The TCPA and the Corporate Veil: Personal Liability is a Distinct Possibility

Fax A recent Michigan case adopted the holdings of other courts in Texas and Maryland to find a business owner personally liable for TCPA violations.  The case revolved around an incorporated business that was contacted by a marketing company about a possible ad campaign in January of 2006.  The business paid the marketer $268.00 to conduct a fax advertising campaign on its behalf, and an ad was sent to 3,159 different fax numbers.

Shortly thereafter, the corporation and its sole officer, director, and shareholder found themselves on the wrong end of a TCPA class action lawsuit filed by fax recipients, who claimed that the faxes were sent without their prior express consent.  The corporation’s officer and shareholder filed a motion for summary judgment, arguing that the complaint against him should be dismissed.  In doing so, he relied upon the protection conferred by the longstanding doctrine of the corporate veil, which protects corporate officers, directors, and shareholders from personal liability.  As a corporate officer and shareholder, he argued that he could be found liable only if the class were able to pierce the corporate veil.

But the Court disagreed.  Citing decisions from another Michigan federal court and from courts in Maryland and Texas, the judge stated that “many courts have held that corporate actors can be individually liable for violating the TCPA where they had direct, personal participation in or personally authorized the conduct found to have violated the statute.'”  The court adopted a personal liability test used by a Florida court, which stated that individual liability exists when the corporate officer directly participated in the conduct that violated the statute.   

In applying the test, the judge found that the corporate officer was the only person who had the authority to issue a check for the company, and by paying for the fax campaign he directed and participated in it for liability purposes.  However, the court declined to award the treble damages available under the statute, based on the fact that the defendant was a small business, and its owner did not seek out a marketing company to send faxes on its behalf, but was instead solicited by the marketing company; a distinction that convinced the court that a treble damages award would be inappropriate. 

The lesson for corporate officers and shareholders should not be difficult to understand.  They can be individually liable under the TCPA where there is direct, personal participation or personal authorization to engage in conduct that violates the TCPA.  In other words, ask your marketing company what type of campaigns they will employ on your behalf, and if they involve telemarketing, faxing, or texting, speak with your corporate attorney before signing on the dotted line.



Author: Seth Heyman
Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.
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