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Physicians Healthsource, Inc. v. Allscripts Health Solutions, Inc.

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

June 2, 2017

PHYSICIANS HEALTHSOURCE, INC., an Ohio corporation, individually and as the representative of a class of similarly-situated persons, Plaintiffs,
v.
ALLSCRIPTS HEALTH SOLUTIONS, INC. and ALLSCRIPTS HEALTHCARE LLC, Defendants.

          MEMORANDUM OPINION AND ORDER

          Jeffrey Cole Magistrate Judge.

         I.

         BACKGROUND

         A.

         The defendants have filed a motion for summary judgment in what is, as Judge Easterbrook remarked almost two years ago in another case, is “another of the surprisingly many junk-fax suits under 47 U.S.C. § 227.” Chapman v. First Index, Inc., 796 F.3d 783, 784 (7th Cir. 2015). The number of suits was surprising given what the court said were the simple rules applicable to the practice of sending fax ads - simple rules that senders seemed to simply ignore. Id. This case is even more surprising than most, given the contentious history between the parties - and counsel. In any event, the defendants ask that the court, for the purposes of summary judgment, determine that the plaintiff gave the defendants express permission to send to it all the faxes at issue.

         While the plaintiff filed its suit five years ago under the Telephone Consumer Protection Act (“TCPA”), 47 USC §227, this case traces its beginnings to another junk fax case, Geismann v. Allscripts-Misy's Healthcare Solutions, Inc., 09 CV 5114, which settled in February 2012. The defendants here are two successors of the defendants there, and, as a result of sending fax ads to a class of recipients, ended up paying plaintiff's class counsel - mostly the same attorneys representing the plaintiff here - about $600, 000 in attorneys' fees. [09 CV 5114, Dkt. #142, at 4]. Yet, the defendants kept sending junk faxes by the thousands, seemingly as it was signing that hefty settlement check. It sent over a thousand faxes two days after it agreed to settle the case. [09 CV 5114, Dkt. #142, at 4; Dkt. #204-5, Page 224/257]. And so, a new plaintiff - this one a veteran junk fax litigator[1] - is back in court with veteran class counsel - three law firms' worth - three dozen offending junk faxes, and thousands of putative class members. So, potentially, it's very much worse for the defendants than last time. The defendants estimate it could be tagged with over $200 million in liability. [Dkt. # 215, at 26].

         As the D.C. Circuit recently said in a $150 million junk fax case, “[l]et that soak in for a minute.” Bais Yaakov of Spring Valley v. Fed. Commc'ns Comm'n, 852 F.3d 1078, 1081 (D.C. Cir. 2017). That's a lot amount of money - a draconian penalty as Judge Posner called it, Creative Montessori Learning Centers v. Ashford Gear LLC, 662 F.3d 913, 915 (7th Cir. 2011) - for the electronic equivalent of the fliers or junk mail most throw in the trash without bothering to look at it. Of course, as Judge Easterbrook commented in Chapman and Judge Pillard echoed in his dissent in Bais Yaakov, it's ridiculously easy to avoid that exposure. Bais Yaakov, 852 F.3d at 1085. To which it should be added, this is the way Congress has decided to deal with the matter. And that is the end of the matter. Creative Montessori Learning Centers v. Ashford Gear LLC, 662 F.3d 913, 915 (7th Cir. 2011). It must be remembered that statutes are to be enforced as Congress intended and not avoided by judicial action. Patterson v. Shumate, 504 U.S. 753, 759 (1992). See also Fed. Deposit Ins. Corp. v. Philadelphia Gear Corp., 476 U.S. 426, 441 (1986).

         So, can it be that the practice is sufficiently efficacious to make it worth the risk? Intuitively, the answer would seem to be “no.” Many of the faxes at issue in this case, weighed against that potential $200 million in damages are, to put in mildly, head-scratchers, why do it: the ads consist of promotions; a survey sent three weeks in a row; a free beach towel when $250 in supplies was ordered; a copy paper raffle; tickets to a minor ball game in Columbus, Ohio (the plaintiff is located 125 miles away in Cincinnati); a free pencil cup with a $300 order; the same (or nearly the same) electronic health records ad sent five times in a month; butter cookies with a $100 order. And these ads were sent in droves - as many as 8, 000 a day. It was cheap when the defendants did it: three cents a fax. But now, divvying up the potential liability among the faxes, that butter cookie fax could end up costing $5.5 million. It certainly seems that some people thought the gamble (or business plan, call it what you will) worthwhile.

         B.

         The statute works like this: it prohibits any person from sending unsolicited fax advertisements, unless the sender has an established business relationship with the recipient, the sender obtained the fax number through voluntary communication or a directory, and the fax includes an opt-out notice meeting certain requirements. 47 U.S.C. §227(b)(1)(C). The statute defines an “unsolicited advertisement” as “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission, in writing or otherwise.” 47 U.S.C. § 227(a)(5). Otherwise, there must be an established business relationship. Federal regulations define “established business relationship” as:

a prior or existing relationship formed by a voluntary two-way communication between a person or entity and a business or residential subscriber with or without an exchange of consideration, on the basis of an inquiry, application, purchase or transaction by the business or residential subscriber regarding products or services offered by such person or entity, which relationship has not been previously terminated by either party.

47 C.F.R. § 64.1200(f)(6). Opt-out notices are also required for faxes sent with the recipient's permission. Ira Holtzman, C.P.A. v. Turza, 728 F.3d 682, 683 (7th Cir. 2013). The provision covering opt-out notices requires that the notice be “clear and conspicuous and on the first page” of the advertisement, and that it state that the recipient can make a request that the sender not send any further unsolicited advertisements, include a cost-free phone or fax number by which the recipient can communicate its request. 47 USC §277(b)(2)(D).

         For one reason or another, the faxes at issue do not comply with the opt-out notice requirements. [Dkt. #204-1, at 18-19]. The potential monkey wrench here, however, is that in August of 2015, the defendants sought and obtained from the FCC a retroactive waiver of the requirement that faxes sent with permission have an opt-out notice. Bais Yaakov of Spring Valley v. F.C.C., 852 F.3d at 1079. The parties are at odds over whether that waiver applies to civil litigation (or simply FCC enforcement proceedings). There is also the question of whether it trumps Turza's 2013 holding that “[e]ven when the Act permits fax ads - as it does to persons who have consented to receive them, or to those who have established business relations with the sender-the fax must tell the recipient how to stop receiving future messages.” 728 F.3d at 683.

         Bais Yaakov held that the FCC's 2006 Solicited Fax Rule was unlawful “to the extent that it requires opt-out notices on solicited faxes.” Bais Yaakov of Spring Valley v. FCC, 852 F.3d at 1079. The Seventh Circuit's prior holding in Turza, however, did not even mention the FCC rule, but relied exclusively on the statute, itself, when it stated that opt-out notices are required on solicited faxes. The Court said: “Even when the Act permits fax ads-as it does to persons who have consented to receive them, or to those who have established business relations with the sender - the facts must tell the recipient how to stop receiving future messages. 47 U.S.C. §227(b)(1)(C)(iii), (2)(D).” Turza, 728 F.3d at 683.

         Given the vertical hierarchy of the federal courts, we are bound to follow Turza and are not at liberty to opt for Bais Yaakov. See Hays v. United States, 397 F.3d 564, 567 (7th Cir. 2005); United States v. Castro-Portillo, 211 F.App'x 715, 722 (10th Cir. 2007); Bell v. Hill, 190 F.3d 1089, 1093 (9th Cir. 1999); United States v. Glaser, 14 F.3d 1213, 1216 (7th Cir. 1994); United States v. Diaz, 122 F.Supp.3d 165, 179 (S.D.N.Y. 2015).

         II. ANALYSIS

         A.

         Summary Judgment

         Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact, and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a).

         The court must construe the evidence and all inferences that reasonably can be drawn from it in the light most favorable to the nonmoving party. Allin v. City of Springfield, 845 F.3d 858, 861 (7th Cir. 2017); Chaib v. Geo Grp., Inc., 819 F.3d 337, 340 (7th Cir. 2016). A factual dispute is “genuine” only if a reasonable jury could find for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Alston v. City of Madison, 853 F.3d 901, 906 (7th Cir. 2017). Here, the defendants are moving for summary judgment on the issue of plaintiff having granted it express permission to send the fax ads at issue. That is an affirmative defense on which the defendants bear the burden, Momient v. Nw. Collectors, Inc., 666 F.App'x 531, 537 (7th Cir. 2016); Van Patten v. Vertical Fitness Grp., LLC, 847 F.3d 1037, 1044 (9th Cir. 2017), and so “must lay out the elements of the claim, cite the facts which they believe satisfy these elements, and demonstrate why the record is so one-sided as to rule out the prospect of a finding in favor of the non-movant on the claim.” Hotel 71 Mezz Lender LLC v. Nat'l Ret. Fund, 778 F.3d 593, 601 (7th Cir. 2015). The defendants have fallen short of making that showing here, and, so, its motion must be denied.

         B.

         The Defendants' Motion

         Part of the premise of the defendants' motion for summary judgment is the concession that the plaintiff's position that it was not one of the defendants' customers is to be accepted, despite the fact that plaintiff eventually admitted at deposition that it was a customer - notwithstanding its apparent falsification about that point in discovery - which is discussed at length in the ruling on the plaintiff's motion for class certification. For the purposes of the motion for summary judgment, the defendants have eschewed the limited safe harbor of the “established business relationship, ” [Dkt. #213, at 1. Thus, the defendants assert that “[f]or the purposes of this motion, however, the Court can accept as true Plaintiff's sworn statement that it was not [defendants'] customer.” See 47 U.S.C. §§ 227 (b)(1)(C); (2)(D); Bridgeview Health Care Ctr., Ltd. v. Clark, 816 F.3d 935, 938 (7th Cir. 2016); Physicians Healthsource, Inc. v. Boehringer Ingelheim Pharm., Inc., 847 F.3d 92, 99 n.4 (2ndCir. 2017).

         That means the defendants must rely on the position that the faxes it sent were not “unsolicited advertisements.” As already noted, the Act defines an “unsolicited advertisement” as any “material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission, in writing or otherwise.” 47 U.S.C.A. § 227(a)(5); [Dkt. #213, at 1 (“. . . the evidence proves that [defendants] received express permission from [plaintiff] to fax information advertising its commercially available goods and services.”)]. The defendants have the burden of proving they had “express permission” to fax the ads at issue. Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991; Junk Fax Prevention Act of 2005, 71 FR 25967-01, 25972, 2006 WL 1151584.

         There are thirty-six faxes at issue. Either the plaintiff gave the defendants express permission to send those ads, or it didn't. Yet, in order to prove what seems like a seemingly simple fact, the defendants have amassed a record in support of its motion for summary judgment that approaches 1000 pages. While it's not always the case that an unwieldy or large record means that there must be a genuine issue of fact, see U.S. ex rel. Yannacopoulos v. General Dynamics,652 F.3d 818 (7th Cir. 2011)(affirming grant of summary judgment in qui tam action concerning the sale and financing of 40 F-16 fighter jets to the nation of Greece, a deal that spanned 7 years and cost over $600 billion), that's often the likely result - especially in what ought to be a rather simple case with clearly defined issues. As the Seventh Circuit said in Adams v. Ameritech Services, Inc.,231 F.3d 414, 417 (7th Cir. 2000), a much more complex discrimination case with 50 plaintiffs, “[w]hile we appreciate the herculean efforts the district court made to wade through the voluminous materials on summary judgment that both sides presented, we conclude that the plaintiffs presented ...


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