ARTICLE
7 August 2019

State Attorney General Telemarketing Lawsuits and Investigations

KM
Klein Moynihan Turco LLP
Contributor
Klein Moynihan Turco LLP (KMT) maintains an extensive practice, with an international client base, in the rapidly developing fields of Internet, telemarketing and mobile marketing law, sweepstakes and promotions law, gambling, fantasy sports and gaming law, data and consumer privacy law, intellectual property law and general corporate law.
Due to rapidly developing technologies and constantly evolving marketing practices, businesses working in the telemarketing space are frequently the subject of Attorney General inquiries and lawsuits.
United States Telemarketing
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Due to rapidly developing technologies and constantly evolving marketing practices, businesses working in the telemarketing space are frequently the subject of Attorney General inquiries and lawsuits. This is true for both businesses providing telemarketing services, as well as those utilizing third-party marketers to sell their respective products or services.

Many operators in this space have likely heard horror stories from peers and competitors (or worse yet, their principals) that were subjected to heavy fines, injunctions and/or penalties for deceptive marketing practices. Needless to say, the first steps taken after hearing from an Attorney General are critical.

How does the Attorney General contact telemarketers?

Telemarketers may first hear from the Attorney General by phone, letter or by service of a Civil Investigative Demand (“CID”) inquiring about their business practices or those of a third party. In other cases, a business may not hear from the Attorney General at all until after a lawsuit is filed. Regardless of the initial communication, how – and through whom – a telemarketer makes its initial response to the Attorney General is critical.

How should telemarketers respond to the Attorney General?

First, the simple answer: A telemarketer should not respond to the Attorney General – its attorneys should. Experienced attorneys will know what to say, what to ask and, perhaps most importantly, when to say nothing. Counsel will determine what is at the core of the investigation and who the real targets are, which will help limit the investigation and point it in the proper direction. Experienced counsel may help prevent an investigation from turning into a lawsuit. If a lawsuit has been commenced, the goal is to get the quickest, most cost-effective and painless resolution. If the resolution involves a written settlement, it is critical that the injunctive provisions therein be narrowly crafted, not only to allow for lawful business to continue, but also to contemplate potential future changes in business practices and technologies.

Second, telemarketers should resist the temptation to create or destroy documents. In this digital age, document tampering or spoliation will generally be uncovered during the discovery portion of the action. Not only will this dramatically increase the Attorney General’s interest in the underlying case, but such activities may create an entirely distinct and additional basis for the Attorney General to pursue the business, as well as the individuals involved.

Third, businesses should not discuss the matter with anyone, including their staff, before speaking with an attorney. In addition, no matter how confident telemarketers are of the propriety of their respective business practices, they should not speak directly to the Attorney General. This firm has seen countless examples of companies – and inexperienced counsel – trying to “set the Attorney General straight” and quickly turning a manageable situation into a disaster. Telemarketers and sellers should not issue press releases, which may only bring more unwanted attention – and perhaps the attention of more Attorneys General – to the situation. Moreover, the CID or other documentation received from the Attorney General may have a confidentiality notice attached, which should not be violated.

Isn’t an Attorney General action just like any other civil litigation?

Far from it. An Attorney General often has a different motivation than a traditional plaintiff. For example:

  • Unlike a civil litigant looking simply for monetary damages, an Attorney General may select a case in order to send a message to an entire industry, particularly since Attorney General actions tend to be higher profile than typical litigation.
  • The economic incentives for an Attorney General to pursue and continue a case are often different because the Attorney General has the resources of the State behind it and often applies a different cost/benefit analysis, particularly if the goal is to provide guidance to an industry.
  • Attorneys General have home field advantage and, in certain circumstances, have a lower standard of proof than a typical civil litigant.
  • Attorneys General often have many remedies available to them, including statutory fines, penalties, disgorgement and certain injunctive relief not available to typical plaintiffs.
  • Attorney’s fees are seldom granted in civil litigation, but payment of the Attorney General’s civil investigative costs is often part of the discussion in most Attorney General matters.

Unfortunately, there are countless examples of attorneys who, through hubris, erroneous tactics or simple lack of understanding of these differences, turn quickly winnable cases into quagmires.

How can telemarketers come out on top?

The best way to succeed in an Attorney General investigation or action is to never appear on the Attorney General’s radar screen in the first place. For businesses engaged in telemarketing, it is critical to retain counsel that is knowledgeable and experienced in telemarketing law long before the Attorney General comes knocking. Counsel should know the ins and outs of telemarketing regulation, as well as the red flags Attorneys General look for. This often saves businesses and their principals substantial time and money.

ARTICLE
7 August 2019

State Attorney General Telemarketing Lawsuits and Investigations

United States Telemarketing
Contributor
Klein Moynihan Turco LLP (KMT) maintains an extensive practice, with an international client base, in the rapidly developing fields of Internet, telemarketing and mobile marketing law, sweepstakes and promotions law, gambling, fantasy sports and gaming law, data and consumer privacy law, intellectual property law and general corporate law.

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