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A Custom Heating & Air Conditioning, Inc. v. Kabbage, Inc.

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

January 18, 2018

A CUSTOM HEATING & AIR CONDITIONING, INC., Individually and on Behalf of All Others Similarly Situated, Plaintiff,
v.
KABBAGE, INC.; GULFCO LEASING LLC; MICHAEL HENRY; And JOHN DOES 1-12, Defendants.

          MEMORANDUM OPINION AND ORDER

          HARRY D. LEINENWEBER, JUDGE UNITED STATES DISTRICT COURT.

         Defendant Kabbage, Inc. moves [ECF No. 104] to strike the class allegations from Plaintiff's First Amended Complaint (the “FAC”)[ECF No. 52]. For the reasons stated herein, Kabbage's Motion is granted, but Plaintiff A Custom Heating & Air Conditioning, Inc., is granted leave to amend its Complaint.

         I. BACKGROUND

         This opinion presumes familiarity with the factual and procedural background described at length in this Court's June 16, 2017 opinion. (Ct. Mem. Op. and Order, June 16, 2017, ECF No. 89.) The short version is this: Plaintiff A Custom Heating & Air Conditioning, Inc. (“Plaintiff”) sued Defendant Kabbage, Inc. (“Kabbage”), among others, claiming that Defendants sent or caused to be sent to Plaintiff fax advertisements in violation of the Telephone Consumer Protection Act, as amended by the Junk Fax Protection Act of 2005, 47 U.S.C. § 227 (together, “the Act” or “the TCPA”). Plaintiff pursued other causes of action as well, but this Court dismissed them for failure to state a claim under Rule 12(b)(6). (Ct. Mem. Op. and Order, June 16, 2017.) Now, Kabbage moves the Court to strike the TCPA class action allegations from Plaintiff's FAC.

         II. LEGAL STANDARD

         “The standard for evaluating motions to strike class allegations is the same as the standard for certifying a class under Rule 23.” Everett v. Baldwin, No. 13 C 04697, 2016 WL 8711476, at *4 (N.D. Ill. Jan. 15, 2016) (citations omitted). An exhaustive class certification analysis is not necessary here. Rule 23(c)(1)(A) requires courts to determine whether to certify an action as a class action “[a]t an early practicable time.” Cholly v. Uptain Grp., Inc., No. 15 C 5030, 2017 WL 449176, at *3 (N.D. Ill. Feb. 1, 2017). Though a court might often find this determination not practicable at the pleading stage, “sometimes the complaint will make it clear that class certification is inappropriate.” Pumputiena v. Deutsche Lufthansa, AG, No. 16 C 4868, 2017 WL 66823, at *8 (N.D. Ill. Jan. 6, 2017). That is the case here, but not for the reason put forth by Kabbage.

         III. DISCUSSION

         Before addressing the ultimate shortcoming of Plaintiff's proposed class, however, the Court addresses another issue raised by the parties. Namely, whether the D.C. Circuit's recent decision in Bais Yaakov of Spring Valley v. FCC, 852 F.3d 1078, 1079 (D.C. Cir. 2017) - which opined that the Act does not impose an opt-out notice requirement on solicited faxes and further that the Act does not empower the FCC to impose such a requirement - is binding authority in the Seventh Circuit. The Court finds that it is.

         A. Whether Yaakov Controls in the Seventh Circuit

         The heart of Kabbage's objection to the class allegations is Plaintiff's proposed class definition:

All persons who were sent one or more telephone facsimile messages on or after four years prior to the filing of this action, that advertised the commercial availability of property, goods, or services offered by Defendants, that did not contain an opt-out notice that complied with federal law.

(FAC ¶ 26.) The trouble here is imprecision. Plaintiff defines its proposed class as a group of persons who received advertisements lacking TCPA-compliant opt-out notices. Kabbage cries foul because, as the Court earlier observed, the definition fails to distinguish between those class members that gave prior permission to Defendants to receive such advertisements and those members that did not. (See, Ct. Mem. Op. and Order, June 16, 2017, at 3.)

         According to Kabbage, this lack of definition renders Plaintiff's class “impossible to certify” in the wake of a recent D.C. Circuit opinion. In Yaakov, the D.C. Circuit ruled on thirteen consolidated petitions for review originally filed in multiple courts of appeals seeking to set aside the FCC's Solicited Fax Rule. Yaakov, 852 F.3d at 1079. Before the FCC issued the Solicited Fax Rule (the “Rule”) in 2006, the TCPA required opt-out notices only for unsolicited faxes. The Rule expanded this requirement to solicited faxes as well. See, 47 C.F.R. § 64.1200(a)(4)(iv) (codification of the Solicited Fax Rule). But months ago, Yaakov stated that the Act does not empower the FCC to impose an opt-out notice requirement on solicited faxes and that the TCPA itself does not impose that requirement. Yaakov, 852 F.3d at 1080-83. Plaintiff claims Yaakov is not controlling here. Instead, Plaintiff points to Ira Holtzman, C.P.A. v. Turza, 728 F.3d 682 (7th Cir. 2013), in which, according to Plaintiff's telling of the case, the Seventh Circuit held that the TCPA imposes the opt-out notice requirement for solicited faxes. (See, Pl.'s Resp. to Kabagge's Mot. to Strike at 14, ECF 120.)

         Thus, the issue is whether, in the Seventh Circuit, opt-out notices are required even for those advertisements that are solicited. If Yaakov controls, then those members of Plaintiff's proposed class (if any) who ...


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