many Brands, Who's Liable?

The setup

Royal sells vehicle service contracts, often called extended warranties, through about 20 marketing vendors. One was All American Auto Protection (AAAP), a call center that sells contracts for many companies. AAAP's telemarketers would first get consumers to agree to a service contract and then select a plan offered by one of their vendors.

Royal's contract with AAAP expressly excluded "any act or omission that violates applicable state or Federal law, including but not limited to 'robo-calling.'" Royal had trained AAAP personnel and required using approved scripts and materials for Royal products, and the president of Royal had visited the call center about a dozen times. AAAP's managers assured Royal they were dialing one at a time and honoring the Do Not Call list.

Charles Jones and Josh Watson, whose cell numbers were on the National Do Not Call Registry, each got four calls from AAAP. AAAP defaulted, so the plaintiffs added Royal. The District of Nevada granted Royal summary judgment.

What the court held

Judge N.R. Smith wrote for the panel. The plaintiffs pressed only two theories.

No actual authority. Even assuming AAAP was Royal's agent, its authority didn't include illegal calls. The contract expressly prohibited robocalling and other unlawful methods, and nothing in the record contradicted that. AAAP being broke and unresponsive didn't change the analysis.

Not enough control for employer-style liability. The court adopted the ten factors from the Restatement (Second) of Agency § 220(2) for deciding whether a principal controls an agent enough to be treated like its employer. Applying them:

1. Royal had some control, but not over call hours or quotas, and none over the initial pitch.
2. AAAP was an independent business selling for many clients.
3. Royal didn't directly supervise the calls.
4. AAAP provided its own phones, computers and office.
5. The contract was for one year, cancelable on 30 days' notice.
6. AAAP was paid by commission per sale.

A couple of factors went the other way, as the sale is Royal's regular business. But the most telling fact: in the one call where a plan was pitched, it was a "Diamond New Car" plan that Royal didn't sell through AAAP. So Royal never controlled any of the calls at issue.

The court was careful to say it wasn't ruling out other agency theories, like apparent authority or ratification. The plaintiffs just didn't argue them on appeal.

Why this matters

Jones is helpful for brands that sell through multi-client call centers. But it's fact-specific, and it leaves other theories open.

Practical observations:

1. Put an express ban on unlawful calling methods in vendor contracts.
2. Determine if your vendors are in fact pitching your product on the call.
3. Act on red flags, which can matter under ratification theories.
4. Plaintiffs should preserve every agency theory on appeal.

Read the Ninth Circuit's amended opinion in Jones v. Royal Administration Services.