Takeaway: The Telephone Consumer Protection Act (“TCPA”) broadly defines the “sender” of a facsimile advertisement to include any entity “whose goods or services are advertised.” On its face, this language creates risk of liability arising out of an illegal fax campaign that a defendant has no knowledge of or control over. In the recent case Comprehensive Health Care Sys. of Palm Beaches, Inc. v. Vitaminerals VM/Orthopedics, Ltd., No. 5:16CV2183, 2017 WL 27263 (N.D. Ohio Jan. 3, 2017) (“Comprehensive”), a district court in the Sixth Circuit observed the absurdity of potential “sabotage liability,” where a company is exposed to liability where a competitor or another entity outside of its control advertises the company’s products in an illegal fax campaign. Businesses should be aware of the potential reach of the TCPA and guard against potential TCPA liability in third-party distribution and marketing agreements.
Cases brought under the TCPA often are based on fax ads that are not transmitted directly by the TCPA defendant. Accordingly, it is possible to be exposed to TCPA liability for a fax campaign conducted by third-party distributors or marketers over whom the TCPA defendant has little or no control. In some cases, the TCPA defendant first learns that its products or services have been advertised through a fax campaign when it is served with a TCPA complaint. The first question an in-house attorney might ask is: How can we be held directly liable for a fax campaign we did not authorize or even know about?
Comprehensive demonstrates the potential reach of the TCPA and the possibility of “sabotage liability.” There, a serial TCPA plaintiff alleged class-action TCPA claims against Vitaminerals (“VM”), a distributor of therapeutic products, as well as Hygenic, for faxes advertising the Hygenic product “Biofreeze.” Although it was clear the faxes were sent only by VM, the TCPA plaintiff named both VM and Hygenic as defendants. The plaintiff alleged that, because the fax campaign advertised a product manufactured by Hygenic, Hygenic was a “sender” under the TCPA and could be held directly liable. Hygenic moved to dismiss, arguing there were no allegations it had knowledge or control over VM’s fax campaign.
The TCPA broadly defines the “sender” of a fax to include the company whose products are advertised
As far-fetched as it may seem, the imposition of liability on Hygenic is arguably consistent with the FCC regulations interpreting the TCPA. Those regulations define the “sender” of a fax as “the person or entity on whose behalf a facsimile unsolicited advertisement is sent or whose goods or services are advertised or promoted in the unsolicited advertisement.” 47 C.F.R. § 64.1200(f)(10) (emphasis added). (This definition is unique to claims arising out of illegal fax campaigns. Direct liability for telephone solicitation is limited to the person that initiates the call. 47 CFR § 64.1200(f)(11).) The second clause – “or whose goods or services are advertised or promoted” – was added by amendment in 2006. Although VM did not send the fax “on behalf” of Hygenic, there is no question the fax promoted Hygenic’s “goods.” Given the use of the word “or,” Hygenic was subject to potential strict liability regardless of whether it had any knowledge of or control over the fax campaign.
In fact, the Sixth Circuit has adopted the broad reading. In Imhoff Inv., L.L.C. v. Alfoccino, Inc., 792 F.3d 627, 636 (6th Cir. 2015), the Sixth Circuit reversed the district court’s dismissal of a direct liability TCPA claim against a restaurant featured in an illegal fax campaign, finding that direct liability attaches “if an unsolicited advertisement for [a defendant’s] goods or services was faxed to an entity with which it had no existing business relationship.” In Siding & Insulation Co. v. Alco Vending, Inc., 822 F.3d 886, 894 (6th Cir. 2016), the court affirmed Imhoff’s broad reading and determined that, for faxes sent after the 2006 amendment, liability “extend[s] to both those entities ‘on whose behalf the advertisement [was] sent’ and those entities ‘whose goods or services [were] advertised or...
