Hepler Broom, LLC

The Eighth Circuit Sends a Bad Message on Unsolicited Faxes

May 11, 2016

Class Certification of TCPA Claims in Sandusky Wellness Center, LLC v. MedTox Scientific, Inc.

Alexander Bain, a Scotsman, worked on an experimental fax machine in the 1840’s, synchronizing the movement of two pendulums through a clock to scan messages on a line by line basis. Bain’s work resulted in a patent issued May 27, 1843 for “improvements in producing and regulating electric currents and improvements in timepieces, and in electric printing, and signal telegraphs.”  The rudimentary fax machine preceded Alexander Graham Bell’s invention of the telephone.  Who knew?

Commercial use of fax machines blossomed in the 1970’s and 1980’s until its decline in popularity with internet based equivalent modalities.  But digitized online faxing has combined the accessibility of fax communications through email and web-based interfaces, without the need for fax machines, printers, or dedicated fax lines.

Bain could never have predicted his work, and numerous other inventors’ improvements through the 20th Century, would become a bane of our existence.  Now, courts confront a slew of so-called “junk fax” cases, which seek class action relief for violations of the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227(b)(1)(C), which prohibits “use [of] any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement” to a “recipient … within the United States.”  The TCPA authorizes a private right of action to enjoin violations and for actual monetary loss or fixed damages of $500 (trebled if willful or knowing) for each unsolicited fax containing an advertisement.  § 227(b)(3).

Cha ching! It did not take long for creative lawyers to recognize the potential for broad class actions for consumers and business recipients of faxed advertisements.   Frequently, lawyers align with small businesses or professionals who receive such faxes, and they serve as readily available class plaintiffs and share in the recoveries or in terrorem settlements induced.  The Seventh Circuit has specifically noted how junk-fax litigation “has blossomed into a national cash cow for plaintiff’s attorneys specializing in TCPA disputes” and expressed its doubt that “Congress intended the TCPA … to become the means of targeting small businesses…while plaintiffs’ attorneys take a big cut.” Bridgeview Health Care Ctr., Ltd. V. Clark, No. 14-3728, 2016 WL 1085233, at *5 (7th Cir. Mar. 21, 2016).

The Eighth Circuit’s Sandusky Wellness Center, LLC v. MedTox Scientific, No. 15-1317 (8th Cir. May 3, 2016) opinion reflects the common situation.   MedTox, a toxicology lab, obtained a mailing list with fax numbers from a health insurance directory.  To promote its lead testing services, it transmitted over 3200 single page faxes to pediatricians, family practitioners, and healthcare entities.  Sandusky’s business was not on the list but one of its providers shared Sandusky’s fax number with MedTox.  Thereafter, MedTox sent a fax, without an individual recipient, to Sandusky. MedTox also apparently had failed to provide an opt-out notice, which the statute requires for even an authorized or solicited fax.

Sandusky filed suit and moved to certify a class of “All persons who (1) on or after four years prior to the filing of this action, (2) were sent telephone facsimile messages regarding lead testing services by or on behalf of MedTox, and (3)which did not display a proper opt out notice.” The District Court denied class certification and granted summary judgment for MedTox, finding the case mooted by MedTox’s settlement offer of $3500 and commitment to refrain from further fax activity.

The Eighth Circuit reversed and addressed the class certification issues, and vacated the District Court’s Order dismissing the case as moot and final judgment for MedTox. Notably, rather than relying on the Supreme Court’s recent Campbell-Ewald Co. v. Gomez, 126 S. Ct. 663 (2016) decision, the court found the class plaintiff’s claim could be mooted by an offer of payment “only where class certification has been properly denied….”

The Eighth Circuit addressed the “ascertainability” requirement for class actions, noting conflicting treatment among other circuits on the meaning of and procedure for determining a readily identifiable, definite, and ascertainable class. The court reiterated its adherence “to a rigorous analysis of the Rule 23 requirements, which includes that a class ‘must be adequately defined and clearly ascertainable.’”  Focusing on the TCPA statutory term “recipient,” the court rejected MedTox’s argument the class definition is defective because multiple claimants could pursue relief based on the same fax.  Because fax logs existed that showed the numbers receiving each fax, the record included objective data from which the recipient could be ascertained. In so doing, the court glossed over the term “telephone facsimile machine;” in essence reading the literal requirement that the offending fax be sent to a “telephone facsimile machine” out of the TCPA.

The Court also addressed the District Court’s abbreviated finding that Sandusky could not satisfy the commonality and predominance requirements of Rule 23(a)(2) and (b)(3). The court concluded that an adequate common contention capable of class wide determination exists, namely, “whether class members received an unsolicited fax advertisement violating the TCPA.”  And this question of law—whether the conduct violated the TCPA—predominates.  The Eighth Circuit’s opinion offers no analysis of why this is not an improper “self-proving” class.

The TCPA treats mass advertisers that use unsolicited faxes or fail to follow the TCPA opt-out notice procedures, particularly in the past when fax machines printed out reams of unwanted messages en masse, harshly to be sure. The FCC has done nothing to abate the litigation mill. But did Congress envision their TCPA deterrence solution to aggravating faxes would create a litigation cottage industry costing parties millions of dollars for relatively harmless conduct? If the flyers were mailed—no problem.  If faxed—a parade of horribles for which it is increasingly likely there is no insurance coverage.

For TCPA fax “junkies” the more interesting question may be whether some form of concrete injury beyond mere violation of the statutory terms satisfies Article III standing. The answer to that question will await the Supreme Court’s forthcoming opinion in Spokeo v.Robins, which was argued on November 2, 2015.  135 S. Ct. 1892 (2015) (cert. granted). Spokeo involved allegations a search engine published inaccurate information in violation of the Fair Credit Reporting Act.  While the passing of Justice Antonin Scalia may impact the outcome, many commentators on the argument indicate it is unlikely a plaintiff need only prove a violation of a federal statute without any showing of real world, concrete harm. But only time will tell.

In isolation, the Eighth Circuit’s interpretations of the Rule 23 class action standards are not necessarily flawed, but broadly interpreted they further the propagation of class action cases that are best suited to generating attorneys’ fees rather than compensation for actual harm to consumers or businesses. I am not faxing this material to anyone.  I promise.