In August 2018, the U.S. Court of Appeals, Seventh Circuit dismissed a Telephone Consumer Protection Act (TCPA) action after finding that the defendant was not the “sender” of the fax at issue. That case was Helping Hand Caregivers v. Darden Restaurants, Inc.
Defendant Mid Wilshire Consulting, which does business as Social Wellness, set up “Lunch ’n Learn” opportunities for doctors to provide wellness presentations at companies. At the presentations, Social Wellness preordered food for attendees. The company reached out to defendant Darden Restaurants—the owner of the Olive Garden chain—to explore a strategic alliance.
While representatives of the two companies engaged in negotiations, they never reached an agreement. Importantly, the email and phone communications discussed only email marketing and no other advertising medium.
Despite the fact the parties never reached an agreement, Social Wellness engaged in a marketing effort by fax, using the Olive Garden logo on a flyer, which stated the two companies were teaming up for a Lunch ’n Learn series. All the contact information on the flyer was for Social Wellness, and the flyer was faxed to numbers that Social Wellness had obtained from a Google search and a list purchased from a person on Craigslist.
No representatives of Darden saw the flyer prior to its distribution. The flyer itself was inconsistent with Darden’s practices, as the company generally did not market by fax nor enter partnerships without a series of legal protections.
Helping Hand Caregivers received the faxed flyer in October 2014 and filed a putative class action under the TCPA naming several individuals as well as Social Wellness and Darden as defendants.
Darden responded with a cease-and-desist letter to Social Wellness that it stop using the company’s Olive Garden trademark, followed by a trademark infringement lawsuit in which the company obtained a default judgment and permanent injunction. Darden also moved for summary judgment in the TCPA action.
Affirming summary judgment in favor of Darden, the Seventh Circuit agreed that the company could not be liable under the TCPA because it was not a “sender” of the fax at issue. Regulations issued pursuant to the statute have defined the “sender” as “the person or entity on whose behalf a facsimile unsolicited advertisement is sent or whose goods or services are advertised or promoted in the unsolicited advertisement.”
Helping Hand focused the panel on the language in the second clause of the regulation, specifically the fact it does not contain the phrase “on whose behalf.” This difference from the first half of the provision imposes a direct liability standard for anyone whose goods or services are promoted in the advertisement, the plaintiff argued, and Darden was therefore liable for the fax because of the Olive Garden trademark.
But the panel found no merit in this position. Under such an approach, “a competitor could send out thousands of unsolicited faxes promoting another company’s goods or services, thereby bankrupting that company, even though the company played no part in sending or authorizing the faxes,” according to Circuit Judge Illana Rovner, writing on behalf of the panel. “Nothing in the statute allows the imposition of liability on an entity wholly unaware of the use of its logo in a fax.”
Instead, agency rules should be applied to determine whether the action was done on behalf of a principal, the Seventh Circuit explained. Helping Hand could demonstrate liability if it produced evidence that Social Wellness had express actual authority to send the fax on Darden’s behalf or if it had implied actual authority or apparent authority.
But the plaintiff failed to provide any such evidence. “At best, it provided testimony that [individuals] representing Social Wellness engaged in discussions regarding a joint marketing plan to involve the sending of emails,” the panel said. “No written or digital correspondence, or testimony, indicates any discussion of fax advertising.”
The type of marketing discussed was key, the panel added, because email marketing does not run afoul of the TCPA, while faxes can. “[T]he relevant question here is whether there were any communications that would indicate an authorization to send a fax advertisement, and as to that issue [testimony is] in agreement that fax advertisements were not discussed or approved, and no written or testimonial evidence allows for a contrary inference,” the panel said, affirming summary judgment in favor of Darden.
To read the opinion in Helping Hand Caregivers v. Darden Restaurants, Inc., click here.
Why it matters: The Seventh Circuit refused to adopt the plaintiff’s strict liability approach to finding a “sender” under the statute, explaining the absurd results of allowing the phrase “on whose behalf” to permit the imposition of liability on an entity completely unaware of the use of its logo in a fax. The panel also reaffirmed that email marketing, unlike faxes and text messages, does not run afoul of the TCPA—a standard which is well-known to those in the marketing industry and not often litigated.