### In the



# United States Court of Appeals

For the Seventh Circuit

____________________

No. 17

‐ 3067

L AWRENCE S. B RODSKY

, individually and on behalf of others

similarly situated,

Plaintiff

‐ Appellant

,

v.

H UMANA D ENTAL I NSURANCE C O

. d/b/a

H UMANA S PECIALTY B ENEFITS

, Defendant

‐ Appellee

.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 10 C 3233

— John Robert Blakey

, Judge

.

____________________

No. 17

‐ 3506

A LPHA T ECH P ET

, I NC

., et al

., Plaintiffs

‐ Appellants

,

v.

E SSENDANT C O

., E SSENDANT I NC

., and E SSENDANT

M ANAGEMENT S ERVICES LLC,

Defendants

‐ Appellees

.2 Nos. 17

‐ 3067 & 17

‐ 3506

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

Nos. 16 C 513 & 16 C 4321

— Thomas M. Durkin

, Judge

.

____________________

A RGUED A PRIL 10, 2018

— D ECIDED D ECEMBER 3, 2018

____________________

Before W OOD

, Chief Judge

, and F LAUM and K ANNE

, Circuit

Judges

.

W OOD

, Chief Judge

. These appeals, which we have consoli

‐

dated for purposes of disposition, both concern the Federal

Communication Commission’s “Solicited Fax Rule.” Despite

the decline and fall of the fax machine, litigation continues be

‐

tween fax advertisers and unwilling recipients of their mes

‐

sages. Behind all this is the Telephone Consumer Protection

Act (“TCPA”), 47 U.S.C. § 227, as amended by the Junk Fax

Prevention Act of 2005, Pub. L. No. 109

‐ 21, 119 Stat. 359, and

as implemented through FCC regulations. The lead plainti ff s

in our cases—Lawrence Brodsky and Alpha Tech Pet, Inc.—

received faxed advertisements that did not comply (so they

said) with the TCPA and the FCC’s Solicited Fax Rule. Each

plainti ff wanted to pursue litigation not just individually, but

as the head of a class. And in each case, the district court re

‐

fused to certify the proposed class, largely on the authority of

the D.C. Circuit’s decision in Bais Yaakov of Spring Valley v.

FCC

, 852 F.3d 1078 (D.C. Cir. 2017) (Kavanaugh, J.). Our re

‐

view of decisions on class certi fi cation, pro or con, is deferen

‐

tial. Pu ff

er v. Allstate Ins. Co.

, 675 F.3d 709, 716 (7th Cir. 2012).

We see no abuse of discretion here, and so we a ffi rm theNos. 17

‐ 3067 & 17

‐ 3506 3

orders of the district courts declining to certify the proposed

classes.

I

A. Brodsky

We can be brief with the underlying facts of both cases.

Plainti ff Brodsky is an insurance wholesaler. HumanaDental

Insurance Company is a Wisconsin corporation that insures a

number of dental plans; another Humana a ffi liate markets

specialty products such as dental, vision, life insurance, and

disability policies. We refer to those defendants collectively as

Humana unless the context requires otherwise. Brodsky has

agreements with many insurance companies, and he sells

their products through various agents. One such agreement

was with “Humana Insurance Company, Humana Health

Plan, Inc., and all of their a ffi liates.” In that contract, Brodsky

agreed that Humana and its a ffi liates “may choose to com

‐

municate with [Brodsky] through the use of

... facsimile to

[his]

... facsimile numbers.” Brodsky accordingly provided

Humana with a fax number ending in 0152.

On May 14, 2008, Brodsky’s 0152 machine received two

identical one

‐ page faxes (“the subject faxes”). The pages indi

‐

cated that they were sent by “Humana Specialty Bene fi ts.”

These faxes were created by Humana’s marketing depart

‐

ment. They did not identify the person or entity to which they

were directed. And, to complicate ma tt ers, the 0152 machine

was not used exclusively by Brodsky; seven other insurance

agents had permission to, and did, use it during the relevant

time. The parties agreed that faxes identical to the subject

faxes were successfully transmi tt ed 19,931 times. Brodsky re

‐ sponded with his lawsuit against Humana.4 Nos. 17

‐ 3067 & 17

‐ 3506

B. Alpha Tech Pet

The facts in this case are similar. Defendant Essendant and

its a ffi liates are national distributors of o ffi ce products, janito

‐

rial and sanitation supplies, breakroom supplies, technology

products, industrial supplies, and automotive aftermarket

tools and equipment. Alpha Tech alleged that the defendants

transmi tt ed unsolicited faxes, including eight advertisements

that were sent between January 16, 2012, and April 26, 2012,

to it and the other class members. The unwanted faxes adver

‐

tised commercial products available from LaGasse, LLC,

which at the time was a wholly owned subsidiary of United

Stationers. United Stationers changed its name to Essendant

Inc. in June 2015, and at the same time LaGasse LLC merged

with Essendant Co.; Essendant Management Services LLC

also allegedly played some role in the fax transmissions. We

refer in this opinion to Essendant, the current name, for sim

‐ plicity. The di ff erent roles each entity played are not material

for our purposes.

According to Alpha Tech, the faxes that Essendant sent to

it violated the TCPA and the Solicited Fax Rule because they

did not include the required opt

‐ out language. It sought to

represent a class of all persons who received advertising faxes

sent by Essendant or any of its a ffi liates or predecessors from

May 1, 2011, to May 1, 2015. This was a huge proposed class:

defendants estimate that it swept in approximately 1.5 million

faxes, in 725 separate transmissions, to nearly 24,000 unique

fax numbers.

II

The Brodsky case began in Illinois state court as a putative

class action raising claims under the TCPA, but it wasNos. 17

‐ 3067 & 17

‐ 3506 5

removed to the federal court. After removal, Humana an

‐

swered and raised the a ffi rmative defenses of pre

‐ existing

business relationship and consent. It pointed to the contrac

‐

tual language mentioned above in support of both defenses.

Its marketing department created the faxes that Brodsky and

other putative class members received. At the bo tt om of the

page of each fax, in fi ne print, it said “If you don’t want us to

contact you by fax, please call 1

‐ 800

‐ U

‐ CAN

‐ ASK.”

The district court initially certi fi ed a class under Federal

Rule of Civil Procedure 23(b)(3) of recipients of faxes that ad

‐

vertised insurance products sold by HumanaDental. In so do

‐ ing, it rejected Humana’s suggestion that it should wait until

the FCC had a chance to rule on Humana’s request for a ret

‐

roactive waiver of the Solicited Fax Rule and until the D.C.

Circuit handed down its decision in the then

‐ pending Bais

Yaakov litigation. But then the ground shifted. On November

2, 2016, the FCC’s Consumer & Governmental A ff airs Bureau

granted Humana’s petition for a waiver, and on March 31,

2017, the D.C. Circuit handed down Bais Yaakov

, in which the

court found that the Solicited Fax Rule could not be applied

to the transactions before it. In so ruling, the court stated that

the FCC had exceeded its authority under the TCPA when it

issued the Solicited Fax Rule, 47 C.F.R. § 64.1200(a)(4)(iv). Hu

‐

mana promptly moved to decertify the class, and the district

court did so on August 28, 2017. As we have noted, we then

granted Brodsky’s petition under Rule 23(f) for immediate re

‐

view of the decerti fi cation decision.

The Alpha Tech case, which was handled by a di ff erent dis

‐

trict court judge, is actually two cases: one that was fi led in

the Northern District of Illinois on January 14, 2016, and the

other ( Craftwood II, Inc. v. Essendant, Inc. ) that was initiated in6 Nos. 17

‐ 3067 & 17

‐ 3506

the Circuit Court of Lake County, Illinois, on March 4, 2016,

and later removed to the Northern District of Illinois and con

‐

solidated with Alpha Tech

. Essendant tried to eliminate the

class allegations with a motion to dismiss or strike, fi led on

March 28, 2016, but the district court denied that motion.

About a year later, before anything else of consequence had

occurred, the D. C. Circuit issued its decision in Bais Yaakov

. On July 27, 2017, largely relying on Bais Yaakov

, Essendant

fi led a preemptive motion to deny class certi fi cation. Alpha

Tech responded with a motion for certi fi cation of three clas

‐

ses, covering 545 of the 725 fax templates Essendant had used.

Nearly all of those faxes contained the following opt

‐ out no

‐

tice: “If you have received this fax in error, please accept our

apologies and call toll free 877

‐ 385

‐ 4440 to be removed from

our list.” Alpha Tech criticized this notice on three grounds:

(1) failure to provide a fax number for opt

‐ out requests; (2)

failure to state that it is unlawful for the sender not to respond

within a reasonable time; and (3) failure to state that the re

‐ cipient must identify the fax number to which the request re

‐

lates. All these requirements appear in the Solicited Fax Rule.

47 C.F.R. § 64.1200(a)(4)(iii).

The district court issued an order denying class certi fi ca

‐

tion on November 3, 2017. It ruled that this court’s decision in

Hol tz man v. Turza

, 728 F.3d 682 (7th Cir. 2013), holding that the

TCPA requires a compliant opt

‐ out notice before a consent

‐

based defense can prevail, did not apply to this situation. In

‐

stead, it agreed with the D.C. Circuit’s ruling in Bais Yaakov

striking down the Solicited Fax Rule, alternately calling that

decision “binding” or at least “persuasive.” In a footnote, it

found additional support for its ruling in the waiver that the

FCC by then had granted to the defendants. Last, with the

regulation out of the picture, it found that individualNos. 17

‐ 3067 & 17

‐ 3506 7

questions predominated and thus that class treatment was in

‐ appropriate. Alpha Tech sought interlocutory review of that

decision, and we agreed to take the case.

III

Because it sits at center stage in these controversies, we

begin by se tt ing out the critical parts of the Solicited Fax Rule:

(a) No person or entity may:

...

(4) Use a telephone facsimile machine, computer,

or other device to send an unsolicited advertise

‐

ment to a telephone facsimile machine, unless—

(i) The unsolicited advertisement is from a

sender with an established business relation

‐ ship

... with the recipient; and

(ii) The sender obtained the number of the tele

‐ phone facsimile machine through—

(A) The voluntary communication of

such number by the recipient directly to the

sender, within the context of such estab

‐

lished business relationship;

...

(iii) The advertisement contains a notice that in

‐

forms the recipient of the ability and means to

avoid future unsolicited advertisements. A no

‐

tice contained in an advertisement complies

with the requirements under this paragraph

only if [certain criteria are met].

...8 Nos. 17

‐ 3067 & 17

‐ 3506

(iv) A facsimile advertisement that is sent to a

recipient that has provided prior express invita

‐

tion or permission to the sender must include an

opt

‐ out notice that complies with the require

‐

ments in paragraph (a)(4)(iii) of this section.

47 C.F.R. § 64.1200(a)(4); see also 47 U.S.C. § 227(b)(1)(C).

Most of this rule is relatively straightforward, but clause (iv)

is anything but that. It is there that the FCC extends the stat

‐

utory requirement for an opt

‐ out notice to all faxes, not just

those that are unsolicited. A fi restorm broke out over the new

rule. In an order addressing several challenges, the FCC up

‐

held its validity but announced that it would grant retroactive

waivers in light of the confusion the rule had produced. In re

Rules and Regulations Implementing the Telephone Consumer Pro

‐

tection Act of 1991

, 29 FCC Rcd. 13998 (2014) (“Anda Order”).

A ff ected parties petitioned the D.C. Circuit for review of the

Anda order, and the result was the Bais Yaakov decision.

The parties have engaged in a lengthy debate over the

question whether Bais Yaakov is formally binding on this

court, or if our obligation is only to give it that respectful con

‐

sideration we would accord to any of our sister circuits’ deci

‐

sions. The problem arises from the Hobbs Act, which gives the

courts of appeals exclusive jurisdiction to review FCC orders,

28 U.S.C. § 2342(a), and lays venue in either the D.C. Circuit

or a regional court (with the Judicial Panel on Multidistrict

Litigation se tt ing venue when multiple petitions are fi led). 28

U.S.C. § 2112(a)(3). The D.C. Circuit was thus the Hobbs Act

court for something, but the question is what: to decide the

validity of the Anda Order, or to reach back to 2006 and rule

on the validity of the original Solicited Fax Order? The dispo

‐

sitional paragraph of the D.C. court’s opinion is ambiguous:Nos. 17

‐ 3067 & 17

‐ 3506 9

We hold that the FCC’s 2006 Solicited Fax Rule is un

‐

lawful to the extent that it requires opt

‐ out notices on

solicited faxes. The FCC’s Order in this case interpreted

and applied that 2006 Rule. We vacate that Order and

remand for further proceedings.

852 F.3d at 1083 (emphasis added). A possible reading of this

paragraph, however, is as a statement that the court’s ruling

extended only to the 2014 Anda Order. The petition for review

of that order was fi led long after the deadline for challenging

the 2006 Order, which imposed the Solicited Fax Rule. The

question is thus what to make of the court’s statement that the

2006 rule itself is unlawful. Is it dictum, or does it have bind

‐ ing force as a ruling pursuant to Hobbs Act review? The Sixth

Circuit opted for the la tt er interpretation in Sandusky Wellness

Ctr., LLC v. ASD Specialty Healthcare, Inc.

, 863 F.3d 460, 467 (6th

Cir. 2017), even though the D.C. Circuit formally was review

‐ ing only the 2014 order. The Ninth Circuit took the same ap

‐ proach in True Health Chiropractic, Inc. v. McKesson Corp.

, 896

F.3d 923 (9th Cir. 2018). But there are risks in using a later pe

‐

tition for review to sweep in some or all antecedent adminis

‐

trative decisions. Time limits ma tt er—indeed, they are recog

‐

nized as jurisdictional for purposes of Hobbs Act review, see

Cal. Ass’n of the Physically Handicapped, Inc. v. FCC

, 833 F.2d

1333, 1334 (9th Cir. 1987) (joining the Second, Fifth, Eighth,

and D.C. Circuits on that point). It is easy to see why: reliance

interests grow around administrative rulings that are not

challenged in a timely way before the proper court of appeals.

If our decision turned on the ultimate binding impact of

the D.C. Circuit’s decision with respect to the 2006 Order, we

would pursue this ma tt er further. But it does not, and thus we

do not need to decide whether we would read Bais Yaakov as10 Nos. 17

‐ 3067 & 17

‐ 3506

broadly as our sister circuits have done. There is no doubt that

the D.C. Circuit vacated the order before it ( i.e. the 2014 Anda

Order) and held that the 2014 application of the 2006 Order

was unlawful. In the end, therefore, this was an “as applied”

decision, not an untimely a tt ack on the 2006 Order. We can

therefore assume that the 2006 Order is still in e ff ect (though

drained of a great deal of force, it seems), but that it must be

construed consistently with the D.C. Circuit’s decision on the

2014 Order, because that decision is binding on all courts of

appeals through the Hobbs Act. And the question in our case

is even narrower, because we are not reviewing the merits of

either order. Instead, we must determine only whether,

against the backdrop of these orders, the district courts here

abused their discretion in fi nding class treatment inappropri

‐

ate.

In answering that question, we start with the language of

the TCPA. As amended by the Junk Fax Act, the TCPA pro

‐

hibits the use of “any telephone facsimile machine

... to send,

to a telephone facsimile machine, an unsolicited advertise

‐

ment.” 47 U.S.C. § 227(b)(1)(C). The Act then defines the term

“unsolicited advertisement” to mean “any material advertis

‐ ing 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.” Id. § 227(a)(5) (emphasis added). There are excep

‐

tions to the prohibitions on sending unsolicited faxes, includ

‐ ing situations where the sender has an established business

relationship with the recipient, the sender obtains the recipi

‐

ent’s fax number through some sort of voluntary communica

‐

tion, and where the unsolicited message has “a notice meeting

the requirements under paragraph (2)(D).” Id.

§ 227(b)(1)(C)(i)–(iii). Such a notice must (1) be clear andNos. 17

‐ 3067 & 17

‐ 3506 11

conspicuous, (2) be located on the first page of the ad, (3) must

state that the recipient may opt out from future unsolicited

ads, and (4) must include a “cost

‐ free mechanism” to send an

opt

‐ out request to the sender. Id. § 227(b)(2)(D).

As we noted earlier, in 2006 the FCC decided to issue a

new rule related to the third of those requirements—the opt

‐

out notice. See Rules and Regulations Implementing the Telephone

Consumer Protection Act of 1991; Junk Fax Prevention Act of 2005

,

71 Fed. Reg. 25,967, 25,971–72 (May 3, 2006) (now codified

at 47 C.F.R. § 64.1200(a)(4)(iv)). The result was the so

‐ called

Solicited Fax Rule we have been discussing. The rule earned

that name because it requires the sender of a faxed advertise

‐

ment to include an opt

‐ out notice even when the ad is sent to

a person from whom the sender did obtain permission (or,

roughly put, a sender who solicited the fax). As the D.C. Cir

‐

cuit put it, “[i]n other words, the FCC’s new rule mandates

that senders of solicited faxes comply with a statutory require

‐

ment that applies only to senders of unsolicited faxes.” 852

F.3d at 1080.

For purposes of the class certification decision, this history

tells us that the legality of the defendants’ actions may end up

depending on whether the fax was sent with permission (le

‐ gal) or not (illegal), and it may also turn on the adequacy of

the opt

‐ out notices on the faxes in question. The consequences

for a firm that violates the TCPA can be dire when it is facing

not just a single aggrieved person, but a class. The statute pro

‐

vides a private right of action to collect either actual damages

or $500 per violation in statutory damages. See 47 U.S.C. §

227(b)(3)(B). Whether that means $500 per fax, or $500 per

transmission, the dollars roll up quickly. The stakes for the

defendants in our cases are substantial.12 Nos. 17

‐ 3067 & 17

‐ 3506

We agree with the D.C. Circuit (and the Sixth and Ninth)

that, at a minimum, it is necessary to distinguish between

faxes sent with permission of the recipient and those that are

truly unsolicited. The question of what su ffi ces for consent is

central, and it is likely to vary from recipient to recipient (or

so the district court reasonably could have concluded). Cf.

Blow v. Bijora, Inc.

, 855 F.3d 793, 804–06 (7th Cir. 2017) (exclud

‐ ing from summary judgment potential class members “who

provided no consent at all or whose consent was more lim

‐ ited”). Brodsky admits that he had a market agreement, and

thus a pre

‐ existing business relationship, with Humana, and

that he expressly agreed in his market agreement that Hu

‐

mana could communicate with him by fax. Humana did so,

and it even added a telephone number Brodsky could use if

he wanted to stop receiving those faxes. But even if, as Brod

‐ sky has argued, this agreement somehow fails to establish his

consent, we do not know what kind of pre

‐ existing arrange

‐

ment may have existed between Humana and the other fax

recipients that Brodsky wants to represent. These are the hall

‐

marks of an issue that requires individual scrutiny. See How

‐

land v. First Am. Title Ins. Co.

, 672 F.3d 525, 534 (7th Cir. 2012)

(holding that a “transaction

‐ speci fi c inquiry prevents class

treatment”).

We must also take into account the fact that the FCC

granted retroactive waivers of compliance with the Solicited

Fax Rule for both sets of defendants. 1 The waivers cover faxes

1 On November 14, 2018, FCC Consumer and Governmental Affairs

Bureau Chief Patrick Webre issued an order eliminating the 2006 Solicited

Fax Rule and dismissing as moot pending applications for retroactive

waivers like those received by defendants. Webre Order, DA 18

‐ 1159Nos. 17

‐ 3067 & 17

‐ 3506 13

sent before April 30, 2015. See In re Rules and Regulations Im

‐ plementing the Telephone Consumer Protection Act of 1991

, 31

FCC Rcd. 11943 (2016) (Humana Order); In re Rules and Regu

‐

lations Implementing the Telephone Consumer Protection Act of

1991

, 30 FCC Rcd. 8598, 8613 (2015) (United Stationers Order).

While the legal underpinnings of these orders were called into

doubt by the D.C. Circuit’s vacation of the Anda Order, nei

‐

ther the Humana Order nor the United Stationers/Essendant

Order was appealed as part of Bais Yaakov

, and so neither one

was vacated by the D.C. Circuit. Furthermore, nothing in the

reasoning of Bais Yaakov undermines the soundness of reliev

‐ ing these two companies from the strictures of the Solicited

Fax Rule. While this might indicate that there is a common

question on the e ff ect of the waivers that a ff ects all class mem

‐

bers, the district courts in our two cases were within their

rights to conclude that there are enough other problems with

class treatment here that a class action is not a superior mech

‐

anism for adjudicating these cases. See Parko v. Shell Oil Co.

,

739 F.3d 1083, 1085 (7th Cir. 2014).

The fi nal questions are whether the waivers have any ef

‐

fect on the availability of a private right of action and whether

that issue is be tt er handled through individual litigation or a

class. The TCPA allows a “person or entity” to bring “an ac

‐

tion based on a violation of this subsection or the regulations

(2018), available at https://docs.fcc.gov/public/attachments/DA

‐ 18

‐ 1159A1.pdf. Two days later, defendants’ counsel alerted us to this order

as additional relevant authority pursuant to Federal Rule of Appellate

Procedure 28(j). While we appreciate counsel calling this development to

our attention, Bureau Chief Webre’s order has no effect on our analysis or

decision. If anything, the rescission of the rule reinforces our conclusion

that these cases are not proper candidates for class treatment.14 Nos. 17

‐ 3067 & 17

‐ 3506

prescribed under this subsection” for injunctive relief, actual

damages, or statutory damages. 47 U.S.C. § 227(b)(3). The al

‐ leged violation in our case is regulatory. We reject the plain

‐

ti ff s’ argument that the statute itself requires opt

‐ out notice

on solicited faxes; it does not, and nothing in Hol tz man sup

‐

ports engrafting such language on the statute. As the opening

sentence of that opinion signals, the issue there had to do with

unsolicited faxes that had no opt

‐ out language, not faxes sent

with advance permission that did include some opt

‐ out lan

‐

guage. 728 F.3d at 683. In addition, Hol tz man arose at a time

before the Solicited Fax Rule was challenged. It thus has no

bearing on the issues now before us.

As a regulatory ma tt er, the Solicited Fax Rule is subject to

the general rule regarding “suspension, amendment, or

waiver of rules.” See 47 C.F.R. § 1.3. That provides, in relevant

part, that “[a]ny provision of the rules may be waived by the

Commission on its own motion or on petition if good cause

therefor is shown.” Id. Concerned about the confusion that the

Rule had caused, the FCC invoked this authority when it is

‐

sued the Humana and United Stationers waivers. See, e.g.,

Humana Order, 31 FCC Rcd. at 11951. But once again, even if

the district court were eventually to conclude that the waivers

are invalid, that is just one question: issues concerning solici

‐

tation, permission, pre

‐ existing relationships, and the like,

would remain as obstacles to class treatment.

IV

We do not rule out the possibility that some of the recipi

‐

ents of Humana’s or Essendant’s faxes were the victims of the

practices prohibited by the TCPA as amended. Some may not

have had pre

‐ existing contractual arrangements, some may

not have signaled their consent to receiving faxes, and someNos. 17

‐ 3067 & 17

‐ 3506 15

senders of faxes may not have received waivers of the Solic

‐

ited Fax Rule from the FCC or the waivers might be fl awed.

We thus express no opinion on the ability of individual plain

‐

ti ff s to go forward with these suits. We hold only that neither

of the district courts in these cases abused its discretion when

it concluded that the criteria for a class action under Rule

23(b)(3) are not met.

We therefore AFFIRM the orders of the district courts in

both Case No. 17

‐ 3067 and in Case No. 17

‐ 3506, denying class

certi fi cation.