Craftwood Ii, Inc. v. Generac Power Sys., Inc.

• Decision Date: 01 April 2019
• Docket Number: No. 18-2883,18-2883
• Citation: 920 F.3d 479
• Parties: CRAFTWOOD II, INC., and Craftwood III, Inc., Plaintiffs-Appellants, v. GENERAC POWER SYSTEMS, INC., and Comprehensive Marketing, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

920 F.3d 479

CRAFTWOOD II, INC., and Craftwood III, Inc., Plaintiffs-Appellants,

v.GENERAC POWER SYSTEMS, INC., and Comprehensive Marketing, Inc., Defendants-Appellees.

No. 18-2883

United States Court of Appeals, Seventh Circuit.

Argued March 27, 2019

Decided April 1, 2019

Charles Darryl Cordero, Attorney, Damon Rubin, Attorney, PAYNE & FEARS LLP, El Segundo, CA, Peter M. Trobe, TROBE, BABOWICE & ASSOCIATES, Waukegan, IL, for Plaintiffs-Appellants.

Molly Arranz, Attorney, Michael L. Resis, Attorney, SMITHAMUNDSEN, LLC, Chicago, IL, for Defendant-Appellee GENERAC POWER SYSTEMS, INC., a Wisconsin corporation.

Paul Bozych, Attorney, Preetha Jayakumar, Attorney, NIELSEN, ZEHE & ANTAS, P.C., Chicago, IL, for Defendant-Appellee COMPREHENSIVE MARKETING, INC., an Illinois corporation.

Before Easterbrook, Kanne, and Hamilton, Circuit Judges.

Easterbrook, Circuit Judge.

Two corporations, Craftwood II and Craftwood III, operate hardware businesses in California. They contend in this suit under the Telephone Consumer Protection Act, 47 U.S.C. § 227, that defendants sent them unsolicited fax advertisements.

Defendants moved to dismiss the complaint under Fed. R. Civ. P. 12(b)(1), contending that plaintiffs lack standing to sue. The district judge granted that motion—not so much because he found the lack of an injury as because he thought that defendants had substantially (though not technically) met the requirements of a defense in § 227(b)(1)(C). On appeal defendants contend expressly what is only implicit in the district court’s decision: that unless plaintiffs prove injury from a violation of law , the suit must be dismissed for lack of a case or controversy. That proposition contradicts the holding of Bell v. Hood , 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946), among many other decisions showing that a plaintiff’s failure on the merits does not divest a federal court of jurisdiction.

The difference between a jurisdictional and a substantive characterization of a defense matters not just because federal courts must raise jurisdiction on their own, even if the litigants are content to have a federal judge resolve the dispute, but because different procedures apply to jurisdictional and substantive issues. When subject-matter jurisdiction—which is to say, the power to hear and decide the case at all—is at stake, a district judge may resolve factual disputes and make any findings necessary to determine the court’s adjudicatory competence. Fed. R. Civ. P. 12(b)(1) ; Venezuela v. Helmerich & Payne International Drilling Co ., ––– U.S. ––––, 137 S.Ct. 1312, 1316, 197 L.Ed.2d 663 (2017) ; McNutt v. General Motors Acceptance Corp ., 298 U.S. 178, 184, 56 S.Ct. 780, 80 L.Ed. 1135 (1936). If the court has jurisdiction, however, then it must take all plausible allegations in favor of the complainant when handling a motion to dismiss under Rule 12(b)(6) or for judgment on the pleadings under Rule 12(c). Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). And if the complaint states a claim for relief, then a material factual dispute will defeat a motion for summary judgment under Rule 56 and entitle the plaintiff to a trial. See, e.g., Celotex Corp. v.Catrett , 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). By treating a defense as if it were an element of subject-matter jurisdiction, the district court transgressed these allocations of authority.

Standing to sue is established by allegations (and, if necessary, proof) of injury, caused by the defendant, and redressable by a favorable judicial decision. See, e.g., Lujan v. Defenders of Wildlife , 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ; Spokeo, Inc. v. Robins , ––– U.S. ––––, 136 S.Ct. 1540, 194 L.Ed.2d 635 (2016). Plaintiffs allege that they received unsolicited fax ads, causing at least two kinds of injury: printing the faxes used paper and toner, which are costly, and the need to read the incoming faxes diverted the time of one or more employees from the businesses’ profitable endeavors. These are concrete rather than abstract losses. The injuries may have been slight, but an "identifiable trifle" suffices. United States v. SCRAP , 412 U.S. 669, 689 & n.14, 93 S.Ct. 2405, 37 L.Ed.2d 254 (1973). Plaintiffs’ injuries were caused by the defendants’ faxed ads and may be redressed by an award of damages. We have resolved dozens of fax-ad suits on the merits without suspecting that we were violating Article III of the Constitution. This suit is no more constitutionally suspect than they. Whether it is good public policy to use the cumbersome and costly process of adjudication to resolve disputes about annoying fax ads is for Congress to decide.

We have thought about the possibility of revising the district court’s decision to be a dismissal on the merits, rather than for lack of standing, but conclude that such a step would be inappropriate, for several reasons.

First, it is presumptively unlawful to send any unsolicited fax advertisement. Copies of some faxes are in the record, and there’s no doubt that they are advertisements. Plaintiffs allege that they were unsolicited. That makes out a plausible claim for relief. Defendants invoke an affirmative defense, but complaints need not anticipate or attempt to plead around potential defenses. See, e.g., Gomez v. Toledo , 446 U.S. 635, 100 S.Ct. 1920, 64 L.Ed.2d 572 (1980) ; United States Gypsum Co. v. Indiana Gas Co ., 350 F.3d 623, 626 (7th Cir. 2003).

Second, precisely because a complaint need not anticipate defenses, it is difficult to see how the suit could be dismissed on the pleadings. Instead the defense has factual components: the existence of a business relation between plaintiff and defendant, the recipient’s provision of a fax number as part of that business relation, and the inclusion in the unsolicited fax of "a notice meeting the requirements under paragraph (2)(D)" of § 227(b). Defendants assert that the first two elements have been met but do not contend that the third is satisfied. So they have not so much as argued that the defense obtains as a matter of law.

Third, allegations must be supported by evidence. Defendants say, and the district judge found, that "plaintiffs" have an established business relation with them, and that "plaintiffs" furnished their fax numbers. For their part, however, plaintiffs contend that only one of them (Craftwood II) was doing business with only one of the defendants (Comprehensive Marketing). That Craftwood II and Craftwood III are...