In Alpha Tech Pet, Inc. v. Lagasse, LLC, 2016 WL 4678316, at *3–5 (N.D.Ill., 2016), Judge Durkin denied a motion to dismiss a blast fax case, finding that the faxes plausibly were advertisements.
Here, all four faxes Defendants contest are plausibly advertisements. The March 15 and February 15 faxes provide the prices for certain goods and encourage customers to investigate the availability of further products on Defendants’ website. These faxes can plausibly be characterized as “advertising the commercial availability or quality of…goods.” 47 U.S.C. § 227(a)(5). The April 25 and 26 faxes do not mention specific goods, but encourage “customers” to place orders online or by phone while Defendants’ email system was not working. Simply by being addressed to “customers” the faxes can be plausibly characterized as advertisements for goods, because a customer is “someone who buys goods.” See Merriam-Webster Dictionary online (www.merriam-webster.com) (visited on Sept. 7, 2016). Additionally, although the faxes state that their purpose was to inform the recipients regarding the functionality of Defendants’ email system, the purpose of providing that information was to enable the “customers” who received the faxes to purchase goods from Defendants. See N.B. Indus. v. Wells Fargo & Co., 2010 WL 4939970, at *6 (N.D. Cal. Nov. 30, 2010) (courts should look past “pretext” in determining whether a fax is an advertisement covered by the TPCA). This is apparent because the faxes also provide information about alternative means of purchasing goods, i.e., on the internet or by phone. Such an “invitation” to do business is plausibly an advertisement. See Brodsky v. HumanaDental Ins. Co., 2014 WL 2780089, at *7 (N.D. Ill. June 12, 2014); Mussat v. Power Liens, LLC, 2014 WL 3610991, at *2 (N.D. Ill. July 21, 2014) (an “invitation” or “offer to make use of” services is plausibly an advertisement). Thus, both the April 25 and 26 faxes are plausibly advertisements. Defendants cite an FCC ruling to point out that “FCC rules emphasize a distinction between advertising faxes versus informational faxes, noting that ‘messages that do not promote a commercial product or service… are not unsolicited advertisements under the TCPA.’ ” R. 20 at 6 (quoting In re Matter of Rules & Reg’s Implementing the TCPA of 1991, 21 FCC Rcd. 3787, 3810 (Apr. 6, 2006)). On the basis of this FCC ruling, Defendants argue that the four faxes at issue are “informational” in that they inform the recipient about Defendants’ prices and the functionality of Defendants’ email system. R. 20 at 8. Defendants contend that to the extent the faxes contain advertising, it is “ ‘incidental’ ” and “ ‘does not convert the entire communication into an advertisement’ ” for purposes of the TCPA. Id. at 7 (quoting 21 FCC Rcd. at 3814). As an initial matter, the FCC ruling Defendants rely on “discusses the meaning of ‘informational communication,’ a phrase that does not appear in [the statute or the federal regulations],” but is the “explanation the [FCC] gave when adopting the regulation.” . . Even if the Court was bound to follow the FCC’s ruling, the Court’s decision would be unchanged because Defendants’ arguments apply the FCC’s ruling too broadly. . . Based on Alpha Tech’s allegations and what the Court can glean from the face of the four faxes at issue, the faxes do not fit the definition of “informational communication” the FCC exempts from the scope of the TCPA. The faxes are not alleged to be “industry news articles, legislative updates, or employee benefit information.” Neither are they alleged to be “issued on a regular schedule” or “directed to…paid subscribers or to recipients who have initiated membership in the organization that sent the communication.” Rather, the faxes at issue are alleged, and appear, to be random communications sent with the intent to encourage “customers” to purchase goods from Defendants.
The District Court also found that the class allegations did not allege a fail-safe class.
Defendants contend that Alpha Tech’s class definition is not “ascertainable” because it is a “fail-safe” class. Application of “Rule 23 requires that a class be defined…clearly and based on objective criteria.” Mullins v. Direct Digital, LLC, 795 F.3d 654, 659 (7th Cir. 2015); see Fed. R. Civ. P. 23(c)(3)(B) (“[T]he judgment in a class action must for any class certified under Rule 23(b)(3), include and specify or describe those to whom the Rule 23(c)(2) notice was directed…and whom the court finds to be class members.”). This requirement is known as “ascertainability.” Mullins, 795 F.3d at 659. One of the “common problems that have caused plaintiffs to flunk this requirement” is “classes that are defined in terms of success on the merits—so-called ‘fail-safe classes.’ ” Id. at 659-60. “Defining the class in terms of success on the merits is a problem because ‘a class member either wins or, by virtue of losing, is defined out of the class and is therefore not bound by the judgment.’ ” Id. at 660 (quoting Messner v. Northshore Univ. Health Sys., 669 F.3d 802, 825 (7th Cir. 2012)). “This raises an obvious fairness problem for the defendant: the defendant is forced to defend against the class, but if a plaintiff loses, she drops out and can subject the defendant to another round of litigation.” Mullins, 795 F.3d at 660 (7th Cir. 2015) (citing Erin L. Geller, Note, The Fail–Safe Class as an Independent Bar to Class Certification, 81 Fordham L. Rev. 2769 (2013)). In cases alleging statutory injuries, like the injury alleged in this case under the TCPA, it can be tempting for a plaintiff to define its class in terms of the statutory elements that establish liability. Many statutory injuries are only actionable because a legislature deemed them to be so. Since the statute defines the injury, it is understandable that a plaintiff would define a class in the statutory terms that define liability. But this focus on the terms of liability frequently results in class definitions that are fail-safe. By contrast, for example, tort actions concern injuries to persons or property that are considered harmful regardless of a legislature’s intent. No legislature needed to pass a law for the consumer of a defective product to collect damages. Since the injury exists apart from a statute, the legal elements that determine liability are independent of the injury for which the plaintiff seeks relief. This clearer separation of the particular circumstances of the plaintiff’s injury and the elements that establish liability makes it easier for the plaintiff in a tort action to define a class properly in terms of the circumstances of the injury as opposed to improperly defining the class in terms of liability. For instance, a plaintiff in a products liability case is unlikely to define the class as those who purchased a “defective product” from the defendant manufacturer. This definition of course is fail-safe because it is couched in terms of liability—it is the “defective” nature of a product that determines liability. Rather, because a plaintiff in a products liability case is focused on the particular product (or part of a product) that caused the injury at issue, the plaintiff is much more likely to define the class as those who purchased “Product X” or any product containing “Part Y.” These definitions leave open the question of liability and avoid the fail-safe trap. Here, Alpha Tech alleges a class defined as those who received fax advertisements from Defendants (1) for which Defendants did not secure “prior express permission” to send, or (2) in which Defendants failed to “display a proper opt-out notice.” With its references to “prior express permission” and “opt-out notice,” this class definition uses the terms that define the scope of liability under the TCPA. The TCPA only prohibits faxed advertisements that are “unsolicited,” and the TCPA defines an “unsolicited advertisement” as one sent without “prior express invitation or permission.” 47 U.S.C. § 227(a)(5). Nevertheless, even a fax sent with permission must include a statutorily described “opt-out notice” to comply with federal regulations. 47 C.F.R. § 64.1200(a)(4)(iv); see also Nack v. Walburg, 715 F.3d 680, 684 (8th Cir. 2013), cert denied 134 S.Ct. 1539 (Mar. 24, 2014); Brodsky, 2014 WL 4813147, at *4. Further, the TCPA also exempts from its prohibition on “unsolicited advertisements” a fax sent to a recipient with whom the sender has an “established business relationship” as long as the fax includes the statutorily described “opt-out notice.” Alpha Tech’s claims center on whether Defendants included a proper opt-out notice on their faxes. Largely because the TCPA requires that faxed advertisements include an opt-out notice regardless of whether the sender received “prior express permission” from, or had an “established business relationship” with, the recipient, Alpha Tech concedes that “prior express permission” is irrelevant to its claims. See R. 26 at 15 (“The Court will not be required to delve into issues of prior express permission or EBR in this case because the class covers faxes lacking compliant opt-out notice.”). Since “prior express permission” is irrelevant to Alpha Tech’s claims, it should not be an element of the class definition, and the Court strikes that portion of the definition. With “prior express permission” stricken, the only remaining issue with respect to the ascertainability of Alpha Tech’s class definition, is whether Alpha Tech’s inclusion of Defendants’ failure to “display a proper opt-out notice” as an element of the definition makes it a fail-safe class. Presumably, Alpha Tech included the failure to “display a proper opt-out notice” as an element in its class definition, because it would like its class to include anyone who received a fax from Defendants without a proper opt-out notice. But whether Defendants included a proper opt-out notice on their faxes is the primary question the answer to which will determine Defendants’ liability in this case. If the Court determines that Defendants failed to include proper opt-out notices in their faxes, Defendants will be liable to the recipients of those faxes. But if the Court determines that Defendants’ faxes included proper opt-out notices, none of the recipients of those faxes will be included in the class. That is the danger of a fail-safe class, and it is present here under Alpha Tech’s current class definition. Analogy to the hypothetical products liability class described earlier will help elucidate the Court’s reasoning. The products liability plaintiff avoids a fail-safe class definition by focusing on the particular factual circumstances that caused the injury at issue. A proper products liability class is not defined as anyone who purchased a general “defective product,” but those who purchased “Product X,” or a product with “Part Y,” in particular. By analogy in this case the proper class is not those who received a fax lacking a proper opt-out notice, but those who received the particular faxes Alpha Tech received, or any faxes that contained the purported opt-out language that Defendants included on the faxes Alpha Tech received, and which Alpha Tech alleges is insufficient under the terms of the TCPA. Thus, the Court redefines the class definition as follows: “All persons who (1) on or after four years prior to the filing of this action (2) were sent any of the telephone facsimile messages attached to this complaint, or (3) were sent a telephone facsimile message that included the message, “If you have received this fax in error, please accept our apologies and call toll free 877-385-4440 to be removed from our list.” This definition avoids the problem of a fail-safe class because it is grounded in the particular factual circumstances that allegedly led to Alpha Tech’s injury. Discovery might reveal a basis to further refine this definition or to dismiss the class allegations altogether. But the definition the Court has crafted will suffice for the time being.7 The Court also grants Alpha Tech leave to amend the Court’s class definition—in accordance with the Court’s reasoning about fail-safe classes—should Alpha Tech believe that the Court’s definition misses some aspect of Alpha Tech’s claims.