TCPA Connect

Court Orders $22M Payment in TCPA Fax Suit

A federal court judge in New Jersey recently held that a defendant could be directly liable under the Telephone Consumer Protection Act for fax ads that it did not send. As a result, David/Randall Associates was ordered to pay more than $22 million for violations of the statute.

City Select Auto Sales brought suit after receiving a faxed ad from DRA. The court certified a class of plaintiffs that each received one or more unsolicited faxes stating “ROOF LEAKS??? REPAIRS AVAILABLE Just give us a call and let our professional service technicians make the repairs!” and “CALL: David/Randall Associates, Inc. TODAY.”

DRA filed a motion for summary judgment, arguing that it could not be held liable because the faxes were sent by a third-party marketing company, Business 2 Business Solutions, on its behalf. Last September the court denied the motion.

The plaintiff then filed its own motion for summary judgment, which U.S. District Court Judge Jerome B. Simandle granted. Having determined liability, the court then ordered the defendant to pay $500 each for the 44,810 faxes at issue, for a total of $22,405,000.

DRA contested both liability and the damages, although the court found none of the arguments availing.

Judge Simandle concluded that the subject faxes constituted advertisements under the TCPA, and the defendant conceded that it did not obtain the prior express consent required by the statute before the faxes were sent. DRA did take the position that “at least 183” of the class members either had a preexisting business relationship with the company or publicized their fax numbers for public distribution.

The court quickly rejected this position, noting that even if a genuine issue of consent was raised, the record contained no dispute that “the advertisements failed to contain a statutorily-compliant opt-out notice.”

The court also said the defendant constituted a “sender” under the TCPA even though it did not push the button on the fax machine.

Relying on an amicus brief submitted by the Federal Communications Commission in an Eleventh Circuit Court of Appeals case, Palm Beach Gold Center v. Sarris, Judge Simandle said the agency “emphasized that the junk-fax provisions of the TCPA clearly allow[] a plaintiff to recover damages [under a theory of direct liability] from a defendant who [transmitted] no facsimile to the plaintiff, but whose independent contractor did, provided that the transmitted fax constitutes an unsolicited facsimile advertisement promoting the defendant’s goods or services in accordance with the binding regulatory definition of ‘seller.’”

He added that “[D]efendants cannot exculpate themselves from ‘liability simply by hiring an independent contractor’ for the purposes of transmitting ‘unsolicited facsimiles on their behalf,’” Judge Simandle wrote. “Rather, ‘a person whose services are advertised in an unsolicited fax transmission, and on whose behalf the fax is transmitted, may be held [strictly] liable under the TCPA’s ban on the sending of faxes,’ despite not physically transmitting the fax.”

The Eleventh Circuit adopted the Commission’s position in the case, as have other courts since then, the court added.

Turning to the damages award, the court found that a hard drive provided by B2B and the expert testimony of the plaintiff’s forensic expert established that B2B successfully sent DRA’s advertisements 44,832 times to 29,113 unique targets.

Judge Simandle rejected all of the defendant’s efforts regarding the admissibility of the hard drive and the expert testimony and noted that DRA did not proffer any evidence of its own to question the expert’s evaluation or the integrity of the hard drive data.

“This court, therefore, finds that the Plaintiff has proved Defendants liable for statutory damages in the amount of $22,405,000,” the court concluded.

To read the opinion in City Select Auto Sales, Inc. v. David/Randall Associates, Inc., click here.

Why it matters: In addition to providing yet another eye-popping damage award in a TCPA suit, the New Jersey opinion serves as a warning that courts may adopt the FCC’s reasoning from the Sarris case in lieu of its position in In re Joint Petition Filed By Dish Network, where the Commission limited direct liability for telemarketing calls only to the party that “initiated” the call (with vicarious liability a possibility for the seller upon whose behalf calls are made).

Additional Notice Required for 7.1M TCPA Class Members

The parties to a pending class action settlement in a Telephone Consumer Protection Act case hit a speed bump earlier this month when they notified the court in a joint status report that more than 7 million class members slipped through the cracks and were not provided direct notice by U.S. mail or email.

Five individuals sued Chase Bank for violations of the statute in Illinois federal court over allegedly illegal calls to their cellphones. The parties reached an agreement for $34 million, with an expected payout of between $20 and $40 for the more than 33 million class members. Last August, Judge Gary Feinerman granted preliminary approval for the deal and a class administrator began notifying the class.

The good news: The left-out class members were included in the parties’ estimates provided to the court regarding the class size at the time of preliminary approval. Also positive: Chase estimated that its records contain the necessary contact information for 99.8 percent of the affected individuals.

The bad news: Supplemental notice is required for the 7.1 million individuals, pushing back the deadlines to conclude the litigation and adding to the administrative expenses.

U.S. District Court Judge Gary Feinerman approved an amended schedule for the supplemental notice and litigation. The 7.1 million individuals will be provided an opportunity to submit claims, object to the settlement, or request exclusion from the deal by September 10, 2015, the court ordered.

The court did not extend the deadline to submit exclusion requests or file objections for those class members who already received notice. However, those individuals who received the initial notice and failed to submit a claim will be provided a reminder notice and given a deadline extension to file claims.

Costs for the reminder and supplemental notices will be paid from the settlement fund.

To read the joint status report in Gehrich v. Chase Bank, click here.

To read the court’s order, click here.

Why it matters: Notice snafus aside, the settlement in the Gehrich case is the latest example of multi-million dollar settlements for TCPA cases that include Capital One’s record $75.5 million agreement, a $45 million payout approved by a Montana federal court earlier this year in a suit against a wireless communications provider, and a $40 million deal by HSBC.

Online Platform for Calling, Texting Campaigns Found to Be a Common Carrier Exempt From TCPA Liability

In an important decision for intermediaries in the telemarketing process, a Washington federal court ruled that a company providing services for telemarketing purposes was exempt from liability under the Telephone Consumer Protection Act as a common carrier.

Rinky Dink, Inc., sued Electronic Merchant Systems for making prerecorded telemarketing calls in violation of the federal statute and Washington state law, naming CallFire as an additional defendant.

Described by EMS as “an online provider,” CallFire provides an online platform for “voice and text connectivity” to customers that design either calling or texting campaigns through its Web site. EMS representatives created “campaigns” with CallFire by selecting the phone numbers to be called, the scheduled call times, and the time period for the campaign. For the message itself, EMS drafted a scripted message and hired an actor to record the message. CallFire was not involved in the creation or the content of the messages.

CallFire moved for summary judgment on two grounds: that as a common carrier it was exempt from liability under the TCPA and that it did not initiate the calls to plaintiff as required by state law.

The court agreed with CallFire on both counts.

“Common carriers are not liable under the TCPA absent a ‘high degree of involvement or actual notice of an illegal use and failure to take such steps to prevent such transmissions,’” U.S. District Court Judge John C. Coughenour explained.

He applied a two-part inquiry, asking first if CallFire held “itself out indifferently to all potential users or, if serving a legally-defined class, [held] itself out indiscriminately to serve all within that class”? CallFire satisfied the “key factor” of offering indiscriminate service to whatever public its service may legally and practically be of use, the court said, with “no indication that CallFire’s terms of service apply differently to any of its customers.” Importantly, the court found that “[c]ommon carriers need not be officially recognized by the Federal Communications Commission.”

As to the second part, the court considered CallFire’s involvement in the design and choosing of the messages. CallFire “allow[ed] customers to transmit messages of their own design and choosing,” Judge Coughenour said. “EMS drafted the message, hired an actor to record the message, selected the phone numbers to be called, and chose the locations and timing of the calls,” the court wrote. “There is no genuine dispute; EMS was the sole architect of the calls placed to plaintiffs.”

Rinky Dink tried to convince the court that because CallFire transmitted calls depending on network availability, it therefore had control over whether the messages were actually delivered, using the example of power outages during Hurricane Sandy. “Plaintiffs appear to illogically suggest that, because forces outside of CallFire’s control may limit the transmission of phone calls at its customer’s specified time, CallFire is therefore in direct control of the calls made,” the judge wrote. He found the argument did not present a genuine issue of material fact.

The plaintiff’s contention that the inclusion of fraud detection in CallFire’s terms of service undermined its status as a common carrier also failed to sway the court. “[T]elephone companies generally considered to be common carriers adopt similar practices,” Judge Coughenour wrote, and merely requiring customers to check their own activities for legal compliance did not render CallFire too highly involved for the exemption, particularly as the company did not edit any recipient lists or content.

Neither did CallFire have actual knowledge of any unlawful activity, the court said. Despite an enforcement action filed by the Federal Trade Commission against CallFire in 2013, the court noted that “none of the allegations in that lawsuit fell under the TCPA” and that the issues involved had “nothing to do with the calls placed by EMS.”

“With regard to CallFire’s liability under the TCPA, there remains no genuine issue of material fact: CallFire is a common carrier, was not involved in EMS’s message transmission to a ‘high degree,’ and did not have actual knowledge of the EMS calls,” Judge Coughenour concluded. “As such, CallFire does not fall within the scope of the TCPA and its motion for summary judgment with regard to plaintiffs’ TCPA claims against it is hereby granted.”

As for the Washington state law claims, the court found that CallFire did not “initiate” the phone calls at issue. Although the term is not defined by the statute, the court looked to the dictionary to determine that CallFire did not “cause the beginning of something.” CallFire’s generation of code and making it available to downstream servers was automatic in nature, the court said, and initiated by CallFire’s customers.

To read the order in Rinky Dink, Inc. v. Electronic Merchant Systems, click here.

Why it matters: The decision provides some breathing room for companies that provide services related to telemarketing calls or text messages by recognizing CallFire as a “common carrier” exempt from TCPA liability, even though the company has not been officially recognized as such by the Federal Communications Commission. As plaintiffs increasingly name third parties and try to hold intermediaries liable under the statute, businesses can look to this decision for guidance about how not to be too “highly involved” and achieve common carrier status.

Eleventh Circuit on the TCPA: Knowledge of Violation Necessary for Willful Damages

Considering the extent of knowledge necessary to engage in a willful or knowing violation of the Telephone Consumer Protection Act, the Eleventh Circuit Court of Appeals ruled that a plaintiff must demonstrate actual knowledge on the part of a defendant that its conduct would violate the statute.

The federal appellate panel also held that a single fax can serve as the basis for two separate violations of the statute—and twice the damages.

John Lary filed a pro se complaint in Alabama federal court against Trinity Physician Financial & Insurance Services and its owner. He claimed that the defendants used an automated telephone dialing system to send an unsolicited advertisement to Lary’s emergency telephone line in violation of the TCPA.

A practicing physician, Lary said he maintains a fax machine connected to an emergency telephone line in his health care facility. In his complaint, Lary alleged that he received just one fax on October 2, 2012, but alleged the defendants violated two separate provisions of the statute: Section 227(b)(1)(A)(i) (prohibiting the use of an ATDS to call any emergency telephone line) as well as Section 227(b)(1)(C), for unlawfully faxing an unsolicited advertisement.

Lary sought treble damages under the TCPA, accusing the defendants of willful and knowing violations of the statute. The defendants notified the court they would not mount a defense and would accept a default judgment. In a motion to the court related to damages, Lary argued he should receive $6,000, and requested treble damages for violations of two provisions of the statute, for two faxes, after adding a second fax to his complaint.

The federal district court awarded Lary a total of $1,000 in damages, or $500 per fax. The judge declined to treble the award and held that each fax constituted a single violation of the statute.

Lary appealed.

Although the Eleventh Circuit determined that the district court awarded Lary the correct amount of damages, the federal appellate panel used a different calculus. Lary’s last-minute addition of a second fax failed, as the defendants could not be held liable in a default judgment for a fax that was not alleged in the complaint, the court said.

However, the error was harmless because Lary was entitled to damages for the remaining fax for two separate violations of the TCPA.

“When [the defendants] used—or employed a third-party to use—an ‘automatic telephone dialing system’ to place a call to ‘an emergency telephone line,’ they committed a violation of the Act, regardless of what message they transmitted,” the panel wrote. “When [the defendants] used that call to ‘send’ an ‘unsolicited advertisement,’ they committed another violation of the Act, and this call would have been a violation even if they had not sent the advertisement to an emergency line.”

Nowhere does Section 277(b) suggest that a continuous course of conduct is limited to a single violation, the Eleventh Circuit said. The statute describes the remedies that a plaintiff can seek and the use of the phrase “each such violation” indicates that a plaintiff may be able to recover for multiple violations.

“In plain terms, the statute allows a person to recover ‘$500 in damages for each’ ‘violation of this subsection,’” the court said. “Section 227(b)(1) has no language limiting the recovery to $500 per ‘call’ or ‘fax,’” while other subsections of the statute suggest that damages should be awarded per “call.” The panel cited a similar holding from the Sixth Circuit Court of Appeal.

At $500 per violation for two subsections relating to a single fax, Lary was entitled to $1,000, the court concluded.

As for trebled damages, they were not available because the plaintiff “failed to allege facts or present evidence to establish that [the defendants] knew they sent a fax to an emergency line or that the advertisement was unsolicited,” the panel explained.

“The requirement of ‘willful[] or knowing[]’ conduct requires the violator to know he was performing the conduct that violates the statute,” the court wrote. “For example, to violate section 227(b)(1)(A)(i), a defendant must know that he is using an ‘automatic telephone dialing system’ to place a ‘call,’ and that the call is directed toward an ‘emergency’ line. If we interpreted the statute to require only that the violator knew he was making a ‘call’ or sending a fax, the statute would have almost no room for violations that are not ‘willful[] or knowing[].’”

Lary’s assertion that the defendants willfully and knowingly violated the TCPA was bare and the complaint lacked any allegations that defendants knew the advertisement was unsolicited or that it was sent to an emergency line, the court said.

The panel also affirmed that Lary was not entitled to a permanent injunction or costs.

To read the opinion in Lary v. Trinity Physician Financial & Insurance Services, click here.

Why it matters: The Eleventh Circuit’s decision presents something of a mixed bag for TCPA defendants. On the one hand, plaintiffs have much to like in the panel’s ruling that a single fax can result in multiple violations of the statute and additional damage awards. On the other, defendants can take some solace in the court’s requirement that a plaintiff must demonstrate that a defendant knows he or she performed the conduct that violates the statute, which can serve as a limitation on trebled damages.



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