Advertising Law Blog

A group that sells discounted medical services won a substantial legal victory in the District of New Jersey, gaining a full dismissal of a $100 million telemarketing lawsuit filed by Verizon and OnStar, the car phone service. Full disclosure: Olshan Grundman, and the author if this article in particular, represented the victorious parties in this lawsuit. The decision established precedent under the Telephone Consumer Protection act, the federal telemarketing statute. The sellers conducted no telemarketing themselves but hired telemarketers to sell their services, and the telemarketers in turn subcontracted some of the telemarketing out. The problem arose when the subcontractors made hundreds of thousands of automated calls to people who did not consent in advance to receiving such calls. This lack of consent rendered the calls illegal and the Telephone Consumer Protection Act provides a remedy of up to $1500 per illegal call. Verizon and OnStar noticed the volume of automated calls passing through their networks and filed suit in New Jersey federal court in 2009 against the sellers, but strangely not against the actual makers of the allegedly illegal calls. The lawsuit sought damages in excess of $100 million for 863,000 illegal calls. After a preliminary injunction motion, discovery, extensive motion practice and three different complaints, the seller filed a motion to dismiss on several bases, most notably that the telemarketers were independent contractors, and in any event, that Verizon and OnStar as telecommunications providers, could not sue under a consumer protection statute. It was a case of first impression, and District Judge Mary L. Cooper of the District of New Jersey granted the motion to dismiss with prejudice, accepting the argument that Verizon and OnStar, as providers of telecommunications services, lacked statutory and prudential standing to sue under a consumer protection statute. Judge Cooper was particularly swayed by the firm's argument that the calls would have been legal if consented to by the recipients and "as the moving defendants pointed out... the right to consent to a telemarketing call belongs to [the possessor] of the Verizon or OnStar brand device or phone number" and not the company that provides the device or phone number. Given the number of telemarketing lawsuits being filed, a defendant should carefully analyze the suit to determine if the plaintiff has the right to assert his, her or its claims.