Design v. Prism Bus. Media

606 F.3d 443

CE DESIGN, LIMITED, an Illinois corporation, individually and as the representative of a class of similarly situated persons, Plaintiff-Appellant,v.PRISM BUSINESS MEDIA, INCORPORATED, Defendant-Appellee.

No. 09-3172.

United States Court of Appeals Seventh Circuit.

Argued Jan. 20, 2010.

Decided May 27, 2010.

Rehearing and Rehearing En Banc Denied July 26, 2010.

Phillip A. Bock, Attorney, Bock & Hatch, David M. Oppenheim, Attorney, Wildman, Harrold, Allen & Dixon, Chicago, IL, Ryan M. Kelly, Anderson & Wanca, Rolling Meadows, IL, for Plaintiff-Appellant.

David F. Cutter, Attorney, Troutman Sanders, Chicago, IL, Theresa M. Trzaskoma, Attorney, Brune & Richard LLP, New York, NY, for Defendant-Appellee.

Before FLAUM, KANNE, and EVANS, Circuit Judges.

EVANS, Circuit Judge.

This is a junk fax case, and like most such cases, the facts are not especially juicy. In 2004 Prism Business Media, Inc., sent CE Design, Limited, a fax advertising a trade show.¹ That's it. But that small act sparked a lawsuit that presents some interesting jurisdictional and regulatory questions. CE Design sued Prism under the Telephone Consumer Protection Act (TCPA), which prohibits the use of fax machines to send unsolicited advertisements. See 47 U.S.C. § 227(b)(1)(C). Prism sought summary judgment on the ground that it shared with CE Design an “established business relationship” (EBR)-a status which, Prism argued, provided a complete defense under the Federal Communications Commission's (FCC) orders implementing the TCPA. In response, CE Design asked the district court to ignore the FCC orders because, according to it, Congress did not authorize the FCC to establish an EBR defense. Because CE Design's request sounded a lot like one “to enjoin, set aside, suspend (in whole or in part), or to determine the validity” of a final FCC order-tasks which the Administrative Orders Review Act places within the exclusive jurisdiction of the courts of appeals see 28 U.S.C. § 2342(1); 47 U.S.C. § 402(a)-the district court concluded that it lacked jurisdiction to consider the validity of the EBR defense. After determining that the relationship between Prism and CE Design met the FCC's definition of an EBR, the court granted Prism's motion for summary judgment. CE Design appeals.

The few facts in this case are undisputed. Prism describes itself as a “business-to-business media company” that publishes trade magazines and sponsors industry-specific trade shows. CE Design, a civil engineering and design firm, is among the more than five million subscribers to Prism's publications. Between 1998 and 2008 CE Design subscribed to three of Prism's publications. For each subscription, CE Design's president and sole shareholder, John Pezl, filled out Prism's subscription card. On at least two of the subscription cards, Pezl provided CE Design's fax number among the required contact information.

On August 23, 2004, Prism sent CE Design the fax that set this lawsuit in motion. Prism sent the fax to Pezl's attention at the fax number he provided in his subscription requests. The fax advertised an upcoming trade show. It included a notice inviting Pezl to write “remove” on the face of the advertisement and fax it back to a toll-free number if he believed he received the fax in error or if he wished to unsubscribe. Instead of accepting that invitation, CE Design filed this putative class-action lawsuit.²

In its complaint, CE Design alleged that Prism violated the TCPA provision prohibiting the use of “any telephone facsimile machine ... to send an unsolicited advertisement to a telephone facsimile machine.” 47 U.S.C. § 227(b)(1)(C). In 2005-after Prism sent the fax but before CE Design filed this suit-Congress passed the Junk Fax Protection Act (JFPA), which amended the TCPA to exempt from the ban on unsolicited fax advertisements any faxes sent “from a sender with an established business relationship with the recipient.” 47 U.S.C. § 227(b)(1)(C)(i). But the pre-JFPA version of the TCPA applies in this case, and the EBR exemption does not appear in that version of the statute. Instead, before 2005 the EBR exemption appeared only in FCC reports and orders implementing the TCPA. See, e.g., In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991 (1992 Report and Order), 7 F.C.C.R. 8752, 8779 n. 87, 1992 WL 690928 (Oct. 16, 1992). Specifically, the FCC's 1992 Report and Order states that “facsimile transmission from persons or entities who have an established business relationship with the recipient can be deemed to be invited or permitted by the recipient.” Id.

In its summary judgment motion, Prism argued that the FCC's 1992 Report and Order provides a complete defense to CE Design's TCPA claim. Prism argued that CE Design's status as a subscriber to Prism's publications meant that they had an EBR at the time Prism faxed the advertisement, and accordingly, the fax it sent CE Design should be deemed invited. In response, CE Design argued that the district court should ignore the 1992 Report and Order, as well as subsequent FCC orders demonstrating that before Congress passed the JFPA, the FCC considered the EBR exemption to apply to faxed advertisements. See, e.g., In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 10 F.C.C.R. 12391, 12408 (Aug. 7, 1995); In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991 (2003 Report & Order), 18 F.C.C.R. 14014, 14127, 2003 WL 21517853 (July 3, 2003). CE Design argued that the FCC was not authorized to interpret the TCPA to include an EBR exemption, and that even if it were, the FCC's interpretation is unreasonable.

In its thorough and thoughtful opinion granting Prism summary judgment, the district court concluded that it lacked jurisdiction to consider CE Design's argument that the FCC was not authorized to establish an EBR defense. Specifically, it noted that the Administrative Orders Review Act, better known as the Hobbs Act, reserves to the courts of appeals the power “to enjoin, set aside, suspend (in whole or in part), or to determine the validity of” all final FCC orders see 28 U.S.C. § 2342(1); 47 U.S.C. § 402(a), and that before seeking relief from an appellate court, a party aggrieved by the FCC's final order must petition the FCC for reconsideration see 47 U.S.C. § 405(a). The district court observed that CE Design's characterization of the EBR exemption as “unauthorized” amounted to an indirect challenge to the FCC's rule, and accordingly, it concluded that it lacked jurisdiction to consider the validity of the EBR exemption. Instead, the district court considered only whether the EBR exemption applies to the facts of this case.³ After carefully considering the FCC's EBR definition, the district court determined that at the time Prism faxed CE Design its advertisement, the parties had an EBR. Accordingly, the fax was deemed to have been invited, and Prism was entitled to summary judgment on CE Design's TCPA claim.

We review the district court's grant of summary judgment de novo. See Covell v. Menkis, 595 F.3d 673, 675 (7th Cir.2010). CE Design presses two main arguments on appeal: first, that the district court's jurisdictional analysis is erroneous because, according to CE Design, the court had no need to consider the EBR exemption at all; and second, that even if the EBR exemption applies, an EBR exists only where the recipient is a residential subscriber. Because CE Design characterizes itself as a business subscriber, it argues that its relationship with Prism does not qualify as an EBR.

In challenging the district court's jurisdictional analysis, CE Design argues that under the familiar analytical framework established in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), there was no need for the court to consider the FCC's rules or the Hobbs Act's jurisdictional bar in evaluating its TCPA claim. The familiar Chevron framework is a tool for judicial review of “an agency's construction of the statute which it administers.” Chevron, 467 U.S. at 842, 104 S.Ct. 2778; see also FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000). In applying the Chevron framework, the court first asks whether the statute is silent or ambiguous on the question at issue, and if it is, the court will look to the agency regulations to determine whether they are based on a reasonable construction of the statute. Chevron, 467 U.S. at 842-43, 104 S.Ct. 2778; Castro v. Chi. Hous. Auth., 360 F.3d 721, 727 (7th Cir.2004). According to CE Design, the district court needed to consider its jurisdiction to review the EBR defense only if it found the TCPA ambiguous and moved past step one of the Chevron analysis. Specifically, CE Design argues that the FCC-created EBR defense conflicts with the TCPA's plain language, which prohibits businesses from faxing unsolicited advertisements and defines “unsolicited advertisement” as one “which is transmitted to any person without that person's prior express invitation or permission.” See 47 U.S.C. § 227(a)(5). CE Design asserts that the phrase “prior express invitation or permission” is unambiguous, and accordingly, it argues that under the Chevron framework, there was no need for the district court to even consider the agency-created EBR defense. CE Design therefore concludes that the Hobbs Act's proscription of district court review of final FCC orders should never have come into play in this case.

CE Design's argument presents something of a chicken-and-an egg question: What comes first, the Hobbs Act's jurisdictional restrictions or step one of Chevron? But while one can go around and around on the chicken-and-the-egg dilemma, an Article III court's obligation to ensure its jurisdiction to resolve a controversy precedes any analysis of the merits. See Davis v. Fed. Election Comm'n, --- U.S. ----, 128 S.Ct....