Imhoff Inv., L. L.C. v. Alfoccino, Inc.

792 F.3d 627

IMHOFF INVESTMENT, L.L.C., PlaintiffAvio, Inc., a Michigan corporation, individually and as the representative of a class of similarly situated persons, Plaintiff–Appellant

v.ALFOCCINO, INC.; D. Taliercio Investments, Inc.; Farshid Shushtari, Defendants–Appellees.

No. 14–1704.

United States Court of Appeals, Sixth Circuit.

July 7, 2015.

ON BRIEF:Phillip A. Bock, BOCK & HATCH, LLC, Chicago, Illinois, for Appellant. John R. Prew, Jason R. Mathers, Harvey Kruse, P.C., Troy, Michigan, for Appellees.

Before: SILER, MOORE, and STRANCH, Circuit Judges.

OPINION

JANE B. STRANCH, Circuit Judge.

Plaintiff Avio, Inc.¹ alleges that Defendant Alfoccino violated the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227(b)(1)(C), (b)(3), by hiring Business to Business Solutions (B2B) to send unsolicited facsimile advertisements to Avio and a class of similarly situated persons. The district court granted Alfoccino's motion for summary judgment, dismissing Avio's case for lack of Article III standing. It also found—as a second, independent basis for granting Alfoccino's motion—that Avio could not prove Alfoccino was vicariously liable for B2B's transmission of the faxes. Because Avio has demonstrated that it does have Article III standing to bring its claim, and because the pertinent FCC regulations indicate that primary, not vicarious liability attaches to Alfoccino under the TCPA, we REVERSE the district court's order granting summary judgment for Alfoccino and REMAND the case to the district court for further proceedings.

I. BACKGROUND

B2B was one of several company names used by Caroline Abraham, who in 2006 conducted fax broadcasting operations for multiple clients. B2B maintained a hard drive that documented thousands of fax transmissions successfully sent on behalf of Alfoccino and other businesses. B2B had obtained the numbers used in the broadcast two years earlier from a company called InfoUSA. Abraham testified that she believed it was legal to send fax advertising to companies that had an established business relationship with the sender and mistakenly thought the companies on the InfoUSA list met that standard. Abraham did not call the businesses on her fax lists to seek consent to send them fax advertisements.

Alfoccino is a restaurant business with two locations. It is operated by brothers Farshid “Tony” Shushtari and Frank Shushtari. Alfoccino, Tony, and an entity that is a part owner of Alfoccino, Taliercio Investments, Inc., are named defendants here. Tony was responsible for Alfoccino's marketing and advertising and was the only person from Alfoccino who communicated with B2B. He regularly hired a company named Value Fax to conduct fax advertising for the restaurants, but hired other companies, including B2B, to fax his advertisements “once or twice” as well. In 2006, Tony hired B2B because they did bulk faxing and cost less than Value Fax had. He directed B2B to send out 20,000 faxes to local businesses on behalf of the two Alfoccino restaurants. The ads he sent out with B2B were identical to the ads he had previously sent out with Value Fax.

Tony stated that Value Fax told him it obtained permission from its fax recipients before sending them ads, and that he had assumed that any company sending out faxes on his behalf would have done the same thing because “I assume that ... if you're doing business you're doing it the right way. I didn't know. I was naïve maybe.” He said that he did not knowingly authorize any fax advertisement that violated the law, and that he would not have authorized the ads had he known they violated the law. Tony, however, did not testify that he instructed B2B to send the ads only to people who had given prior permission to receive them, and none of Tony's written instructions to B2B in the record mention compliance with the law. None of the documents B2B produced include a representation about the legality of B2B's practices or a statement that B2B had obtained prior permission from its targets.

B2B's computer files contain copies of the documents faxed back and forth between Alfoccino and B2B and the final version of the Alfoccino ads that were sent. They also contain logs listing the fax numbers targeted, the time, date, and duration of each transmission, and whether each was successfully completed. According to Avio's expert, Robert Biggerstaff, B2B's fax logs show that Alfoccino's advertisements were successfully sent 13,980 times to 7,625 unique fax numbers. The logs show that B2B faxed Alfoccino's ad to Avio on November 13, 2006 at 1:42 a.m. and again on December 4, at 8:40 p.m. The first transmission was three pages and the phone lines were connected for two minutes and three seconds. The second transmission was one page and the phone lines were connected for 33 seconds. Both transmissions were successfully completed.

Avio's representative, David Barnett, testified at deposition that he had no personal recollection of receiving Alfoccino's fax or of its substance, and that he could not remember what year it was sent, but that he would have been the person who got it off the fax machine. Though he testified that it was his practice to keep even junk faxes after having received them, he did not locate a physical copy of the Alfoccino ad.

The original plaintiff filed this action in January 2010. The case was dismissed for lack of subject matter jurisdiction over TCPA claims in July 2010, but on appeal this court reversed and remanded based on intervening circuit precedent holding that federal courts have subject matter jurisdiction over TCPA claims.² In 2013, Avio moved for class certification, seeking to establish a class of the more than 7,000 unique recipients of B2B's fax of the Alfoccino's ad. While that motion was pending, Alfoccino filed a motion for summary judgment, which was granted on May 9, 2014. The district court found that Avio lacked Article III standing to pursue its claim and, as a secondary basis for dismissal, that Alfoccino could only be held vicariously liable—not directly liable—under the statute, and Avio failed to offer sufficient evidence for a jury to find Alfoccino vicariously liable for the faxes B2B transmitted.

II. ANALYSIS

A. Article III Standing

Courts must resolve questions of subject matter jurisdiction before ruling on the merits of the claim. Gross v. Hougland, 712 F.2d 1034, 1036 (6th Cir.1983). Where the plaintiff has no Article III standing to bring a case, jurisdiction is lacking and the court must dismiss it. TCG Detroit v. City of Dearborn, 206 F.3d 618, 622 (6th Cir.2000). To have Article III standing, a plaintiff must “allege personal injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be redressed by the requested relief.” Murray v. U.S. Dep't of Treasury, 681 F.3d 744, 748 (6th Cir.2012). The alleged injury must be both “concrete and particularized” and “actual or imminent, not conjectural or hypothetical.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., 528 U.S. 167, 180, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ).

The TCPA prohibits the use of “any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement.” 47 U.S.C. § 227(b)(1)(C). It provides a private right of action, permitting plaintiffs to seek (1) to enjoin a violation of the Act; (2) to recover for actual monetary loss from such a violation or to receive $500, whichever is greater; or (3) both (1) and (2). 47 U.S.C. § 227(b)(3).

Though the TCPA does not expressly state who has a cause of action to sue under its provisions, its descriptions of the conduct it prohibits repeatedly refer to the “recipient” of the unsolicited fax, 47 U.S.C. § 227(b)(1)(C), (b)(2)(D), and in enacting the TCPA, Congress noted that such fax advertising “is problematic” because it “shifts some of the costs of advertising from the sender to the recipient” and “occupies the recipient's facsimile machine so that it is unavailable for legitimate business messages while processing and printing the junk fax.” H.R. Rep. 102–317 at 10 (1991).

In the instant case, the district court ruled that Avio lacked Article III standing, noting that it “refuses to find that a plaintiff satisfies Article III's injury in fact requirement when all it knows about its alleged injury is based upon what someone else told it.” Avio, Inc. v. Alfoccino, Inc., 18 F.Supp.3d 882, 891 (E.D.Mich.2014). Sixth Circuit authority filed several months after the district court's opinion, however, points to the opposite conclusion: that plaintiff Avio, as the recipient of Alfoccino's unsolicited advertising faxes, does allege an injury sufficient to meet the requirement for Article III standing.

In American Copper & Brass, Inc. v. Lake City Indus. Products, Inc., this court affirmed a district court decision granting class certification and ultimately summary judgment to a class of plaintiffs who had received junk fax advertisements that 13213 transmitted on behalf of the defendant, Lake City. 757 F.3d 540, 542 (6th Cir.2014). The pertinent facts in American Copper are virtually identical to those of the instant case: Lake City's president paid 13213 to transmit an advertisement on its behalf to thousands of recipients who had not been vetted by 13213 and with whom it had no prior business relationship. Id. at 542–43. American Copper sued under the TCPA and moved for class certification, proposing a class consisting of all persons who were successfully sent a fax from Lake City Industrial Products, Inc. on one of three dates in February 2006. Id. To support the motion, American Copper attached a report from its expert witness Robert Biggerstaff—Avio's expert in the instant case as well—concluding, based on his review of B2B's fax records, that a total of 10,627 successful transmissions of a complete fax were received by 10,627 unique...