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CE Design Ltd. v. Prism Business Media

August 12, 2009

CE DESIGN LTD., PLAINTIFF,
v.
PRISM BUSINESS MEDIA, INC., DEFENDANT.



The opinion of the court was delivered by: Rebecca R. Pallmeyer United States District Judge

Judge Rebecca R. Pallmeyer

MEMORANDUM OPINION AND ORDER

Plaintiff CE Design Ltd. ("CE Design") brings this action against Defendant Prism Business Media, Inc.("Prism")*fn1 alleging violations of the Telephone Consumer Protection Act ("TCPA"), which prohibits, among other things, the sending of unsolicited fax advertisements without the recipient's "prior express invitation or permission." 47 U.S.C. § 227. Plaintiff filed suit as a putative class action on August 16, 2007 in the Circuit Court of Cook County, Illinois, and Defendant timely removed the case to this court on the basis of federal question jurisdiction, 28 U.S.C. § 1331, and, alternatively, on the basis of diversity jurisdiction pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d). ("Notice of Removal" [1] ¶¶ 1, 4.)

The facts are largely undisputed. On August 23, 2004, Defendant faxed an advertisement to Plaintiff at its place of business in Rolling Meadows, Illinois. At the time, Plaintiff subscribed to several trade magazines published by Defendant, and Defendant used a fax number Plaintiff had voluntarily supplied in conjunction with these subscriptions. Plaintiff alleges that the fax advertisement was sent without its express permission in violation of the TCPA and pursuant to Defendant's "policy and practice of faxing unsolicited advertisements to persons in Illinois and other states." (Compl. ¶¶ 1, 2.) In response, Defendant asserts that its conduct falls within an exception to the TCPA's prohibition on unsolicited fax advertisements where the sender and recipient have an "established business relationship" ("EBR"), and that such a relationship constitutes a complete defense to liability. Defendant has moved for summary judgment, and for the reasons discussed below, its motion is granted.

FACTUAL BACKGROUND*fn2

The Parties

Prism is a "business-to-business media company," incorporated in Delaware and with its principal place of business in New York City. (Def. 56.1 ¶ 1.) As a business-to-business (as opposed to direct-to-consumer) media publisher and supplier, Prism publishes more than 100 trade magazines and electronic newsletters, and sponsors national industry-specific trade showsboth in the United States and abroad. (Def. 56.1 ¶ 5.) Prism's publications have a current circulation of more than five million readers, which include both business and individual subscribers. (Def. 56.1 ¶ 6.) Prism solicits new subscribers by placing subscription cards in publications, contacting potential subscribers through telemarketing campaigns, promoting its publications at trade shows, and making offers through direct mail, by phone, and over the internet. (Def. 56.1 ¶ 7.) A new subscription record is created when a potential subscriber accepts Prism's solicitation and is "qualified," that is, the subscriber meets a specific demographic profile for a free subscription. (Def. 56.1 ¶ 9.) Prism maintains demographic information on its subscribers, including the nature of the individual subscriber's business, its title, company size, and purchasing authority. (Def. 56.1 ¶ 8.) Since 2003, Prism has used Hallmark Data Systems, Inc. ("Hallmark") as its "circulation fulfillment vendor," a role which entails maintaining and updating Prism's subscription lists by storing subscription source documents in accordance with BPA's audit requirements, managing subscriber accounts, and updating subscriber databases with information obtained from Prism's telemarketing, direct mail, and e-mail vendors. (Def. 56.1 ¶¶ 13-14.)

Each year, Prism "requalifies" subscribers to confirm that their subscription data is accurate and that they wish to continue receiving the publication or publications to which they subscribe. (Def. 56.1 ¶ 15.) The process of requalification entails contacting the subscriber using various methods, including telemarketing campaigns, subscription renewal cards, and solicitations through e-mail or over the internet. (Def. 56.1 ¶ 16.) If a subscriber fails to requalify for two consecutive years, the subscription is canceled, and the subscriber is removed from the publication's subscription list. (Def. 56.1 ¶ 54.)

CE Design is an Illinois corporation with its principal place of business in Rolling Meadows, Illinois. (Def. 56.1 ¶ 2.) Although CE Design does not specify its business in the pleadings, the court has located a website in the company's name, describing it as a professional civil engineering and design firm that offers its services "throughout the Midwest including Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio, Pennsylvania, and Wisconsin." See http://www.cedesignltd.com (last visited Aug. 6, 2009). John Pezl is CE Design's president and sole shareholder. (Def. 56.1 ¶ 33.)

The Parties' Business Relationship

CE Design admits that it subscribed to no fewer than three of Defendant's publications between 1999 and 2008. (Pl. 56.1 Resp. ¶¶ 37-40, 42-43, 45-46, 48, 53-54, 56-58, 61, 64.) According to Prism's records, in December 1999, Pezl filled out a subscription card for "American City & Country" ("AC&C"), a publication "serving the field of municipal and county government including mayors, city and county managers, city and county engineers, and related companies such as consulting engineering firms and other independent contractors." (Def. 56.1 ¶¶ 36, 38.) On the subscription card, Pezl provided CE Design's address, phone number, and fax number, and affirmed that the subscription was in his name as the president of CE Design. (Def. 56.1 ¶ 38.) Thereafter, Pezl renewed CE Design's subscription by submitting a subscription renewal card each year from 2000 through 2006 and again in 2008. In 2007, CE Design renewed its subscription via the internet. (Def. 56.1 ¶ 39.)

According to Prism's records, from 2002 through 2005, CE Design subscribed to "Electrical Construction & Maintenance" ("EC&M"), a publication that provides technical information to electrical professionals, such as electrical contractors, industrial plants, and consulting electrical engineers. (Def. 56.1 ¶ 44, 45-54.) Again, the subscription was in Pezl's name as president of CE Design, and Prism's records show that Pezl provided CE Design's address, phone, number, and fax number. (Def. 56.1 ¶ 45.) In 2003 and 2004, an independent telemarketing firm employed by Prism confirmed CE Design's subscription information. (Def. 56.1 ¶ 48.) In 2005 and 2006, CE Design failed to requalify for a subscription to EC&M, and Prism removed CE Design from its EC&M subscription list in 2006 pursuant to its standard practice. (Def. 56.1 ¶¶ 53-54)

Finally, Prism's records indicate that from 2003 through 2007, CE Design subscribed to "Retail Traffic," a publication with a focus on real estate and whose subscribers include developers, owners, retailers, brokers, architects and lenders. (Def. 56.1 ¶ 55, 57.) As with its subscriptions to AC&C and EC&M, the subscription was in Pezl's name as president of CE Design, and Prism's subscriber record included CE Design's address and telephone number, but not its fax number. (Def. 56.1 ¶¶ 58-59.) CE Design renewed its subscription by phone in 2004, by mailing in two subscription cards signed by Pezl in 2005, and via the internet in 2006 and 2007. (Def. 56.1 ¶¶ 61, 64.)

The Electrical West Fax

On August 23, 2004, Prism sent a fax to CE Design and other subscribers, advertising an upcoming trade show called "Electrical West." (Def. 56.1 ¶ 67.) Prism sent the fax to "J Pezl" at "CE Design Ltd," using the fax number provided in connection with the AC&C and EC&M subscriptions. (Def. 56.1 ¶ 68.) The fax included a notice inviting the recipient to write "remove" on the face of the advertisement and fax it back toll-free at the number provided if the recipient believed it had received the fax "in error" and wished to unsubscribe. (Pl. 56.1 Resp. ¶ 69.) CE Design never sought to unsubscribe before or after Defendant sent the August 23, 2004 fax. (Def. 56.1 ¶ 70.) CE Design has not alleged that Prism sent any other unsolicited fax advertisements to its fax machine before or since the August 23, 2004 fax.

DISCUSSION

In its single claim in this case, Plaintiff alleges that Defendant violated a provision of the TCPA that prohibits the "use of any telephone facsimile machine, computer or other device to send an unsolicited advertisement to a telephone facsimile machine."*fn3 47 U.S.C. 227(b)(1). The statute provides a private right of action for injunctive relief and/or damages for a violation of 47 U.S.C. 227(b). The TCPA is a strict liability statute, but the court has discretion to award treble damages for a willful or knowing violation of 47 U.S.C. 227(b).

Plaintiff alleges that "[o]n or about August 23, 2004, Defendant transmitted by telephone facsimile machine an unsolicited advertisement to Plaintiff's facsimile machine," and that "Defendant knew or should have known (i) Exhibit A [the August 23, 2004 fax advertisement]was an advertisement and (ii) Defendant did not have permission or invitation to send Exhibit A to Plaintiff and the other members of the class." (Compl. ¶¶ 11,12.) Plaintiff claims it suffered damages in the form of the cost of the paper and toner consumed when Defendant transmitted the fax advertisement and in employee time lost in the receipt, routing, and review of Defendant's faxes. (Compl. ¶ 26.) Plaintiff alleges that it is a member of a larger class that has suffered similar harm as a result of Defendant's actions. (Compl. ¶ 16.)

Defendant admits that it faxed an advertisement to Plaintiff on August 23, 2004 and that it did so without Plaintiff's express permission. Defendant contends that it is nonetheless not liable under the TCPA because an "established business relationship" ("EBR") existed between Prism and CE Design by virtue of CE Design's voluntary subscriptions to Prism publications. This so-called "EBR exemption" to the TCPA's general prohibition of unsolicited fax advertisements does not appear in the TCPA itself. Rather, it is a creature of the FCC's rulemaking powers, and its validity and application was the subject of some contention prior to 2005, when Congress passed the Junk Fax Protection Act ("JFPA"), amending the TCPA to codify the EBR exemption. See Junk Fax Prevention Act of 2005 § 2(a), Pub. L. No. 109-21, 119 Stat. 359. As it is currently drafted, the JFPA exempts from the statute's prohibition on unsolicited fax advertisements any advertisements "from a sender with an established business relationship with the recipient." 47 U.S.C. § 227(b)(C)(i)). Because the alleged violation occurred before the adoption of the JFPA, in this case the court must apply the law as it existed before the passage of that Act.

Plaintiff does not dispute that it has a an "established business relationship" with Defendant under the TCPA. Instead, Plaintiff presents two arguments in opposition to summary judgment, both of which challenge the application of the EBR exemption for fax advertisements. First, Plaintiff contends that the FCC exceeded its rule-making authority and contradicted the plain language of the TCPA in promulgating the EBR exception. Plaintiff suggests that the court has authority under Chevron to ignore, without invalidating, the FCC's erroneous interpretation of the clear and unambiguous language of the TCPA. Second, Plaintiff argues that even if the EBR exemption is a valid exercise of the FCC's ...


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