Kenro, Inc. v. Fax Daily, Inc.

• Decision Date: 10 April 1997
• Docket Number: No. IP 95-1077-C-B/S.,IP 95-1077-C-B/S.
• Citation: 962 F.Supp. 1162
• Parties: KENRO, INC., on behalf of itself and all others similarly situated, Plaintiff, v. FAX DAILY, INC., and Huntington National Bank of Indiana d/b/a Huntington Banks on behalf of itself and all others similarly situated, Defendants.
• Court: U.S. District Court — Southern District of Indiana

Page 1162

962 F.Supp. 1162

KENRO, INC., on behalf of itself and all others similarly situated, Plaintiff, v. FAX DAILY, INC., and Huntington National Bank of Indiana d/b/a Huntington Banks on behalf of itself and all others similarly situated, Defendants.

No. IP 95-1077-C-B/S.

United States District Court, S.D. Indiana.

April 10, 1997.

Irwin B. Levin, Cohen & Malad, Indianapolis, for Plaintiff.

Adam Arceneaux, Ice Miller Donadio & Ryan, Indianapolis, Christopher H. Belch, Roach Lynch & Belch, Indianapolis, Russel Jones, Carmel, for Defendants.

ENTRY

BARKER, Chief Judge.

In this entry, the Court resolves a number of pending motions in the above-referenced action: 1) Kenro's request that the Court reconsider its decision in Kenro, Inc. v. Fax Daily, Inc., 904 F.Supp. 912 (S.D.Ind.1995), in which we held that federal courts have federal question subject matter jurisdiction over actions brought under the TCPA; 2) defendant Huntington National Bank's ("Huntington") motion to dismiss, based upon the alleged unconstitutionality of certain provisions of the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. §§ 227(b)(1)(C) and (b)(3)(B); 3) Kenro's petition for class certification; and 4) defendant Fax Daily's motion to dismiss for failure to state a claim. For the reasons discussed below, each of these motions and/or requests is denied.

I. PROCEDURAL BACKGROUND

On July 14, 1995, Kenro filed a class action complaint in the Marion Superior Court alleging that defendants Fax Daily and Huntington violated the TCPA by transmitting by telephone facsimile machine ("fax") an unsolicited publication titled "Fax Daily," which contains unsolicited advertisements. On August 14, 1995, Huntington, with the consent of Fax Daily, removed this action to this Court pursuant to 28 U.S.C. § 1441(a), claiming that this court has federal question subject matter jurisdiction over the action pursuant to 28 U.S.C. § 1331. On November 8, 1995, this Court denied Kenro's motion to remand this action to state court, finding that this Court had federal question subject matter jurisdiction over the action pursuant to 28 U.S.C. § 1331, and that the action was therefore properly removed to federal court pursuant to 28 U.S.C. § 1441(a).

II. ANALYSIS

A. Kenro's Request That This Court Reconsider Its November 8, 1995 Ruling.

In our November 8, 1995 opinion denying Kenro's motion to remand, we held that Kenro's complaint alleged a violation of the TCPA, a federal law which expressly provides for a private cause of action, and that the complaint therefore presented a federal question, pursuant to 28 U.S.C. § 1331.. We interpreted language in the TCPA which provides that "a person ... may if otherwise permitted by the laws or rules of court of a State, bring in an appropriate court of that State ... [an action under the TCPA]" as providing for concurrent federal and state jurisdiction. 47 U.S.C. § 227(b)(3) (emphasis added). Noting that repeals by implication are not favored, we reasoned that if Congress had intended to provide for exclusive state jurisdiction, it would have done so with clear mandatory language, rather than using the permissive word "may".

On February 11, 1997, the Fourth Circuit Court of Appeals issued an opinion holding that the above-quoted language in the TCPA provides for exclusive state jurisdiction. International Science & Technology Institute, Inc. v. Inacom Communications, Inc., 106 F.3d 1146 (4th Cir.1997). Kenro requests that we reconsider our November 8, 1995, decision in light of the Fourth Circuit's decision in International Science.

Recognizing that its conclusion that state courts have exclusive jurisdiction over a cause of action created by federal law was "somewhat unusual," id., at 1149, the Fourth Circuit nonetheless explained that "when ... the permissive authorization extends only to courts of general jurisdiction, that authorization cannot confer jurisdiction on unmentioned courts of limited jurisdiction, which require a specific grant." Id. at 1151. The TCPA itself need not confer jurisdiction on federal district courts, however, because that is done by 28 U.S.C. § 1331, which provides that "[t]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." The Fourth Circuit reasoned that the general federal question jurisdiction established in § 1331 is superseded when the federal law that creates a cause of action (here the TCPA) "manifest[s] a particular intent to assign the cause of action to courts other than district courts." Id. at 1155. After carefully considering the International Science decision, we respectfully disagree with the Fourth Circuit's interpretation of the TCPA and stand by our conclusion that, had Congress intended to supersede the federal question jurisdiction provided by § 1331 and instead provide for exclusive state court jurisdiction, it could and would have done so with clear language to that effect. See, Kenro, 904 F.Supp. at 915 ("we will not assume that the language in the TCPA providing for a private right of action in state court was meant to repeal federal question jurisdiction which exists under 28 U.S.C. § 1331."). Accordingly, Kenro's request that we reconsider our November 8, 1995 decision denying Kenro's motion to remand is denied.

B. Huntington's Motion to Dismiss — Constitutionality of the TCPA.

Huntington contends that § 227(b)(3)(B) of the TCPA, which provides for damages measured by actual monetary loss or $500, whichever is greater, denies defendants judicial review with respect to the amount of damages, in violation of the Due Process Clause of the Fifth Amendment of the Constitution. Huntington also contends that § 227(b)(1)(C), which prohibits the use of "any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine ....," is an unconstitutional prohibition of commercial speech under the First Amendment.

1. Due Process Challenge

Huntington claims that 1) by setting a minimum $500 damages award for violations of the TCPA, regardless of the amount of actual monetary damages, Congress has deprived defendants of any opportunity to contest the amount of damages awarded, and 2) the potential $500 award is excessive in relation to actual damages. The constitutionality of § 227(b)(3)(B) is a matter of first impression in the federal courts.

In support of its procedural argument, Huntington relies heavily upon the Supreme Court's decision in Honda Motor Co., Ltd. v. Oberg, 512 U.S. 415, 114 S.Ct. 2331, 129 L.Ed.2d 336 (1994), for the proposition that due process requires that judicial review or some other adjudicatory process be available to contest the amount of a damage award in relation to actual injury. Huntington's reliance on Honda Motor is misplaced, because Honda Motor addressed the specific question of "whether the Due Process Clause requires judicial review of the amount of punitive damage awards." 512 U.S. at 420, 114 S.Ct. at 2335 (emphasis added). In reaching its holding that a provision of the Oregon state Constitution prohibiting judicial review of punitive damages awarded by juries violated due process, the Supreme Court focused on the "acute danger of arbitrary deprivation of property" posed by the jury's "wide discretion in choosing amounts," the "potential that juries will use their verdicts to express biases against big businesses," and the possibility of "partiality" or "passion and prejudice" influencing the jury's award of punitive damages. Id., at 424-28, 430-33, 114 S.Ct. at 2337-38, 2340-41. In other words, the Honda Motors' holding that judicial review was necessary for punitive damage awards set by juries was based largely on its concerns regarding the possible motivations and the broad discretion of juries. We decline to extend the holding of Honda Motor to require judicial review of statutorily prescribed damage awards that may exceed the amount of actual loss proven at trial.

Huntington is correct in asserting that the due process clause applies to statutorily prescribed compensatory damage awards as well as jury-determined punitive damage awards. However, "[a] statutorily prescribed penalty violates due process rights `only where the penalty prescribed is so severe and oppressive as to be wholly disproportional to the offense and obviously unreasonable'." United States v. Citrin, 972 F.2d 1044, 1051 (9th Cir.1992) (quoting St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 66-67, 40 S.Ct. 71, 73, 64 L.Ed. 139 (1919)). The fact that the TCPA establishes as a remedy a damages award of $500, even when actual monetary damages is less than $500, does not itself make the award excessive and unreasonable. See Williams, 251 U.S. at 66, 40 S.Ct. at 73 (no requirement that statutory penalty "be confined or proportioned to his loss or damages; for, as it is imposed as a punishment for the violation of a public law, the Legislature may adjust its amount to the public wrong rather than the private injury ...") (citations omitted); Franklin v. First Money, Inc., 427 F.Supp. 66, 72, n. 14 (E.D.La.1976) (noting that "Congress has not flinched, in other areas of the law, from exacting damages which do not necessarily reflect actual damages"), aff'd, 599 F.2d 615 (5th Cir.1979). In fact, statutorily-prescribed minimum damage awards are permissible even where there is no proof of any actual damages. Scofield v. Telecable of Overland Park, Inc., 751 F.Supp. 1499, 1521 (D.Kan.1990) ("liquidated damages are properly awardable even without a showing of actual damages"-upholding Cable Communications Policy Act provision for liquidated damages of § 100/day per violation or § 1,000, whichever is higher), reversed on other grounds, 973 F.2d 874 (10th Cir.1992). The success of Huntington's due process challenge, therefore, depends on whether the $500 amount of damages prescribed by the TCPA is...