By Joan C. Rogers
A lawyer's biweekly faxes to potential clients were “unsolicited advertisements” that violated the federal Telephone Consumer Protection Act as a matter of law and made him liable for millions of dollars in statutory damages, the U.S. Court of Appeals for the Seventh Circuit decided Aug. 26 (Ira Holtzman, C.P.A., & Assocs. Ltd. v. Turza, 7th Cir., No. 11-3188, 8/26/13).
In an opinion by Chief Judge Frank H. Easterbrook, the court affirmed summary judgment against the lawyer in a class action brought by recipients of the faxes, which provided humdrum business advice along with the lawyer's name, practice areas and contact information. The court remanded for reconsideration of how the statutory damages award should be allocated, however.
Illinois attorney Gregory P. Turza used a marketing firm to send “Daily Plan-It” faxes every other week to more than 200 certified public accountants.
A CPA who received 32 faxed editions of the “Daily Plan-It” filed a federal class action against Turza, alleging that the transmissions violated the Telephone Consumer Protection Act of 1991, 47 U.S.C. §227, which prohibits unsolicited fax advertisements except in certain circumstances.
The district court certified a class of the faxes' recipients and granted summary judgment against Turza on the merits. It ordered him to pay $4,215,000, based on $500 in statutory damages for each of 8,430 faxes.
Turza appealed, arguing that the faxes did not violate the TCPA.
Easterbrook noted that even when the TCPA permits fax advertisements--as it does to recipients who have consented to receive them or who have established business relations with the sender--the message must tell the recipient how to stop receiving future ads.
Because Turza's faxes did not provide opt-out information, if they contained advertisements they violated the TCPA whether or not the recipients were Turza's clients, the court said.
As for whether the faxes included advertising content, the court noted that the TCPA defines an “unsolicited advertisement” at Section 227(a)(5) as “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission, in writing or otherwise.”
Easterbrook said that about 75 percent of each fax Turza sent was devoted to “mundane advice,” while the remainder provided his name, logo, specialties and contact information.
While the faxes may not have touted the quality of the lawyer's services, they did declare the availability of his services and thus amounted to advertising under the TCPA as a matter of law, the court ruled.
“That 75% of the page is not an ad does not detract from the fact that the fax contains an advertisement,” Easterbrook wrote.
The court reasoned that if Macy's faxed potential customers a page from the New York Times that was devoted 75 percent to news and 25 percent to an ad for goods on sale at Macy's, the fax would contain an ad for goods on sale at Macy's. Turza's faxes likewise contained advertisements for his services, it concluded.
Turza relied heavily on a statement by the Federal Communications Commission in which the agency discussed faxes of informational communications and stated that “An incidental advertisement contained in such a newsletter does not convert the entire communication into an advertisement.”
The court didn't buy it. Easterbrook described that passage as “mysterious” in that it discusses the meaning of “informational communication”--a phrase that appears nowhere in the TCPA or the FCC's regulation--rather than the meaning of the word “advertisement.”
He also emphasized that the passage referring to an “incidental” advertisement appears not in the FCC's regulation on faxed advertisements but rather in an explanation the agency gave when adopting the regulation. The passage is perhaps best understood as a declaration of the commission's enforcement plans, he suggested.
In any event, Easterbrook pointed out, the FCC said in the same passage that the use of a newsletter format does not necessarily protect the sender under the TCPA.
Here, the court said, “the plug for Turza's services was not incidental to a message that would have been sent anyway; promotion or marketing was the reason these faxes were transmitted.” The faxes were not even remotely like a law firm's newsletter alerting clients to legal developments, Easterbrook said.
Although the court affirmed on the merits, it remanded for the district court to reconsider the allocation of damages.
It was premature, Easterbrook said, for the district court to direct a “cy pres” award to a Chicago legal aid program for any amount left over after payments to class members and counsel fees, especially without soliciting argument from the parties on the issue and without discussing the differences between class actions involving individual injuries, such as this one, and common-fund suits.
“Only if Turza pays more than enough to satisfy all claims by class members will it be necessary to decide whether the residue goes back to him or is put to some other use,” the court said.
Phillip A. Bock of Bock & Hatch, Chicago, and Brian J. Wanca of Anderson & Wanca, Rolling Meadows, Ill., represented the named plaintiff. Steven D. Pearson of Meckler Bulger Tilson Marick & Pearson LLP, Chicago, represented Turza.
Full text at http://www.bloomberglaw.com/public/document/IRA_HOLTZMAN_CPA__ASSOCIATES_LIMITED_individually_and_as_represen.
The ABA/BNA Lawyers’ Manual on Professional Conduct is a joint publication of the American Bar Association Center for Professional Responsibility and Bloomberg BNA.
Copyright 2013, the American Bar Association and The Bureau of National Affairs, Inc. All Rights Reserved.