Friday, July 25, 2014

FYI: 6th Cir Rejects "Ascertainability" Argument, Holds Any Recipient of "Junk Fax" Has Standing Under TCPA

The U.S. Court of Appeals for the Sixth Circuit recently affirmed a district court’s grant of class certification and summary judgment in favor of a plaintiff class concerning alleged “junk fax” violations of the federal Telephone Consumer Protection Act, 47 U.S.C. § 227 et seq. (“TCPA”).


In doing so, the Court rejected the defendant’s argument that class was not objectively ascertainable, because the record demonstrated the fax numbers were objective data, and thus according to the Court the ascertainability requirement had been satisfied.  The Court further held that any recipient of an unsolicited fax advertisement has standing to raise TCPA violations, as opposed to just the owner of the fax machine that received the unsolicited fax.


A copy of the opinion can be found at:


Defendant corporation (“Defendant”) responded to an advertisement – ironically sent to it via fax -- from an alleged “fax blasting” company that advertised it would send 10,000 fax advertisements for its customers.  The Defendant hired the fax blasting company to send advertisements on its behalf and the it sent out over 10,000 fax advertisements.


Plaintiff wholesaler (“Plaintiff”) received one of the Defendant’s fax advertisements. The Plaintiff had no prior relationship with the Defendant and did not give permission to receive the fax advertisement.


The Plaintiff filed suit alleging violations of the TCPA.  After amending its complaint twice, the Plaintiff moved for class certification and proposed the following class definition:


All persons who were successfully sent a facsimile on February 20, 2006, February 21, 2006 or February 22, 2006 from “Lake City Industrial Products, Inc.”; inquiring, “Sick And Tired of Thin, Low Quality Import Pipe Thread Sealing Tapes?”; stating “End the problems now with high quality, MADE IN U.S.A. 100% virgin ptfe pipe thread sealing tapes!”; and offering “Free! Private label on every roll for first time orders.” 


In support of its motion, the Plaintiff attached a report from its expert witness that stated “a total of 10,627 successful transmissions of a complete fax [i.e., the Lake City advertisement] were successfully sent to and received by 10,627 unique fax numbers.”


The Defendant opposed the motion for class certification arguing, among other things, that Michigan Court Rule 3.501(A)(5) (“MCR 3.501(A)(5)”) forbids the maintenance of class actions in TCPA cases in Michigan federal courts. 


As you may recall, MCR 3.501(A)(5) states that “an action for a penalty or minimum amount of recovery without regard to actual damages imposed or authorized by statute may not be maintained as a class action unless the statute specifically authorizes its recovery in a class action.”


The district court rejected the Defendant’s argument and certified the class. The Plaintiff proceeded to summary judgment. The Defendant opposed summary judgment by arguing that: (1) it should not be held liable under the TCPA for the fax blaster’s actions, as the fax blaster was a separate company that actually sent the faxes;  (2) the Plaintiff failed to offer evidence regarding how many recipients had printed the advertisement; and (3) that the entry of summary judgment would bankrupt the Defendant.


The district court granted the Plaintiff’s motion for summary judgment. The Defendant appealed. 


On appeal, the Defendant argued the class definition was improper and overbroad because it included persons who lacked standing to assert a TCPA claim, and that MCR 3.501(A)(5) prevents the maintenance of a class action for TCPA violations in Michigan.


As to its standing argument, the Plaintiff attacked the class definition because it included “persons that may not have ever received, noticed or printed the fax but who are somehow associated with a number on the hard drive’s fax logs . . . [and] further includes persons that may not be (or who were) the owners of the machines or fax number [who] may or may not have actually received [the] fax.” 


In support of its standing argument, the Defendant cited Machesney v. Lar-Bev of Howell, Inc., 292 F.R.D. 412 (E.D. Mich. 2013). In Machesney, the court held that the “person or entity that owned the fax machine that received the unsolicited fax advertisement at issue is the [only] person or entity with standing to assert a TCPA claim.” Id. at 428. It made this determination after reviewing the legislative history of the TCPA and concluding that the statute was “intended to address . . . the cost of the paper and ink incurred by the owner of the fax machine.”


The Sixth Circuit declined to follow the Machesney court’s reasoning.  Specifically, the Sixth Circuit held there was no reason for the Machesney court to examine the legislative history of the TCPA because its plain language prohibits the “use of any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement.” 47 U.S.C. § 227(b)(1)(C).


Moreover, the Sixth Circuit disagreed with the Machesney court’s conclusion that the TCPA was “intended to address . . . the cost of the paper and ink incurred by the owner of the fax machine,” stating it was too narrow.  The Court acknowledged that Congress was concerned with costs associated with unsolicited fax advertisements, but explained that “unsolicited fax advertisements impose costs on all recipients, irrespective of ownership and the cost of paper and ink, because such advertisements waste the recipients’ time and impede the free flow of commerce.”


Thus, the Sixth Circuit rejected the Defendant’s reliance on Machesney for the proposition that owners (and only owners) of fax machines have standing to sue under the TCPA.


The Defendant also addressed the meaning of the phrase “successfully sent,” which appeared in the Plaintiff’s class definition. Specifically, the Defendant argued a fax might be “successfully sent” without being received by its intended recipient. However, the Defendant did not present any evidence to rebut the Plaintiff’s expert witness’s report that explained over 10,000 faxes were successfully sent and received by 10,000 different fax numbers. Thus, the Sixth Circuit rejected the Defendant’s argument.


The Defendant next argued that the class was not objectively ascertainable. However, the Sixth Circuit rejected this argument because the record demonstrated the fax numbers were objective data, and thus the ascertainability requirement had been satisfied.


The Defendant also argued the district court erred when it declined to apply MCR 3.501(A)(5). Specifically, the Defendant argued that because the “TCPA contains a damages provision that provides for a minimum amount of recovery ($500 per violation) without regard to actual damages and because it does not specifically authorize recovery in a class action, TCPA suits cannot be maintained as class actions in Michigan state court.” 


The Sixth Circuit held that MCR 3.501(A)(5) did not apply because federal courts have federal-question jurisdiction over private TCPA suits. Mims v. Arrow Financial Services, LLC, 132 S. Ct. 740,747 (2012). 


The Court noted that “Congress may bypass the federal rules and require the federal courts to apply state procedure.” In re Nguyen, 211 F.3d 105, 108 (4th Cir. 2000.) The Defendant argued that the following statutory language evidenced Congress’s intent that state procedural rules apply in all TCPA suits: “a person or entity may, if otherwise permitted by the laws or rules of court of a State bring in an appropriate court of that State.”


However, the Sixth Circuit held that Congress simply intended to “enable states to decide whether and how to spend their resources on TCPA enforcement.” Giovanniello v. ALM Media, LLC, 726 F.3d 106, 114 (2d Cir. 2013). Thus, the Court held the language relied upon by the Defendant does not provide a basis to apply state procedural rules in TCPA class actions brought in federal court.


The Court acknowledged that allowing TCPA class-action suits to be maintained in federal district courts could lead to forum shopping. However, the U.S. Supreme Court recently held in a case involving a conflict between Rule 23 of the Federal Rules of Civil Procedure and a New York procedural rule prohibiting class actions in cases involving a statutory penalty, that a “Federal Rule governing procedure is valid whether or not it alters the outcome of the case in a way that induces forum shopping.” Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 416 (2010).


Thus, the Sixth Circuit rejected the Corporation’s argument that the district court erred in declining to apply MCR 3.501(A)(5), and affirmed the district court’s judgment.






Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
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Chicago, Illinois 60602
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