Bais Yaakov of Spring Valley v. ACT, Inc.

• Decision Date: 30 August 2021
• Docket Number: No. 20-1537,20-1537
• Citation: 12 F.4th 81
• Parties: BAIS YAAKOV OF SPRING VALLEY, on behalf of itself and all others similarly situated, Plaintiff, Appellant, v. ACT, INC., Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

12 F.4th 81

BAIS YAAKOV OF SPRING VALLEY, on behalf of itself and all others similarly situated, Plaintiff, Appellant,

v.ACT, INC., Defendant, Appellee.

No. 20-1537

United States Court of Appeals, First Circuit.

August 30, 2021

Aytan Y. Bellin, with whom Bellin & Associates LLC was on brief, for appellant.

Robert A. Burgoyne, with whom Perkins Coie LLP, Robert L. Leonard, and Doherty, Wallace, Pillsbury & Murphy, P.C., were on brief, for appellee.

Before Lynch, Kayatta, and Barron, Circuit Judges.

KAYATTA, Circuit Judge.

ACT, Inc., is a non-profit entity that develops and administers the ACT college admissions test. Bais Yaakov of Spring Valley is a small private high school to which ACT sent three one-page faxes in 2012. Bais Yaakov has since pursued ACT with a zeal that would impress even Hugo's Inspector Javert. On behalf of itself and a class of similarly situated recipients of faxes from ACT, Bais Yaakov alleges that the faxes were unsolicited advertisements sent in violation of the Telephone Consumer Protection Act of 1991 (TCPA), 47 U.S.C. § 227(b)(1)(C). Bais Yaakov seeks injunctive relief and statutory damages in an amount ACT estimates to exceed $400,000,000.

After almost eight years of litigation -- including an interlocutory appeal to this court, see Bais Yaakov of Spring Valley v. ACT, Inc., 798 F.3d 46, 46 (1st Cir. 2015) -- the district court entered judgment against Bais Yaakov. It found that class certification was unwarranted and that Bais Yaakov's individual claim was rendered moot by ACT's offer to pay the full amount of that claim ($46,500) and its promise not to send further faxes to Bais Yaakov. While we see no abuse of discretion in the denial of class certification, we vacate the judgment because Bais Yaakov's own claim for damages is not quite moot. Our reasoning follows.

I.

In 2005, Bais Yaakov filled out a High School Code Request Form, on which it provided its fax number. Students use the High School Code number to have their ACT test scores reported to their high school. On the form, Bais Yaakov checked a box indicating that it wanted to administer certain standardized tests, that it wanted to receive its students' test scores, and that it wanted to receive SAT or ACT publications.

Seven years later, ACT sent three faxes to Bais Yaakov over the course of three months. The first fax was a one-page flyer stating in large bold letters, "Don't forget to register for the ACT!" Underneath, the fax directed counseling staff to "[r]emind" students of the next ACT test date, which it featured prominently. It listed the registration deadlines for the test date and advised that "[s]tudents can meet the ... deadline by registering on-line" at a specified ACT web address. In the top-left corner, the fax presented the name "ACT" above the words "advancing lives."

The second fax was identical to the first but with a different test date and corresponding registration deadlines.

The third fax contained what appears to be an image of a crowd cheering at a baseball game, with the words "Give Your Students the Home-Field Advantage" superimposed on one side and "ACT" on the other. The bottom of the image stated, "Become an ACT Test Center." Beneath the image was more text, which said, among other things: "By offering the ACT at your high school you provide your students with a competitive edge."; "Your school can benefit too. Your school staff will be compensated for assuming the roles of test supervisor, room supervisors, and proctors."; and "The curriculum-based ACT is accepted by all 4-year colleges and universities in the U.S." (emphasis omitted).

Bais Yaakov alleges that these three faxes are among over 28,000 unlawfully faxed advertisements ACT sent to over 7,000 schools across the country between 2008 and 2012.

II.

A.

The TCPA prohibits sending advertisements to fax machines, but with two principal exceptions: An advertisement may be sent to a fax machine (1) if the person to whom it is sent has given "prior express invitation or permission, in writing or otherwise," 47 U.S.C. § 227(a)(5) ; or (2) if certain conditions are satisfied, one of which requires the inclusion of an opt-out notice on the fax, id. § 227(b)(1)(C). None of the faxes at issue in this appeal contains an opt-out notice, so any that are advertisements are unlawful if they were sent without prior express invitation or permission.

By regulation, the Federal Communications Commission (FCC) promulgated a substantial further limitation on sending advertisements by fax. In its so-called Opt-Out Regulation (also referred to as the Solicited Fax Rule), the agency decreed that even faxes sent with prior express invitation or permission must contain an opt-out notice. See Rules & Regulations Implementing the Telephone Consumer Protection Act of 1991; Junk Fax Prevention Act of 2005, 71 Fed. Reg. 25,967, 25,971 -72 (May 3, 2006) (formerly codified at 47 C.F.R. § 64.1200(a)(4)(iv) ); Bais Yaakov of Spring Valley v. FCC, 852 F.3d 1078, 1080 (D.C. Cir. 2017) (Kavanaugh, J.). ACT included no opt-out notice in any of its faxes, so if the Opt-Out Regulation is valid, prior express invitation or permission would be no defense. Instead, ACT's liability to any recipient would turn entirely on whether the fax was an advertisement.

The FCC defines the term "advertisement" for purposes of the TCPA as "any material advertising the commercial availability or quality of any property, goods, or services." 47 C.F.R. § 64.1200(f)(1) ; see also 47 U.S.C. § 227(a)(5) (using similar language to define the term "unsolicited advertisement"). To classify a communication as "advertising," the agency looks to the communication's "primary purpose." In re Rules & Regulations Implementing the Telephone Consumer Protection Act of 1991, 31 FCC Rcd. 13,289, 13,291 (2016).

B.

Bais Yaakov proposed two alternative classes, labeled Class A and Class B. With Class A, Bais Yaakov sought to include only recipients of "unsolicited" fax "advertisements" from ACT containing no opt-out notice. With Class B, Bais Yaakov sought to take advantage of the Opt-Out Regulation by broadening the class to include recipients of any (even solicited) fax advertisements from ACT that did not contain an opt-out notice as required by the regulation.

With the parties' consent, the district court considered first whether the Opt-Out Regulation was valid. In finding the regulation to be invalid, the district court deemed binding a decision to that effect by the Court of Appeals for the D.C. Circuit. See Bais Yaakov of Spring Valley v. ACT, Inc., 328 F.R.D. 6, 10 (D. Mass. 2018) (citing Bais Yaakov, 852 F.3d at 1083 ).¹

Having eliminated the Opt-Out Regulation as a tool for establishing that every fax sent by ACT necessarily violated the TCPA because ACT never included opt-out notices, the district court turned its attention to the two issues raised by the TCPA's exceptions from its prohibition on advertisements: Did the fax contain an advertisement? And, if so, was it unsolicited (i.e., sent without prior express invitation or permission)? As to these two issues, the district court took the standard Rule 23 approach: It did not try to resolve the issues; rather, it properly tried to decide whether Bais Yaakov had shown that resolution of the issues could be accomplished on a common, class-wide basis. See Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, 568 U.S. 455, 459–60, 133 S.Ct. 1184, 185 L.Ed.2d 308 (2013) ("[T]he office of a Rule 23(b)(3) certification ruling is not to adjudicate the case; rather it is to select the ‘metho[d]’ best suited to adjudication of the controversy fairly and efficiently." (second alteration in original)).

Looking first at the request to certify Class B, the district court found that the invalidity of the Opt-Out Regulation permitted a defense based on prior express permission. Assaying the record, it then concluded that the need to adjudicate such a defense would require an examination of the circumstances of each class member and its communications with ACT to determine whether that class member gave the requisite permission. And the need to engage in such an individual inquiry meant that common issues would not predominate as required in order to certify a class under Rule 23(b)(3). See In re Asacol Antitrust Litig., 907 F.3d 42, 51–52 (1st Cir. 2018).

With proposed Class A, Bais Yaakov sought to eliminate this diversity among class members by limiting that class to recipients of unsolicited faxes. The district court rejected this attempt, finding that such a class would constitute a "fail-safe class," i.e., a class that would bind class members only if they won. See In re Nexium Antitrust Litig., 777 F.3d 9, 22 & n.19 (1st Cir. 2015). The district court then reasoned that if the class were redefined to include recipients of any faxes from ACT, it would suffer from the same defects as did Class B.

Having denied class certification, the district court turned to Bais Yaakov's individual claim, on which the parties had cross-moved for summary judgment. See Bais Yaakov of Spring Valley v. ACT, Inc., 438 F. Supp. 3d 106, 108 (D. Mass. 2020). The district court found that genuine disputes of material fact -- namely, whether the three faxes identified by Bais Yaakov qualified as advertisements and whether Bais Yaakov gave the requisite permission -- precluded granting summary judgment for either party. Id. at 109–10.

Later, ACT moved to dismiss Bais Yaakov's claim as moot. According to the district court, by that point ACT had "unconditionally tendered to [Bais Yaakov] all the statutory damages that it [sought] on an individual basis." Bais Yaakov of Spring Valley v. ACT, Inc., 461 F. Supp. 3d 3, 5 (D. Mass. 2020). As to injunctive relief, ACT had not sent Bais Yaakov a fax since 2012, and it had agreed not to send any faxes in the future in violation of the TCPA. Id. at 4–5. The district court therefore found the case moot and dismissed it. Id. at 5.

Bais Yaakov now appeals three rulings of...