On December 5, 2016 a federal judge in Missouri ruled that under common law Agency Principals a hospital could not be found vicariously liable for potential Telephone Consumer Protection Act (TCPA) violations of a third party collection agency.  The case is Petri v. Mercy Health d/b/a Mercy Hospital St. Louis, Case No. 15-1296, E.D. Missouri).


In July 2010, Defendant Mercy Health (Mercy) entered into a Collection Services Agreement with Valarity, LLC. (Valarity.) Under the agreement, Valarity was to perform various collection services for Mercy including “telephone calls and requests for payment.” The agreement contains a provision stating that Valarity would be acting as an independent contractor for Mercy and that nothing in the agreement should be deemed to create an agency relationship between them. It further states that each party would be solely responsible for the acts, omissions, and control of its own employees.

Plaintiff Joseph Petri (Petri) alleged that Valarity used an automated dialing system to call his cellular phone approximately 26 times between February and April 2014. The calls were made to collect debt that “supposedly arose from medical services claimed to be provided by Mercy to Petri, which was ultimately found to be a mistake.”  Petri claimed that Valarity’s conduct violated the TCPA and because Valarity was acting on behalf of and as an agent for Mercy, Mercy should be held vicariously liable here.

Before the court was a Motion for Summary Judgment brought by Mercy. Editor’s note: A motion for summary judgment is based upon a claim by one party (or, in some cases, both parties) that contends that all necessary factual issues are settled or so one-sided they need not be tried. The summary judgment is appropriate when the court determines there no factual issues remaining to be tried, and therefore a cause of action or all causes of action in a complaint can be decided upon certain facts without trial.

In its Motion for Summary Judgment Mercy argued that it cannot be liable for Valarity’s actions because Valarity was not its agent under common law principles of agency.

In Petri’s response/opposition to Mercy’s Motion for Summary Judgment the Plaintiff’s attorney included references to corporate and tax records that he claimed show that Valarity is actually owned by Mercy.


The Court’s Decision

The court granted Mercy’s motion for summary judgment. A copy of the Memorandum and Order can be found here.

The court began its analysis by discussing Principal/Agency common law:

“Agency is the fiduciary relationship that arises when one person (a ‘principal’) manifests assent to another person (an ‘agent’) that the agent shall act on the principal's behalf and subject to the principal's control, and the agent manifests assent or otherwise consents so to act.” Restatement (Third) Of Agency.

Agency is a legal concept that depends upon the existence of certain factual elements: (1) the manifestation by the principal that the agent shall act for him; (2) the agent’s acceptance of the undertaking; and (3) the understanding of the parties that the principal is to be in control of the undertaking.

The party asserting that a relationship of agency exists generally has the burden in litigation of establishing its existence.”

In their Motion for Summary Judgment Mercy argued that Valarity was not its authorized agent and points to the language of its collections agreement with Valarity, which contains a provision explicitly stating that Valarity was not subject to Mercy’s control and was acting as an independent contractor. Mercy also provided an affidavit from one of its vice presidents, confirming that, as stated in the agreement, Valarity did not have the authority to act on Mercy’s behalf and Mercy had no right to control Valarity.

The only evidence submitted by Petri was an affidavit from his attorney, John Yanchunis, attesting that he found corporate and tax records on the internet indicating Mercy is the parent company of Valarity.

The court ruled that, even assuming the records submitted by Petri constitute admissible evidence, it was not enough to create an issue of material fact as to whether Valarity was acting as Mercy’s agent.

The court wrote:

“A close look at the documents cited by Yanchunis reveal that they provide evidence only as to the legal and tax relationship between Mercy and Valarity. They establish nothing about the day-to-day business relationship between the companies, and they provide no evidence that Mercy controlled Valarity’s collections activities. As such, Petri has provided no evidence to indicate that Valarity was acting as Mercy’s authorized agent when it violated the TCPA.”


insideARM Perspective

This is not the first and it will not be the last attempt to find a client vicariously liable for TCPA claims against a Third Party collection agency. Plaintiff attorneys everywhere are always in search of the proverbial “deep pocket.” This case had the unusual twist of statements in an affidavit by the Plaintiff’s attorney that the third party collection agency involved in the activity was also owned by the hospital Defendant. 

The result in this case should not be considered the final say on this issue. Facts and circumstances will be different in every case.

The potential exposure for clients is real. What this case tells us is contract language is important. But the analysis should not end there.

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