Seventh Circuit Holds That TCPA Fax Regulations Do Not Impose Strict Liability for Actions of Contractors

By Joseph C. Wylie II, Molly K. McGinley, Nicole C. Mueller

On March 21, 2016, the Seventh Circuit issued its decision in Bridgeview Health Care Ctr., Ltd. v. Clark, Nos. 14-3728 & 15-1793 (7th. Cir. 2016), holding that agency principles apply to TCPA claims in determining whether a fax sent by a third-party is sent “on behalf of” a principal.  In doing so, the Seventh Circuit applied a uniform standard of agency principles to fax advertisements and calls under the TCPA despite the Federal Communications Commission’s (the “FCC”) previous assertions that vicarious liability for fax activity is subject to a different and potentially broader test.  As previously discussed, other courts have declined to apply agency principles to decide this question, in effect applying different standards to fax and call activity.

While the TCPA provides that it is unlawful to “use any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement,” it is silent as to who qualifies as a “sender” of fax advertisements.  The federal regulations define a fax sender as “the person or entity on whose behalf a facsimile unsolicited advertisement is sent or whose goods or services are advertised or promoted in the unsolicited advertisement.”  In 2013, a FCC ruling stated that sellers may be liable for calls placed by third parties under federal agency principles.  In response to a query from the Eleventh Circuit, the FCC later clarified that the ruling was inapplicable to fax advertisements.  The FCC stated that under the TCPA, a seller can only be vicariously liable under agency principles for telephone calls placed on its behalf by a third-party telemarketer, while a seller in a fax case will be directly liable even if the fax was sent without its knowledge or authorization “so long as the transmitted fax constitutes an unsolicited facsimile advertisement promoting the defendant’s goods or services.”

In Clark, the defendant authorized a marketing contractor to send approximately 100 fax advertisements to consumers within 20 miles of his business location in Terre Haute, Indiana.  The marketer, however, faxed nearly 5,000 advertisements across Indiana, Illinois and Ohio.  The plaintiff sought to certify a class of all recipients of faxes sent by the defendant’s contractor.

The district court granted partial summary judgment for the plaintiff, finding defendant liable for violating the TCPA by authorizing fax advertisements to plaintiffs within 20 miles of Terra Haute.  The district court judge entered the statutory penalty of $500 per recipient to 32 identifiable such recipients, resulting in a $16,000 judgment.  After a bench trial, the court determined that Clark was not liable to recipients, including the plaintiff, who were outside the region in which the defendant had authorized fax activity.  Both parties appealed to the Seventh Circuit.

On appeal, the Seventh Circuit recognized that Dish Network is inapplicable to fax activity, but nonetheless held that courts should look to traditional agency principles to determine whether an action is done “on behalf” of a principal.  The Seventh Circuit found that the marketer acted outside the scope of the authority granted to it, and held that the lower court had not erred in concluding that Clark was not liable for faxes sent more than 20 miles from Terra Haute.

The Seventh Circuit’s opinion contained some harsh criticism of the current wave of TCPA litigation, noting that “what motivates TCPA suits is not simply the fact that an unrequested ad arrived on a fax machine” but that such litigation has “blossomed into a national cash cow for plaintiff’s attorneys specializing in TCPA disputes” and expressing doubt that Congress meant for the TCPA “which it crafted as a consumer protection law, to become the means of targeting small businesses.”

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