Sandusky Wellness Ctr., LLC v. ASD Specialty Healthcare, Inc.

• Decision Date: 11 July 2017
• Docket Number: No. 16-3741,16-3741
• Citation: 863 F.3d 460
• Parties: SANDUSKY WELLNESS CENTER, LLC, an Ohio limited liability company, individually and as the representative of a class of similarly situated persons, Plaintiff-Appellant, v. ASD SPECIALTY HEALTHCARE, INC., d/b/a Besse Medical AmerisourceBergen Specialty Group, Inc.; John Does 1–10, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

863 F.3d 460

SANDUSKY WELLNESS CENTER, LLC, an Ohio limited liability company, individually and as the representative of a class of similarly situated persons, Plaintiff-Appellant,

v.ASD SPECIALTY HEALTHCARE, INC., d/b/a Besse Medical AmerisourceBergen Specialty Group, Inc.; John Does 1–10, Defendants-Appellees.

No. 16-3741

United States Court of Appeals, Sixth Circuit.

Argued: February 2, 2017

Decided and Filed: July 11, 2017

As Corrected on Denial of Rehearing En Banc September 1, 2017

ARGUED: Glenn L. Hara, ANDERSON + WANCA, Rolling Meadows, Illinois, for Appellant. Martin W. Jaszczuk, JASZCZUK P.C., Chicago, Illinois, for Appellees. ON BRIEF: Glenn L. Hara, ANDERSON + WANCA, Rolling Meadows, Illinois, Matthew E. Stubbs, MONTGOMERY RENNIE & JONSON, Cincinnati, Ohio, for Appellant. Martin W. Jaszczuk, W. Scott Hastings, Keith L. Gibson, LOCKE LORD LLP, Chicago, Illinois, Jennifer J. Dawson, MARSHALL & MELHORN, LLC, Toledo, Ohio, for Appellees.

Before: SUHRHEINRICH, SUTTON, and McKEAGUE, Circuit Judges.

OPINION

McKEAGUE, Circuit Judge.

In 2010, Defendant ASD Specialty Healthcare, d/b/a/ Besse Medical AmerisourceBergen Specialty Group ("Besse"), a pharmaceutical distributor, sent a one-page fax advertising the drug Prolia to 53,502 physicians. Only 40,343, or 75%, of these faxes were successfully transmitted. Plaintiff Sandusky Wellness Center, a chiropractic clinic that employed one of these physicians, claims to have received this so-called "junk fax," and—three years later—filed a lawsuit against Besse for the annoyance. Sandusky alleged that Besse violated the Telephone Consumer Protection Act, 47 U.S.C. § 227, by sending an unsolicited fax advertisement lacking a proper opt-out notice, and it sought to certify a putative class of all 40,343 Prolia fax recipients. The district court denied Sandusky's motion for class certification, and because that decision was not an abuse of discretion, we affirm.

I

We first provide a brief overview of the Telephone Consumer Protection Act before turning to the facts of this case.

A

In 1991, Congress passed the Telephone Consumer Protection Act (TCPA), see Pub. L. No. 102-243, 105 Stat. 2394, which was later amended by the Junk Fax Prevention Act of 2005, see Pub. L. No. 109-21, 119 Stat. 359 (codified at 47 U.S.C. § 227 ). These legislative efforts were geared towards curbing the inundation of "junk faxes" that businesses were receiving. H.R. Rep. 102–317 at 10 (1991). These faxes were seen as problematic because they forced unwitting recipients to bear the costs of the paper and ink and also monopolized the fax line, preventing businesses from receiving legitimate messages. Id.

In response, the TCPA generally banned the sending of any "unsolicited advertisement" via fax. 47 U.S.C. § 227(b)(1)(C) (emphasis added). A fax is "unsolicited" if it is sent to persons who have not given their "prior express invitation or permission" to receive it. Id. § 227(a)(5). The statute carves out a narrow exception to this general ban by permitting the sending of unsolicited faxes if a sender can show three things: (1) the sender and recipient have "an established business relationship"; (2) the recipient voluntarily made his fax number available either to the sender directly or via "a directory, advertisement, or site on the Internet"; and (3) the fax contained an opt-out notice meeting detailed statutory requirements. Id. § 227(b)(1)(C)(i)-(iii). The upshot of this exception is that if an unsolicited fax does not contain a properly worded opt-out notice, the sender will be liable under the statute, regardless of whether the other two criteria are met.

Congress also authorized the Federal Communications Commission (FCC) to "prescribe regulations to implement the requirements of [the TCPA]." Id. § 227(b)(2). In 2006, the FCC promulgated a rule requiring opt-out notices on solicited faxes, i.e., those faxes sent to recipients who had given their "prior express invitation or permission" to receive it. See Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991; Junk Fax Prevention Act of 2005, 71 Fed. Reg. 25,967, 25,971 –72 (May 3, 2006) (now codified at 47 C.F.R. § 64.1200(a)(4)(iv) ) (the "Solicited Fax Rule"). After the passage of the Solicited Fax Rule, both unsolicited and solicited faxes were required to include opt-out notices that, among other things, were "clear and conspicuous," informed recipients that a sender was required to comply with an opt-out request "within the shortest reasonable time," and included a telephone number recipients could call to exercise their opt-out rights. See 47 U.S.C. § 227(b)(2)(D)(i)-(vi).

To ensure fax senders complied with the TCPA, Congress provided for a private right of action that allowed individuals and entities to sue for injunctive and monetary relief based on any violation "of [the statute] or the regulations prescribed [there]under." Id. § 227(b)(3). Specifically, fax senders faced a $500 fine for each fax sent that violated the TCPA or any FCC rule—a fine that could be increased to $1,500 per fax for willful violations. Id.

The import of the TCPA's damage scheme combined with the FCC's Solicited Fax Rule meant vast exposure to liability for businesses that used fax machines to advertise. For example, even individuals who agreed to receive faxes could nevertheless turn around and sue senders for $500 per fax if, in their view, an opt-out notice was not sufficiently "clear and conspicuous." For businesses that sent faxes on a mass scale, this liability quickly added up. See, e.g., Nack v. Walburg , 715 F.3d 680, 682 (8th Cir. 2013) (recognizing that the Solicited Fax Rule's opt-out notice requirement subjected Walburg to "a class-action complaint seeking millions of dollars even though there is no allegation that he sent a fax to any recipient without the recipient's prior express consent"). Here, for example, Sandusky proposed a class size of 40,343 individuals and entities. With a minimum of $500 potentially owed to each class member, Besse could be on the hook for over $20 million.

Concerned by this specter of crushing liability, businesses (and courts) began to question whether the FCC possessed the authority to promulgate the Solicited Fax Rule given that the text of the TCPA appeared to reach only unsolicited faxes. See, e.g., id. (finding it "questionable whether the regulation at issue ... properly could have been promulgated under the statutory section that authorized a private cause of action"). Many fax senders petitioned the FCC for a declaratory ruling asking the agency to acknowledge its lack of statutory authority, see Anda Petition for Declaratory Ruling, CG Docket No. 05-338 (Nov. 30, 2010).

But in 2014, the FCC issued an order denying the petitioners' request, standing by the Solicited Fax Rule. See Order, Petitions for Declaratory Ruling, Waiver, and/or Rulemaking Regarding the Commission's Opt-Out Requirements for Faxes Sent with the Recipient's Prior Express Permission , 29 F.C.C.R. 13,998, 13,998, 14,005 (2014) ("2014 Order"). In the same order, the FCC granted retroactive waivers of liability to the petitioners, exempting them from compliance with the Rule during a certain timeframe due to confusion over its applicability. Id. at 13,998. Furthermore, the FCC encouraged other fax senders to "seek waivers such as those granted in this [2014] Order." Id. Besse heeded this advice, and in August 2015, the FCC granted it, along with 100 others, a similar liability waiver. Order, Petitions for Declaratory Ruling and Retroactive Waiver of 47 C.F.R. § 64.1200(a)(4)(iv) Regarding the Commission's Opt-Out Requirements for Faxes Sent with the Recipient's Prior Express Permission , 30 F.C.C.R. 8598 (2015) ("2015 Order").

After the 2014 Order was issued, several fax senders filed petitions for review of the agency's decision in multiple circuit courts. Bais Yaakov Docket, Notice of Multi-Circuit Petitions for Review filed on 11/13/14; Attachment A. The United States Judicial Panel on Multidistrict Litigation consolidated the petitions in the District of Columbia Circuit. Bais Yaakov Docket, Consolidation Order filed on 11/14/14. In March 2017, a split panel of the D.C. Circuit struck down the Solicited Fax Rule, holding it "unlawful to the extent that it requires opt-out notices on solicited faxes." Bais Yaakov of Spring Valley v. FCC , 852 F.3d 1078, 1083 (D.C. Cir. 2017). Applying the Chevron framework, the majority found that the clear text of the TCPA reached only unsolicited fax advertisements and that the FCC was thus without the authority to promulgate a rule governing solicited faxes. See id. at 1082 (citing Chevron USA Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842–43 & n.9, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984) ) ("Congress drew a line in the text of the statute between unsolicited fax advertisements and solicited fax advertisements."). Because the majority struck down the Solicited Fax Rule, the question of the FCC's authority to issue retroactive waivers—which was also challenged—became moot. Id. at 1083 n.2. The D.C. Circuit's invalidation of the Solicited Fax Rule occurred after the district court denied Sandusky's motion for class certification in this case.

B

Besse is a distributor of pharmaceuticals and medical products. In 2007, it purchased a list of physician contact information from InfoUSA, a third-party data provider. Some of the physicians on that list, Besse later learned, happened to be current or former customers. Besse condensed the InfoUSA List down to 53,502 names, creating the Prolia List, which it planned to use to send a fax advertising the drug. On June 16, 2010, WestFax, a fax broadcaster, transmitted the Prolia fax on Besse's behalf. The one-page fax stated that "Besse Medical is proud to offer Prolia" and touted "FREE Overnight Shipping on all PROLIA orders!" See R. 1-1, Prolia Fax at 1, PID 15. The ad also contained a blank order form, a fax number where completed orders...