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Brodsky v. HumanaDental Insurance Co.

United States District Court, N.D. Illinois, Eastern Division

September 29, 2016

LAWRENCE S. BRODSKY, individually and as the representative of a class of similarly-situated persons, Plaintiff,


          John Robert Blakey United States District Judge

         Plaintiff Lawrence Brodsky (“Plaintiff” or “Brodsky”) filed this putative class action against Defendant HumanaDental Insurance Company (“Defendant” or “HDIC”) after receiving two messages on his fax machine. Plaintiff argues that these faxes represented improper advertisements in violation of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227 et seq. Currently pending before the Court are Plaintiff's Motion For Class Certification [290], Defendant's Motion To Dismiss For Lack Of Subject Matter Jurisdiction Under FRCP 12(b)(1) [323], and Defendant's Motion For Leave To File Eighth and Ninth Affirmative Defenses To The Amended Complaint [281]. As explained below, Defendant's Motion To Dismiss For Lack Of Subject Matter Jurisdiction Under FRCP 12(b)(1) [323] is denied, Defendant's Motion For Leave To File Eighth and Ninth Affirmative Defenses To The Amended Complaint [281] is denied as moot, and Plaintiff's Motion For Class Certification [290] is granted in part and denied in part, .

         I. Legal Standard

         When analyzing Defendant's motion to dismiss, the Court must construe the Amended Complaint [32] in the light most favorable to Plaintiff, accept as true all well-pleaded facts and draw reasonable inferences in his favor. See Long v. Shorebank Dev. Corp., 182 F.3d 548, 554 (7th Cir. 1999). To survive Defendant's motion, the Plaintiff must competently prove by a preponderance of the evidence that subject matter jurisdiction exists. NLFC, Inc. v. Devcom Mid-America, Inc., 45 F.3d 231, 237 (7th Cir. 1995). The Court “may properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists.” Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 444 (7th Cir. 2009) (internal quotation omitted).

         To obtain class certification, Plaintiff must satisfy the four Rule 23(a) requirements-numerosity, commonality, typicality and adequacy of representation-and one subsection of Rule 23(b). See Arreola v. Godinez, 546 F.3d 788, 794 (7th Cir. 2008). Here, Plaintiff moves to certify a class under Rule 23(b)(3), so he must show: (1) that issues common to the class members predominate over questions affecting only individual members; and (2) that a class action is superior to other available adjudication methods. See Messner v. Northshore University HealthSystem, 669 F.3d 802, 811 (7th Cir. 2012). Plaintiff bears the burden of proving each Rule 23 requirement by a preponderance of the evidence. Id. Failure to satisfy any requirement precludes class certification. Oshana v. Coca-Cola Co., 472 F.3d 506, 513 (7th Cir. 2006).

         This Court has broad discretion to determine whether to certify a class. In exercising its discretion, this Court does not presume that all well-pleaded allegations are true and can look “beneath the surface” of the Amended Complaint [32] to conduct the inquiries required by Rule 23. Davis v. Hutchins, 321 F.3d 641, 649 (7th Cir. 2003); Szabo v. Bridgeport Machines, Inc., 249 F.3d 672, 677 (7th Cir. 2001). Although a determination regarding class certification should not turn upon the likelihood of success on the merits, this Court must make the factual and legal inquiries necessary to ensure that the class certification requirements are satisfied, even if that implicates some overlap with the merits of the case. Messner, 669 F.3d at 823-24; American Honda Motor Co., Inc. v. Allen, 600 F.3d 813, 815 (7th Cir. 2010).

         II. Background[1]

         A. Factual History

         Plaintiff Brodsky is a “wholesaler of insurance” who does business as a sole proprietorship known as the Lawrence S. Brodsky Agency, Inc. (the “LSB Agency”). Defendant HDIC is a Wisconsin corporation that insures certain dental plans, including the HumanaDental Prevention Plus plan, the HumanaDental PPO and Traditional Preferred Plans. “Humana Specialty Benefits, ” a group within Humana Inc., markets “specialty products, ” including dental, vision, life insurance and disability products.

         Brodsky and the LSB Agency have “market agreements” with numerous insurance companies. Brodsky then sells the products of those insurance companies through various insurance agents/independent contractors. One of Brodsky's market agreements was with “Humana Insurance Company, Humana Health Plan, Inc., and all of their affiliates.” That agreement is known as a “Group Producing Agent or Agency Contract.” This Agency Contract stipulated that Brodsky and the LSB Agency agreed that Humana Insurance Co. and all of its affiliates “may choose to communicate with [Brodsky and/or the LSB Agency] through the use of . . . facsimile to the . . . facsimile numbers of” Brodsky and the LSB Agency. In connection with his Agency Contract, Brodsky provided Humana Insurance Co. with a specific facsimile number ending in 0152.

         On May 14, 2008, Brodsky's fax machine assigned to the 0152 number received two identical one-page fax messages (“the Subject Faxes”). The bottom of the Subject Faxes indicated that they were sent by “Humana Specialty Benefits.” There is no dispute that the Subject Faxes were created by the Marketing Department of Humana Inc., and received the internal designation GN-Fax 4/08. The Subject Faxes do not identify the individual or entity to which they were specifically sent. At least seven of Brodsky's insurance agents/independent contractors had permission to use (and did in fact use) Brodsky's office space and fax machine during the time period at issue. The parties have stipulated that faxes identical to the Subject Faxes (similarly designated GN-Fax 4/08) were successfully transmitted 19, 931 times. [285] Ex. 21, ¶ 20.

         B. Procedural Posture

         Plaintiff initiated the present litigation in state court against HDIC. [1] Ex. A at 1. HDIC, in turn, removed the litigation to this Court. Id. HDIC first moved to dismiss on the basis that its prior offers of full relief to Plaintiff rendered the litigation moot. [14] at 2-3. That motion was denied. [21] at 1. HDIC then moved for summary judgment, arguing, inter alia, that HDIC did not “send” the Subject Faxes, the Subject Faxes were not “sent” to Plaintiff, the Subject Faxes were not “advertisements, ” and Plaintiff had consented to delivery of the Subject Faxes. [118] at 1-5. Defendant's motion for summary judgment was denied as to Plaintiff's TCPA claim. [189] at 12-23. HDIC moved for reconsideration of that ruling [199], which was denied. [212] at 3-9. In the course of ruling on both HDIC's motion for summary judgment and motion for reconsideration, Judge Durkin ultimately determined, inter alia, that:

(1) Whether the Subject Faxes were “advertisements” within the meaning of the TCPA is a disputed factual question, [189] at 16-18;
(2) Whether HDIC was a “sender” of the Subject Faxes within the meaning of the TCPA is a disputed factual question, [189] at 13-16;
(3) Brodsky has standing to pursue a TCPA claim based on the Subject Faxes, even if they were intended for independent contractors with whom he associated, as “it makes no difference to whom the [Subject Faxes were] sent, ” [212] at 9; and
(4) The opt-out notices on the Subject Faxes were deficient as a matter of law, thereby precluding Defendant from raising defenses sounding in “express prior invitation” or “established business relationship.” [189] at 21-23.

         On March 23, 2016, HDIC deposited $25, 000 in an escrow account with U.S. Bank, N.A. [323] ¶¶ 4-6. Under the escrow agreement, upon entry of a final order from this Court, U.S. Bank, N.A. is directed to pay the escrow funds to the Plaintiff. Id. In connection with the tender and deposit of funds into the escrow account, HDIC has also agreed, in written correspondence with Plaintiff, to refrain from sending any faxes to Plaintiff in the future. Id.

         III. Analysis

         Defendant's Motion To Dismiss For Lack Of Subject Matter Jurisdiction Under FRCP 12(b)(1) [323] and Defendant's Motion For Leave To File Eighth and Ninth Affirmative Defenses To The Amended Complaint [281] contest Plaintiff's standing in light of HDIC's creation of the escrow account. Given the potentially dispositive nature of this question, the Court addresses these motions first.

         A. Defendant's Motion to Dismiss

         Defendant claims that by placing in escrow an amount equal to or greater than Plaintiff's potential individual recovery, it has mooted any putative “claim or controversy” and thereby deprived Plaintiff of standing. Defendant's argument misconstrues governing precedent, and is therefore rejected.

         1. Campbell-Ewald Requires A “Fair Opportunity” To Litigate Class Claims

         The Supreme Court of the United States recently had occasion to address Article III standing under similar circumstances in Campbell-Ewald Co. v. Gomez, 136 S.Ct. 663 (2016). The plaintiff in Campbell-Ewald filed a putative class action complaint pursuant to the TCPA. Id. at 667. Defendant in that case proposed to settle plaintiff's individual claim through a FRCP 68 offer of judgment and parallel settlement offer. Id. at 667-68. After plaintiff rejected those offers, the defendant moved to dismiss pursuant to FRCP 12(b)(1) for lack of subject matter jurisdiction. Id. at 668. More specifically, the defendant argued that no “case or controversy” existed insofar as plaintiff had been offered complete relief. Id.

         The Court rejected defendant's “pick off” attempt. The Court stated that a case becomes moot “only when it is impossible for a court to grant any effectual relief whatever to the prevailing party, ” and that “as long as the parties have a concrete interest, however small, in the outcome of the litigation, the case is not moot.” Id. at 669 (internal quotation omitted). An unaccepted settlement offer simply has “no force, ” and like other unaccepted contract offers “creates no lasting right or obligation.” Id. at 666. The Court further observed that, given “the defendant's continuing denial of liability, adversity between the parties persists.” Id.

         The majority in Campbell-Ewald also explicitly “adopt[ed] Justice Kagan's analysis” in Genesis Healthcare Corporation v. Symczyk, 133 S.Ct. 1523 (2013). In that case Justice Kagan, writing in dissent, explained:

Nor does a court have inherent authority to enter an unwanted judgment for Smith on her individual claim, in service of wiping out her proposed collective action. To be sure, a court has discretion to halt a lawsuit when the defendant unconditionally surrenders and only the plaintiff's obstinacy or madness prevents her from accepting total victory. But the court may not take that tack when the supposed capitulation in fact fails to give the plaintiff all the law authorizes and she has sought. And a judgment satisfying an individual claim does not give a plaintiff like Smith, exercising her right to sue on behalf of other employees, “all that [she] has . . . requested in the complaint (i.e., relief for the class).” Deposit Guaranty Nat'l Bank v. Roper, 445 U.S. 326, 341 (1980) (Rehnquist, J., concurring). No more in a collective class action brought under the FSLA than in any other class action may a court, prior to certification, eliminate the entire suit by acceding to a defendant's proposal to make only the named plaintiff whole. That course would short-circuit a collective action before it could begin, and thereby frustrate Congress's decision to give FLSA plaintiffs “the opportunity to proceed collectively.” Hoffmann-LaRoche, 493 U.S., at 170, 110 S.Ct. 482; see Roper, 445 U.S., at 339, 100 S.Ct. 1166. It is our plaintiff Smith's choice, and not the defendant's or the court's, whether satisfaction of her individual claim, without redress of her viable classwide allegations, is sufficient to bring the lawsuit to an end.

Symczyk, 133 S.Ct. at 1536 (Kagan, J., dissenting). Ultimately, Campbell-Ewald stands for the proposition that, notwithstanding a defendant's individual settlement attempts, “a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that [class] certification is warranted.” Campbell-Ewald Co., 136 S.Ct. at 672.

         2. Campbell-Ewald's Remaining Hypothetical

         The majority in Campbell-Ewald stated, in dicta, that it did not “now decide whether the result would be different if a defendant deposits the full amount of the plaintiff's individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount, ” as that “question is appropriately reserved for a case in which it is not hypothetical.” Id. at 672. Unsurprisingly, TCPA defendants across the country have endeavored to test the limits of Campbell-Ewald by making this hypothetical a reality. Federal courts faced with this situation have reached divergent conclusions. Compare South Orange Chiropractic Center, LLC v. Cayan LLC, No. 15-13069, 2016 WL 1441791, at *5 (D. Mass. Apr. 12, 2016) (holding the named plaintiff's individual TCPA claims were moot “because Defendant has offered to deposit a check with the court, to satisfy all of Plaintiff's individual claims (and more), and to have the district court enter judgment in Plaintiff's favor”) and Price v. Berman's Automotive, Inc., No. 14-763, 2016 WL 1089417, at *3 (D. Md. Mar. 21, 2016) (issuance of unconditional cashier's check with proof of payment and delivery to plaintiff would moot plaintiff's claim); and Leyse v. Lifetime Entertainment Services, LLC, ___ F.Supp.3d ___, 2016 WL 1253607, at *2 (Mar. 17, 2016) (a “defendant's deposit of a full settlement with the court, and consent to entry of judgment against it, will eliminate the live controversy before a court”) with Chen v. Allstate Ins. Co., 819 F.3d 1136, 1146 (9th Cir. 2016) (defendant's attempt to “invoke the hypothetical question reserved in Campbell-Ewald” is rejected, as plaintiff “has not actually or constructively received” the money placed in escrow) and Bais Yaakov of Spring Valley v. Graduation Source, LLC, ___ F.Supp.3d ___, 2016 WL 872914, at *1 (S.D.N.Y. Mar. 7, 2016) (“Although Defendants sought to avail themselves of the hypothetical proposed in Campbell-Ewald by depositing the full amount of statutory damages into the Court's Finance Unit and assenting to the injunctive relief requested by Plaintiff in its Complaint, Plaintiff's individual claims remain live.”).

         This Court finds more persuasive those cases rejecting a defendant's attempt to invoke the hypothetical reserved in Campbell-Ewald. See Fauley v. Royal Canin U.S.A., Inc., 143 F.Supp.3d 763, 765 (N.D.Ill. 2016) (characterizing the alternative view as “inconsistent” with Campbell-Ewald). At bottom, Campbell-Ewald constitutes an admonishment that “a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.” Campbell-Ewald Co., 136 S.Ct. at 672. Accordingly, it is inappropriate to enter judgment on a named plaintiff's individual claims, “over the plaintiff's objection, before the plaintiff has had a fair opportunity to move for class certification.” Chen, 819 F.3d at 1147.

         The Seventh Circuit has not yet specifically ruled upon the hypothetical reserved by the Campbell-Ewald majority. However, this Court's conclusion today comports with their previous guidance. In Chapman v. First Index, Inc., the plaintiff brought a putative TCPA class action, and before a class had been certified, the defendant offered the plaintiff judgment for $3, 002 (the full statutory damages), an injunction, and an award of costs. 796 F.3d 783 (7th Cir. 2015). The defendant's offer lapsed unaccepted, and the defendant then moved to dismiss the action as moot. Id. at 786. The district court granted the motion but the Seventh Circuit reversed, largely based on Justice ...

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