Lacking List of Recipients, Sixth Circuit Denies Class Certification
By Christine M. Reilly, Chair, TCPA Compliance and Class Action Defense | Diana L. Eisner, Associate, Litigation
Finding that the question of consent in a Telephone Consumer Protection Act (TCPA) class action requires an individualized inquiry and without a list of recipients the class cannot be ascertained, the U.S. Court of Appeals, Sixth Circuit declined to certify a class of tens of thousands of plaintiffs in a junk fax case.
In 2007, ASD Specialty Healthcare purchased from a third-party data provider contact information consisting of a list of 53,502 physicians’ names. The distributor of pharmaceuticals and medical products hired a fax broadcaster to send a one-page fax advertising the drug Prolia. Invoice records confirmed that only 40,343 faxes (or 75 percent of the total list) were successfully transmitted. A fax log of the distribution was later destroyed pursuant to ASD’s 18-month document retention policy.
Almost three years after it claims to have received the Prolia fax, serial-plaintiff medical practice Sandusky Wellness Center sued ASD, alleging the fax ran afoul of the TCPA with a noncompliant opt-out notice. After discovery, the plaintiff sought certification of a putative class comprising all 40,343 fax recipients.
The district court denied the motion for class certification, relying in part on a liability waiver from the Solicited Fax Rule granted to ASD by the Federal Communications Commission. Sandusky appealed. In the interim, the U.S. Court of Appeals, D.C. Circuit struck down the Rule.
Both because of the waiver exempting ASD from liability and the D.C. Circuit ruling invalidating the Solicited Fax Rule, questions of consent presented individualized issues counseling against class certification, the Sixth Circuit held, affirming denial of the plaintiff’s motion.
If Sandusky’s 40,343-member class were certified, the district court would face the task of filtering out those individuals who solicited the Prolia fax, to whom ASD was not liable. “Regardless of other questions that may be common to the class, identifying which individuals consented would undoubtedly be the driver of the litigation,” the panel wrote, precluding certification under Federal Rule of Civil Procedure 23(b)(3).
The undertaking would be individualized because ASD produced evidence that “several thousand” names on the Prolia list were current or former customers, in the form of more than 450,000 pages of various forms where customers had provided ASD with their fax numbers. The district court reviewed a sample of the documents and concluded that many forms would demonstrate that the customers had given the requisite consent to receive the Prolia fax and thus would not have claims against the defendant.
“But identifying these individuals ‘would require manually cross-checking 450,000 potential consent forms against the 53,502 potential class members,’” the court said. “Identifying solicited fax recipients through a form-by-form inquiry is sufficiently individualized to preclude class certification.”
In addition to issues of consent, an inability to identify class members also stood in the way of certifying a class, the Sixth Circuit said. Both parties agreed that 25 percent of the Prolia list did not receive the fax based upon the distribution list, which was no longer in existence.
“In the absence of fax logs listing the status of each attempted transmission, the district court resolved that ‘each potential class member would have to submit an affidavit certifying receipt of the Prolia fax,’” the court wrote, finding several problems with this exercise. The fax was sent in 2010, meaning recollections would be suspect and affidavits self-serving.
Although the panel acknowledged that courts have been “inconsistent” in how they have accounted for difficulties in identifying class members, especially in the context of the TCPA, it held fast to the position that the class device was not superior to other available methods in this case.
“[I]t is possible that all 53,502 intended recipients might submit affidavits claiming receipt of the Prolia fax and their entitlement to $500 in damages,” the panel wrote. “Finding out which quarter of these individuals were being untruthful would require scrutinizing each affidavit and would undoubtedly be a difficult undertaking. In fact, it may not even be possible, in which case the district court would be tasked with fashioning some type of reduced equitable relief for all recipients. Practical concerns such as these highlight the difficulties the district court would have in managing Sandusky’s proposed class and further underscore the inappropriateness of class certification.”
Class certification under the TCPA is not automatic, the Sixth Circuit said, noting that it was unaware of any court that has mandated certification where fax logs did not exist—and declining to be the first.
“Perhaps if Sandusky had brought suit earlier, fax logs would have existed, and their absence would not pose an independent barrier to class certification,” the panel wrote. “Or, Sandusky could have filed an individual claim against [ASD] and presented a copy of the Prolia fax as evidence of receipt. Instead, Sandusky did neither of these things. By choosing to file a class action when it did, Sandusky shouldered the burden of proving that its proposed class satisfied Rule 23. It simply did not meet that burden here.”
To read the opinion in Sandusky Wellness Center, LLC v. ASD Specialty Healthcare, Inc., click here.
Why it matters: The Sixth Circuit’s practical application of Rule 23 foreclosed class certification in the lawsuit. With the death of the Solicited Fax Rule, consent is becoming a key issue in many TCPA fax cases, particularly where the faxes are sent to current or former customers. The Sixth Circuit recognized that consent is an individualized issue that impedes class certification. Moreover, without fax logs to establish the actual recipients of the Prolia fax, the class would not be ascertainable. Thus, these two aspects made the case not conducive to the class action device. This is a significant victory for a defendant facing the potential of over $20 million in liability (at a minimum of $500 potentially owed to each of the proposed 40,343 class members). “While class certification may be ‘normal’ under the TCPA, that does not mean it is automatic,” the court wrote. “While there may be several benefits to affording TCPA cases class treatment—for example, as a way to hold businesses accountable when smaller recovery values provide fewer incentives for solo claims—those benefits do not always outweigh the difficulties of managing a proposed class.”
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Text Completing Transaction Doesn’t Violate TCPA, Court Rules
By Christine M. Reilly, Chair, TCPA Compliance and Class Action Defense | Diana L. Eisner, Associate, Litigation
A text message doesn’t constitute telemarketing pursuant to the Telephone Consumer Protection Act (TCPA) where it was sent to complete a transaction, according to a decision from a federal court judge in Washington.
The dispute began when Noah Wick saw an online ad for a free nutritional supplement. Clicking on the link, he entered his name, mailing address, phone number and email address; clicked “rush my order”; and was then directed to a second page with pricing information. He then abandoned the purchase. Not long after, he received a text message stating: “Noah, Your order at Crevalor is incomplete and about to expire. Complete your order by visiting [a link].”
Rather than complete his order, Wick sued Twilio, allegedly the sender of the message, for violating the TCPA by sending the text message. The company moved to dismiss the lawsuit.
While the court found Wick had standing to sue and had plausibly alleged that the defendant used an automated telephone dialing system, U.S. District Court Judge Robert S. Lasnik granted the motion to dismiss because Wick consented to receive the text.
“The [Federal Communications Commission] defines telemarketing as ‘the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods or services, which is transmitted to any person,’” the court said.
“A review of the allegations and attached exhibits shows that plaintiff entered his identifying information (name, address, phone number and email), agreed to the offer’s terms and conditions, and clicked on the ‘Rush My Order’ button before closing the webpage,” Judge Lasnik wrote. “Whatever his subjective intent regarding making a purchase, the text message he received was aimed at completing a commercial transaction that he had initiated and for which he had provided his phone number.”
Therefore, the text message Wick received did not constitute telemarketing, the court said. “Because plaintiff consented to the communications at issue when he submitted his telephone number as part of Crevalor’s ordering process, plaintiff failed to plead a TCPA violation.”
Wick’s state law claims fell for similar reasons, the court held, granting Twilio’s motion to dismiss the lawsuit.
To read the order in Wick v. Twilio, click here.
Why it matters: Communications about incomplete applications and orders have been a gray area for some time. Many businesses have abstained from such communications out of fear of TCPA liability. By concluding that these communications are not marketing, this decision could provide some comfort to businesses seeking to send such communications. Moreover, according to the court, where a prospective purchaser has entered his contact information in an online form and submitted it (even if the order is not completed), the individual has provided prior express consent for non-marketing communications.
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TCPA Violation Where Marketing the ‘One Purpose’ of Calls
By Christine M. Reilly, Chair, TCPA Compliance and Class Action Defense | Diana L. Eisner, Associate, Litigation
On remand from the U.S. Court of Appeals, Eighth Circuit, a Missouri federal judge found that robocalls voiced by Mike Huckabee violated the Telephone Consumer Protection Act (TCPA) because they had the primary purpose of advertising a movie and not conducting a political survey.
Between Sept. 9 and Sept. 15, 2012, a marketing company made more than 3 million robocalls. Those who did not answer received prerecorded messages stating, “Liberty. This is a public survey call. We may call back later.”
If the call was answered, the script began: “Hello, this is Governor Mike Huckabee, with a 45-second survey. Do you believe in American freedom and liberty? … Would you, like me, Mike Huckabee, like to see Hollywood respect and promote traditional American values? I am an enthusiastic supporter of a new movie called “Last Ounce of Courage.” It is a film about faith, freedom and taking a stand for American values. May I tell you more about why I recommend that you … see the movie?”
Recipients who indicated “yes” heard more about the movie. “Thank you for your interest. ‘Last Ounce of Courage’ opens in theaters on Friday, September 11th. ‘Last Ounce of Courage’ will inspire you and your loved ones to celebrate our nation and the sacrifices made to protect our liberties. It is a great story about taking a stand for religious freedom. The film is a timely reminder of all that is worth defending in our nation. Experience the ‘Last Ounce of Courage’ trailer and see audience reactions at www.lastouncethemovie.com; that’s www.lastouncethemovie.com.”
Ron and Dorit Golan—whose number was registered on both the National Do Not Call Registry and the Missouri No-Call list—received two of the robocall messages and filed suit against the marketing company, the film company behind the movie and various individuals, including Huckabee, alleging violations of the TCPA and Missouri’s No-Call law.
The district court granted the defendants’ motion to dismiss the suit, ruling that the Golans had not suffered an injury in fact because none of the messages they received contained an advertisement and they did not hear the entire script of the call. On appeal, the Eighth Circuit reversed.
On remand, U.S. District Court Judge E. Richard Webber first addressed the purpose of the telephone calls, making quick work of the defendants’ argument that the calls were not commercial but a political survey to collect data.
“Although Defendants assert there are disputed facts regarding the purpose of the telephone call, the Court need only read the script of the prerecorded message to determine these telephone calls are telemarketing,” the court wrote. “[T]here is no way to interpret this script as anything other than an attempt to convince consumers to go see the movie. This is telemarketing; the telephone calls are for the purpose of encouraging the purchase of a product, here, a movie.”
The defendants were similarly unable to persuade the court that the calls had a dual purpose of both advertisement and political survey. Not only has the Federal Communications Commission found that most dual-purpose calls constitute unsolicited advertisements, the court said that “it is clear from the script, there was only one purpose of these telephone calls, to market the movie.”
“However, even if Defendants’ argument was correct, the dominant purpose of the telephone calls is to market the movie, not to conduct a political survey,” Judge Webber said. “The focus of the telephone call is the movie and values represented in the movie, while only two questions, if any, can be considered a political survey. Because the telephone calls are telemarketing, they are subject to the TCPA.”
Turning to the issue of consent, the court disagreed that when consumers provided their phone number to the marketing company to receive calls about religious freedom, they consented to receiving calls about the movie.
“Providing a phone number to an entity does not mean the consumer has expressly consented to contact for any purpose; consent for one purpose does not equate to consent for all purposes,” the court wrote. “In this matter, Defendants assert they obtained consent to call the numbers about religious freedom or religious liberty. This is not consent to receive telephone calls advertising a movie, even if the movie, in some manner, relates to religious freedom. Consent for a political topic is not consent for an advertisement.”
In addition, the court wasn’t entirely confident that prior consent was obtained for telephone calls about religious freedom, as the only evidence the defendants provided was their own testimony.
Judge Webber also rejected the defendants’ attempt to split the calls into sections, arguing that only those who answered “yes” heard more about the movie, thereby demonstrating their consent. “Prior express consent does not include consent during the telephone call,” the court said. “Defendants must have obtained consent before placing the phone call, which did not happen here.”
Granting summary judgment in favor of the plaintiffs on the issues of consent and the purpose of the call, the court also said it would apply joint and several liability if the defendants were found liable.
To read the opinion in Golan v. Veritas Entertainment, LLC, click here.
Why it matters: Whether a communication is advertising is a subject of much debate. Here, the district court had little trouble determining that the purpose of the calls was to promote the movie, not conduct a political survey, finding no merit to the defendants’ fallback argument that the calls had a dual purpose. In addition, the court homed in on the importance of the scope of consent, finding that even if consumers had provided their phone numbers for the purpose of receiving calls about religious freedom or liberty, they had not consented to receiving calls about the movie.
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FCC Seeks Comment on Reassigned Numbers
By Christine M. Reilly, Chair, TCPA Compliance and Class Action Defense | Diana L. Eisner, Associate, Litigation
In a new Notice of Inquiry (NOI) approved by the Federal Communications Commission at the July open meeting, the agency requested feedback on handling unwanted phone calls to reassigned phone numbers.
According to the FCC, approximately 35 million telephone numbers are disconnected and aged per year, with one source reporting that 100,000 numbers are reassigned by wireless carriers every day. Facing millions of complaints from consumers each year—and recognizing the potential liability for companies unaware that an individual’s number has changed—the agency initiated a proceeding to address the problem of reassigned numbers.
“To mitigate this problem, one approach is to develop a means for robocallers to verify whether a number has been reassigned prior to initiating the call,” according to the NOI. “This approach has broad support among both robocallers and consumers, all of whom may benefit if robocallers have better access to information about when numbers have been reassigned.”
The FCC first requested industry feedback on the ways in which the providers who have the information could report number reassignments in an accurate and timely way, what information should be reported, and when it should be reported—when a telephone number is disconnected, or when the number changes from available to assigned?
The agency also wondered about the scope of the reporting requirement: Should it be limited to wireless providers (excluding VoIP and wireline), or should it extend to all voice service providers? Additional information about the costs and benefits to voice service providers would be helpful, the FCC noted, querying the potential burden of reporting. “Should we consider a safe harbor from TCPA violations for robocallers who use the comprehensive reassigned number resource, or is an additional incentive not needed to increase its use?” the NOI queried.
Turning to the appropriate mechanism for reporting, the agency proffered four possibilities, requesting comment on each as well as the potential for other solutions. The first alternative: The FCC would establish and select an administrator of a central database of reassigned numbers, where voice service providers would report information to the database and robocallers would in turn ask the database for information about reassigned numbers.
“This approach, if adopted, would allow the Commission to oversee the quality of the data and of database operations, to restrict access to the data to appropriate entities under reasonable terms and conditions, and to ensure that the data continues to be available for as long as necessary, unlike commercial databases that might cease operations,” the FCC explained.
Other alternatives include reporting reassigned number information to robocallers directly or to reassigned number data aggregators, having each voice service provider offer robocallers the ability to query its own reassigned number information (with an application programming interface), or creating a public database of reassigned number information.
The FCC asked for feedback on additional issues such as the format of reassigned number information reporting, the frequency of updates, whether voice service providers should be compensated for reporting, eligibility to access reassigned number information and how the database would be funded.
Comments will be accepted until Aug. 28, with reply comments due by Sept. 26.
Why it matters: Calling the NOI “an important first step,” FCC Chairman Ajit Pai said solving the problem of reassigned numbers “would save everyone a lot of trouble.” Businesses have already faced the threat of liability under the TCPA for reaching out to reassigned numbers, even with the agency’s “one free call” rule established in the 2015 Declaratory Ruling.
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