A Telephone Consumer Protection Act defendant dodged liability in a case involving notorious marketing company Business to Business Solutions (B2B) when the Seventh Circuit Court of Appeals found that the defendant did not authorize B2B to send thousands of faxes on its behalf.

Affordable Digital Hearing owner Jerry Clark received multiple sales calls from a B2B employee offering to send fax advertisements to potential business customers. Clark agreed to give the program a try. He edited and approved the language of an ad for his company.

He also verbally instructed B2B to send about 100 faxes to local businesses within a 20-mile radius of his company's location in Terre Haute, Indiana. Clark—who never asked to see the list of fax numbers that B2B was using—paid the marketing company $279.

Unbeknownst to Clark, B2B actually faxed 4,849 ads for Affordable Digital Hearing across Indiana, Illinois, and Ohio. One of the recipients, Bridgeview Health Care Center in Illinois, filed suit against Clark under the TCPA. A magistrate judge certified all fax recipients as a class and granted summary judgment for those members located within 20 miles of Terre Haute. Each of those 32 recipients was awarded $500, for a total judgment of $16,000 against Clark.

Following a bench trial, the magistrate judge held that Clark was not liable to recipients—including Bridgeview—located outside the 20-mile perimeter. Bridgeview appealed and the Seventh Circuit affirmed.

Federal regulations define the fax sender as either the person "on whose behalf" the unsolicited ad is sent or the person whose services are promoted in the ad. Using an agency analysis, the panel explained that Bridgeview could proceed on any of the three theories to demonstrate B2B sent the fax "on behalf of" Clark: express actual authority, implied actual authority, or apparent authority.

Clark did not confer express actual authority on B2B, the court said. "For this type of agency to exist, Clark must have directly spoken or written to B2B, telling it to send nearly 5,000 fax ads across multiple states," the court said. "The record establishes that Clark told B2B it should send 100 faxes within 20 miles of Terre Haute. Instead, B2B sent 4,849 faxes across three Midwestern states. Because B2B expressly contradicted Clark's actual instructions, this is clearly not express actual agency."

The panel found it "impossible" to conclude that implied actual authority existed, as "[n]othing about fax marketing inherently calls for sending thousands of advertisements," and "nothing about fax marketing inherently demands sending these ads to states where the advertiser does not do business."

Finally, the court said Bridgeview failed to establish apparent authority. "Clark did nothing to create an appearance that B2B had authority to send faxes on behalf of either Affordable Hearing or Clark himself," the panel wrote. "In fact, the fax-ad copy was the only way Clark could have communicated with the recipients, because their identities were unknown to him. And the ad did not even reference B2B. In short, B2B made an independent decision to blast faxes across multiple state lines."

The Seventh Circuit affirmed the trial court's ruling that Clark was not liable for faxes sent outside the 20-mile radius.

Clark's attempt to reverse class certification on the argument that Bridgeview, being outside of the 20-mile radius, was not an adequate class representative failed to persuade the court. Every class member had the same interest—to obtain the $500-per-recipient penalty for TCPA violations—and the fact "that Bridgeview faced an added hurdle in its claim … did not prevent the district court from finding that Bridgeview could adequately represent plaintiffs within 20 miles of Terre Haute," the court said.

The court recognized that lumping all the plaintiffs into one class created an odd outcome. The named plaintiff lost, while other class members won a judgment the named plaintiff could not collect. "It could have been worse, however, and the law allows this split-level result," the panel said, noting the "pervasive nature" of junk fax litigation.

"We doubt that Congress intended the TCPA, which is crafted as a consumer-protection law, to become the means of targeting small businesses," the court wrote. "Yet, in practice, the TCPA is nailing the little guy, while plaintiffs' attorneys take a big cut." Class counsel admitted at oral argument that they obtained B2B's hard drive and used information to find plaintiffs, with about 100 TCPA suits currently pending. "Congress likely should have targeted the marketing firms, rather than their unsuspecting clients," the panel noted.

Despite this, letting the certification order stand would not affect Clark's liability to pay the plaintiff and the judgment is already limited to class members within 20 miles of Terre Haute, the court said.

To read the opinion in Bridgeview Health Care Center v. Clark, click here.

Why it matters: The Seventh Circuit decision affirmed the use of an agency analysis to consider whether Clark could be liable for the faxes sent by B2B and found that none of the three theories of agency applied to the defendant's relationship with the marketing company. The panel also took the opportunity to highlight the "national cash cow for plaintiff's attorneys specializing in TCPA disputes," while noting that the defendant is stuck with a $16,000 judgment simply for trying a new kind of marketing.