If the Government Contract Requires Outbound Calls or Texts: A Cautionary Tale

Kelley Drye Client Advisory

Government Contractor Seeks Supreme Court Ruling on TCPA Liability

The Campbell-Ewald Company provided recruiting assistance services under a government contract with the U.S. Department of the Navy.  The company used a subcontractor for the actual transmission of the messages, but Campbell-Ewald was responsible for the development of the content of the messages and had approval from the U.S. Department of the Navy to conduct the campaign.  Campbell-Ewald was sued under the Telephone Consumer Protection Act (“TCPA”) and determined to be liable by lower courts for sending text messages to cell phone numbers as part of its performance under its government contract.  On January 16, 2015, Campbell-Ewald submitted a petition for a writ of certiorari to the Supreme Court of the United States seeking a determination from the Court as to whether Campbell-Ewald, as a government contractor, should be exempt from liability under TCPA through the doctrine of derivative sovereign immunity.  Campbell-Ewald is asking the Court to overturn a decision from the Court of Appeals for the Ninth Circuit which held that derivative sovereign immunity, established in Yearsley v. W.A. Ross Construction Co., 309 U.S. 18 (1940), is limited to claims arising out of property damage caused by public works projects.

The plaintiff sued Campbell-Ewald based on three texts that he received with the recruitment message, claiming that he never consented to receive such messages.  Campbell-Ewald asserts that because the Navy did not waive sovereign immunity from liability under the TCPA, the company, as a contractor for the Navy, should also be exempt from liability under the doctrine of derivative sovereign immunity.

In Yearsley, the Supreme Court found that a contractor hired by the U.S. government to build dikes along the Missouri River in order to improve navigation was entitled to sovereign immunity from a tort action for property damage because the contractor’s actions were authorized and directed by the Government of the United States” and the authority was validly conferred.  The Ninth Circuit rejected Campbell-Ewald’s assertion of immunity pursuant to this case, finding that Yearsley established a narrow rule regarding claims arising out of property damage caused by public works projects.”  In its petition, Campbell-Ewald argues that the Ninth Circuit’s interpretation not only is at odds with Yearsley and the decisions of other courts of appeals, but also seriously erodes a bedrock protection for those who carry out valid government contracts for the public good.”

Interestingly, Campbell-Ewald primarily asks the Court in its petition for a determination as to whether the company’s offer to fully compensate the plaintiff for the alleged violations effectively moots a plaintiff’s claims, and if so, whether the class action can proceed if the representative plaintiff’s claims are mooted.  Campbell-Ewald claims that the circuit courts are split on the issue and the resolution of that split is needed even more urgently now.”  This urgent need, Campbell-Ewald asserts, arises out of a dissenting opinion in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), which suggests that offers of full payment of an individual claim do not moot a class action plaintiff’s ability to move forward with a lawsuit.  Campbell-Ewald states that the circuit courts are using this dissent as a vehicle to allow cases to proceed even after a defendant has made a settlement offer to satisfy a plaintiff’s claim in full.

The consumer plaintiff has until March 23, 2015 to file a response to Campbell-Ewald’s petition.  In the meantime, the U.S. Chamber of Commerce and Business Roundtable filed an amicus brief supporting the petition.