Matthew N. Fulton, D.D.S., P.C. v. Enclarity, Inc.

• Decision Date: 02 November 2018
• Docket Number: No. 17-1380,17-1380
• Citation: 907 F.3d 948
• Parties: MATTHEW N. FULTON, D.D.S., P.C., Individually and as the Representative of a Class of Similarly Situated Persons, Plaintiff-Appellant, v. ENCLARITY, INC.; LexisNexis Risk Solutions, Inc.; LexisNexis Risk Solutions GA, Inc. ; LexisNexis Risk Solutions FL, Inc. ; John Does 1–12, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

907 F.3d 948

MATTHEW N. FULTON, D.D.S., P.C., Individually and as the Representative of a Class of Similarly Situated Persons, Plaintiff-Appellant,

v.ENCLARITY, INC.; LexisNexis Risk Solutions, Inc.; LexisNexis Risk Solutions GA, Inc. ; LexisNexis Risk Solutions FL, Inc. ; John Does 1–12, Defendants-Appellees.

No. 17-1380

United States Court of Appeals, Sixth Circuit.

Decided and Filed: November 2, 2018

Rehearing En Banc Denied December 27, 2018^*

ON BRIEF: Phillip A. Bock, David M. Oppenheim, BOCK, HATCH, LEWIS & OPPENHEIM, LLC, Chicago, Illinois, for Appellant. Tiffany Cheung, Benjamin F. Patterson, MORRISON & FOERSTER LLP, San Francisco, California, Joseph R. Palmore, Bryan J. Leitch, MORRISON & FOERSTER LLP, Washington, D.C., for Appellees.

Before: GIBBONS, WHITE, and STRANCH, Circuit Judges

STRANCH, J., delivered the opinion of the court in which WHITE, J., joined. GIBBONS, J. (pg. 955–56), delivered a separate dissenting opinion.

JANE B. STRANCH, Circuit Judge.

Plaintiff Matthew N. Fulton, DDS, P.C., a dental practice in Linden, Michigan, brings this suit on behalf of itself and others similarly situated. Fulton alleges that it received a fax from Defendants in September 2016 that was an unsolicited advertisement under the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227, but that failed to include the requisite opt-out provision. Arguing that the fax did not qualify as an advertisement under the TCPA, Defendants moved to dismiss the complaint. The district court granted the motion. Applying the standards governing dismissal of a complaint for failure to state a claim, we find that Fulton has plausibly alleged that the fax was an unsolicited advertisement insofar as it alleged that the fax served as a pretext to send Fulton additional marketing materials. Accordingly, we REVERSE and REMAND this case for additional proceedings consistent with this opinion.

I. BACKGROUND

This lawsuit stems from a fax Fulton’s dental practice received on September 7, 2016.¹ The fax provided in pertinent part:

Re: Fax Number Verification for Delivery of Patient PHI (Internal ID: 34290748)

The purpose of this Fax Verification Request is to help preserve the privacy and security of your patients’ Protected Health Information ("PHI"), as defined by the Health Insurance Portability and Accountability Act ("HIPAA"). LexisNexis is seeking your cooperation to verify or update your information. We validate and update the fax in our system so our clients can use them for clinical summaries, prescription renewals, and other sensitive communications. Verifying the practice address, phone number[,] and your secure fax number(s) for this location will minimize the potential privacy risks that could arise from information sent to an unsecured location. As part of our effort to assure that the [sic] transmission of PHI, it is vital to verify the information for Dr. Matthew Norman Fulton, DDS is accurate. This information will be verified once each year.

(R. 1-2 at PageID 32) The fax then provided space for recipients either to validate the contact information listed in the fax’s heading or to update their contact information. It also had a signature line and room for comments. The fax ended by providing a phone number and by incorporating a website of Frequently Asked Questions (FAQs) with the inclusion of the following Universal Resource Locator (URL): http://www.enclarity.com/providerfaqs.php. The fax did not contain an opt-out notice.

Fulton attached the LexisNexis Provider FAQs as an exhibit to the complaint. The FAQs indicate that the "system" referred to in the fax is the Master Provider Referential Database. Defendants explain that providers’ contact information will be licensed to their "customer base," which is comprised of "health insurance plans, preferred provider organizations, pharmacy network companies, pharmacy benefit managers, property and casualty insurance carriers, retail pharmacies, government entities, as well as life sciences companies (pharmaceutical and medical device manufacturers)." (R. 1-3 at PageID 35) According to the FAQs, Defendants "have compiled the largest, most accurate database of medical provider business and professional demographic data in the United States." (Id. at PageID 36) The FAQs also indicate what will happen to providers’ verified contact information:

Our customers use provider information in a variety of ways, including communicating patient prescription data, validating provider identity for claims payments, reimbursing providers for medical bills, updating provider directories, renewing prescriptions, researching health care practitioners to invite them to become part of a provider network, sending important notifications, such as product recalls, and other uses.

(Id. at PageID 37) Validating one’s contact information, the FAQs state, will "help to drive more business to you." (Id. at PageID 40)

Other portions of Defendants’ website promote the advantages of using Defendants’ "ProviderLookup" product, which is their "Web-based, real-time provider information search service" that uses the information in the Master Provider Referential Database. (R. 1-4 at PageID 43) In other words, the contact information gathered by faxes like the one Fulton received is used to build the Master Provider Referential Database, which Defendants sell to their customer base through ProviderLookup.

Fulton filed a two-count class action complaint in October 2016. Count I asserted that the fax violated the TCPA, and Count II asserted a state law conversion claim. Fulton named as Defendants Enclarity, Inc., LexisNexis Risk Solutions, Inc., LexisNexis Risk Solutions GA, Inc., LexisNexis Risk Solutions FL, Inc., and John Does 1–12 (collectively referred to herein as Defendants). The complaint included the fax itself, as well as printouts from Defendants’ referenced website, including the FAQs, a provider lookup form, Defendants’ privacy policy, and Defendants’ terms and conditions. Fulton alleged that the fax was a pretext to obtain both "participation in Defendants’ proprietary database" and "consent ... to send additional marketing faxes to recipients." (R. 1 at PageID 5) Fulton alleged that both "Defendants and third parties will use the information to contact the recipients regarding products, services, competitions and promotions." (Id. at PageID 13)

Fulton also contended that the fax was "a pretext to increase awareness and use of Defendants’ proprietary database service and increase traffic to Defendants’ website." (Id. ) According to Fulton, "Defendants consolidate healthcare provider contact information into their proprietary Master Provider Referential Database, a commercially available product or service that Defendants sell or lease to their subscribers and licensees." (Id. at PageID 8) The complaint set forth class allegations, including that Defendants sent the same fax that Fulton received to at least 39 other similarly situated individuals.

Defendants responded to the complaint by filing a motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). They argued that the fax did not meet the TCPA’s definition of an advertisement and therefore was not required to have an opt-out provision. The district court agreed. It found that "[n]othing mentioned in the fax is available to be bought or sold," and concluded that the fax "lack[ed] the commercial components inherent in ads." Matthew N. Fulton, D.D.S., P.C. v. Enclarity, Inc. , No. 16-13777, 2017 WL 783499, at *3 (E.D. Mich. Mar. 1, 2017) (citations and internal quotation marks omitted). The court also found that even if Defendants might "profit from verifying Plaintiff’s contact information to third parties, there is no allegation or argument that Defendants are advertising—or will advertise—any goods or services to Plaintiff." Id. The district court disregarded the attachments to the complaint, on the basis that this court’s decision in Sandusky WellnessCenter., LLC v. Medco Health Solutions, Inc. , 788 F.3d 218, 221 (6th Cir. 2015), constrained its analysis to the four corners of the fax. Id. After dismissing Fulton’s TCPA claim with prejudice, the district court determined that the state law conversion claim belonged in state court and dismissed it without prejudice. Id. at *5.

II. DISCUSSION

A. Standard of Review

We review de novo the grant of a motion to dismiss under Rule 12(b)(6). Keys v. Humana, Inc. , 684 F.3d 605, 608 (6th Cir. 2012). Courts must "construe the complaint in the light most favorable to the plaintiff[ ] [and] accept all well-pleaded factual allegations as true." Hill v. Snyder , 878 F.3d 193, 203 (6th Cir. 2017). To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is facially plausible when a plaintiff "pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

B. The Sandusky Decision

We begin by clarifying this court’s decision in Sandusky , 788 F.3d 218. The district court’s opinion is founded upon its interpretation of Sandusky , which it understood as compelling its holding that the TCPA claim fails unless the commercial nature of the fax is evident from the face of the fax. The district court also adopted the Defendants’ argument that Sandusky requires a fax to "propose a commercial exchange between the sender and the recipient" to trigger TCPA coverage. These holdings reflect an improper understanding of Sandusky and impose undue restrictions on TCPA claims.

Sandusky , a summary judgment decision, addressed two faxes sent to a chiropractor by Medco Health Solutions, a benefit manager that acted "as an intermediary between health plan...