Texas v. American Blastfax, Inc.
| Decision Date | 17 August 2001 |
| Docket Number | No. A 00 CA 085 SS.,A 00 CA 085 SS. |
| Parties | State of TEXAS v. AMERICAN BLASTFAX, INC., et al. |
| Court | U.S. District Court — Western District of Texas |
C. Brad Schuelke, Assistant Attorney General, Leela R. Fireside, Attorney General's Office, Capitol Station, James L. Anthony, Office of the Attorney General, Consumer Protection Division, Austin, TX, for State of Texas, plaintiffs.
Dean D. Hunt, Bracewell & Patterson, L.L.P., Houston, Andrew M. Taylor, Bracewell & Patterson, L.L.P., Austin, TX, for American Blastfax, Inc., Michael Horne, Greg Horne, defendants.
FINDINGS OF FACT and CONCLUSIONS OF LAW
BE IT REMEMBERED on the 16th day of March 2001 the Court called the above-styled cause for trial. The plaintiff appeared by representation of counsel. All defendants appeared by representation of counsel, and defendants Greg and Michael Horne also appeared in person. All parties announced ready for trial and, all parties having waived their rights to trial by jury, a one day trial proceeded before the Court on March 16, 2001.
This case is brought by plaintiff the State of Texas against defendants American Blastfax, Inc. ("Blastfax") and Blastfax's two officers and directors, Greg and Michael Horne, alleging causes of action under the Telephone Consumer Protection Act, 47 U.S.C. § 227 ("TCPA") and the Texas Deceptive Trade Practices Act, TEX. BUS. & COMM. CODE § 17.41 ("DTPA"). On February 9, 2001, the Court partially granted the State's summary judgment motion, and held defendant Blastfax had violated the TCPA by sending unsolicited intrastate fax advertisements within Texas, and had violated the DTPA by misleading Texas consumers about the legality of its business. The issues at trial were the amount of damages and the scope of injunctive relief, if any, for Blastfax's violations, and whether the individual defendants could be held personally liable for these violations.
Defendant American Blastfax, Inc. is a Texas corporation located in Addison, with about fifteen employees. Since 1997 its primary business has been sending fax advertisements on behalf of third parties within Texas. All the fax advertisements sent by Blastfax are intrastate. See, e.g., Defendants' Pretrial Order [# 60], at 1. Defendant Greg Horne is the president of Blastfax. He maintains the financial records, oversees the sales operations, programs computers to send faxes, and selects the actual programs used to send the fax advertisements. His father, defendant Michael Horne, is the vice president of Blastfax. He has essentially the same duties as Greg Horne, although he deals more with Blastfax's daily computer activities. Since 1997, Greg and Michael Horne have been Blastfax's only two officers, directors and shareholders (each owns fifty percent of Blastfax), and are solely responsible for developing Blastfax's business plan. In addition, they are responsible for overseeing and directing all the day-to-day operations of Blastfax.
Blastfax's main asset is its database — its list of fax numbers for potential customers. When a company hires Blastfax, Blastfax uses this database to fax the third-party's advertisements.1 Greg and Michael Horne are primarily responsible for developing the database, by taking fax numbers from phonebooks, computer programs and public sources, and by purchasing lists of fax numbers from third parties. The two of them decide what numbers to ultimately include in the database, and what software program to use in faxing the advertisements. Typically, if a new name and fax number is added to the Blastfax database, the defendants do not contact this person or otherwise inform the person that he/she is now part of the database. Much less frequently, a name and number will be added to the database when a person contacts Blastfax. At least half the persons on Blastfax's database did not consent to be placed on the database. According to the defendants, Blastfax has no way to determine which persons have given such consent.
In February 2000, the State filed this lawsuit. Prior to filing, the State put the defendants on notice that they were violating the TCPA every time they sent an unsolicited intrastate fax advertisement. At the time, the Hornes realized the TCPA's heavy fines could bankrupt Blastfax, but they decided to accept this risk and did not alter their business.
In April 2000, the defendants moved to dismiss this lawsuit, arguing the TCPA does not apply to intrastate faxes. After extended briefing by the parties, the Court denied the motion to dismiss on October 5, 2000. See Texas v. American Blastfax, Inc., 121 F.Supp.2d 1085 (W.D.Tex.2000). In the order, the Court held, as a matter of law, that the TCPA applies to intrastate faxes. The defendants all received notice of this order. Nonetheless, they continued to send unsolicited intrastate fax advertisements in Texas. See, e.g., Plaintiff's Ex. 7 and 8. They even sent unsolicited fax advertisements to the Texas Attorney General's office. See Plaintiff's Ex. 2, at ABF 1046-71 and 1646-57; Plaintiff's Ex. 3, at ABF 831-51 and 1661-66; Plaintiff's Ex. 4, at ABF 124-49 and 1673-80; Plaintiff's Ex. 5, at ABF 1211-13, 1633-45 and 1727-32. The defendants testified at trial that, after October 5, 2000, they attempted2 to send an average of five fax advertisements per month to the approximately 500,000 persons in the database — i.e., about 2.5 million fax advertisements per month. See also Defendants' Trial Brief [# 64], Ex. A (Affidavit of Greg Horne), at ¶ 2. The defendants further testified at trial that at least half of these faxes were sent to persons without their consent or permission, and with whom the defendants had no established business relationship. See also Plaintiff's Summary Judgment Motion [# 44], Ex. B, at 72. In addition, the defendants testified at trial that, despite the Court's order (and with the encouragement of counsel3), they continued to tell their customers the TCPA did not apply to intrastate faxes, and did not inform their customers of the Court's October 5, 2000 order. See also id., Ex. B, at 71.
In early December 2000, Blastfax contracted with the Dallas Mavericks basketball team to send fax advertisements on behalf of the Mavericks. See Plaintiff's Ex. 14, at ABF 1792. At some point, the applicability of the TCPA to these faxes became an issue. On December 14, 2000, Blastfax sent a fax to the Mavericks stating that the TCPA did not apply to the advertisements faxed by Blastfax on behalf of the Mavericks. See id. at ABF 1794. Attached to the fax was a provision of a Texas state law governing fax transmissions, and a March 2000 advice letter from counsel, concluding the TCPA does not apply to intrastate faxes. See id. at ABF 1795-1807. The fax did not include, and did not mention, the Court's October 5, 2000 order.
On February 9, 2001, the Court partially granted the State's summary judgment motion. The Court reiterated its holding that the TCPA applies to intrastate faxes, and found Blastfax had violated the TCPA by sending unsolicited intrastate faxes in Texas. The Court also held Blastfax had violated the DTPA by misleading Texas consumers about the legality of the defendants' business. The Court reserved for trial the amount of damages and whether defendants Greg and Michael Horne were personally liable for these violations.
This time, the defendants began telling their customers about the Court's order. However, the defendants still continued to send unsolicited intrastate fax advertisements in Texas until March 15, 2001 (the day before trial). See, e.g., Plaintiff's Ex. 9, 10 and 13. They also continued to send unsolicited fax advertisements to the Texas Attorney General's office. See Plaintiff's Ex. 2, at ABF 1658-60 and 1720-21; see also Plaintiff's Ex. 3, at ABF 1667-69 and 1722-26; Plaintiff's Ex. 4, at ABF 1681-83 and 1737; Plaintiff's Ex. 5, at ABF 1733-36. Some of these faxes identified Blastfax as the sender, see Plaintiff's Ex. 13, at 1770, while others did not. See id. at 1771, 1773 and 1775. In addition, some of these faxes did not indicate the time they were sent. See id.
The day before trial, March 15, 2001, the defendants claim to have laid off all Blastfax employees and shut down the company. In addition, defendants Greg and Michael Horne allegedly filed (or were preparing to file) petitions for personal bankruptcy. Because a lawsuit filed by a governmental unit to enforce and seek damages under its consumer protection laws is not subject to the bankruptcy code's automatic stay, this case proceeded to trial on March 16, 2001.4
As noted, the Court has already held defendant Blastfax violated the TCPA by sending intrastate fax advertisements in Texas without the recipient's consent or permission, and to recipients with whom the defendants had no established business relationship. The Court further finds defendants Greg and Michael Horne are personally liable for these violations, and the three defendants shall be jointly and severally liable for the total TCPA damages awarded in this lawsuit.
The defendants contend that under the TCPA "[p]ersonal liability cannot be imposed on an officer of a corporation simply because of his official position." See Defendants' Pretrial Brief, at 4. The defendants also contend the TCPA "does not provide for lawsuits against officers pertaining to corporate acts." See Defendants' Proposed Findings of Fact and Conclusions of Law, at 7. The State counters it is not suing the individual defendants simply because of their status as officers of Blastfax, but rather is suing them "based on their own conduct which is in violation of the [TCPA]." See Plaintiff's Trial Brief [# 62], at 1. The State argues Greg and Michael Horne are personally liable because they did far more than simply sit on the Blastfax board while the company...
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