Monday, April 18, 2022

FYI: 7th Cir Upholds Denial of TCPA Class Cert When Common Issues of Consent Did Not Predominate

The U.S. Court of Appeals for the Seventh Circuit recently affirmed a trial court's denial of class certification in a federal Telephone Consumer Protection Act (TCPA) putative class action, holding that common issues of consent did not predominate.


A copy of the opinion is available at:  Link to Opinion


Plaintiff, a motel operator, brought claims pursuant to the TCPA against a vendor ("Vendor") after receiving a facsimile advertisement from Vendor. The facsimile advertisement was sent to more than 10,000 recipients.


Plaintiff sought to certify a class of all recipients of the advertisement. The trial court found that Plaintiff failed to meet its burden of demonstrating that common issues of fact predominated. 


As you may recall, the TCPA prohibits "any telephone facsimile machine ... to send, to a telephone facsimile machine, an unsolicited advertisement." 47 U.S.C § 227(b)(1)(c). An unsolicited advertisement is "any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission, in writing or otherwise." 47 U.S.C. § 227(a)(5).


Thus, the issue of whether the advertisement was consensual or "solicited" was key to recovery under the TCPA.  The trial court found that because Vendor assembled the list of recipients from a number of different relationships and circumstances that could indicate the receipt of the advertisement was consensual, Plaintiff failed to meet its burden of demonstrating that common issues of fact predominated.


After the trial court denied class certification, Plaintiff moved for reconsideration of the order, or in the alternative for certification of a class of recipients whose fax numbers were obtained from a list of franchisees of a specific franchisor only and whose numbers had been supplied to Vendor due to their status as a Franchisor-approved supplier, as was the case for Plaintiff.


The trial court again concluded that sorting through which of the recipients had engaged in conduct that met the definition of "soliciting" the fax would require case-by-case assessment and declined to certify the modified class. 


Plaintiff appealed both rulings.


Plaintiff first argued that the trial court abused its discretion by applying erroneous legal rules to the predominance inquiry.  Plaintiff asserted that Vendor should have been required to show evidence that a significant portion of the class had provided express prior permission.


The Seventh Circuit noted that plaintiffs seeking to certify a class bear the burden of proving compliance with Fed. R. Civ. Pro. 23, "prior express invitation or permission" is an affirmative defense for which the defendant bears the burden of proof at trial.  The Appellate Court however found that the trial court did not err on either the facts or the law.


The predominance inquiry "tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation," and "calls upon courts to give careful scrutiny to the relation between common and individual questions in a case." Tyson Foods, Inc.  v. Bouaphakeo, 577 U.S. 442, 453 (2016).


The Seventh Circuit held that the trial court properly noted that the question of whether the fax was sent without prior express permission was a key issue to be resolved in order to allow the proposed class to recover under the TCPA. Thus, the question for class certification purposes was whether this issue was susceptible to generalized class-wide proof.


The Seventh Circuit noted that the numbers that Vendor used for the broadcast were obtained in multiple ways, including the numbers collected from the smaller modified class. The Appellate Court also noted that Vendor made more than vague assertions about prior permission, providing evidence about various relationships, contracts and personal contacts it had with the recipients. This necessitated individual analysis of prior express permission.


Although Plaintiff argued that Vendor failed to prove that any single recipient consented, the Seventh Circuit noted that it is the method of determining the answer to the permission inquiry that drives the predominance consideration and not the answer itself. This is the case not only for the elements that plaintiff must prove but also for affirmative defense like prior express permission.


"At class certification, the issue is not whether plaintiffs [or defendants] will be able to prove these elements on the merits, but only whether their proof will be common for all plaintiffs [or defendants], win or lose." In re Allstate Corp. Sec. Litig., 966 F.3d at 595, 604 (7th Cir. 2020).  Thus, the Seventh Circuit held the trial court did not abuse its discretion in denying class certification based on Plaintiff's failure to carry its burden of demonstrating predominance.


Plaintiff next argued that the trial court applied an erroneous "implied consent" standard for "prior express invitation or permission" to receive fax advertisements under the TCPA, rather than the standard set forth in Physicians Healthsource, Inc. v. A-S Medication Solutions, LLC 950 F.3d 959 (7th Cir. 2020). 


Under the TCPA, a party sending a transmission by fax is liable only for unsolicited advertisements. 47 U.S.C. § 227(b)(1)(C)(iii). To be unsolicited, the transmission must be sent without the recipient's prior express invitation or permission. 47 U.S.C. § 227(a)(5).


The Seventh Circuit again disagreed, holding that, on consideration of the modified class, the trial court found that express permission required the customer to understand that by providing its fax number it was agreeing to receive faxed advertisements.  The Appellate Court also noted that the TCPA does not require a specific form of invitation or permission. Thus, the Seventh Circuit held, the question of prior express permission was again an individual inquiry that predominated over common issues.


Plaintiff argued that the standard for "express prior permission" was narrowed by Physicians Healthsource and the trial court applied a less rigorous "implied consent" standard when it denied class certification.  Here, Plaintiff again argued that Vendor should have been required to set forth evidence that a "significant percentage" of the class consented prior to finding that individual issues predominated.


However, the Seventh Circuit pointed out that Vendor did present a plausible permission defense and present evidence in support of said defense. The Appellate Court noted that if Vendor's claim of permission had been based on a "legally flawed definition," its arguments regarding predominance would fail, but that the trial court correctly applied a definition that was consistent with the standard used in Physicians Healthsource.


The Seventh Circuit held that the refinements to the standard in Physicians Healthsource did not affect the predominance analysis in this case, as Plaintiff failed to offer a generalized class-wide manner to resolve the question.


Finally, Plaintiff argued that the trial court erred in denying certification of the modified class by treating permission to receive the fax as transferrable.  Plaintiff argued that for the modified class, on a class-wide basis, any permission granted in franchise agreements to its franchisor, was not transferrable to Vendor.


However, the Seventh Circuit noted that Vendor had offered evidence that the permission granted in franchise agreements by class members arguably gave permission not only to the franchisors but to the franchisor's approved vendors and affiliates. When permission is granted broadly to a group of possible senders, those senders may be able to demonstrate that the statutory defense of prior express permission or invitation has been met. Thus, the Appellate Court again found no error.


Therefore, the Seventh Circuit held that the trial court did not abuse its discretion in denying class certification, and affirmed the trial court's ruling.




Ralph T. Wutscher
Maurice Wutscher LLP
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