In a decision that may have ripple effects in other pending Telephone Consumer Protection Act actions, on June 2, 2018, the US District Court for the Middle District of Florida issued a stay in Scoma Chiropractic, P.A. v. Dental Equities, LLC, a junk fax case brought against MasterCard International Inc., (MasterCard), pending a ruling from the Federal Communications Commission (FCC) regarding whether online fax services fall within the scope of “telephone facsimile machines” (TFMs) under the Act.
The Telephone Consumer Protection Act of 1991 (TCPA), as amended by the Junk Fax Protection Act of 2005, makes it “unlawful for any person . . . to use any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement.” 47 U.S.C. § 227(b)(1)(c) (emphasis added). A “telephone facsimile machine” is defined under the TCPA as any “equipment which has the capacity (A) to transcribe text or images, or both, from paper into an electronic signal and to transmit that signal over a regular telephone line, or (B) to transcribe text or images (or both) from an electronic signal received over a regular telephone line onto paper.” 47 U.S.C. § 227(a)(3). When the TCPA was enacted in 1991, the definition of “telephone facsimile machine” described a traditional fax machine that utilized a “regular telephone line” to send or receive text or images.
One of the primary harms cited by Congress in enacting the TCPA was the cost fax recipients assumed in having their telephone lines tied up, and the use of the recipients’ toner and paper to automatically print unwanted faxes. Since the TCPA was enacted, fax technology has evolved. Modern online fax providers use cloud-based fax servers to send, receive and store faxes without the need for on-site physical fax machines. Online fax services also convert faxes into digital files thus making the files available to recipients through an online portal or as an email attachment.
On July 13, 2017, AmeriFactors Financial Group, LLC filed a Petition for Expedited Declaratory Ruling with the FCC. CG Docket Nos. 02-278, 05-338, filed July 13, 2017 (Doc. #145-5, the AmeriFactors Petition). The AmeriFactors Petition, now almost a year old, seeks a declaratory ruling that online fax services do not fall under the definition of “telephone facsimile machines” in the TCPA, or fit within the plain meaning of the TCPA. See id. The Petition highlighted that online fax services, by existing exclusively in the digital space, eliminate the core harm that the TCPA was designed to address.
In May 2018, MasterCard moved for a stay of the Scoma action pending a ruling on the AmeriFactors Petition, arguing that the primary jurisdiction doctrine compelled a stay to allow the FCC to rule on the definition of “telephone facsimile machines.” MasterCard also noted that a ruling from the FCC excluding online fax services from the definition of TFMs would have a significant impact on the case. One of the named plaintiffs used an online fax service, and the logs of the facsimile transmissions at issue could not distinguish between faxes sent to online fax services and those sent to traditional fax machines.
Plaintiffs objected to the stay, arguing that the FCC already determined the issues raised by the AmeriFactors Petition in previous rulings, including but not limited to, the 2015 ruling on the Westfax petition. Citing to Bowen v. Georgetown Univ. Hospital, 488 U.S. 204, 208-09 (1988), plaintiffs also argued that even if the petition were granted, the change in interpretation would be a mere clarification that would not apply retroactively to the faxes at issue in the case.
In granting the stay, the court held that deferring to the FCC would advance the basic purpose of the primary jurisdiction doctrine because the “specialized knowledge of the FCC is needed to answer the questions before the Court” on “[w]hether TFMs encompass online fax services.” See Scoma Chiropractic, P.A. v. Dental Equities, LLC, 16-cv-62942 (M.D. Fla. May 4, 2018) (Dkt. No. 164). The court also noted that if the case were to proceed “there is a risk that the Court could reach a determination that is inconsistent with the FCC’s ultimate decision on the AmeriFactors Petition” on an issue that directly implicates whether plaintiffs can meet the requirements for class certification. See id.
The court rejected plaintiffs’ argument that the issue had already been ruled on by the FCC, specifically noting that “[a]lthough there have been prior occasions when the FCC has addressed whether certain computerized faxing technology falls within the TCPA’s prohibitions . . . none appear to be directly applicable to the issues raised here with regard to sending and receiving faxes using cloud-based servers, raising a potential first-impression interpretation for the FCC.” Id. The court also noted that whether the ruling will retroactively apply to the faxes at issue depends on whether the FCC’s decision is rulemaking or a clarification (or both), but reserved that issue for after a ruling by the FCC. See id.
The Scoma court’s ruling acknowledges the potentially significant impact that the FCC ruling could have on the viability of junk fax cases. A ruling on the AmeriFactors Petition could be issued at any time. In the interim, defendants in junk fax cases may consider the potential impact the ruling could have on their cases, and whether seeking a stay may be warranted.