An owner with “direct, personal participation” in the company’s decision to send illegal faxes could be liable under the TCPA, a federal court judge in Michigan has ruled.
John R. Beason, the owner of Tax Connection, was contacted by marketing company Business to Business Solutions about a possible ad campaign. Beason agreed to pay $268 for Business Solutions to prepare an advertisement and transmit it to 5,000 fax numbers. On January 5, 2006, the ad was sent to 3,159 different telephone numbers.
Recipients filed a class-action lawsuit alleging that the faxes were sent without prior express consent in violation of the TCPA. Beason filed a motion for summary judgment, arguing that the complaint against him in his individual capacity should be dismissed. He could be found liable only if the class were able to pierce the corporate veil, he told the court.
But U.S. District Court Judge Julian Abele Cook, Jr., disagreed. “Although the Sixth Circuit has not ruled on this issue, many courts have held that corporate actors can be individually liable for violating the TCPA "where they 'had direct, personal participation in or personally authorized the conduct found to have violated the statute.'"" He cited decisions from another Michigan federal court and from courts in Maryland and Texas.
The court adopted the standard announced by a Florida court: “Where courts have declined to find personal liability, there has been little evidence of the corporate officer’s direct participation in the wrongdoing.”
In applying the test to evaluate Beason’s actions, Judge Cook found that “he is the only person who has the authority to issue a check for the company.” The evidence included a $268 check made out to Business Solutions from his own account that contained a memo line stating “5,000 fax ads.”
“The defendants do not dispute that Beason personally participated in the payment of and authorization for the fax ads,” the court concluded. “As a result, he is personally liable for the violation of the TCPA.” In addition, Judge Cook ruled that a state law corollary to the federal TCPA did not preclude the lawsuit. Michigan’s more limited statute requires that a plaintiff first notify the fax sender in writing that he or she does not consent to receive faxes, before bringing a lawsuit. Beason and Tax Connection contended that since the plaintiff was not permitted to file suit under state law, the claim was similarly barred under the TCPA.
But the court rejected the defendants’ argument, as the Michigan law “does not mention the TCPA or purport to preclude a federal cause of action in any way.” In fact, the law “provides a cause of action that is entirely separate from the federal cause of action authorized by the TCPA,” the court said, citing to last year’s U.S. Supreme Court decision in Mims v. Arrow Financial Services, LLC.
In a victory for the defendants, however, Judge Cook declined to award treble damages under the statute. Tax Connection is a small business and Beason did not seek out a marketing company to send faxes on its behalf; instead, Business Solutions contacted the defendants and offered to conduct the fax campaign – despite the prohibitions of the TCPA. Therefore, “an award of treble damages is not appropriate,” he held.
To read the order in Jackson Five Star Catering v. Beason, click here.
Why it matters: The Michigan court found that corporate actors could be individually liable under the TCPA where there is direct, personal participation or personal authorization by a corporate officer. Beason, as sole owner of Tax Connection, gave his personal authorization to Business Solutions by agreeing to the fax campaign and signing the check. That $268 for 5,000 fax advertisements could now cost Beason and his company more than $1.5 million in damages under the TCPA.