CEO Escapes Personal TCPA Liability: “Ownership… is not enough to sustain personal liability for individuals”

As I’ve said over and over again, the fact that corporate officers, directors and employees can be held personally liable for TCPA violations committed by their employers/companies is the most unfair rule in the American legal system. 

So every time I see someone escape the TCPA personal liability trap it puts a smile on my face.

Ariel Freud should be smiling right now.

Freud owns and operates several companies that sell extended vehicle warranty plans to customers.

Now let me just pause and say certain participants in that particular vertical have not been the most responsible when it comes to consumer outreach. Now I know a few of the “good guys” in that space as well, but the rotten apples are certainly starting to spoil the bunch. So–shape up.

In any event, Freud was personally sued for the activities of his businesses respecting outbound calls to consumers. But, in Rucker v. Nat’l Auto. Fin. Servs. Llc, Civil Action No. 20-16377 (MAS) (TJB), 2021 U.S. Dist. LEXIS 191396 (D.N.J.  September 30, 2021) the Court found the allegations of the Complaint insufficient to warrant personal liability.

The Rucker court noted that the Third Circuit had cast some doubt on the availability of personal liability under the TCPA in the famous City Select case. Nonetheless the Court elected not to resolve that issue and rested on the pleading standard: the Plaintiff’s allegations were just too conclusory to establish personal participation in the alleged wrongdoing.

Here are the key findings:

• Mere ownership of a company is not sufficient to warrant personal liability;

• General allegations that acts were taken “under the direction” of Freud are insufficient;

• Vague allegations  that Freud “oversaw, directed and authorized” his companies and the calls at issue are conclusory;
  
• General workplace complaints to the effect that “Freud do[es] not care as long as you get as many sales as possible,” are insufficient to show direct participation.

Pretty good stuff.

My favorite part of the case, however, is that the court properly refuses to permit discovery without valid allegations. THAT’S how the process is supposed to work. First a plausible claim must be stated. Then access to the cumbersome machinery of civil discovery may be granted. True the Plaintiff can allege facts on information and belief and then use discovery to gather evidence supporting his theory–but the allegations must be there first. Otherwise it is a fishing expedition.

I rarely applaud a court for a well-reasoned ruling–I mean, that’s sort of their job–but given how the case law here has developed, I really have to say this is a great and well reasoned decision.

Keep this one in mind folks.