Individual Issues Resulting From Oral Consent Ends Certification Effort

TCPA Connect

Where the defendant in a Telephone Consumer Protection Act (TCPA) case told a judge in the U.S. District Court, Eastern District of Pennsylvania that consent to receive faxed ads was provided orally, individual issues will predominate and preclude class certification, the court ruled. That case was KHS Corp. v. Singer Financial Corp.

Based in Philadelphia, defendant Singer Financial Corp. (SFC) provides commercial real estate financing. For 25 years, Paul Singer has been the president and sole owner of SFC, which has employed no more than four people at any time. Throughout SFC’s existence, the company has faxed advertisements to potential customers.

Over the company’s lifetime, Singer built a contact database with more than 3,000 entries. Contacts included real estate investors, realtors, bankers, attorneys and accountants, with Singer adding to the list via cold-calling, networking or meetings. He testified that he spoke personally to each contact and that all fax numbers in his database were obtained during one of those conversations.

SFC sent thousands of faxes each year at Singer’s direction. After receiving eight of the faxes, plaintiff KHS Corp. filed a putative class action against SFC under the TCPA in 2016, alleging that it had not provided consent to receive the faxes.

KHS moved to certify a class of fax recipients during the period of June 24, 2014, to June 22, 2016. Records indicated the defendant sent 30,706 faxes to 2,297 unique recipients during this time.

Facing conflicting testimony from the two parties, U.S. District Judge Anita S. Brody denied the motion. Karl H. Schwemlein, the owner of KHS, denied that his company was ever in contact with Singer or SFC and denied ever providing KHS’ fax number along with consent to receive the faxed ads.

On the other hand, Singer asserted that in the 1990s he spoke directly with Schwemlein over the phone during a cold call and was given permission to send a faxed flyer about SFC.

Focusing her discussion on the predominance requirement of Federal Rule of Civil Procedure 23, Judge Brody found that KHS had not established, based on a preponderance of the evidence, that its putative class met the requirements.

“In this case, a prediction of how issues will ‘play out’ makes clear that the individualized question of consent will defeat predominance of common issues because the ultimate question for each class member will be whether a given fax sent by SFC was solicited or unsolicited,” the court said.

“Here, the facts demonstrate many reasons why common questions will not predominate leading to the potential for thousands of mini-trials on the individualized issue of consent. For each class member, a fact finder will have to determine whether a received fax was solicited or unsolicited. This is raised because of the unchallenged nature of the evidence of how Singer created his contact list that was used to fax putative class members. Over the 25 years he was in business Singer claims to have added to his list continually by speaking directly to potential contacts, either through networking or on cold calls. Importantly, Singer claims that when he spoke to people and received a fax number, he would ask for permission to send faxed flyers.”

KHS’ own claim was illustrative of the problem, the court added. Singer claimed he remembered a specific conversation with Schwemlein, who testified that he never spoke to Singer or had any knowledge of SFC.

“KHS has not provided any further evidence to contest Singer’s assertion of consent. Without more, whether Singer and Schwemlein spoke and which party is more credible is simply a fact question that must be determined by a jury,” Judge Brody wrote. “When this situation is aggregated with the potentially thousands of other class members, it creates the very real potential for thousands of mini-trials.”

It would require “immense” court resources to sort out the possible unique paths of each class member to Singer’s contact list, the court said.

As a fallback argument, KHS told the court that even if Singer received consent to send faxes, that consent was for “information” and not advertising.

“The problem for KHS, however, is that if a recipient voluntarily gives her fax number, she consents to receive material related to the reason she gave the number,” the court said. “Singer has alleged that he received fax numbers and consent from each class member both to receive ‘flyer[s],’ and ‘information’ on SFC. To determine whether the faxes relate to the reason that a class member gave her fax number, the Court, or a jury, would have to engage in an intensely fact specific inquiry—requiring precise analysis of the conversation as well as credibility determination. Again, purported conversations with other class members may raise similar factual issues that will need to be resolved individually. Ultimately, there can be no predominance in the face of such individualized disparity.”

Judge Brody denied the motion for class certification.

To read the memorandum in KHS Corp. v. Singer Financial Corp., click here.

Why it matters: Given the testimony on how the defendant’s contact list was built—based on individual conversations and oral consent to receive faxes—the court could find no way to certify a class without creating an immense burden for the court or a jury. The court did note that “many TCPA fax cases are still appropriate for class certification,” where the question of consent may be a common one. “That [was] not the case here where Singer compiled his fax list over 25 years in various, unique ways and testified that he received consent from each recipient,” the court concluded.



pursuant to New York DR 2-101(f)

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