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Raitport v. Harbour Capital Corp.

United States District Court, D. New Hampshire

May 11, 2018

Menachem Raitport and Crown Kosher Meat Market, Inc., Plaintiffs
Harbour Capital Corporation, Defendant

          Aytan Y. Bellin, Esq. Michael J. Sheehan, Esq. William E. Christie, Esq.


          Steven J. McAuliffe United States District Judge.

         This proposed class action arises out of Harbour Capital's allegedly improper transmission of facsimile advertisements to Menachem Raitport and/or his business, Crown Kosher Meat Market (collectively, “Raitport”), in violation of the Telephone Consumer Protection Act and FCC regulations promulgated pursuant to that statute. By order dated September 12, 2013, the court stayed this action, pending completion of collateral administrative proceedings before the FCC likely to resolve critical questions of law underlying this litigation. See Order Imposing Stay (document no. 85). See generally Petitions, FCC Proceeding Nos. 02-278 and 05-338.

         Those administrative proceedings have been completed and, accordingly, Raitport moves the court to lift the stay. Raitport also seeks leave to file a brief addressing whether, under the Hobbs Act, this court has jurisdiction to follow a decision issued by the Court of Appeals for the D.C. Circuit arising out of the FCC administrative proceedings. He also seeks leave to amend his motion for class certification to add a third subclass of plaintiffs. Also pending before the court is Raitport's motion for class certification, which the parties have fully briefed.

         For the reasons discussed, Raitport's motion to lift the stay (document no. 98) is granted in part, and denied in part. His motion for class certification (document no. 42) is denied.


         I. The Governing Statute and Regulations.

         The Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005 (collectively, the “TCPA”), prohibits the use of any device to send, to a telephone facsimile machine, an “unsolicited advertisement.” 47 U.S.C. § 227(b)(1)(C). The statute defines “unsolicited advertisement” as “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission, in writing or otherwise.” 47 U.S.C. § 227(a)(5).

         The statute does, however, provide an exception to that general prohibition on unsolicited fax advertisements, if: (a) the sender has an established business relationship with the recipient; (b) the sender obtained the recipient's fax number through voluntary communication or a directory; and (c) the unsolicited fax includes an opt-out notice meeting certain statutory requirements. 47 U.S.C. § 227(b)(1)(C). In short, then, under certain circumstances a business may send an “unsolicited advertisement” by fax to a third party, but that fax must include the statutorily-mandated opt-out language. See Id. § 227(b)(2)(D) (providing that such opt-out language must be “clear and conspicuous” and “on the first page of the unsolicited advertisement, ” it must state that the recipient may opt out from future unsolicited advertisements, and must include a “cost free mechanism to send an opt-out request to the sender of the unsolicited advertisement).

         In 2006, the FCC issued what has come to be known as the “Solicited Fax Rule.” 47 C.F.R. § 64.1200(a)(4)(iv). That rule requires the sender of a facsimile advertisement to include the statutory opt-out language even when the fax is sent to a “recipient that has provided prior express invitation or permission to the sender.” Id. (emphasis supplied). “In other words, the FCC's new rule mandates that senders of solicited faxes comply with a statutory requirement that applies only to senders of unsolicited faxes.” Bais Yaakov of Spring Valley v. FCC, 852 F.3d 1078, 1080 (D.C. Cir. 2017) (emphasis in original). On its face, the Solicited Fax Rule would certainly seem to exceed the FCC's statutorily vested authority to regulate this area. See 47 U.S.C. § 227(b)(2). See also Nack v. Walburg, 715 F.3d 680, 682 (8th Cir. 2013) (noting that “it is questionable whether the regulation at issue [] properly could have been promulgated under the statutory section that authorizes a private cause of action.”). But, challenging the validity of that rule is, to say the least, difficult - in part because federal district courts lack jurisdiction to declare that rule invalid.[1]

         Consequently, as the Court of Appeals for the Eighth Circuit recognized, even if the Solicited Fax Rule is plainly beyond the regulatory authority of the FCC, court's (including the courts of appeals) must enforce it as written, unless and until it is properly challenged in an appeal arising from agency action and deemed unenforceable by a court of competent jurisdiction.

The Administrative Orders Review Act (“Hobbs Act”), 28 U.S.C. § 2342 et seq., precludes us from entertaining challenges to the regulation other than on appeals arising from agency proceedings (except arguably in extenuating circumstances not at issue in this case). Without addressing such challenges, we may not reject the FCC's plain-language interpretation of its own unambiguous regulation.

Nack v. Walburg, 715 F.3d 680, 682 (8th Cir. 2013).

         Harbour Capital never filed a timely administrative challenge to the Solicited Fax Rule with the FCC. So, says Raitport, this court's job is straightforward: unless and until the Court of Appeals for the First Circuit (or the Supreme Court) invalidates the Solicited Fax Rule in a proceeding arising out of a proper administrative challenge to that rule, this court is bound to apply the rule as written. As discussed below, application of the Solicited Fax Rule is critical to Raitport's claims in this case.

         II. Plaintiffs' Claims.

         According to the amended complaint (document no. 34), beginning on May 5, 2005, Harbour Capital sent “well over ten-thousand” unsolicited fax advertisements that failed to include the opt-out language required by the TCPA. Id. at paras. 15-16. Then, more than a year later, beginning on August 1, 2006, Harbour Capital again sent “well over 10, 000” unsolicited and/or solicited fax advertisements that failed to bear the required opt-out language. Id. at paras. 17-18.[2]

         The two proposed subclasses of plaintiffs that Raitport seeks to certify do not distinguish between “solicited” and “unsolicited” faxes. Instead, those subclasses include all recipients of faxes sent by Harbour on or about two dates (October 4, 2006 and November 7, 2006). See Motion for Class Certification (document no. 42) at 2. No distinction is drawn because, according to the Amended Complaint (citing both the TCPA and the Solicited Fax Rule), all fax advertisements sent by Harbour Capital - both solicited and unsolicited - were required to contained opt-out language. And, says Raitport, although Harbour Capital's faxes did include opt-out language, that language did not strictly comply with the statutory requirements.

         For anyone who sends a fax advertisement that improperly omits the required opt-out language, the TCPA provides a private right of action and imposes statutory damages of $500 per fax (which can be trebled, if the court concludes the statutory violation was willful or knowing). 47 U.S.C. § 227(b)(3). So, based upon Raitport's allegations and the number of facsimile advertisements Harbour Capital reportedly sent, Harbour Capital faces potential class action damages of between roughly $15 and $45 million.

         Raitport's assertion that all of the faxes sent by Harbour Capital were required to bear the statutorily mandated opt-out language is central to his claims. But, that assertion turns upon the continued enforceability of the FCC's Solicited Fax Rule. If that rule is invalid, there is a substantial problem with certifying either of Raitport's original proposed subclasses, since each would contain both individuals who received unsolicited faxes (which, under the TCPA, must have included the required opt-out language) as well as individuals who received solicited faxes (to which such a requirement would not apply). His proposal to add a third subclass faces obstacles as well.


         I. The FCC's “Solicited Fax Rule” is Invalid.

         Many courts have recognized the Solicited Fax Rule as being beyond the scope of the FCC's regulatory authority. But, by virtue of the Hobbs Act, those such courts were nonetheless required to enforce the rule as written. That, in turn, led to the certification of numerous class action lawsuits in which millions or even tens of millions of dollars (“bet the company” damages) were at issue. See generally Creative Montessori Learning Centers v. Ashford Gear LLC, 662 F.3d 913, 915 (7th Cir. 2011). Indeed, the requirements imposed by the TCPA and the Solicited Fax Rule have proved lucrative for class action plaintiffs and their counsel, but posed high financial risk for businesses engaged in direct advertising programs. See, e.g., Physicians Healthsource, Inc. v. Allscripts Health Solutions, Inc., 2017 WL 2391751 at *1, n.1 (N.D. Ill. June 2, 2017) (“Teaming up with the Law Firm Anderson & Wanca, representing it here, the plaintiff has, in just the last four years, sued at least eighteen different companies in federal courts in Illinois, Indiana, Michigan, Missouri, California, Pennsylvania, New Jersey, Connecticut, Massachusetts, North Carolina, and Florida. And that includes only those cases in which written opinions were published on Westlaw. Counsel tells us plaintiff has brought more than twenty such cases altogether.”).

         In 2017, however, the legal landscape changed. Significantly. The Court of Appeals for the Eighth Circuit described the historical and procedural background to that change as follows:

Petitioner Anda is a company that sells generic drugs. As part of its business, Anda faxes advertisements to small pharmacies. Anda's fax advertisements convey pricing information and weekly specials to the pharmacies. Many pharmacies have given permission to Anda for Anda to send those faxes.
In 2010, Anda sought a declaratory ruling from the FCC clarifying that the [TCPA] does not require an opt-out notice on solicited fax advertisements - that is, those that are sent ...

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