Wengle v. Dialamerica Mktg., Inc.

• Decision Date: 22 September 2015
• Docket Number: Case No. 14-cv-10644
• Citation: 132 F.Supp.3d 910
• Parties: Geraldine Wengle, Plaintiff, v. DialAmerica Marketing, Inc., Defendant.
• Court: U.S. District Court — Eastern District of Michigan

132 F.Supp.3d 910

Geraldine Wengle, Plaintiff,

v.DialAmerica Marketing, Inc., Defendant.

Case No. 14-cv-10644

United States District Court, E.D. Michigan, Southern Division.

Filed September 22, 2015

As Amended October 2, 2015

Ian B. Lyngklip, Julie A. Petrik, Lyngklip Associates Consumer Law Center, PLC, Southfield, MI, Mary B. Reiten, Terrell Marshall Daudt & Willie PLLC, Seattle, WA, for Plaintiff.

Jeffrey M. Garrod, Orloff, Lowenbach, Roseland, NJ, Richard Strenger, Law Offices of Rich Strenger, PLLC, Lake Orion, MI, Thomas D. Noonan, Strenger & Noonan, PLLC, Bloomfield Hills, MI, for Defendant.

AMENDED ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (ECF #40)¹

MATTHEW F. LEITMAN, UNITED STATES DISTRICT JUDGE

The Telephone Consumer Protection Act, 47 U.S.C. § 227 et. seq .,and its implementing regulations (collectively, the "TCPA") generally prohibit telemarketers from placing solicitation calls to consumers who have added their names to the National Do Not Call Registry. But calls placed "on behalf of" a "tax-exempt nonprofit organization" are exempt from this prohibition. See 47 U.S.C. § 227(a)(4); 47 C.F.R. 64.1200(f)(14)(iii)(the "Nonprofit Exemption"). The question currently before the Court is whether calls placed by Defendant DialAmerica Marketing, Inc. ("DialAmerica") to Plaintiff Geraldine Wengle ("Wengle") fall within the Nonprofit Exemption. DialAmerica argues that the calls are covered by the Nonprofit Exemption because it placed those calls on behalf of a tax exempt nonprofit organization, the Special Olympics of Michigan ("SOMI"). Wengle counters that the Nonprofit Exemption does not apply to DialAmerica's calls to her because DialAmerica placed the calls for its own commercial purposes. The Court agrees with DialAmerica, and it therefore GRANTS DialAmerica's Motion for Summary Judgment (ECF #40).

RELEVANT FACTUAL BACKGROUND

A. The Parties

Wengle is a resident of Dearborn, Michigan. On May 14, 2010, she registered her home phone number with the National Do Not Call Registry in order to avoid calls from telemarketers. (See Wengle Declaration, ECF #50 at 1, ¶2, Pg. ID 799; see also registration confirmation, ECF #50-2 at 1, Pg. ID 805.)

DialAmerica is a for-profit telemarketing company that frequently works as a professional fundraiser for charitable organizations. In 2008, DialAmerica obtained a State of Michigan License to Solicit Charitable Contributions. (See license, ECF #34-3 at 18, Pg. ID 535.) The State has renewed this license each year from 2009 through 2015. (See licenses, ECF #34-3 at 29-34, Pg. ID 546-551.)

SOMI is the authorized Michigan affiliate of the Special Olympics. (See Declaration of Lois Arnold, ECF #34-1 at 2, ¶2, Pg. ID 428.) SOMI is a tax-exempt charitable organization that provides year-round sports training and athletic competition for children and adults with intellectual disabilities. (See id . at 2, ¶¶ 2-3, Pg. ID 428) Lois Arnold ("Arnold") is SOMI's President and CEO. (See id. at 1, ¶1, Pg. ID 427.)

SOMI raises funds to promote its charitable mission in many ways. Its fundraising methods include special events, direct mail, corporate sponsorships, and business-to-business fundraising. (See id. at 2, ¶4, Pg. ID 428) SOMI also uses professional telemarketers to raise funds. (See id. at 3, ¶5, Pg. ID 429) Arnold says that professional telemarketing is a "potent fundraising method ...[that] is critical to fulfilling SOMI's core mission because ... it enables SOMI to raise funds without having to incur the risk of paying for fundraising expenses that might exceed the revenue generated by SOMI." (Id. )

B. DialAmerica's Sponsor Fundraising Program and the Federal Communication Commission's Refusal to Exempt the Sponsor Program from the TCPA

In the early 2000s, DialAmerica implemented what was called the "Sponsor Program" through which it sold magazine subscriptions and donated a portion of the proceeds to charitable organizations. The record does not contain a detailed description of the Sponsor Program, but DialAmerica offered the following explanation of the program to the Federal Communications Commission (the "FCC"):

[T]hrough its Sponsor Program, DialAmerica contracts with magazine publishers to offer magazine subscriptions at heavily discounted rates, creating a catalog of over 400 magazines for sale. It then works with a specific charity to conduct outreach and fundraising. DialAmerica makes telephone calls to consumers, during which they describe the particular charity, and ask consumers to subscribe to a magazine of their choice. Consumers are told that 12 ½ percent of each sale will go to the charity. If a consumer buys a magazine subscription, the charity receives 12 ½ percent of the subscription price. From the discounted subscription price, DialAmerica pays the magazine publisher an agreed upon amount. DialAmerica retains a portion of the subscription price to cover its costs.

20 FCC Rcd. 3788, 3799, n. 85 (2005).

In 2005, DialAmerica asked the FCC to rule that calls made pursuant to the Sponsor Program were covered by the Nonprofit Exemption. See id. at 3799, ¶29. As described in more detail below (see p. 14-15 infra ), the FCC declined to grant DialAmerica its requested exemption.

C. DialAmerica Replaces the Sponsor Program

In 2006, DialAmerica replaced the Sponsor Program with a new magazine-sales fundraising program that the parties have referred to as the "Professional Fundraising Program." (See, e.g., Wengle Response Brief, ECF #49 at 5, Pg. ID 776.) The Professional Fundraising Program differs from the Sponsor Program in many ways. For example, under the Professional Fundraising Program, if a consumer purchases a magazine, the resulting contractual and business relationship is between the consumer and the charity, not between the consumer and DialAmerica; indeed, the bill for the consumer's purchase is "sent out in the name of the charity," not in DialAmerica's name. (Deposition of DialAmerica Vice-President Noreen Kaminski, ECF #51-3 at 25, Pg. ID 829.) In addition, under the Sponsor Program consumers paid DialAmerica directly for the magazines they purchased and DialAmerica then donated a portion of those proceeds to charity, but under the Professional Fundraising Program, "[t]he monies go directly to the charity. [The charities] have their own post office box and their own bank accounts." (Id . at 24, Pg. ID 828.) After the money is deposited into a charity's bank account, the money is then transferred to DialAmerica for processing—i.e., for payment of the subscription price to the magazine publisher and for payment of DialAmerica's fees and expenses. (See id. at 25-27, Pg. ID 829-831.) DialAmerica then remits 12.5-percent of the funds collected from magazine sales back to the charity. (See id .) Moreover, under the Professional Fundraising Program DialAmerica collects "direct donations" from consumers who do not wish to purchase any magazines, and the charities receive 100-percent of those donations. (See id. at 24, Pg. ID 828.) DialAmerica did not collect direct donations under the prior Sponsor Program. (See id .)

D. SOMI Engages DialAmerica to Raise Money on Terms that Give SOMI Substantial Control and That Incorporate the Financial Structure of the Professional Fundraising Program

By written agreement dated July 23, 2008, SOMI engaged DialAmerica to conduct a magazine-sale fundraising campaign "on [SOMI's] behalf" (the "SOMI-DialAmerica Program"). (SOMI-DialAmerica contract, ECF #34-1 at 12-13, Pg. ID 438-439.) Under the SOMI-DialAmerica Program, SOMI retains considerable control over the solicitation process. For example, SOMI has "the right, to approve in writing, in advance, each and every use of its name, trademark and logo, including without limitation, on any script or promotional and related materials regardless of medium." (Id. at 12, ¶1, Pg. ID 438.) SOMI has exercised this control by reviewing and approving the fundraising script that DialAmerica uses during its calls with consumers. (See Arnold Decl., ECF #34-1 at 4, ¶¶ 10, 12, Pg. ID 430.) In addition, "[t]he telemarketing script is consistently [revised and] tailored to include information received from SOMI to promote specific current events being conducted by SOMI." (Id. at 4, ¶12, Pg. ID 430.)

Moreover, under the SOMI-DialAmerica Program, SOMI, not DialAmerica, retains the "established business relationship" with each consumer who purchases a magazine subscription. (SOMI-DialAmerica contract, ECF #34-1 at 13, ¶4, Pg. ID 439.) Thus, "[w]hen a magazine sale is made, the customer is sent a SOMI invoice bearing SOMI's logo, identifying SOMI as the invoicing entity, and specifying that the invoiced amount is payable to SOMI and is to be sent to a Michigan Post Office Box in the same of SOMI." (Arnold Decl., ECF #34-1 at 5, ¶13, Pg. ID 431; see also SOMI invoice, ECF #34-1 at 34, Pg. ID 460.) The initial invoice also includes a "thank you" letter from Arnold, SOMI's President and CEO, that says, in part, "[t]he money raised from this program will go directly toward our services for the athletes who represent the true spirit of [SOMI]." (Arnold Decl., ECF #34-1 at 5, ¶14, Pg. ID 431; see also SOMI invoice, ECF #34-1 at 34, Pg. ID 460; thank-you notes, ECF #34-1 at 36, Pg. ID 462.)

The SOMI-DialAmerica Program incorporates the financial structure of the Professional Fundraising Program. "SOMI [initially] receives 100% of each magazine sale and 100% of every direct donation made to support SOMI's cause." (Arnold Decl., ECF #34-1 at 6, ¶15; see also SOMI-DialAmerica contract, ECF #34-1 at 12, Pg. ID 438.) These funds are initially deposited into a bank account owned and controlled by SOMI—an account that SOMI established with JPMorgan Chase Bank² (see Arnold Decl., ECF #34-1 at 6, ¶16, Pg. ID 438; see also SOMI bank account records, ECF #34-1 at 39-52, Pg. ID 465-478)—and are then "forwarded to [DialAmerica's] headquarters for processing." (SOMI-DialAmerica contract, ECF #34-1 at 12, ¶3, Pg. ID 438...