District Court Finds Telecom Intermediary Liable for Illegal Robocalls

A phone company may be held liable for illegal robocalls transmitted over its network, a federal court ruled Thursday. Partly granting Florida’s motion for summary judgment, the U.S. District Court of Southern Florida found that Smartbiz Telecom violated the Truth in Caller ID Act and the Telemarketing Sales Rule (TSR). While the court will move to trial on Florida’s additional counts alleging Telephone Consumer Protection Act (TCPA) violations, Judge Jose Martinez disagreed with Smartbiz, which, as an intermediate provider that didn't initiate the calls, argued it can't be held liable under the TCPA. Smartbiz, Martinez wrote, "was involved in the placing of the telephone calls because it knowingly allowed fraudulent calls to transit its network.”

For TCPA attorney Eric Troutman of Troutman Amin, the "entire ruling is novel.” In an email Friday, he wrote, “The fact that an intermediary carrier might be held directly liable for calls it did not originate but merely allowed to traverse its network will be mind-boggling to many.”

“Our telecom network only works because intermediary carriers do not question the content of every call or message,” added Troutman. “If they did, it would introduce multiple gatekeepers into an equation that should be built for speed and efficiency of communication. Enhancing regulation on gateway providers -- those that allow access to the network in the first place -- makes sense, but requiring each intermediate carrier (of which there may be a dozen for a single call path) to stand in the way of presumably-vetted communication is unwarranted, cumbersome and dangerous to the integrity of the network.”

Florida alleged that Smartbiz transmitted illegal robocalls in violation of the TCPA, TSR, Truth in Caller ID Act and Florida's Deceptive and Unfair Trade Practice Act (case 1:22-cv-23945). The state sought damages and an injunction to stop Smartbiz from transmitting fraudulent robocalls.

Martinez said Florida provided strong evidence that Smartbiz knew about the illegal robocalls on its network. Records of the FCC-appointed industry traceback group, which tracks the origin of suspected illegal robocalls, show that Smartbiz received at least 256 traceback notifications from June 26, 2020, to Jan. 30, 2023, the judge noted. The defendant responded to many of the notifications, frequently leaving comments about what it planned to do in response, the judge added. Also, upstream providers sent complaints to Smartbiz about the illegal activity, "such as spoofed [automatic number identifications], calls that were associated with fraud, calls characterized as scams and robocalls, and imposter scam calls,” the judge said.

"Defendant was notified of the transmission of misleading or inaccurate [caller ID] information through various means, including traceback notifications and complaints from downstream providers,” the judge said. “These notifications informed Defendant of specific instances where its network was transmitting calls where the caller was impersonating law enforcement or a well-known brand.” The judge added that "consumers who reportedly answered spoofed calls transmitted by Defendant confirm that the intent of the calls was to steal things of value, including money or personal information.”

Florida passed the test for summary judgment on its claim that Smartbiz violated the Truth in Caller ID Act, which says that fraudulent caller ID spoofing involving U.S. callers is illegal, said Martinez. First, the defendant is in the U.S., he reasoned. Second, Smartbiz acted in connection with a voice service because it directly provides voice service. Third, Smartbiz knowingly caused the fraudulent transmissions, said the judge.

Moreover, Smartbiz violated the TSR, which prohibits abuse and deception by telemarketers and bans others from providing assistance for a practice that they know violates the TSR, the judge said. The defendant provided "substantial assistance" by knowingly transmitting scam calls that violated the TSR. "Defendant had the power to stop every call that transited its network," said Martinez: But the phone company “continuously play[ed] a role in connecting these calls.”

However, to determine if there was a TCPA violation, a jury must decide if Smartbiz did enough to try to mitigate illegal robocalls, Martinez said. Florida satisfied most requirements of TCPA claims, including that the calls occurred in the U.S., that Smartbiz had actual knowledge it was transmitting the calls, and that the calls went to cellular or residential lines and played prerecorded or artificially recorded voice messages, said the judge.

However, "it cannot, as a matter of law, be concluded that [Smartbiz] failed to take steps to prevent such transmissions." Smartbiz "claims to have implemented various procedures to prevent illegal traffic,” said Martinez: Florida argues “that these measures were either ineffective or not properly implemented,” but their effectiveness "is a question for a jury to decide.”