Ambiguous FCC Junk Fax Rules Put Agency in Middle of Nationwide Court Battles

The companies argue the TCPA was intended to regulate only unsolicited faxes, but ambiguity in the rules has opened the door to lawsuits, many of them “seeking millions of dollars,” said Best Buy Builders, a small roofing contractor in the St. Louis area (http://bit.ly/1rTWQ0o). The company said it’s being sued for sending a fax to someone who had “expressly consented to receipt of the fax and gave Best Buy Builder’s telemarketer its fax number for that purpose.”

Attorneys representing plaintiffs in suits against many of the companies petitioning the FCC told aides to FCC Chairman Tom Wheeler and the other commissioners that the companies are trying to “circumvent the law,” said an ex parte notice (http://bit.ly/1oeOwAX). Attorneys representing companies and plaintiffs in many of the suits either declined to comment, citing pending litigation, or did not return phone calls Thursday.

The Consumer and Governmental Affairs Bureau issued a public notice July 25 seeking comment on the petitions in docket 02-278 (http://bit.ly/UE3IAP). Comments are due Aug. 8, replies Aug. 15.

It’s not usual for litigants in class-action lawsuits to seek changes or clarifications from regulatory bodies, attorneys who've been involved in such cases told us Friday. The TCPA has invited a number of such petitions, said Latham & Watkins’ Matthew Brill, representing pharmaceutical company Anda in a pending November 2010 petition seeking FCC intervention. That petition seeks a ruling that any rule on solicited faxes isn’t based on Communications Act Section 227(b), which allows relief in court. The petitions responded to an “explosion of litigation,” because “ambiguous” rules have given rise to “opportunistic plaintiffs” seeking damages, he said. Andra faces suits in Florida federal court and Missouri state court, he said. Anda’s petition was not one of those mentioned in the public notice.

"It is very common, particularly for defendants in class actions, to attempt to go to regulatory bodies (as well as to Congress or state legislative bodies) to seek changes in the applicable rules that will derail the actions,” said Public Citizen attorney Scott Nelson. “These often take the form, as here, of requests that the agency ‘clarify’ that the law has all along favored the defendant, even when (as in this instance) that is manifestly not the case.” The organization has not been involved in junk fax litigation, a spokeswoman said.

The spate of petitions, Nelson said, is due to companies “trying to evade liability based on extremely dubious arguments that consumers previously ‘consented’ to receive faxes, but their unwillingness to include opt-out notices makes clear that they know perfectly well that consumers don’t want them and never really knowingly consented.” Agencies have not always shied away from addressing issues that are at stake in suits, he said. “They usually give very serious consideration to claims by defendants that regulations should be clarified to avoid unintended liabilities, but that does not always mean that defendants get what they want.” There’s a “good chance” the agency will not grant the petition for clarification, he said, because the opt-out provision “is necessary to implement the statutory prohibition on unsolicited junk faxes."

Section 64.1200(a)(4)(iv) of FCC rules “does not make sense as drafted,” Merck & Company said in its petition (http://bit.ly/1rTXdYV). The pharmaceutical company is facing a class-action lawsuit (http://1.usa.gov/1u4vkLU) in U.S. District Court in Connecticut for faxing a doctor to invite him to an interactive telesymposium with “'important clinical information about schizophrenia and bipolar disorder.'” The rule states, “'No person or entity may: ... Use a telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine... A facsimile advertisement that is sent to a recipient that has provided prior express invitation or permission to the sender must include an opt-out notice that complies with the requirements in paragraph a(4)(iii) of this section,'” Merck’s petition said. Because the rule references both unsolicited faxes and faxes sent with consent, “it is impossible to tell whether the Rule is intended to reach solicited as well as unsolicited faxes,” Merck said.

To require the opt-out instructions even on faxes sent with the permission of the recipients would impose “significant burden and potential liability” as well as “significant injury” to businesses for sending information about “discounts, opportunities to upgrade software, and other offers via fax,” wrote McKesson, which delivers medicines and healthcare products to drug stores, in its comments (http://bit.ly/1kp6zK5). McKesson backed a petition (http://bit.ly/UE3tFS) by Stericycle, a medical and biohazardous waste disposal company, seeking clarification or a retroactive waiver from the rule. The petition is one of five to the FCC seeking declaratory relief. Petitioners asked the agency to state the junk fax rules are not based on Communications Act Section 227(b), which would mean plaintiffs would not have a private right of action to pursue violations of the rule.

What constitutes consent isn’t always clear cut, said Brian Wanca and Glenn Hara, the Illinios attorneys representing many of the plaintiffs. The attorneys told FCC aides, recounted an ex parte filing, that “Stericycle purchased a list of fax numbers from a third party, directed the third party to scrub the list to remove Stericycle’s customers, and then sent faxes with non-compliant opt-out notice to those numbers.” The faxes provided only a fax number instead of required opt-out information, the filing said. Whether those who received faxes had consented to them is in dispute, Stericycle acknowledged in its petition. It said that question would be settled in the court case and the FCC should focus only on clarifying the rule or granting the waiver. Stericycle is facing a suit in the U.S. District Court in the Northern District of Illinois (http://1.usa.gov/1k9LeUA).

In other cases, companies have “manufactured claims” of prior permission, Wanca and Hara said in a second ex parte filing ((http://bit.ly/1k9LuCY), based on the fax recipients having an “established business relationship” with them. Since that line is “often murky,” the attorneys told commission staff the “best policy to implement the TCPA’s goal of protecting consumers” is for the agency to say the opt-out requirement applies to all faxes. For the commission to regulate solicited faxes as well as unsolicited ones is a “faulty and overbroad proposition that would expand the Commission’s regulatory authority well beyond the text of the TCPA,” Stericycle said in response comments (http://bit.ly/1n81OiH). Granting a judicially binding waiver would violate the separation of powers, Wanca and Hara said in the second ex parte filing.