District Court (Cal.) Certifies TCPA Fax and Call Class; Offers Sua Sponte Lecture on the Social Utility of Class Actions as a Device to Force Corporations to Internalize the Social Costs of their Actions.

In Bee, Denning, Inc. v. Capital Alliance Group, 2015 WL 5675798, at *1-2 (S.D.Cal.,2015), Judge Bashant certified  fax-blast and cell-phone classes arising from a telemarketing scheme that included unsolicited faxes followed by automated calls to cellular telephones.  The facts were as follows:

The allegations at the heart of this case involve a familiar feature of the modern business and consumer landscape-telemarketing. Defendant Capital Alliance Group, a California corporation with its principal place of business in Santa Ana, CA, acts as a loan broker that matches investors (lenders) with small businesses seeking loans. (FAC 2:14–18; Pls.’ Mot. 2:5–12.) Defendant Narin is the CEO of Capital Alliance, and is responsible for the company’s daily operations, including sales and marketing activities. (Pls.’ Mot. 3:3–4:5.) Plaintiff Bee, a consulting company based in La Jolla, CA, alleges that on or about August 14, 2013, it received from Capital Alliance an unsolicited fax advertisement offering a “fast and simple” short-term business loan in violation of the TCPA. (FAC 5:3–6.) Bee received similar faxes from Defendants on September 9, 2013 and September 23, 2013. (FAC 5:19–20.) These fax advertisements-which are substantially similar in form and content-do not list Capital Alliance as the company offering the loan, but instead use different company names, such as “Community Business Funding.” (Pls.’ Mot. 5:18–6:5.) However, when Bee called the number listed on one of the faxes, Bee was ultimately directed to a live representative of Capital Alliance. (FAC 5:7–16.) Plaintiffs assert that Capital Alliance uses at least eleven aliases to disguise the fact that the fax advertisements are sent on its behalf. (Pls.’ Mot. 4.) Bee did not provide prior express consent to receive fax advertisements from Capital Alliance, nor did it have an established business relationship with Capital Alliance. (FAC 5:24–28.)  Plaintiff Bee contends that several other small business owners have similarly received unsolicited “junk faxes” from Capital Alliance in violation of the TCPA. (Pls.’ Mot. 4:6–7:4.) In each instance, the allegations and supporting declarations involve a strikingly similar set of circumstances: (1) a person receives an unsolicited fax advertisement offering a business loan from a company with a nondescript name such as “Community Business Funding,” “Community,” or “Snap Business Funding”; (2) the fax directs the recipient to call a toll-free number or visit a website listed on the fax to start the loan application process; and (3) calls made to the toll-free numbers listed on these fax advertisements, more often than not, ultimately connect to Capital Alliance.¹ (Hoover Decl. 3:6–11.) In short, the fax advertisements contain different company names and toll-free numbers, but they are ultimately traceable to Capital Alliance. According to Bee, Defendants contracted with a third-party vendor, Absolute Fax, to solicit business through these junk faxes on Defendants’ behalf. (Pls.’ Mot. 2:13–18.) Defendant Narin acknowledges that Absolute Fax is the only fax vendor Defendants retained to “generate leads” and “make[ ] the phone[s] ring,” but maintains that Defendants did not pay Absolute Fax to send facsimiles “to any person, for any reason.” (Defs.’ Opp’n 4:1–2.) Absolute Fax is exclusively in the business of fax marketing. (Pls.’ Mot. 2:16–17.) For his part, Plaintiff Chick alleges that on or about December 6, 2013, he received an automated call with a prerecorded message to his cell phone from the phone number 888–364–6330. (FAC 6:18–22.) The prerecorded message related to preapproval for a business loan. (FAC 6:19–20.) When a caller dials 888–364–6330, the call is answered by an automated answering system that ultimately connects to Capital Alliance. (FAC 6:24–7:2.) Chick alleges that this and like calls violate the TCPA’s prohibition on prerecorded voice calls. (FAC 6:18–7:10.) Defendant Narin acknowledges that Capital Alliance contracted with a company named Marketing Communications to generate leads, and admits that he provided the “gist of the content” for the prerecorded messages Marketing Communications used to advertise Capital Alliance’s product. (Reiten Decl. 21:21–24:23.)   Plaintiffs allege that Defendants violated two separate provisions of the TCPA. The first, 47 U.S.C. § 227(b)(1)(C), makes it unlawful “to use any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement,” unless the sender has an “established business relationship” and meets other conditions.² The second provision at issue, 47 U.S.C. § 227(b)(1)(A), makes it unlawful “to make any call … using any automatic telephone dialing system or an artificial or prerecorded voice … to any telephone number assigned to a … cellular telephone service[.]” The statute creates a private right of action, providing for $500 or the actual monetary loss in damages for each violation, and treble damages for each willful or knowing violation. 47 U.S.C. § 227(b)(3).  Plaintiffs filed this putative class action on behalf of a nationwide class of individuals who received unsolicited fax advertisements sent by or on behalf of Capital Alliance, or who received telephone calls made by or on behalf of Capital Alliance using a prerecorded voice.

The District Court certified the two classes, finding, among other things, that predominance and superiority were satisfied.

The Court is especially confident that predominance has been satisfied in this case because Defendants neither contend, nor provide any evidence, that they had an established business relationship (“EBR”) with recipients of the faxes, or received prior express consent from recipients of the automated calls. (Reiten Decl. 73:3–14.). Under the TCPA, a person may, under certain conditions, send unsolicited fax advertisements to a person with whom the sender has an EBR, and may initiate automated calls to a person’s cell phone if the recipient has provided prior express consent. See 47 U.S.C. § 227(b)(1)(C); 47 U.S.C. § 227(b)(1) (A). Thus, the existence of an EBR or prior express consent raises the possibility of individual differences among class members. See, e.g., Connelly v. Hilton Grand Vacations Co., LLC, 294 F.R.D. 574, 578 (S.D.Cal.2013) (holding predominance requirement not satisfied where the context of class members’ interactions with Defendant was sufficiently varied to require individual evaluation of whether express consent was provided). Here, however, Defendants make no showing that the EBR or express consent exemption applies, and they certainly do not argue that such individual questions outweigh the common issues. Where a party has not submitted any evidence of an EBR or express consent, courts will not presume that resolving such issues requires individualized inquiries. . . . Rule 23(b)(3) also requires Plaintiffs to demonstrate “that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed.R.Civ.P. 23(b) (3). . . .The average consumer considering whether to bring an individual action alleging a TCPA violation confronts a classic negative-value suit scenario: the cost of litigating an individual claim outweighs the potential gains. See Tidmarsh, supra, at 1167–68 (defining negative-value suit). This disparity between litigation costs and prospective recovery provides “the most compelling rationale for finding superiority in a class action.” Smith v. Microsoft Corp., 297 F.R.D. 464, 468–69 (S.D.Cal.2014) (quoting Castano v. Am. Tobacco Co., 84 F.3d 734, 748 (5th Cir.1996)); see also Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 617, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) (“The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights.”); Wolin, 617 F.3d at 1175 (“Where recovery on an individual basis would be dwarfed by the cost of litigating on an individual basis, this factor weighs in favor of class certification.”). Although Defendants apparently contend that the class members here have sufficient incentive to pursue a solo action, this assertion is unpersuasive. While an individual does have the option of bringing a TCPA claim in state small claims court, thus avoiding the costs of an attorney, that alternative does not provide an equally effective or efficient method of handling the instant case. Here, Defendants have allegedly concealed their role in the prohibited conduct through use of nearly a dozen aliases and difficult to trace toll-free numbers. This fact scenario-one that requires something beyond a basic reading of the TCPA and its unsettled case law-is thus ill-suited for small claims litigation. Under these circumstances, $500 (or even $1,500) for each violation is unlikely to incentivize the average claimant to incur the opportunity costs of time, effort, and attention to pursue her claim on an individual basis. Defendants also challenge superiority on the grounds that the “manageability of the class” will be “exceedingly difficult” because “individualized issues of liability and damages will devolve into multiple mini-trials.” (Defs.’ Opp’n 15:27–16:1.). This Court disagrees. As the Court explains in its discussion of the predominance requirement, common issues dominate this litigation. Defendants have identified no individual issue of liability or damages that “outweigh the benefits of considering common issues in one trial.” Zinser, 253 F.3d at 1192. Indeed, Defendants have not specified any individual issue of liability or damages at all, let alone individual issues pervasive enough to render class certification inappropriate. To the extent individualized inquiries might arise, the Court can either handle such issues in the context of classwide proceedings or, if necessary, revisit certification. Kristensen, 12 F.Supp.3d at 1307 (finding superiority requirement met in a putative TCPA class action where the Court could review individual affidavits averring lack of consent to receive text messages sent on behalf of Defendant to Plaintiff’s cell phone). Accordingly, the Court finds that Plaintiffs have met the superiority requirement as to both classes.

The Court concluded with a sua spent lecture on the social utility of class actions.

Jurists and commentators have long debated the merits of the modern class action and the public policies behind Rule 23. See David Marcus, The History of the Modern Class Action, Part I: Sturm Und Drang, 1953–1980, 90 Wash. U.L.Rev. 587 (2013) (defining the contours of the debate as one between advocates of a “regulatory conception” of Rule 23 versus supporters of a more limited “adjectival conception” of the Rule). It is the view of this Court that the instant case highlights one of the strongest justifications for the class action device: its regulatory function. See Marcus, supra, at 590 (explaining that proponents of the “regulatory conception” of Rule 23 view class actions as an important supplement to public administration and as a device for maximizing regulatory efficacy). A statute such as the TCPA, which provides for a relatively small recovery for individual violations but is designed to deter conduct directed against a large number of individuals, can be effectively enforced only if consumers have available a mechanism that makes it economically feasible to bring their claims. Without the prospect of a class action suit, corporations balancing the costs and benefits of violating the TCPA are unlikely to be deterred because individual claims will not impose the level of liability that would outweigh the potential benefits of violating the statute. This, of course, does not relieve Plaintiffs of their burden to meet the requirements for class certification under Rule 23. But Rule 23 analysis should be conducted in light of the objectives of the statute at issue, not in a vacuum devoid of policy context. See, e.g., Bateman, 623 F.3d at 716 (“While Rule 23 affords district courts wide discretion in deciding whether to certify a class, the district court was obliged to exercise that discretion in light of the objectives of [the Fair and Accurate Credit Transactions Act].”) In the context of the TCPA, the class action device likely is the optimal means of forcing corporations to internalize the social costs of their actions. See, e.g., Myriam Gilles & Gary B. Friedman, Exploding the Class Action Agency Costs Myth: The Social Utility of Entrepreneurial Lawyers, 155 U. Pa. L.Rev. 103 (2006) (arguing for the primacy of a deterrence-centric approach to class actions that views deterrence of corporate wrongdoing as the class action’s central goal).