Court: District Court, D. New Hampshire; May 11, 2018; Federal District Court
A proposed class action has been initiated against Harbour Capital for allegedly sending improper facsimile advertisements to Menachem Raitport and his business, Crown Kosher Meat Market, in violation of the Telephone Consumer Protection Act (TCPA) and related FCC regulations. The court previously stayed the action on September 12, 2013, pending the outcome of FCC administrative proceedings that would clarify key legal questions relevant to the case. With those proceedings now complete, Raitport seeks to lift the stay and file a brief regarding the court's jurisdiction under the Hobbs Act in light of a D.C. Circuit decision stemming from the FCC proceedings. He also intends to amend his class certification motion to include an additional subclass. Raitport's motions to lift the stay and for class certification have been partially granted and denied, respectively.
The TCPA, as amended by the Junk Fax Prevention Act of 2005, prohibits sending unsolicited advertisements to fax machines unless certain conditions are met: an established business relationship exists, the fax number was obtained through voluntary communication or a directory, and the fax includes a clear opt-out notice on the first page, allowing recipients a cost-free way to refuse future unsolicited faxes.
In 2006, the FCC established the "Solicited Fax Rule," requiring all senders of fax advertisements, including those sent with prior consent, to include statutory opt-out language. This rule appears to exceed the FCC’s regulatory authority under 47 U.S.C. 227(b)(2), as it imposes obligations typically associated with unsolicited faxes on solicited ones. Despite its questionable validity, federal district courts lack jurisdiction to invalidate the rule, meaning it must be enforced as written unless successfully challenged in a proper administrative appeal. Harbour Capital did not submit a timely challenge to this rule. Consequently, the court is obligated to apply the rule until a higher court invalidates it.
In the case at hand, Harbour Capital allegedly sent over 10,000 unsolicited faxes without required opt-out language beginning May 5, 2005, and similarly sent more than 10,000 faxes after the rule took effect on August 1, 2006, which also lacked proper opt-out language. The proposed subclasses for class certification by Raitport include all recipients of faxes sent on specific dates without distinguishing between solicited and unsolicited faxes, as all were required to comply with the Solicited Fax Rule. Raitport contends that while Harbour's faxes included some opt-out language, it did not meet the statutory standards.
Under the TCPA, sending a fax advertisement without the required opt-out language allows recipients to pursue a private right of action, with statutory damages set at $500 per fax, potentially tripled for willful violations. Raitport claims Harbour Capital's non-compliance with this requirement could result in class action damages ranging from $15 to $45 million, hinging on the claim that all faxes lacked the mandated opt-out language. However, the enforceability of the FCC's Solicited Fax Rule is pivotal; if deemed invalid, it complicates the certification of Raitport's proposed subclasses, which include individuals who received both solicited and unsolicited faxes. Courts have found the Solicited Fax Rule to exceed FCC authority, yet the Hobbs Act necessitates enforcement of the rule, leading to significant class action lawsuits with substantial financial implications for businesses engaged in direct advertising. The plaintiff, represented by Anderson, Wanca, has filed numerous lawsuits across multiple states in recent years, revealing a pattern of aggressive litigation in this area.
In 2017, the Eighth Circuit Court of Appeals addressed significant legal changes regarding fax advertisements under the Telephone Consumer Protection Act (TCPA). Petitioner Anda, a generic drug company, faced a class action lawsuit in 2008 for allegedly violating the FCC's Solicited Fax Rule by failing to include opt-out notices on fax advertisements sent to pharmacies that had consented to receive them. Despite many pharmacies' explicit permission, they sought over $150 million in damages against Anda. Anda had previously petitioned the FCC for a ruling that the TCPA does not mandate opt-out notices for solicited faxes. The FCC maintained its position that the TCPA requires such notices for both solicited and unsolicited faxes. In response, several businesses, including Anda, challenged the FCC's ruling, leading to a consolidation of petitions in the D.C. Circuit Court of Appeals. The court ultimately determined that the FCC had overstepped its authority, clarifying that while the TCPA mandates opt-out notices for unsolicited faxes, it does not impose this requirement for those sent with prior express permission.
Congress distinctly differentiated between unsolicited and solicited fax advertisements in the Act, mandating that unsolicited faxes include an opt-out notice while not imposing this requirement on solicited faxes. The court emphasized that the Federal Communications Commission (FCC) lacks the authority to require opt-out notices for solicited faxes, as Congress has not authorized such action, making the FCC's Solicited Fax Rule unlawful in this regard. The court vacated the FCC's 2014 order related to this rule.
Raitport contended that the court should enforce the Solicited Fax Rule, arguing that the Hobbs Act limits jurisdiction to the courts of appeals for reviewing FCC regulations, and thus the First Circuit’s failure to address the rule invalidates the Bais Yaakov decision's applicability in this case. The court rejected this interpretation, noting that it would create inconsistent enforcement across jurisdictions and contradict established interpretations of the Hobbs Act. Citing the Sixth Circuit's ruling, the court affirmed that the Bais Yaakov decision invalidated the Solicited Fax Rule nationwide, as the D.C. Circuit had become the sole venue for challenges to this rule. This promotes judicial efficiency and uniformity by requiring challenges to be first brought before the FCC and then consolidated in a single circuit court. Consequently, the Solicited Fax Rule is deemed invalid.
Decisions from the Courts of Appeals for the Fourth and Ninth Circuits establish that rulings on challenges to FCC regulations, when consolidated by the Multidistrict Litigation Panel, are binding nationwide. The Fourth Circuit, for instance, has determined that after multiple petitions regarding the FCC's First Report and Order were consolidated and assigned to the Eighth Circuit, this circuit became the exclusive forum for such challenges, as per 28 U.S.C. § 2112(a). This consolidation aims to prevent confusion and conflicting decisions among different circuits. Similarly, the Ninth Circuit ruled that the Eleventh Circuit's decisions on the FCC's Second Report and Order are also binding outside that circuit, supporting the exclusive jurisdiction of appellate courts to review FCC orders under 47 U.S.C. § 402(a) and 28 U.S.C. § 2342(1). The D.C. Circuit has reiterated that jurisdiction granted to a specific court excludes original jurisdiction in others for cases covered by that statute. Additionally, federal district courts outside the D.C. Circuit have recognized the binding authority of decisions such as Bais Yaakov, affirming the nationwide applicability of these rulings.
The court asserts that the D.C. Circuit, after consolidation by the Multidistrict Litigation Panel, became the exclusive venue for contesting the FCC's Solicited Fax Rule, which has been invalidated and is thus binding on this court. The Hobbs Act delineates that circuit courts have exclusive jurisdiction over final FCC orders, and despite the district court's disagreement with the Eleventh Circuit's ruling in NASUCA v. FCC regarding the invalidity of the FCC's Order, it remains bound by that decision. Raitport's claim that this court must adhere to the invalidated Solicited Fax Rule until it is overturned by the First Circuit or the Supreme Court lacks legal foundation.
Additionally, Raitport's proposal for class certification, which includes Class A and two subclasses, is rejected. Class A includes individuals who received specific facsimile advertisements from the Defendant between August 1, 2006, and the present, while subclasses pertain to individuals who received particular advertisements on specified dates in 2006. Raitport argues that the requirements for class certification under Federal Rule 23(a) and Rule 23(b)(3) are satisfied, but the court disagrees, indicating that the proposed subclasses cannot be certified.
The Class and Subclasses proposed by Raitport are defined based on the content of the opt-out notice in the fax advertisements from Harbour, rather than on prior express invitation or permission to send those faxes. Since Harbour was not required to include an opt-out notice for solicited faxes, the proposed subclasses are deemed over-inclusive. The issue of class certification mirrors that in the Sandusky case, where the predominant question is whether each recipient consented to receive the faxes. This individual consent issue would complicate litigation if the class were certified, as the court would need to sift through members to identify those who solicited the faxes. Several courts have similarly denied class certification in TCPA cases when determining class membership hinged on whether individuals consented to receive faxes. The TCPA does not impose an opt-out requirement for solicited faxes, and since the relevant rule is no longer applicable, determining TCPA claims would necessitate assessing the solicitation status of each class member. Due to these individualized consent issues, the Court finds that class treatment is not appropriate under Rule 23, resulting in the denial of Raitport’s motion to add a third subclass.
Raitport's request to amend his motion for class certification to include a third subclass of individuals who did not give prior express consent to receive fax advertisements is denied. The faxes in question were sent over a decade ago, in 2006, and it is confirmed that Harbour Capital's agent, Westfax, did not maintain records of which specific customers received the faxes, only the number of transmissions that connected to a fax machine. This lack of documentation means that identifying the 29,720 potential subclass members would require individual inquiries into whether each person remembers receiving a fax and consenting to it, which complicates class certification due to the individualized factual issues involved.
The court emphasized the necessity for a class to be "sufficiently defined" under the ascertainability requirement, which mandates that class membership can be determined through objective criteria. In this case, the individualized questions about fax receipt among nearly 30,000 potential recipients rendered Raitport's proposed class unascertainable, as individual affidavits would not provide a reliable or administratively feasible method for identification. The district court also cited similar issues in a related case, Sandusky, where the reliance on self-serving affidavits from potential class members regarding receipt of faxes was deemed problematic. Overall, the inability to definitively identify class members based on the available evidence led to the denial of the motion for class certification.
When the Multidistrict Litigation Panel consolidated challenges to the FCC's Solicited Fax Rule in the D.C. Circuit Court of Appeals, that court became the exclusive venue for determining the rule's validity. Its ruling that the Solicited Fax Rule is unlawful is binding nationwide unless overturned by the Supreme Court, which has not intervened in this case. Raitport's claims to the contrary lack merit and are contradicted by strong legal precedent. Consequently, Harbour Capital is only obligated to include opt-out language on unsolicited fax advertisements; those sent with recipient consent do not require such language.
Raitport's proposed class, which fails to differentiate between recipients who consented and those who did not, is deemed unascertainable, preventing common factual questions from prevailing. Similar issues arise with Raitport's request to amend his class certification motion to introduce a third subclass, which is also unascertainable due to the passage of time and lack of records regarding who received the faxes.
The court partially granted Raitport's Motion to Lift Stay by lifting the previously imposed stay but denied his requests for additional briefing and for amending the motion for class certification. Raitport's Motion for Class Certification was ultimately denied. The Hobbs Act grants appellate courts exclusive jurisdiction to review FCC regulations, requiring challenges to be filed within 60 days. Raitport acknowledged that Harbour transmitted significant numbers of fax advertisements in October and November 2006. Notably, Ajit Pai, then an FCC commissioner, noted that only unsolicited advertisements are subject to the opt-out requirement. The Supreme Court denied certiorari on this matter, concluding the administrative challenge to the Solicited Fax Rule. The court found no need for supplemental briefing on the issue raised by Raitport.
The court's ruling clarifies that Raitport's claim does not represent a collateral attack on the FCC's Solicited Fax Rule. Instead, the rule was appropriately contested under the Hobbs Act, and the circuit court in Bais Yaakov deemed the rule unlawful and invalid. Raitport's interpretation of the First Circuit's decision in Brotherhood of Locomotive Engineers is incorrect; the opinion does not imply that this court lacks jurisdiction to adhere to the D.C. Circuit's Hobbs Act ruling in Bais Yaakov. Additionally, the consolidation of challenges to the Solicited Fax Rule in the D.C. Circuit was not a standard referral from the Multidistrict Litigation Panel, but rather an assignment under the authority granted to the MDL Panel by 28 U.S.C. § 2112(a)(3), which pertains to the review and enforcement of agency orders.
