Brodsky ex rel. Situated v. Humanadental Ins. Co.

• Decision Date: 03 December 2018
• Docket Number: No. 17-3506,No. 17-3067,17-3067
• Citation: 910 F.3d 285
• Parties: Lawrence S. BRODSKY, Individually and on Behalf of Others Similarly Situated, Plaintiff-Appellant, v. HUMANADENTAL INSURANCE CO. d/b/a Humana Specialty Benefits, Defendant-Appellee. Alpha Tech Pet, Inc., et al., Plaintiffs-Appellants, v. Essendant Co., Essendant Inc., and Essendant Management Services LLC, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

910 F.3d 285

Lawrence S. BRODSKY, Individually and on Behalf of Others Similarly Situated, Plaintiff-Appellant,

v.HUMANADENTAL INSURANCE CO. d/b/a Humana Specialty Benefits, Defendant-Appellee.

Alpha Tech Pet, Inc., et al., Plaintiffs-Appellants,

v.Essendant Co., Essendant Inc., and Essendant Management Services LLC, Defendants-Appellees.

No. 17-3067

No. 17-3506

United States Court of Appeals, Seventh Circuit.

Argued April 10, 2018

Decided December 3, 2018

Glenn L. Hara, Attorney, ANDERSON & WANCA, Rolling Meadows, IL, Phillip Andrew Bock, David Max Oppenheim, Attorneys, BOCK, HATCH, LEWIS & OPPENHEIM, LLC, Chicago, IL, for Plaintiff-Appellant LAWRENCE S. BRODSKY.

William A. Chittenden, III, David J. Novotny, Joseph Robert Jeffery, Attorneys, CHITTENDEN, MURDAY & NOVOTNY LLC, Chicago, IL, for Defendant-Appellee HUMANADENTAL INSURANCE COMPANY.

Glenn L. Hara, Attorney, ANDERSON & WANCA, Rolling Meadows, IL, for Plaintiffs-Appellants ALPHA TECH PET, INC., CRAFTWOOD LUMBER COMPANY, CRAFTWOOD II, INC.

Givonna St. Clair Long, Attorney, KELLEY DRYE & WARREN LLP, Chicago, IL, Lauri A. Mazzuchetti, Attorney, KELLEY DRYE & WARREN LLP, Parsippany, NJ, James Bryan Saylor, Attorney, KELLEY DRYE & WARREN LLP, New York, NY, for Defendants-Appellees LAGASSE, LLC, ESSENDANT MANAGEMENT SERVICES, LLC, ESSENDANT CO., UNITED STATIONERS, INCORPORATED.

Before Wood, Chief Judge, and Flaum and Kanne, Circuit Judges.

Wood, Chief Judge.

These appeals, which we have consolidated for purposes of disposition, both concern the Federal Communication Commission’s "Solicited Fax Rule." Despite the decline and fall of the fax machine, litigation continues between fax advertisers and unwilling recipients of their messages. Behind all this is the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227, as amended by the Junk Fax Prevention Act of 2005, Pub. L. No. 109-21, 119 Stat. 359, and as implemented through FCC regulations. The lead plaintiffs in our cases—Lawrence Brodsky and Alpha Tech Pet, Inc.—received faxed advertisements that did not comply (so they said) with the TCPA and the FCC’s Solicited Fax Rule. Each plaintiff wanted to pursue litigation not just individually, but as the head of a class. And in each case, the district court refused to certify the proposed class, largely on the authority of the D.C. Circuit’s decision in Bais Yaakov of Spring Valley v. FCC , 852 F.3d 1078 (D.C. Cir. 2017) (Kavanaugh, J.). Our review of decisions on class certification, pro or con, is deferential. Puffer v. Allstate Ins. Co. , 675 F.3d 709, 716 (7th Cir. 2012). We see no abuse of discretion here, and so we affirm the orders of the district courts declining to certify the proposed classes.

I

A. Brodsky

We can be brief with the underlying facts of both cases. Plaintiff Brodsky is an insurance wholesaler. HumanaDental Insurance Company is a Wisconsin corporation that insures a number of dental plans; another Humana affiliate markets specialty products such as dental, vision, life insurance, and disability policies. We refer to those defendants collectively as Humana unless the context requires otherwise. Brodsky has agreements with many insurance companies, and he sells their products through various agents. One such agreement was with "Humana Insurance Company, Humana Health Plan, Inc., and all of their affiliates." In that contract, Brodsky agreed that Humana and its affiliates "may choose to communicate with [Brodsky] through the use of ... facsimile to [his] ... facsimile numbers." Brodsky accordingly provided Humana with a fax number ending in 0152.

On May 14, 2008, Brodsky’s 0152 machine received two identical one-page faxes ("the subject faxes"). The pages indicated that they were sent by "Humana Specialty Benefits." These faxes were created by Humana’s marketing department. They did not identify the person or entity to which they were directed. And, to complicate matters, the 0152 machine was not used exclusively by Brodsky; seven other insurance agents had permission to, and did, use it during the relevant time. The parties agreed that faxes identical to the subject faxes were successfully transmitted 19,931 times. Brodsky responded with his lawsuit against Humana.

B. Alpha Tech Pet

The facts in this case are similar. Defendant Essendant and its affiliates are national distributors of office products, janitorial and sanitation supplies, breakroom supplies, technology products, industrial supplies, and automotive aftermarket tools and equipment. Alpha Tech alleged that the defendants transmitted unsolicited faxes, including eight advertisements that were sent between January 16, 2012, and April 26, 2012, to it and the other class members. The unwanted faxes advertised commercial products available from LaGasse, LLC, which at the time was a wholly owned subsidiary of United Stationers. United Stationers changed its name to Essendant Inc. in June 2015, and at the same time LaGasse LLC merged with Essendant Co.; Essendant Management Services LLC also allegedly played some role in the fax transmissions. We refer in this opinion to Essendant, the current name, for simplicity. The different roles each entity played are not material for our purposes.

According to Alpha Tech, the faxes that Essendant sent to it violated the TCPA and the Solicited Fax Rule because they did not include the required opt-out language. It sought to represent a class of all persons who received advertising faxes sent by Essendant or any of its affiliates or predecessors from May 1, 2011, to May 1, 2015. This was a huge proposed class: defendants estimate that it swept in approximately 1.5 million faxes, in 725 separate transmissions, to nearly 24,000 unique fax numbers.

II

The Brodsky case began in Illinois state court as a putative class action raising claims under the TCPA, but it was removed to the federal court. After removal, Humana answered and raised the affirmative defenses of pre-existing business relationship and consent. It pointed to the contractual language mentioned above in support of both defenses. Its marketing department created the faxes that Brodsky and other putative class members received. At the bottom of the page of each fax, in fine print, it said "If you don’t want us to contact you by fax, please call 1-800-U-CAN-ASK."

The district court initially certified a class under Federal Rule of Civil Procedure 23(b)(3) of recipients of faxes that advertised insurance products sold by HumanaDental. In so doing, it rejected Humana’s suggestion that it should wait until the FCC had a chance to rule on Humana’s request for a retroactive waiver of the Solicited Fax Rule and until the D.C. Circuit handed down its decision in the then-pending Bais Yaakov litigation. But then the ground shifted. On November 2, 2016, the FCC’s Consumer & Governmental Affairs Bureau granted Humana’s petition for a waiver, and on March 31, 2017, the D.C. Circuit handed down Bais Yaakov , in which the court found that the Solicited Fax Rule could not be applied to the transactions before it. In so ruling, the court stated that the FCC had exceeded its authority under the TCPA when it issued the Solicited Fax Rule, 47 C.F.R. § 64.1200(a)(4)(iv). Humana promptly moved to decertify the class, and the district court did so on August 28, 2017. As we have noted, we then granted Brodsky’s petition under Rule 23(f) for immediate review of the decertification decision.

The Alpha Tech case, which was handled by a different district court judge, is actually two cases: one that was filed in the Northern District of Illinois on January 14, 2016, and the other (Craftwood II, Inc. v. Essendant, Inc. ) that was initiated in the Circuit Court of Lake County, Illinois, on March 4, 2016, and later removed to the Northern District of Illinois and consolidated with Alpha Tech . Essendant tried to eliminate the class allegations with a motion to dismiss or strike, filed on March 28, 2016, but the district court denied that motion. About a year later, before anything else of consequence had occurred, the D. C. Circuit issued its decision in Bais Yaakov . On July 27, 2017, largely relying on Bais Yaakov , Essendant filed a preemptive motion to deny class certification. Alpha Tech responded with a motion for certification of three classes, covering 545 of the 725 fax templates Essendant had used. Nearly all of those faxes contained the following opt-out notice: "If you have received this fax in error, please accept our apologies and call toll free 877-385-4440 to be removed from our list." Alpha Tech criticized this notice on three grounds: (1) failure to provide a fax number for opt-out requests; (2) failure to state that it is unlawful for the sender not to respond within a reasonable time; and (3) failure to state that the recipient must identify the fax number to which the request relates. All these requirements appear in the Solicited Fax Rule. 47 C.F.R. § 64.1200(a)(4)(iii).

The district court issued an order denying class certification on November 3, 2017. It ruled that this court’s decision in Holtzman v. Turza , 728 F.3d 682 (7th Cir. 2013), holding that the TCPA requires a compliant opt-out notice before a consent-based defense can prevail, did not apply to this situation. Instead, it agreed with the D.C. Circuit’s ruling in Bais Yaakov striking down the Solicited Fax Rule, alternately calling that decision "binding" or at least "persuasive." In a footnote, it found additional support for its ruling in the waiver that the FCC by then had granted to the defendants. Last, with the regulation out of the picture, it found that individual questions predominated and thus that class treatment was inappropriate. Alpha Tech sought interlocutory review of that decision, and we agreed to take the case.

III

Because it sits at center stage in these controversies, we begin by setting out the critical parts of the Solicited Fax Rule:

(a) No person or entity may:

...

(4) Use a telephone facsimile machine, computer, or other device

...