On March 21, the U.S. Court of Appeals for the Seventh Circuit affirmed a lower court’s ruling that a small business had no liability under the Telephone Consumer Protection Act (TCPA) for fax advertisements sent by a third-party outside the scope of the business owner’s express authorization that restricted specifically the quantity and geographic scope of the ads. Bridgeview Health Care Ctr. Ltd. v. Clark, No. 14-3728, 2016 WL 1085233 (7th Cir. Mar. 21, 2016). The decision reflects a practical and common sense approach to the TCPA’s strict liability scheme when a third-party fax broadcaster is involved.
In 2006, a small business owner agreed to allow a marketing company to send no more than 100 faxes to recipients within a 20-mile radius of Terre Haute, Indiana. In fact, the marketing company sent approximately 5,000 faxes to recipients outside the 20-mile radius. The district court certified all fax recipients as a class and granted summary judgment to the fax recipients located within the approved geographic boundary, assessing the $500 statutory penalty per fax for a total judgment of $16,000. After a bench trial on the claims asserted on behalf of the remaining class members outside the 20-mile radius of Terre Haute—including the class representative—the district court entered judgment for the small business finding its liability was coextensive with (and not greater than) the numerical and geographic limits of its authorization to the marketing company.
On appeal, the Seventh Circuit applied an agency analysis to determine whether the faxes sent beyond the 20-mile radius were sent “on behalf of” the small business under 47 C.F.R. § 64.1200(f)(10) (defining a fax sender as either the person “on whose behalf” the advertisement is sent or the person whose services are shown in the advertisement). The Court examined the three possible types of agency and concluded that none of them applied, thus limiting the business owner’s liability to faxes sent within the approved 20-mile radius. First, the business owner did not give the marketing company express actual authority. The evidence showed that the marketing company unilaterally decided to send more faxes than authorized by the business owner thereby negating a finding of express actual agency. Second, there was no implied actual authority because there was nothing inherent in fax marketing that would permit sending thousands of advertisements into three states where the business did not actually transact business. Third, the evidence did not support a finding of apparent authority because the small business “did nothing to create an appearance that B2B [the marketing company] had authority to send faxes on behalf of either” the small business or its owner individually. In rejecting this third category, the Court also noted that (1) the advertisement itself was the only way the small business was communicating with these recipients because they were unknown to the owner otherwise; and (2) the ad did not reference the marketing company. Therefore, the recipients could not have reasonably believed that the small business had consented to this action by the marketing company.
In finding no error in the lower court’s award of summary judgment in favor of the fax recipients located within the authorized geographic radius, the Court noted the change in the use of faxes since the time of the TCPA’s enactment in 1991 and stated:
We doubt that Congress intended the TCPA, which it crafted as a consumer-protection law, to become the means of targeting small businesses. Yet in practice, the TCPA is nailing the little guy, while plaintiffs’ attorneys take a big cut . . . . Nevertheless, we enforce the law as Congress enacted it.
This case provides valuable guidance for businesses in limiting and possibly avoiding TCPA liability when communications are made through a third-party marketer. Businesses should give specific, written instructions to third-party marketing companies regarding the scope of their authority. Moreover, businesses should ensure that the fax advertisements contain an opt-out notice that complies with the TCPA. If a business is already facing a TCPA lawsuit involving fax advertisements sent on its behalf by a third-party, the business should immediately review all contracts and communications with that third-party to determine whether liability can be limited, as it was in Bridgeview.