First Jury Verdict – Do Not Call Violations Of Telemarketing Sales Rule

A federal court jury in Utah delivered a verdict in favor of the Federal Trade Commission against three Utah-based firms and their owner, finding that they engaged in deceptive and unlawful telemarketing campaigns pitching movies, including making more than 117 million illegal calls to consumers, in violation of the FTC’s Telemarketing Sales Rule (TSR).

The case, which the Department of Justice (DOJ) brought in May 2011 on behalf of the FTC, is the first-ever jury verdict in an action to enforce the TSR and the Commission’s Do Not Call (DNC) Registry rules. The court will decide what relief to impose in later proceedings.

According to the Commission’s complaint, Forrest S. Baker III, and three Utah firms that he controls violated the TSR and the FTC Act multiple times and deceived customers about where the proceeds from their movie purchases would go. The three Utah firms named as co-defendants with Baker are Feature Films for Families, Inc., Corporations for Character, L.C., and Family Films of Utah.

In March 2015, the court resolved several legal issues, including ruling that telephone calls that defendants argued were surveys, fundraising or informational calls were illegal telemarketing. The court ruled that certain claims made by Corporations for Character in charitable solicitation calls were not misleading and that the government would need additional computer records to challenge other representations. The court also concluded that a jury trial would be necessary to resolve several factual issues.

During the eight-day trial, which concluded on May 25, DOJ presented evidence through FTC witnesses and others showing that the defendants’ activities included a nationwide calling campaign conducted by Corporations for Character under the name “Kids First,” in which telemarketers offered to send two complimentary DVDs and requested feedback on whether the movies should be included on a list of recommended movies.

The defendants’ telemarketers called millions of numbers on the DNC Registry during this campaign and told consumers that “all of the proceeds” from the sale of Feature Films for Families DVDs would be used to complete a recommended viewing list of the nonprofit Coalition for Quality Children’s Media. In reality, Feature Films for Family had contracted to receive 93 percent of the sales to these consumers.

The evidence also showed that in 2009 Feature Films for Families called consumers to urge them to buy tickets to see “The Velveteen Rabbit,” a film produced by Baker and released in theaters before going to DVD. The telemarketers made no effort to avoid calling consumers on the DNC Registry, making more than 2.5 million calls to registered numbers.

The May 25 jury also heard testimony from consumers who received telemarketing calls even after telling Feature Films for Families’ telemarketers not to call. Call records presented at trial showed that these consumers were not alone. In pitching Feature Films DVDs, the defendants’ telemarketers called tens of millions of consumers who had made do-not-call requests.

After hearing the evidence, on May 25, the jury found the defendants responsible for 117 million violations of the TSR, including 99 million illegal calls to telephone numbers listed on the DNC Registry, as well as more than four million additional calls in which the defendants’ telemarketers made misleading statements to induce DVD sales.

The jury verdict covered six different TSR violations, including violations of the FTC’s regulations requiring telemarketers to use caller identification names that tell consumers what seller is calling, and restrictions on telemarketers making calls to consumers without connecting the call to a sales representative within two seconds of the consumer’s greeting.

The jury also found the defendants had actual or implied knowledge of these violations, allowing the court to assess civil penalties under the FTC Act. Courts can impose civil penalties of up to $16,000 per violation against businesses that violate the TSR.