In support of this motion, Monitronics states as follows: INTRODUCTION

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Ashlyn Reed
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1 FILED * Electronic Copy * MS Public Service Commission * 9/2/2018 * MS Public Service Commission * Electronic JUL BEFORE THE PUBLIC SERVICE COMMISSION OF MISS.PlJBLICSERVICE THE STATE OF MISSISSIPPI COMMlSSION MISSISSIPPI PUBLIC SERVICE COMMISSION PLAINTIFF V. DOCKET NO.: 2013-NC-32 ISI ALARMS NC INC., AND MONITRONICS SECURITY LP DEFENDANTS MOTION TO DISMISS BY MONITRONICS SECURITY LP Defendant Monitronics Security LP ("Monitronics") moves for the Mississippi Public Service Commission ("PSC") to dismiss this action with prejudice pursuant to Rule 12 of its Public Utilities Rules of Practice and Procedure. Monitronics further respectfully requests a hearing before the PSC on this Motion. In support of this motion, Monitronics states as follows: INTRODUCTION 1. The Complaint alleges that Monitronics and ISI Alarms, Inc. ("ISI"), violated the Mississippi Telephone Solicitation Act ("MTSA"), Miss. Code Ann , et seq., as a result of three telephone calls purportedly made to three Mississippi residents in December 2012 and January 2013.' According to the Complaint, these telephone calls involved the offer of a residential security system for purchase. The Complaint only provides specific information regarding one of the three telephone calls, and no specific information is provided regarding the other two telephone calls except the alleged date of the call and the recipient's alleged telephone number. 2. Monitronics is an alarm monitoring company. It does not solicit potential customers by telephone or contract with third-parties to perform telephone solicitation on Monitronics' behalf. As an alarm monitoring company, Monitronics monitors signals from alarm systems that have already been sold and installed by separate alarm installation companies. * See Complaint, Exhibit A.

2 is the Through contracts with these installation companies, Monitronics Imay either monitor alarm signals on behalf of installation companies as a subcontractor, or Monitronics rmay purchase the alarm monitoring contract between the customer and installation companies. As part of its business practice, Monitronics does not engage in anx telephone solicitation to potential individual customers.2 3. The Complaint fails to state a claim against Monitronics and should be dismissed for the following reasons. First, the subject matter of the alleged telephone calls - sale of a home security system - exempted by Miss. Code Ann l(a), because the sale is not completed over the phone, but requires a later face-to-face meeting. Second, Monitronics is not a "telephone solicitor" as defined by Miss. Code Ann (c). Third, Monitronics did not make the three telephone calls and the Complaint fails to identify any facts showing that Monitronics had any connection with these calls. Fourth, if these telephone calls were made by Defendant ISI, the calls were made for ISI's benefit, not Monitronics' benefit, and Monitronics is not liable for alleged conduct by ISI as a matter of law. Finally, Monitronics has a good faith defense under Miss. Code Ann , because it established and implemented, with due care, reasonable practices and procedures to effectively prevent telephone solicitations in violation of the MTSA through verbal instructions and contractual agreements. I. THE TELEPHONE SOLICITATIONS AT ISSUE ARE ARE EXEMPTED UNDER THE MTSA. 4. Under Miss. Code Ann , the MTSA lists a number of exempt categories of telephone solicitations; therefore, a telephone solicitation falling under these categories cannot form the basis for an alleged MTSA violation. Under 711(a), the first exempt category is a telephone solicitation made by a person: 2 See Affidavit of Robert Sherman, Exhibit B, 2. 2 * Electronic Copy * MS Public Service Commission * 9/2/2018 * MS Public Service Commission * Electronic

3 i. Who does not make the major sales presentation during the telephone solicitation; ii. Without the intent to complete or obtain provisional acceptance of a sale during the telephone solicitation; or iii. Without the intent to complete, and who does not complete, the sales presentation during the telephone solicitation, but who completes the sales presentation at a later face-to-face meeting between the person soliciting and the prospective purchaser or consumer. (emphasis added). 5. The MTSA cannot apply to a sale in which the telephone caller does not complete the sales presentation during the telephone solicitation, but intends to complete the sale at a later face-to-face meeting. The Complaint alleges that the subject telephone calls were for the purpose of selling a home security system. Such a solicitation falls under this exemption because the sale cannot be completed over the telephone, but can only be completed after a later face-to-face meeting with the customer. A security system, unlike other types of products, is not something that can be purchased over the telephone and shipped to a customer, but it is something that must be installed. Further, the number and location of security system devices (door contacts, motion detectors, etc.) depend upon the residential structure and customer needs which cannot be determined over the telephone; therefore, the installation requires a face-to-face meeting with the customer at the residence where the alarm system is to be installed. Finally, a security system sale is not complete until a customer signs a sale and installation contract after a face-to-face meeting. Up until that point, the customer is free to decline the purchase of a security system. Because the sale of home security system requires a face-to-face meeting to complete the sale, it is exempted from the MTSA under (a), and the Complaint should be dismissed. 3

4 II. MONITRONICS IS NOT A "TELEPHONE SOLICITOR" AS DEFINED BY THE MTSA. 6. Second, the Complaint alleges that Monitronics violated MTSA provisions' regulating conduct by a "telephone solicitor"; however, Monitronics is not a "telephone solicitor" under the MTSA. Under Miss. Code Ann (c), a "telephone solicitor" is defined as "any person, firm, entity, organization, partnership, association, corporation, charitable entity, or a subsidiary or affiliate thereof, who engages in any type of telephone solicitation on his or her own behalf or through representatives, independent contractors, salespersons, agents, automated dialing systems or machines or other individuals or systems." 7. Monitronics is not a "telephone solicitor" because it is not "engaged in any type of telephone solicitation" either on its own behalf or through third-parties.4 Monitronics monitors alarm signals for alarm systems that have already been sold and installed by independent alarm installation companies. Monitronics does not engage in telephone solicitation to potential individual customers for the sale of alarm systems and does not contract with other third-parties to perform telephone solicitation on Monitronics' behalf. Therefore, Monitronics is not a "telephone solicitor" as defined by 705(c) of the MTSA and the claims against Monitronics should be dismissed. 3 The Complaint alleges that Monitronics violated Miss. Code Ann , which provides, "All telephone solicitors must register with the commission before conducting any telephone solicitations in the State of Mississippi." The Complaint further alleges that Monitronics violated (1) and 707(2) with regard to each of the three telephone calls. Section 707(1) provides, "Except as otherwise provided pursuant to Section or , a telephone solicitor may not make or cause to be made any telephone solicitation to any consumer in this state unless the telephone solicitor has purchased the 'no-calls' database from the commission or the entity under contract with the commission." Section 707(2) provides, "Except as otherwise provided pursuant to Section or , a telephone solicitor may not make or cause to be made any telephone solicitation to any consumer in this state who has given notice to the commission, or the entity under contract with the commission, of his or her objection to receiving telephone solicitations." 4 Exhibit B, Affidavit of Robert Sherman, 2. 4

5 III.THE COMPLAINT FAILS TO IDENTIFY ANY FACT SHOWING THAT THE SUBJECT TELEPHONE CALLS WERE MADE BY MONITRONICS. 8. Third, the Complaint fails to identify any fact showing that the subject telephone calls were made by Monitronics or on Monitronics' behalf. The Complaint alleges that Monitronics violated Miss. Code Ann (1) and (2) with regard to telephone calls made on December 5, 2012 (to number ); December 14, 2012 (to number ) and January 30, 2013 (to telephone number ). The Complaint only provides specific information regarding one of these calls (the January 30 call), and the Complaint does not provide any further information regarding the other two calls. 9. With regard to the January 30 call, a consumer complaint is attached to the Complaint. According to the consumer complaint, a telephone call was made on January 30 at 12:30 p.m. to Ms. Charlotte Weatherly by a telemarketing company known as "Security Tech," apparently in an attempt to sell an alarm system. The consumer complaint does not mention Monitronics, and there is no indication from the consumer complaint that Monitronics had any connection with the telephone call. Further, Monitronics did not contract with "Security Tech" to provide any telemarketing services on Monitronics' behalf.' 10. The Complaint did not attach consumer complaints regarding the other two telephone calls, and the Complaint provides no information regarding these calls other than the date of the call and the recipient's telephone number. The Complaint does not identify the name of the telemarketing company, the substance of the telephone call, or even the product that was being offered for sale. Thus, the Complaint fails to identify any fact showing that Monitronics had any connection with these two telephone calls. * Exhibit B, Affidavit of Robert Sherman, 7. 5

6 l1. Additionally, an Affidavit of James Taylor is also attached to the Complaint, and states, in pertinent part: "My investigation as of February 6, 2013 has determined that ISI Alarms NC, Inc., and Monitronics Security, L.P., has made, or has caused to be made, numerous telephone solicitations to the telephone lines of residential subscribers in the State of Mississippi who have given notice to the Mississippi Public Service Commission of the subscribers' objections to receiving telephone solicitations and were placed on Mississippi Telemarketing No Call List." Mr. Taylor's Affidavit, which is entirely conclusory, fails to identify any specific telephone calls he alleges were made by Monitronics or identify any factual basis for his conclusion that Monitronics was involved or connected with any specific telephone solicitations. Therefore, there is no evidence that any of the three telephone calls identified in the Complaint were made by or on behalf of Monitronics, and the Complaint should be dismissed. IV.MONITRONICS IS NOT RESPONSIBLE FOR ANY TELEPHONE SOLICITATIONS PURPORTEDLY MADE BY OR ON BEHALF OF ISI 12. Fourth, Monitronics is not responsible for any telephone solicitations allegedly made by or on behalf of ISI. Although not alleged in the Complaint, the PSC has claimed that Monitronics is responsible for telephone calls made by ISI, the other Defendant. As noted with regard to Monitronics, the Complaint fails to identify any specific fact showing that ISI had any connection with the three subject telephone calls. However, even if the Complaint identified a fact showing that ISI had some connection with any of the three telephone calls, there is no legal or statutory basis for claiming that Monitronics is responsible for such conduct. 13. First, an installation company that solicits by telephone does so on its own behalf, because Monitronics is never obligated to purchase an alarm monitoring agreement from the installation company. Monitronics monitors alarm signal systems for installed alarm systems through two different types of agreements. Monitronics may enter into a Master Contract 6

7 Monitoring Agreement ("CMA") with an installation company, and, under the CMA, Monitronics may monitor alarm signals on behalf of the alarm installation company as a subcontractor. In such a case, Monitronics does not have a contractual relationship with the customer and the installation company remains responsible to its customer for alarm monitoring. Monitronics may also enter into an Alarm Monitoring Purchase Agreement ("AMPA") with an installation company. Under the AMPA, the installation company Imay offer the alarm monitoring agreement with its customer for sale to Monitronics, but is not required to do so. Similarly, Monitronics inay choose to purchase the alarm monitoring agreement, but is not required to do so. If Monitronics chooses to purchase an alarm monitoring contract offered for sale, the installation company will assign the alarm monitoring contract to Monitronics, and Monitronics assumes the alarm monitoring responsibilities owed to the customer Although Monitronics has a contractual relationship with ISI, any telephone solicitations allegedly made by ISI were made for ISI's own benefit. On February 21, 2008, Monitronics entered into a CMA and an AMPA with ISI.' Under the AMPA, ISI may offer alarm monitoring contracts for sale to Monitronics, but is not required to do so, and Monitronics may purchase an alarm monitoring contract offered for sale by ISI, but is not required to do so. Although Monitronics has a right of first refusal under the AMPA, ISI is not required to offer any contract for sale to Monitronics. If Monitronics declines to purchase an offered contract, then ISI may offer the contract to another company. However, regardless of whether an alarm monitoring contract is offered or purchased, ISI is initially responsible to the customer for all alarm monitoring contracts it sells, and remains responsible for any contracts that it does not sell. Further, even with regard to alarm monitoring contracts that it sells, ISI remains solely 6 Exhibit B, Affidavit of Robert Sherman, Exhibit B, Affidavit of Robert Sherman, 5and Exhibits 1 and 2, with amendments, attached thereto. 7

8 responsible for the sale and installation, because Monitronics does not purchase the sales and installation contract and is not involved in the sales or installation. Consequently, if ISI made any telephone solicitation for the sale of an alarm system, any such telephone solicitation was made on behalf of ISI, not on behalf of Monitronics. 15. Second, there is no basis for any claim that Monitronics is legally responsible for ISI's alleged telephone solicitations merely because Monitronics does business with ISI. As a matter of contract, ISI was an independent contractor, and ISI was not an employee or agent for Monitronics." ISI never had contractual authority to perform any act on Monitronics' behalf, including any telephone solicitation. The AMPA provided that ISI had no right to obligate Monitronics with respect to the marketing, sale or installation of alarm monitoring equipment." ISI was also prohibited from representing to others that it was an agent of Monitronics, and ISI could only represent that it was an independent contractor with the right to present qualifying alarm monitoring contracts to Monitronics, which may or may not be accepted for purchase.' 16. Accordingly, it is clear that ISI did not have actual authority to represent to others that it was acting on behalf of Monitronics. There is also no basis for any claim that ISI possessed apparent authority to act on Monitronics' behalf. Under Mississippi law, a principal may be held liable for conduct by an agent who had "apparent authority" to act on behalf of the * See Exhibit 2 to Exhibit B. Section of the AMPA states, "This Agreement, and Seller's participation in the Authorized Dealer Program, does not create a relationship of agency, partnership, jointventure, agency, association for profit or any other relationship among Purchaser and Seller. Seller shall at all times during the term hereof act as an independent contractor and none of Seller's employees, subcontractors, agents or representatives shall be considered employees, subcontractors, agents or representatives of Purchaser." (emphasis added). See Exhibit 2 to Exhibit B. Section of the AMPA states, "Seller shall have no right, express or implied, commit or otherwise obligate Purchaser in any manner with respect to the marketine, sale or installation of alarm monitoring equipment or the marketing and sale of alarm monitoring contracts or the monitoring of alarm monitoring contracts." (emphasis added). io See Exhibit 2 to Exhibit B. Section of the AMPA states, "References by Seller to other parties that it is an Authorized Dealer or a participant in the Authorized Dealer Program shall be strictly limited to a representation that it is an independent contractor who has the right to present qualifying alarm monitoring contracts to Purchaser for purchase and for monitoring if accepted by Purchaser, and no other representations regarding its status may be made by Seller without prior written consent of Purchaser." 8

9 principal only if there was evidence of the following: (1) acts or conduct of the principal indicating the agent's authority, (2) reasonable reliance upon those acts by a third person, and (3) a detrimental change in position by the third person as a result of that reliance." For Monitronics to be held responsible for alleged telephone solicitations by ISI, there must be some act by Monitronics directed to the telephone call recipient that would lead the recipient to believe that ISI was acting on Monitronics' behalf.12 There is no evidence of any such conduct. V. MONITRONICS HAS A GOOD FAITH DEFENSE WHICH BARS THE COMPLAINT 17. Finally, Monitronics also has a good faith defense against any telemarketing claim under Miss. Code Ann Under 729, "It shall be a defense in any action or proceeding brought under Section or that the defendant has established and implemented, with due care, reasonable practices and procedures to effectively prevent telephone solicitations in violation of this article." 18. Monitronics has established reasonable practices and procedures to effectively prevent telephone solicitations in violation of the MTSA. Monitronics verbally instructs all of the installation companies from which it purchases alarm monitoring contracts to comply with all federal and state laws, including laws regarding telephone solicitation13. Further, under its contracts with these installation companies, Monitronics requires compliance with telemarketing laws. For example, under Section 3.17 of the AMPA with ISI, as modified by a Second Addendum, ISI contractually agreed that it was in compliance with all laws, rules and " Adams CommunityCare Center, LLC v. Reed, 37 So.3d 1155, l 160 (Miss. 2010); McFarland v. Entergy Mississippi, Inc., 919 So. 2d 894, 902 (Miss. 2006). 12 Compere's Nursing Home, Inc. v. Estate offarish, 982 So.2d 382, (Miss. 2008) (apparent authority cannot be established without conduct by the principal that would lead the alleged injured party into believing that an individual was an agent). 13 See Affidavit of Robert Sherman, Exhibit B, 8. 9

10 regulations, including federal and state telemarketing statutes, rules and regulations.14 Further, under of the AMPA with ISI, as modified by a Second Addendum, ISI agreed that it was responsible for compliance with all laws, rules, regulations, statutes, and orders regarding telemarketing." Accordingly, through its verbal instructions and contracts, Monitronics has established reasonable practices and procedures to effectively prevent telephone solicitations in violation of the MTSA, and any claims should be dismissed under CONCLUSION 19. Therefore, the Complaint against Monitronics should be dismissed for the following reasons: The sale of a home security system is exempted under Miss. Code Ann (a), because a later face-to-face meeting is required to complete the sale. Monitronics is not a "telephone solicitor" as defined by Miss. Code Ann (c), because it does not engage in telephone solicitation of potential customers. The Complaint fails to identify any facts showing that Monitronics had any connection with the three telephone calls identified in the Complaint. If any of these telephone calls were made by Defendant ISI, the calls were made for ISI's benefit, and were not made on Monitronics' behalf; 14 Exhibit B, Sherman Affidavit, Exhibit 2. This provision states, "Seller is in compliance with all laws, rules and regulations related to any Contract, including, without limitation: the provisions of federal and state laws relating to "truth in lending," "home solicitation contracts" or "home solicitation" of any kind or nature whatsoever; the FCC Telephone Consumer Protection Act Rules; the FTC's Telemarketing Sales Rule; any other state and federal telemarketing and consumer marketing statutes, rules and regulations; and, any other consumer marketing methods which are subject to restrictions under state or federal law." " Exhibit B, Sherman Affidavit, Exhibit 2. This provision states, "Seller shall be solely responsible for complying with all laws, rules, regulations, statutes, governmental directives, orders and ordinances of any kind relating to telemarketing, direct mail marketing or any other marketing or advertising methods (including but not limited to those rules, regulations and statutes referenced in section 3.17). Seller further acknowledges and agrees that the use of the Purchaser's name, logo, trademarks, copyrights or any other proprietary mark or designation of Purchaser in any telemarketing, direct mail marketing or any other marketing or advertising method is strictly prohibited without the express written consent of the Purchaser. Seller shall indemnify, defend and hold Purchaser harmless from and against any liability, damage, loss, cost or expense (including reasonable attorneys' fees) which may be asserted against Purchaser as a result of Seller's failure to be in compliance with the provisions of this section, as well as section 3.17." 10

11 Monitronics has established a good faith defense under Miss. Code Ann , by using verbal instructions and contractual agreements to effectively prevent telephone solicitations in violation of the MTSA. WHEREFORE, PREMISES CONSIDERED, Monitronics Security LP respectfully requests that the PSC dismiss the Complaint against Monitronics with prejudice. Monitronics further respectfully requests a hearing before the PSC on this Motion. This the 1st day of July, Respectfully submitted, MONITRONICS SC RITY LP By: /,. unn (MSB #8581) * K ý Simpkins (MSB # Kevi. A. Rogers (MSB #101230) Its Attorneys OF COUNSEL: WELLS MARBLE & HURST, PLLC 300 Concourse Blvd., Suite 200 Ridgeland, Mississippi Post Office Box 131 Jackson, Mississippi Telephone: Facsimile: paunn@wellsmar.com ksimpkins@wellsmar.com krogers@wellsmar.com 11

12 CERTIFICATE OF SERVICE I, Kevin A. Rogers, attorney for Monitronics Security, LP, one of the Defendants herein, certify that a true and correct copy of the above and foregoing document has been forwarded to the following, by depositing the same in the United States Postal Service with the postage prepaid: William Jeffrey Jernigan, Esquire Special Assistant Attorney General Post Office Box 1174 Jackson, Mississippi This the 1" day of July, Kev. o 12

Case: 3:18-cv Document #: 1 Filed: 05/18/18 Page 1 of 6. United States District Court Western District of Wisconsin

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