As we’ve recently highlighted, the FCC is currently seeking industry comment on how it should interpret the term “sender” for purposes of imposing liability for faxes sent in violation of the TCPA. Until the agency releases an order clarifying the definition of the term, companies who advertise their products or services via fax must proceed with caution, as they may be found liable for Junk Fax violations even if they have contracted with a vendor to design, implement, and run their fax campaign.

An example of the risk associated with allowing others to run your fax campaign was highlighted in a decision issued by a federal judge in Manhattan this week in Bais Yaakov of Spring Valley v. Educational Testing Service. There, the court denied a motion for summary judgment filed by Educational testing Services (“ETS”), a nonprofit organization, after concluding that enough facts were in dispute such that a jury could determine that ETS was the “sender” of a fax, even though it had: (a) contracted with a third-party publishing company to distribute, market, and advertise the products sold by ETS; and (2) explicitly defined the relationship between the corporation and the publishing company as one involving independent contractors.

The plaintiff in the case, a religious high school, is one you may be familiar with. It has initiated at least fourteen putative class action lawsuits under the TCPA – and, more specifically, the Junk Fax Act – since 2011 and has been at the center of several high-profile TCPA decisions. Here, it filed suit against ETS, a nonprofit known for its role in administering the SAT, PSAT, and AP exams, for a single fax it received from Houghton Mifflin Harcourt Publishing Co. (“HMH”), which advertised Criterion, a web-based application that was owned by ETS.

In 2008, ETS entered into an exclusive distribution agreement with HMH, pursuant to which HMH obtained the exclusive right to distribute, market, and advertise Criterion in the K-12 market in the United States. Pursuant to this agreement, HMH agreed to “comply with any and all applicable laws [and] regulations,” including the TCPA, and ETS agreed to not conduct any sales or marketing activities on its own. Consequently, HMH was solely responsible for making marketing decisions as it pertained to Criterion, and while the agreement did not specifically address marketing by fax, it did provide that HMH would “use commercially reasonable efforts to promote the use and sale of Criterion,” and would “establish the marketing strategy[], [and] develop and distribute marketing and promotional materials” as an independent contractor.

In 2012, HMH decided to market the Criterion product by fax, and, despite later acknowledging that HMH did not need ETS’s approval to send the fax, it asked an ETS employee to review the fax it planned to send. Two ETS employees reviewed the fax, and days after conveying their approval, HMH contracted with another third party to send the fax to over 22,000 different schools in seven different states. Other than the two ETS employees who reviewed the fax, no other ETS employees were aware of the HMH fax campaign. That is, until ETS was named as a defendant in the lawsuit filed by Bais Yaakov, which sought statutory damages claiming the fax it received failed to include several opt-out requirements, including: (1) an opt-out fax number; (2) an opt-out telephone number; (3) a cost-free opt-out mechanism; (4) a statement notifying recipients that opt-outs will only be effective if the recipient identifies the telephone number of the recipient’s fax machine; (5) a statement notifying recipients that the sender’s failure to comply with an opt-out request within 30 days is unlawful; and (6) a statement notifying recipients that opt-out requests will be effective so long as the recipient does not subsequently re-invite or permit the sender to send fax advertisements.

ETS’s Motion for Summary Judgment:

ETS moved for summary judgment asserting that: (1) the school’s claim did not allege any actual damages, and therefore failed to meet Article III’s injury-in-fact requirement; (2) the school’s injury was not “fairly traceable” to ETS’s conduct because Bais Yaakov and ETS had an “established business relationship” (“EBR”) through other service-based agreements, meaning ETS was permitted to send an unsolicited fax to the school; and (3) ETS was not the sender of the fax because HMH independently conceived of and executed the fax advertisement campaign.

The court easily dispensed with the first two arguments, finding that: (1) under recently decided Supreme Court precedent, violation of the TCPA itself creates a real and not abstract harm that meets Article III’s injury-in-fact requirement; and (2) despite ETS’s prior business dealings with Bais Yaakov, this relationship, by itself, did not permit ETS to send unsolicited advertisements to the school without including in the fax a TCPA-compliant opt-out notice, which the nonprofit acknowledged was not present. ETS’s third argument, however, took some time for the court to unpack and, because of its significance to fax-marketing-oriented corporations in general, deserves special attention.

Determining the Fax “Sender” Under the TCPA

The TCPA does not define the term “sender” for purposes of TCPA liability under the Junk Fax rules. Instead, the FCC has 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.” In the Second Circuit, where the court hearing this case is located, a test for determining the “sender” does not exist, but other circuits have approached the fax “sender” question using a multi-factor approach. For example, the Sixth and Eleventh Circuits have determined this issue by looking to “the degree of control that [the person on whose behalf the fax advertisements were sent] exercised over the preparation of the faxes, [and] whether the latter entity approved the final content of the faxes as broadcast,” as well as the level of autonomy the product’s producer had given the sender. Here, the court elected to apply this multi-factor approach.

In reaching its conclusion that ETS is potentially a sender of the fax, the court acknowledged numerous factors that tended to show HMH did not send the fax on ETS’s behalf, including facts showing: (1) ETS did not participate in generating the idea for the HMH fax; (2) ETS did not determine the recipients and reach of the HMH fax; (3) ETS did not engage or pay the third-party services employed by HMH to produce and send the fax out; and (4) ETS and HMH engaged in the distribution of the Criterion product as independent contractors. However, the court also identified certain factors signaling that HMH did send the fax on ETS’s behalf, such as: (1) ETS’s expectation that HMH would market its Criterion product; (2) the explicit statement in the parties’ distribution agreement recognizing that HMH would “use commercially reasonable efforts to promote the use and sale of Criterion”; (3) the ETS employees’ review, approval, and knowledge of the fax that was sent; and (4) the language of the fax itself, which promoted an ETS product. Based on these various factors and facts, the court determined that a reasonable jury could find that the fax was sent on behalf of ETS, meaning it would allow the case to proceed.

This case presents a very good illustration of the ongoing issues associated with the term “sender” under the Junk Fax rules and the risks associated with allowing others to run your company’s fax campaign. It also underscores why businesses should take the opportunity to respond to the FCC’s invitation for public comment before the April 8, 2019 deadline.