The U.S. Court of Appeals for the Second Circuit handed a loss to a pharmaceutical company in a Telephone Consumer Protection Act action, reversing dismissal of the suit after finding that an unsolicited fax inviting doctors to a free dinner meeting could be considered an unsolicited advertisement.

On April 6, 2010, pharmaceutical company Boehringer Ingelheim Pharmaceuticals sent a fax to Physicians Healthsource, inviting one of the practice’s doctors to a free dinner meeting and discussion. The fax stated:

“Boehringer Ingelheim Pharmaceuticals, Inc. cordially invites you to join us for a dinner meeting entitled, 'It’s Time to Talk: Recognizing Female Sexual Dysfunction and Diagnosing Hypoactive Sexual Desire Disorder.' Based on recent data from a large U.S. study (PRESIDE), 43% of U.S. women aged [greater than] 18 years have experienced a sexual problem in their lives and 9.5% of the same group of women have experienced decreased sexual desire with distress. This program has been developed to discuss Female Sexual Dysfunction (FSD), including Hypoactive Sexual Desire Disorder (HSDD) including pathophysiology models, epidemiology, and diagnosis. We hope you will join us for this informative and stimulating program.”

The fax provided registration details but did not include an opt-out feature. Physicians Healthsource RSVP’d by filing a TCPA class action alleging that the fax was an unsolicited advertisement because it promoted the services and goods of Boehringer.

Boehringer moved to dismiss the suit and asked the Connecticut district court to take judicial notice of public records of the Food and Drug Administration showing that, at the time the fax was sent, the pharmaceutical company had submitted for approval to market a drug named Flibanserin to treat HSDD. Because the drug had yet to be approved by the FDA, Boehringer was forbidden to promote it, the defendant told the court, meaning the dinner was not a pretext to pitch a product or service.

The district court agreed and granted the motion to dismiss. Physicians Healthsource appealed and the Second Circuit reversed, holding that the fax may be an unsolicited advertisement in violation of the TCPA.

Reviewing the Federal Communications Commission’s 2006 Rule elaborating on the statute’s definition of “unsolicited advertisement,” the federal appellate panel cited language from the Rule that “facsimile messages that promote goods or services even at no cost, such as free magazine subscriptions, catalogs, or free consultations or seminars, are unsolicited advertisements under the TCPA’s definition. In many instances ‘free’ seminars serve as a pretext to advertise commercial products and services.”

Boehringer’s fax may have been just such a commercial pretext, the Second Circuit said. “Businesses are always eager to promote their wares and usually do not fund presentations for no business purpose,” the court wrote. At the early pleading stage, “where it is alleged that a firm sent an unsolicited fax promoting a free seminar discussing a subject that relates to the firm’s products or services, there is a plausible conclusion that the fax had the commercial purpose of promoting those products or services.”

The defendant can rebut such an inference, the panel noted, “by showing that it did not or would not advertise its products or services at the seminar, but only after discovery.”

Not every unsolicited fax promoting a free seminar satisfies the Rule, the court said. “There must be a commercial nexus to a firm’s business, i.e., its property, products, or services; that, in our view, is satisfied at the pleading stage where facts are alleged that the subject of the free seminar relates to that business.”

For example, if the Handy Widget Company funded a professorship at a local law school in the name of its deceased founder and faxed invitations on its letterhead to an inaugural lecture entitled “The Relevance of Greek Philosophers to Deconstructionism,” the complaint would not state a claim under the TCPA “because the Handy Widget Company is not in the business of philosophical musings,” the Second Circuit hypothesized.

Alternatively, if the fax invite was for a seminar on increasing widgets’ usefulness and productivity, a TCPA claim would be validly alleged.

The court was not persuaded that the lack of FDA approval for Boehringer’s FSD and HSDD drugs was dispositive. “Although not approved, the drug is intended as a remedy for the ailments to be discussed at the event,” the court wrote. “To be sure, Boehringer was prohibited from … ‘promoting’ an unapproved drug … but that prohibition is not necessarily inconsistent with the free dinner’s mentioning the possible future availability of the drug. Nothing in the statute or Rule limits their scope to the advertisement of products or services then available.”

One member of the panel authored a concurring opinion, agreeing that the complaint stated a claim under the TCPA, but writing separately to suggest an alternative reading of the 2006 Rule as treating free seminars as a per se advertisement under the statute.

“The 2006 Rule, in other words, can be read to say, in sum: Because of the frequency, observed by the Commission, that messages offering free goods or services in fact mask or precede efforts to sell something, the Commission has adopted a prophylactic presumption that fax messages offering free goods or services are advertisements and thus are prohibited by Section 277 (unless they are either sent with the consent of the recipient or meet the requirements for the statutory exception),” according to the concurrence.

To read the decision in Physicians Healthsource, Inc. v. Boehringer Ingelheim Pharmaceuticals, Inc., click here

Why it matters: While the majority of the Second Circuit panel declined to read the FCC’s 2006 Rule as creating a rebuttable presumption that a fax message offering free goods or services is an advertisement per se, the opinion still puts companies on notice that a faxed communication could create liability under the TCPA if a court finds a “commercial nexus” between the invitation and the company’s business. The panel did note that defendants can defend against the nexus with evidence of a non-commercial purpose. For example, Boehringer can present testimony of the dinner meeting participants as well as the meeting’s agenda, transcript, presentation slides, speaker list, or any internal e-mails or correspondence discussing the meeting, the court suggested.