4th Cir.: ACA contractor was immune from TCPA claim

A U.S. Department of Health & Human Services contractor that used an auto-dialer to send pre-recorded messages about the availability of health insurance enjoyed derivative sovereign immunity for what may have otherwise been a TCPA violation.

Background

The Affordable Care Act directs the Centers for Medicare & Medicaid Services to keep applicants informed about their eligibility for enrollment in a qualified health plan. The Centers maintain the HealthCare.gov website, through which individuals may enroll for health coverage under the Affordable Care Act using an online application. This application requires visitors to provide their name and phone number and accept the Centers’ privacy policy by affirmatively clicking an “Accept” box acknowledging that the Centers may use the phone number provided to contact them with more information.

The Centers contracted with General Dynamics Information Technology Inc. to make phone calls from January 1, 2015, through May 16, 2016, to inform individuals about their ability to buy health insurance through the Affordable Care Act’s health insurance exchanges.

The Centers authorized General Dynamics to use an auto-dialer to make the calls and provided a script and a list of phone numbers for each call. The contract also required General Dynamics to maintain a corporate compliance program to help ensure compliance with statutes and regulations, as well as an enforcement and disciplinary process to address violations.

On December 1, 2015, the Centers sent General Dynamics approximately 2.65 million telephone numbers and directed General Dynamics to call each of those numbers over the next five days in accordance with their contract. Thus, General Dynamics called Plaintiff Craig Cunningham’s cell phone, with approximately 680,000 other numbers, on December 2, 2015.

General Dynamics made the auto-dialed, pre-recorded call to Cunningham’s cell phone, leaving the following voicemail with the script provided by the Centers:

“Hello! This is an important message from HealthCare.gov. The deadline to enroll in a 2016 health insurance plan is coming soon. You may be able to qualify for financial help to make health insurance more affordable. With financial help, most people can find plans for $75 or less per month. Visit HealthCare.gov today to see how much you can save. If you have questions, you can call the Health Insurance Marketplace to talk to a trained enrollment specialist at 1-800-318-2596. That’s 1-800-318-2596. We are available 24 hours a day and the call is free. Don’t forget — the deadline to enroll is Tuesday, December 15th. If you’ve already taken action and have 2016 health coverage, please ignore this message. Thank You! Goodbye.”

Cunningham commenced this putative class action suit against General Dynamics on May 16, 2016, alleging that he received this auto-dialed, pre-recorded phone call from General Dynamics advertising the commercial availability of health insurance without having given his prior consent, in violation of the Telephone Consumer Protection Act. General Dynamics moved to dismiss for lack of subject matter jurisdiction, arguing that it was immune from suit. The district court agreed with General Dynamics and, after limited jurisdictional discovery for Cunningham to contest this determination, granted General Dynamics’s motion. This appeal followed.

Application to federal claims

Cunningham asserts that the doctrine set forth in Yearsley v. W. A. Ross Constr. Co., 309 U.S. 18 (1940), only applies when a federal contract or federal directive displaces state law to absolve government contractors from state law liability. Finding nothing in Yearsley or its progeny that limits its application solely to state law liability, this court disagrees.

Yearsley immunity has also been applied to federal causes of action, even recently to the Telephone Consumer Protection Act – the same federal law at issue here. Thus, this court concludes that the Yearsley doctrine applies to claims arising under federal law.

Government authorization

Under Yearsley, a government contractor is not subject to suit if (1) the government authorized the contractor’s actions and (2) the government validly conferred that authorization, meaning it acted within its constitutional power. The Supreme Court recently stated that, as long as the authorization was validly conferred, there is no liability on the part of the contractor who simply performed as the government directed.

The Centers contracted with General Dynamics to carry out its statutory mandate under the Affordable Care Act, and the contract required General Dynamics to call individuals about health insurance options. The Centers provided the phone numbers to be called by auto-dialer, including Cunningham’s number, and instructed General Dynamics to leave a pre-recorded message. Quite plainly, General Dynamics performed exactly as the Centers directed.

Cunningham nonetheless argues that General Dynamics’s contract required the company to follow applicable laws and that, by failing to independently obtain prior consent from each name on the list the Centers provided in order to ensure compliance with the Telephone Consumer Protection Act, General Dynamics violated the contract, requiring this court to find that the Centers did not authorize General Dynamics’s actions. To the contrary, there is no indication that General Dynamics was authorized to contact these individuals other than to place the automated call, and the company wasn’t permitted to deviate from the script provided. The Centers’ representative testified that they did not direct General Dynamics to obtain consent from the individuals on the call lists or to investigate the numbers provided, and they did not expect General Dynamics to obtain such consent. Therefore, General Dynamics did not violate the contract.

Because General Dynamics adhered to the terms of its contract, the court concludes that the government authorized General Dynamics’s actions, satisfying step one of the Yearsley analysis.

Validly-conferred authority

General Dynamics made calls pursuant to the Centers’s statutory mandate, and there is no dispute that the government could delegate its authority to General Dynamics to make an automated phone call.

Nevertheless, Cunningham argues that the government cannot “validly confer” the authority to engage in conduct that violates the law; thus, the Centers could not validly confer authority to call him without prior consent in violation of the Telephone Consumer Protection Act. But the question at Yearsley’s step two is not whether informing applicants of their enrollment eligibility violated the law, but rather whether Congress had the authority to assign General Dynamics to complete that task. The purpose of Yearsley immunity is to prevent a government contractor from facing liability for an alleged violation of law. Thus, an alleged violation of law cannot per se preclude such immunity. Consequently, this court rejects Cunningham’s over-inclusive interpretation of what constitutes a “valid conferral” of authority under this prong.

Because the government authorized General Dynamics’s actions and that authorization was validly conferred, the district court did not err in concluding that General Dynamics was entitled to derivative sovereign immunity for this claim.

Effect of immunity

Finally, Cunningham asserts that the district court should have dismissed the case for lack of subject-matter jurisdiction, rather than treating the Yearsley doctrine as a merits defense to liability. But in In re KBR Inc., Burn Pit Litig., 744 F.3d 326 (4th Cir. 2014), this court’s express statements regarding Yearsley immunity, and implicit approval of using a Rule 12(b)(1) motion to dismiss to dispose of a case where Yearsley applies, compel the court to conclude – once again – that Yearsley operates as a jurisdictional bar to suit and not as a merits defense to liability.

The court recognizes that discovery may be appropriate before granting a Rule 12(b)(1) motion to dismiss on this basis. Where, as here, a party challenges the veracity of the facts underpinning subject-matter jurisdiction, the trial court may go beyond the complaint, conduct evidentiary proceedings, and resolve the disputed jurisdictional facts.

Here, the parties participated in 75 days of limited discovery on the applicability of Yearsley, which included six subpoenas, four Touhy requests, numerous other document requests, six depositions, and supplemental briefing. Accordingly, this court is satisfied that appropriate procedural safeguards and sufficient information supported the district court’s ruling on General Dynamics’s motion.

Affirmed.

Cunningham v. Gen. Dynamics Info. Tech. Inc., Case No. 17-1592, Apr. 24, 2018. 4th Cir. (Floyd), from EDVA at Alexandria (O’Grady). Aytan Yehoshua Bellin for Appellant; James P. Rouhandeh for Appellee. VLW No. 018-2-079, 18 pp.