Treble Damages Require Willful, Knowing Conduct, Ninth Circuit Says

TCPA Connect

The Ninth U.S. Circuit Court of Appeals recently weighed in on treble damages in a Telephone Consumer Protection Act (TCPA) dispute involving junk faxes.

True Health Chiropractic sued McKesson Corp. for violating the statute, alleging that McKesson sent True Health 13 faxes advertising and offering rebates for medical billing software.

When True Health moved to certify a class of fellow recipients of such faxes, it also asked for treble damages. In support, it pointed to a 2008 citation against McKesson from the Federal Communications Commission (FCC) for sending “one or more unsolicited advertisements to telephone facsimile machines in violation of Section 227(b)(1)(C) of the [TCPA].”

On cross-motions for summary judgment, the district court issued a mixed decision, granting summary judgment to True Health on McKesson’s defenses that the plaintiffs consented to receive its faxes and granting McKesson’s motion to deny class certification and treble damages.

Both parties appealed.

McKesson argued that its registration forms and end-user license agreements (EULA) established consent by the plaintiffs to receive faxed advertisements. But the federal appellate panel disagreed, as the registration form “merely” prompted users to provide their address, email, phone number and fax number.

“Nothing about the form would suggest to a reasonable consumer that, upon submitting the form, he or she had agreed to receive faxed advertisements,” the court said.

Under the terms of the EULA, consumers consented only to the transmission to McKesson of “certain computer and software usage information.”

While the EULA states that McKesson collected this information to assist it in offering end users other features and services, this language did not demonstrate that the parties contemplated that “features and services” from McKesson would include sending the plaintiffs faxed advertisements, the court held.

The district court also correctly found that it was bound by the FCC’s Amerifactors Financial declaratory ruling, which determined that the TCPA does not apply to faxes received through an online fax service, when it decertified the proposed class, the Ninth Circuit found.

Finally, the panel turned to the question of whether or not the district court abused its discretion by denying treble damages to True Health on its remaining individual claims—and answered in the negative.

“A court may award treble damages if it finds that a defendant ‘willfully or knowingly’ violated the TCPA,” the court wrote. “We agree with the Eleventh Circuit that this standard requires more than merely intentional or volitional action.”

In other contexts, the Ninth Circuit has construed “willfully” as requiring awareness that an action constitutes a legal violation, and “knowingly” as requiring awareness of the facts that constitute a legal violation.

Further, the U.S. Supreme Court has held in the context of the Fair Credit Reporting Act that willful violations include both knowing violations and reckless violations of a standard.

A violation is reckless if it “is not only a violation under a reasonable reading of the statute’s terms” but also shows that the actor “ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless.”

“Applying this standard here, McKesson did not willfully or knowingly violate the TCPA,” the court wrote.

Although the FCC cited the company in 2008, “it did not explain which of McKesson’s faxes violated the TCPA or why.” Therefore, the 2008 warning did not establish that, when McKesson sent the faxes to True Health, McKesson “knowingly violated the TCPA or ran a risk of violating the TCPA that was substantially greater than the risk associated with a ‘merely careless’ reading of the TCPA.”

The panel affirmed the district court’s grant of summary judgment for True Health on consent and affirmed the district court’s grant of summary judgment for McKesson denying class certification and denying treble damages.

To read the memorandum opinion in True Health Chiropractic, Inc. v. McKesson Corp., click here.

Why it matters

The Ninth Circuit refused to allow treble damages in the case, explaining that a defendant must “willfully or knowingly” violate the TCPA, which requires more than merely intentional or volitional action. Even a prior citation for the defendant from the FCC for sending an unsolicited faxed ad in violation of the statute didn’t sway the federal appellate panel, which concluded that the warning didn’t establish the defendant ran a risk of violating the TCPA that was greater than a “merely careless” reading of the statute. Arguably, this decision may bolster fax defendants’ arguments that claims allegedly supporting treble damages do not meet the required threshold. 



pursuant to New York DR 2-101(f)

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