Gorss Motels, Inc. v. Safemark Sys., LP

• Decision Date: 26 July 2019
• Docket Number: 18-15232,Nos. 18-12511,s. 18-12511
• Citation: 931 F.3d 1094
• Parties: GORSS MOTELS, INC., a Connecticut corporation, individually and as the representative of a class of similarly situated persons, E&G, Inc., a West Virginia corporation, individually and as the representatives of a class of similarly situated persons, Plaintiffs - Appellants, v. SAFEMARK SYSTEMS, LP, Defendant - Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

931 F.3d 1094

GORSS MOTELS, INC., a Connecticut corporation, individually and as the representative of a class of similarly situated persons, E&G, Inc., a West Virginia corporation, individually and as the representatives of a class of similarly situated persons, Plaintiffs - Appellants,

v.SAFEMARK SYSTEMS, LP, Defendant - Appellee.

Nos. 18-12511

18-15232

United States Court of Appeals, Eleventh Circuit.

July 26, 2019

Ross M. Good, Glenn L. Hara, Ryan Michael Kelly, Jeffrey A. Berman, Anderson Wanca, ROLLING MEADOWS, IL, for Plaintiffs - Appellants.

Joseph L. Francoeur, Wilson Elser Moskowitz Edelman & Dicker, LLP, NEW YORK, NY, Amy Baker, Wilson Elser Moskowitz Edelman & Dicker, LLP, ORLANDO, FL, Melissa Murphy-Petros, Wilson Elser Moskowitz Edelman & Dicker, LLP, CHICAGO, IL, for Defendant - Appellee.

Before WILLIAM PRYOR, NEWSOM, and BRANCH, Circuit Judges.

WILLIAM PRYOR, Circuit Judge:

This consolidated appeal requires us to decide whether, under the Telephone Consumer Protection Act, 47 U.S.C. § 227, a fax recipient provided prior express permission to receive faxes from a sender and, if so, whether the faxes needed to contain opt-out notices under an agency regulation. Gorss Motels, Inc., and E&G, Inc., operate hotels as franchisees of Wyndham Hotel Group. In their franchise agreements, the hotels agreed that Wyndham affiliates could offer assistance with purchasing items for their hotels and provided their fax numbers. Safemark Systems, a Wyndham affiliate that provides safes to franchisees, sent two faxes to franchisees, including Gorss and E&G. The hotels filed a complaint against Safemark on behalf of a putative class alleging that the faxes violated the Act, which makes it unlawful to send certain unsolicited fax advertisements. The district court denied class certification and concluded that the solicited-fax rule, a regulation of the Federal Communications Commission that required solicited faxes to include compliant opt-out notices, 47 C.F.R. § 64.1200(a)(4)(iv) (effective until March 19, 2019), was invalid. The district court later granted summary judgment to Safemark. It ruled that the faxes did not violate the prohibition on unsolicited faxes because the hotels had provided prior express permission to receive faxes from Safemark in their franchise agreements. And the district court reiterated that, because the faxes were solicited, they did not need to contain compliant opt-out notices. While these appeals were pending, the Commission eliminated the solicited-fax rule in the light of our sister circuit’s decision that the rule is invalid, see Bais Yaakov of Spring Valley v. Fed. Commc’ns Comm’n , 852 F.3d 1078 (D.C. Cir. 2017), cert. denied ––– U.S. ––––, 138 S. Ct. 1043, 200 L.Ed.2d 300 (2018). Because we agree that the faxes were solicited and need not have contained opt-out notices, we affirm.

I. BACKGROUND

Gorss Motels and E&G operate hotels as franchisees of Wyndham Hotel Group. To become Wyndham franchisees, both hotels executed franchise agreements, which required them to maintain Wyndham’s standards at their hotels. Those standards included that the hotels must purchase or obtain certain items only from suppliers that Wyndham approved. In section 4.4 of the franchise agreement, the hotels agreed that Wyndham "may offer optional assistance to [them] with purchasing items used at or in the Facility." And the hotels agreed that Wyndham’s "affiliates may offer this service on [its] behalf." The hotels provided their fax numbers in a later section of the agreement. Over their years as Wyndham franchisees, the hotels also provided their fax numbers on several "Contact Information" forms.

To assist its franchisees with purchasing items for their hotels, Wyndham facilitated the "Approved Supplier Program" through its wholly owned subsidiary Worldwide Sourcing Solutions. The Approved Supplier Program benefits franchisees by identifying suppliers with products that conform to Wyndham’s standards and by obtaining competitive pricing on those products. Franchisees receive communications about suppliers in the program from Wyndham. And at Wyndham’s annual conference, which franchisees attend, approved suppliers set up booths to promote their products. Gorss and E&G registered for these conferences and again provided their fax numbers on their registration forms.

Suppliers who are part of the Approved Supplier Program have access to the franchisees. To participate in the program, suppliers are required to pay a fee, part of which creates a marketing fund that each supplier may use for various marketing opportunities directed at the franchisees. Suppliers also gain access to a database containing the franchisees’ contact information. The database included the fax numbers of Gorss and E&G.

Safemark, a company that manufactures, leases, and sells safes, was an approved supplier of safes for Wyndham franchisees. In 2013, Safemark hired a fax broadcasting company to send a one-page fax to the franchisees using the contact information from the Approved Supplier Program’s database. The 2013 fax advertised Safemark’s safes and promoted its booth at an upcoming Wyndham conference. It contained no notice of how a recipient could opt out of receiving future faxes from Safemark. The 2013 fax was transmitted to 7,402 recipients, including Gorss.

Near the end of 2015, Desiree Rico, a Worldwide Sourcing marketing manager, emailed Michele Anderson, Safemark’s contracts manager, to inquire whether Safemark would like to spend the remainder of its marketing fund for that year. Rico suggested several marketing options, including an upcoming fax blast to Wyndham franchisees and banner advertisements on the Wyndham franchisee website. Anderson forwarded the email to Nancy Wright, the Safemark Vice President of Sales. Wright later recalled speaking to Anderson about the fax blast and "probably said fine." Anderson responded to Rico’s email by requesting that the banner ads redirect users who click them to a specific page on Safemark’s website, but she did not mention the fax blast. The next day, Rico sent Anderson an email confirming that the fax blast would occur the first week of December and attached a copy of the Safemark fax.

During the first week of December 2015, Worldwide Sourcing sent a five-page fax to the franchisees promoting the products of several approved suppliers, including Safemark. Each page of the fax promoted a different supplier’s product. The bottom of each page contained an opt-out notice with a Wyndham email and phone number. The 2015 fax was transmitted to 3,328 recipients, including Gorss and E&G.

Gorss filed a complaint, which E&G later joined, against Safemark alleging that the 2013 and 2015 faxes violated the Telephone Consumer Protection Act, 47 U.S.C. § 227. After discovery ensued, the hotels moved for certification of two classes, one for recipients of the 2013 fax and one for recipients of the 2015 fax. To satisfy the requirement for class actions that common questions predominate, see Fed. R. Civ. P. 23(b)(3), the hotels argued that the question whether the faxes contained deficient opt-out notices was common to the class. The hotels contended that, regardless of whether the faxes were unsolicited or solicited, they required compliant opt-out notices because the Act requires an opt-out notice on unsolicited faxes, 47 U.S.C. § 227(b)(1)(C), (b)(2)(D), and a regulation from the Federal Communications Commission known as the "solicited-fax rule" required the same opt-out notice on solicited faxes, 47 C.F.R. § 64.1200(a)(4)(iv) (effective until March 19, 2019). After Gorss filed its complaint, Safemark petitioned the Commission for a retroactive waiver of the solicited-fax rule for its faxes. See Petition of Safemark Systems, LP for Retroactive Waiver of 47 C.F.R. § 64.1200(a)(4)(iv) , CG Docket Nos. 02-278, 05-338 (filed Oct. 6, 2016).

The district court denied class certification. It ruled that common questions did not predominate because it would be required to conduct individual inquiries into whether each fax recipient had given permission for Safemark to send the faxes—that is, whether the faxes were solicited. The district court rejected the hotels’ argument that, even if the faxes were solicited, the solicited-fax rule required them to contain compliant opt-out notices. The district court relied on a decision from the District of Columbia Circuit holding that the solicited-fax rule was unlawful, see Bais Yaakov , 852 F.3d 1078. "Without determining whether Bais Yaakov is binding in this Circuit," the district court found "the opinion to be persuasive" and declined to apply the solicited-fax rule to Safemark’s faxes—that is, if the faxes were solicited, the district court concluded that Safemark’s faxes need not have contained opt-out notices. "Given that the Solicited Fax Rule d[id] not apply, and the issues of consent [could not] be resolved without individualized inquiry," the district court ruled that common questions did not predominate and so class certification was inappropriate.

We granted the hotels permission to appeal the denial of class certification. But the district court denied the hotels’ motion to stay the proceedings while its interlocutory appeal was pending. Both parties moved for summary judgment.

Meanwhile, the Commission issued an order eliminating the solicited-fax rule. See Order, Petitions for Reconsideration and/or Declaratory Ruling and Retroactive Waiver of 47 C.F.R. § 64.1200(a)(4)(iv) Regarding the Commission’s Opt-Out Notice Requirement for Faxes Sent with the Recipient’s Prior Express Permission , 33 FCC Rcd. 11179, 11179 (Nov. 14, 2018) [hereinafter Elimination Order]. In the same order, the Commission "dismiss[ed] as moot the ten pending petitions for retroactive waiver," which included Safemark’s petition. Id. at 11183 ; see also id. at 11182 n.21 (listing pending petitions). The elimination of the solicited-fax rule would become effective when it was...