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UESCO Industries, Inc. v. Poolman of Wisconsin, Inc.

Court of Appeals of Illinois, First District, First Division

June 17, 2013

UESCO INDUSTRIES, INC., an Illinois Corporation, Individually and as the Representative of a Class of Similarly Situated Persons, Plaintiff-Appellee,
v.
POOLMAN OF WISCONSIN, INC., Defendant-Appellant.

Appeal from the Circuit Court of Cook County No. 09 CH 16028, Honorable Carolyn Quinn, Judge Presiding.

Presiding Justice Hoffman and Justice Cunningham concurred in the judgment and opinion.

OPINION

DELORT JUSTICE

¶ 1 The ability to electronically send enormous volumes of advertisements at minimal cost, and the nuisances those advertisements create in daily life, have resulted in a number of laws aimed at limiting those practices. After determining that reams of unsolicited advertisements were clogging facsimile transmission machines, Congress imposed a stiff $500-per-fax penalty in an attempt to price facsimile advertisers out of the marketplace. Some businesses, unaware of the federal law and believing that faxed advertisements might actually generate new customers, continued to hire specialized businesses to send faxes on their behalf. The senders, in turn, perhaps fully aware of the legal prohibitions against their transmissions, relied on loopholes in the law to avoid liability for the penalties, or operated from foreign locations from which it would be difficult to trace the origin of the advertisements. The $500-per-fax penalty, multiplied by the colossal number of faxes, established a favorable atmosphere for lucrative class action litigation. In this lawsuit, brought by a "junk fax" recipient, we are called upon to determine whether the circuit court properly granted class certification.

¶ 2 Defendant, Poolman of Wisconsin, Inc., appeals an order of the circuit court of Cook County granting plaintiff, Uesco Industries, Inc., class certification in an action alleging violations of the federal Telephone Consumer Protection Act (Act) (47 U.S.C. § 227(b)(1)(C) (2006)), and a state law claim for conversion. On this interlocutory appeal, defendant argues that the circuit court erred by granting class certification. Defendant asserts the court did not apply the appropriate legal standard in determining whether plaintiff's claim was actionable and, as a result, plaintiff was not an adequate class representative. Defendant also contends plaintiff's counsel could not adequately represent the class.

¶ 3 We reverse the circuit court's decision to grant class certification. As a result, we conclude the issue of whether plaintiff's counsel is adequate to represent the class is moot.

¶ 4 BACKGROUND

¶ 5 Plaintiff is an Illinois corporation in the business of manufacturing and distributing overhead cranes. Defendant, a Wisconsin corporation, services, sells, and repairs swimming pools, hot tubs, and fireplaces.

¶ 6 On April 21, 2009, plaintiff filed a class action complaint alleging that, on or about March 6, 2006, defendant sent an advertisement by facsimile (fax) to plaintiff and over 39 others without the recipients' permission or invitation. Count I of the complaint asserted that defendant thereby violated the Act, which prohibits the use of "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) (2006). Count II was a state law claim sounding in conversion. It alleged that, by sending plaintiff and others an unsolicited fax advertisement, defendant improperly and unlawfully converted the putative class members' fax machines, toner, paper, and employee time to defendant's own use. Plaintiff attached a copy of the fax it received, which advertised swimming pool and hot tub pumps and parts. Both counts alleged there were common issues of fact and law warranting class certification pursuant to section 2-801 of the Illinois Code of Civil Procedure (Code) (735 ILCS 5/2-801 (West 2008)). On the same date, plaintiff moved for class certification.

¶ 7 On October 8, 2009, defendant filed an answer and affirmative defenses to the class action complaint. Defendant denied that a class action is proper in this matter. In its sixth affirmative defense, defendant asserted that it did not authorize any fax transmittal to plaintiff.

¶ 8 Plaintiff filed an amended class action complaint, elaborating on the allegations of the original pleading, as well as an amended motion for class certification. The amended complaint pled that the initial fax from defendant was received on March 16, 2006, not March 6, 2006. Plaintiff again attached a copy of the fax advertisement it allegedly received to its amended complaint.

¶ 9 On January 18, 2011, defendant moved for summary judgment on plaintiff's amended class action complaint. Defendant argued that the undisputed facts established defendant did not send or authorize the sending of the fax advertisement to plaintiff in March 2006. Rather, without a formal contract, defendant hired a third-party fax broadcaster, Business to Business Solutions (B2B), to send fax advertisements only to small electric motor repair and service companies. Based on deposition testimony from Wesley Wiedenbeck (one of defendant's two shareholders, officers, and directors) and Caroline Abraham (the sole proprietor of B2B), defendant asserted that, aside from directing B2B to advertise solely to small electric motor repair and service companies and approving the advertising design, defendant was not involved with the advertising campaign. Defendant asserted that it did not create or see the list of fax recipients and never received confirmation that the faxes were sent. Defendant argued that it could not be held liable under the Act or for conversion not only because defendant did not authorize or instruct B2B to send the fax advertisement to plaintiff, but also because the facts established that B2B exceeded its authority in doing so by sending the advertisement to businesses other than those that repair and service small electric motors.

¶ 10 Plaintiff responded that under the Federal Communication Commission's (FCC) long- standing interpretation of the Act, liability under the Act generally attaches to the person or entity on whose behalf the fax was transmitted. Plaintiff also argued that the Act does not require proof of authority or agency for liability to attach. Plaintiff further asserted there was no evidence that any recipient of the faxes at issue had given defendant authorization or permission to send them, even if B2B had limited its broadcast to small electric motor repair and service companies.

¶ 11 Defendant also argued that the FCC has defined a "sender" as "the person on whose behalf the fax advertisement is sent, " but that neither Congress nor the FCC ever defined the phrase "on whose behalf." Moreover, defendant maintained that "sender" is defined with respect to a defense to liability, but that the term does not appear in the prohibition against sending unsolicited fax advertisements. Defendant further contended that the common law rules of agency are incorporated into any claim created by the Act and operate to bar plaintiff's complaint, because B2B operated outside defendant's instructions. Lastly, defendant argued that, absent class certification, the sole issue was whether defendant was liable to plaintiff, without examining potential liability to other members of the putative class.

¶ 12 On June 3, 2009, the circuit court heard argument on defendant's summary judgment motion. The court also considered the following pertinent deposition testimony from Wiedenbeck, Abraham, and James Martin, plaintiff's accounting manager.

¶ 13 Wiedenbeck testified that he and his wife have owned defendant since 2000. The idea to advertise by fax originated from a broadcast fax advertisement defendant received from B2B. The fax advertised B2B's services and stated, "Conforms to February, 2006 faxing guidelines!" Wiedenbeck believed that statement meant B2B's fax advertisement services were legal. He considered that advertising by fax could provide a "good marketing stream."

¶ 14 After receiving the broadcast fax, Wiedenbeck contacted B2B and spoke to a "Kevin Wilson" to obtain additional information. Wilson faxed Wiedenbeck a form explaining how to order B2B's fax advertising services. In return, Wiedenbeck faxed Wilson the design and layout that B2B requested. Wiedenbeck testified Wilson told him B2B would send faxes only to those persons or companies who gave permission to receive such advertising. At the time Wiedenbeck decided to hire B2B, he believed it was legal to send unsolicited advertising faxes.

¶ 15 On March 8, 2006, Wilson faxed two letters to Wiedenbeck. One of the letters described B2B's services and stated, "We do everything for you. We even write your fax ad and supply the business numbers to fax." The second letter thanked Wiedenbeck for providing the details of defendant's business for inclusion in the fax advertisement. The second letter, which included in its letterhead a company named, "MaxiLeads, " stated:

"We will not send faxes without your approval. When the ads are completed, we will fax them to you for your approval. Select the ad you like best and make any necessary changes.
After your final approval, we'll send your fax ads immediately to where they're most apt to bring you new customers. Your advertising will reach thousands within a few short days."

¶ 16 The letter was signed by Wilson and the letterhead provided an electronic mail (email) address for a Kevin Wilson in Romania. A contact telephone number on the letterhead listed a New York area code.

¶ 17 On the same date, Wiedenbeck faxed a cover sheet with defendant's letterhead to Wilson, stating, "At this point in time I would like only to market to 'Small Electric Motor Repair Service Companys [sic]' nationally so please tell me how much it will be." Wiedenbeck recalled a conversation he had with Wilson during which Wilson specifically told Wiedenbeck that B2B could market to a list of fax telephone numbers for small electric motor repair and service companies. Wiedenbeck did not ask Wilson where he was able to obtain such a list. Wiedenbeck also did not ask Wilson for a copy of the list of fax numbers to be utilized in the advertising campaign.

¶ 18 On March 9, 2006, Wilson faxed a letter to Wiedenbeck requesting additional corrections to the advertisement, if necessary, and to reply with a written approval if Wiedenbeck approved of the advertisement. The letter also stated, "We will call you to make the final arrangements for your advertising campaign." Wiedenbeck apparently received a second copy of the same letter, but dated March 14, 2006. Wiedenbeck faxed to Wilson the copy of the March 14, 2006 letter with the revised advertisement attached. The attached draft of the advertisement included defendant's B2B client number and a handwritten approval signed by Wiedenbeck, stating, "Add [sic] Looks Great." The approved advertisement included a paragraph of small print at the bottom of the page stating the following:

"The above sponsor is not affiliated with, nor endorsed by, any charitable organization [-] Please Contribute to Reputable American Charities Dedicated to Helping Hurricane Victims This is a private and confidential charitable message intended only for the above named party. If you, or someone acting in your behalf, did not request or allow us, our agents, our customers, or our sponsors, to send faxes to this number, we sent this message in error, and we apologize. To STOP charitable or other faxes, call the 'Remove' Hotline (below). To continue to receive, do NOT call the Remove Hotline. This message is the exclusive property of Macaw, SRL, 46 Match Factory St, Sec 5, Buc, Rom, 050183, 40723294564, which is solely responsible for its contents and destinations. Date and time stamp are at the top of this page."

¶ 19 Wiedenbeck testified that he read the small print on the draft advertisement and that it "helped give credibility to the company as well, that if you want your information deleted, then we will do that, because I received stuff like this over my fax machine all the time, and I never knew it was illegal."

¶ 20 In response to Wiedenbeck's approval, Wilson faxed another letter dated March 14, 2006, requesting payment for services. The letter stated, "As agreed, you pay only $28 to join our Priority Club, the Priority Club rate of $214 for us sending 6, 000 fax ads (in 3 sets of 2, 000 each), and $60 to personalize the ads (1 cent each). This comes to a total of $302." The letter instructed Wiedenbeck to make the payment to "Business to Business Solutions." Wiedenbeck requested in a response fax to Wilson that the fax advertisement campaign not proceed before March 16, 2006. Wiedenbeck could not recall whether he received any communication from B2B that the fax advertisements had been sent.

¶ 21 On November 14, 2006, Wiedenbeck received another fax from Wilson with a letterhead from a company named, "The Marketing Research Center, " and a contact telephone number with a different New York area code. The letter proposed another fax advertising campaign costing $950 to transmit 31, 600 personalized advertisements "to all the fax numbers that we have for hotels and motels in the U.S." The letter requested that payment be made to "Business to Business Solutions" and not The Marketing Research Center. Wiedenbeck responded on December 1, 2006 and requested a different layout for the second advertisement, which he sent to Wilson by email. Wiedenbeck could not recall how many fax advertisements were sent as part of the second campaign. Wiedenbeck received a faxed letter from Wilson on December 13, 2006, stating that B2B received payment for the second campaign. The letter also stated:

"Note that some fax recipients may contact you and complain. Do NOT let this bother you. This is normal and harmless. If you do receive a complaint, say exactly,
'We apologize and thank you for calling. We sent the ad to you by mistake. It will never happen again if you give me your number!'
Take the number, say 'Thank you, ' and hang up. If they call back say the same thing and hang up again. ...

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