Alarm.com recently settled a $28 million TCPA lawsuit as a result of being held vicariously responsible for the actions of one of their partners. When I read the partner was Alliance Security, I wasn’t surprised based on my personal experience with them 5 years prior…
It was October 2013 and I answered my cell phone to hear a pre-recorded message offering me a home security system. Instead of just hanging up as usual, I took a different approach. I pressed 1 to express my interest and talk to a representative. For context, I was paying close attention to these calls for two reasons: 1) the TCPA had just been updated to require prior express written consent for these types of calls, and 2) a number of the biggest home security companies rely on our technology to document consent for TCPA compliance. I wanted to make sure whomever was illegally calling me wasn’t supplying leads or call transfers to one of my clients.
After feigning interest in a home security system and going through the process, I was able to convince them to tell me the name of their company: Alliance Security. Frustrated by receiving so many robocalls, I contacted a member of their marketing team and explained the situation. He was polite and said they would add me to their DNC list, blaming it on one of his marketing partners. I explained that this activity was illegal and would create significant legal liability. He assured me they were a compliant organization and mentioned they used a well-known compliance auditing firm. He also said “I have a team of lawyers who handles the lawsuits so it’s not my position to answer how they would handle a suit.” This was a company trying to protect their existing practices because they were growing rapidly. Even though the methods might be illegal, they were working, so they had financial incentive to continue.
Despite his assurances, I continued to receive calls, so I contacted him again and requested information on the partner calling me, which he provided. This is where things got comical: the company was based in south Florida, had no website, the phone number provided was disconnected, and the email address was a gmail account. I couldn’t find any info on his contact’s name – no profile on LinkedIn. So if he was being truthful and I was called by this partner, Alliance wasn’t doing any due diligence on the identity of their partners, let alone the methods they used to generate leads. I voiced my concerns and made suggestions, but he clearly felt they were in good shape. The calls finally stopped so I forgot about it.
About 6 months later in 2014 I saw their name again with this announcement by the FTC. Alliance Security was fined $3.4 million by the FTC. For the FTC to be involved, there must have been a lot of consumer complaints (I wasn’t the only annoyed recipient of these calls). “Companies that use lead generators must exercise due diligence when they buy lists of phone numbers,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, “or else they can be on the hook for illegal telemarketing. Relying on a say-so that the numbers were obtained legally, or that the consumers have agreed to be called, even if their numbers are on the Do Not Call Registry, isn’t enough.”
Then in the fall of 2017, Monitronics settled a TCPA case for $28 million. The suit named multiple defendants – Alliance Security and the makers of the systems they sold, including Monitronics and Alarm.com. The class claimed that Monitronics was vicariously responsible for the calls placed by its authorized dealers (Alliance Security) and their vendors. While Alliance might have been the primary defendant, the others had deeper pockets.
Now in 2018, Alarm.com has also settled for $28 million. When you add it all up – the $3.4 million FTC penalty, the $28 million Monitronics settlement, and now the $28 million Alarm.com settlement — these illegal phone calls resulted in penalties of about $60 million! It’s hard to believe. Not surprisingly, it appears that Alliance Security is now in bankruptcy proceedings.
This is the lesson: you can’t turn a blind eye to the actions of your partners. It is better to “trust, but verify.”
This is extremely unfortunate as both Monitronics and Alarm.com are reputable companies I believe had no intention of funding these activities. They probably weren’t concerned about TCPA liability since they had contracts with their partners requiring they operate their businesses in compliance with all applicable laws. In theory, they were protected. This is the lesson: you can’t turn a blind eye to the actions of your partners. It is better to “trust, but verify.”
Vet your partners, understand their marketing methods, and if they use any outbound calling/texting to consumers, ask them to prove they have obtained consent from their prospects. I often talk to companies that say they don’t need to take precautions and protect themselves because they haven’t yet been sued. Unfortunately, this approach, as in the case of Alliance Security, can have catastrophic consequences.