Arnold Chapman & Paldo Sign & Display Co. v. Wagener Equities, Inc.

Decision Date31 March 2014
Docket NumberNo. 14–8004.,14–8004.
Citation747 F.3d 489
CourtU.S. Court of Appeals — Seventh Circuit
PartiesARNOLD CHAPMAN AND PALDO SIGN & DISPLAY COMPANY, individually and as representatives of a class of similarly situated persons, Plaintiffs–Respondents, v. WAGENER EQUITIES, INC. and Daniel Wagener, Defendants–Petitioners.

OPINION TEXT STARTS HERE

Phillip A. Bock, Attorney, Bock & Hatch, Chicago, IL, for PlaintiffsRespondents.

Robert Connor Heist, Attorney, R. Connor & Associates, P.C., Chicago, IL, for DefendantsPetitioners.

Before POSNER, KANNE, and ROVNER, Circuit Judges.

POSNER, Circuit Judge.

The defendants in this class action suit under the Telephone Consumer Protection Act, 47 U.S.C. § 227, seek our leave to appeal from the district court's order certifying the class. Fed.R.Civ.P. 23(f). The defendants are a business that manages commercial real estate properties for the properties' owners, and the owner of the business. The suit charges the defendants with having paid a “fax blaster” called Business to Business Solutions to send unsolicited fax advertisements, in violation of the Act's “junk fax” prohibition, 47 U.S.C. § 227(b)(1)(C), to 10,145 persons. They are the members of the class. Class counsel is seeking statutory damages, as they would surely eclipse any actual damages if the entire class is determined to have been victimized by the defendants' fax campaign. For then the aggregate statutory damages will be either a little more than $5 million or, if the violation is determined to be willful or knowing, as much as three times greater. § 227(b)(3).

If the expected damages are so great in relation to the defendants' assets that if the class certification order stands, the defendants may well be forced—even if they have a strong case on the merits—to settle, in order to avoid the risk of a catastrophic judgment, we would give careful consideration to the request for leave to appeal the order. Kohen v. Pacific Investment Management Co., 571 F.3d 672, 677–78 (7th Cir.2009); Blair v. Equifax Check Services, Inc., 181 F.3d 832, 834–35 (7th Cir.1999). But the defendants haven't told us what their assets are—just that the corporate defendant is “a small family owned business.” It is no doubt small in relation to such family-owned businesses as Koch Industries and Walmart, but maybe not so small that a contingent liability of $15 million would force it to settle; it hasn't settled yet, and this suit will be celebrating its fifth birthday later this year.

Even if the defendants could prove that they'll be forced to settle unless we reverse the class certification order, they would have to demonstrate a significant probability that the order was erroneous. “However dramatic the effect of the grant or denial of class status in ... inducing the defendant to capitulate, if the ruling is impervious to revision there's no point to an interlocutory appeal.” Id. at 835.

The defendants' principal argument is that only owners of fax machines have standing to sue under the Telephone Consumer Protection Act. The plaintiffs have not presented evidence concerning the ownership of the fax machines of the class members. But what the Act prohibits is faxing unsolicited fax advertisements “to a telephone facsimile machine.” § 227(b)(1)(C). There is no mention of ownership.

The defendants cite a district court decision that read an ownership requirement into the Act on the ground that Congress's concern was with the “cost of the paper and ink incurred by the owner of the fax machine and the fax machine owner's loss of the use of the machine.” Compressor Engineering Corp. v. Manufacturers Financial Corp., 292 F.R.D. 433, 448 (E.D.Mich.2013). The decision is erroneous on its own terms, because the lessee of a fax machine pays for the paper and often for the ink. And if he doesn't, no matter. For contrary to Compressor Engineering, our decision in Holtzman v. Turza, 728 F.3d 682, 684 (7th Cir.2013), holds that no monetary loss need be shown to entitle the junk-fax recipient to statutory damages. Whether or not the user of the fax machine is an owner, he may be annoyed, distracted, or otherwise inconvenienced if his use of the machine is interrupted by unsolicited faxes to it, or if the machine wears out prematurely because of overuse attributable to junk faxes. Nor does entitlement to statutory damages require any showing of injury of any sort, for such damages not only serve to compensate for injuries difficult to estimate in dollar terms, but also, like statutory compensation for whistleblowers, operate as bounties, increasing the incentives for private enforcement of law. Anyway it would be arbitrary to limit relief under the junk-fax provision of the Telephone Consumer Protect Act to owners of fax machines, and there is no suggestion of such a limitation in the statute.

At most the defendants' argument would support adding to the class the owners, if different from the users, of the fax machines that received the unauthorized fax advertisements. There is no doubt that many of the current class members do own their fax machines. The defendants don't deny that one of the named plaintiffs, Paldo Sign & Display Company, does; but the other, Chapman, appears to as well. It's true that he was a federal prisoner when the defendants' fax was transmitted to the fax machine in his home, but that should make no difference, on the defendants' own theory, to his eligibility to be a member of the class, and indeed to be a class representative (though, embarrassed by Chapman's situation, class counsel has dropped him as a class representative; but he remains a member of the class). It's irrelevant that, being in prison, he couldn't use the machine. (His wife received the defendants' faxes while he was imprisoned.)

Anyway a class can be certified without determination of its size, so long as it's reasonable to believe it large enough to make joinder impracticable and thus justify a class action suit. Kohen v. Pacific Investment Management Co., supra, 571 F.3d at 677–78. “How many (if any) of the class members have a valid claim is the issue to be determined after the...

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