Opinion ID: 2798275
Heading Depth: 2
Heading Rank: 2

Heading: CE Design’s Lawsuit Against Custom

Text: In April 2008, Custom faxed an unsolicited advertisement for screening enclosures to CE Design and then, or about then, sent the same or a similar fax to at least 2,551 others. CE Design contends that this unsolicited fax damaged it by costing it time, paper, and ink toner. Seeking redress, CE Design sued Custom in Illinois state court and sought to certify a class of others that had also received the fax or a similar fax from Custom. In its complaint, CE Design pleaded three claims for relief. First, CE Design alleged that Custom’s fax violated the Telephone Consumer Protection Act (TCPA), which provides $500 in damages for each TCPA violation. 47 U.S.C. § 227(b)(3). In support of this claim, CE Design specifically alleged that: [Custom] knew or should have known that [CE Design] and the other class members had not given express invitation or permission for [Custom] or anybody else to fax advertisements about [Custom’s] goods or services, that [CE Design] and the other class members did not have an established -6- business relationship with [Custom], that [the advertisements Custom sent] were advertisements . . . . Appellant’s App. vol. I at 102. Second, CE Design alleged common-law conversion based on Custom’s faxes using the recipients’ paper, toner, and fax machines, and it sought property damages for those losses. Similar to how it pleaded its TCPA count, CE Design alleged that “[Custom] knew or should have known that its misappropriation of paper, toner, and employee time was wrongful and without authorization.” Appellant’s App. vol. I at 105. Third, CE Design alleged that Custom’s fax violated the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), 815 Ill. Comp. Stat. 505/2. After CE Design served the complaint, Custom tendered its defense to Emcasco. In response, Emcasco denied coverage and declined to defend Custom. In June 2011, with the case so positioned, Custom and CE Design settled CE Design’s lawsuit. The two parties agreed to request that the Illinois state court enter judgment against Custom for $1,276,000 (the TCPA’s $500 per violation multiplied by 2,552 unsolicited faxes). See 47 U.S.C. § 227(b)(3). As part of the settlement, CE Design agreed to enforce the judgment only against Emcasco.4 Custom settled because “[it did] not have significant assets other than insurance, and any judgment that is executed against [it] would likely force [it] into 4 The settlement stated that Custom “will assign to the Class . . . to the full extent permitted by law, all of [Custom’s] claims against and rights to payments from insurers, including [Emcasco], under any and all insurance policies issued by [Emcasco]. . . .” Appellant’s App. vol. II at 344. -7- bankruptcy. . . .” Appellant’s App. vol. II at 364. In its notice of the proposed settlement to the class members, CE Design recommended settling for the agreed sum, stating that a prevailing plaintiff could recover $500 for each TCPA violation proved. CE Design also informed the class members that “[Custom’s] insurance policies are the only meaningful source of recovery.” Appellant’s App. vol. II at 364. In September 2011, the Illinois trial court approved the settlement agreement and entered judgment. In disposing of the case, the trial court adopted the parties’ proposed language, including these terms:  The damages amount agreed to is what a reasonably prudent person in [Custom’s] position would have settled for on the merits of the claims in this Litigation;  2,552 unsolicited faxed advertisements were sent on [Custom’s] behalf to 2,552 persons between February 1, 2008 and April 30, 2008;  [Custom] believed that [it] had the consent of the fax recipients when [it] sent the faxes;5  [Custom] did not intend to injure the fax recipients;  [Custom] tendered this lawsuit to [Emcasco] and [Emcasco] refused to defend or indemnify this matter. Appellant’s App. vol. II at 474. The trial court entered “judgment on Counts I, II and III [the TCPA, conversion, and ICFA claims, respectively] . . . against [Custom], jointly and 5 As mentioned, CE Design’s complaint alleged that Custom “knew or should have known” that Custom sent an unsolicited fax to CE Design and others, and that Custom “knew or should have known” that its fax would convert CE Design’s property. Appellant’s App. vol. I at 102, 105. With CE Design’s about-face in the settlement, it positioned itself better to assert that Custom’s fax was an accident. -8- severally, in the total amount of $1,276,000,” with Custom’s policy with Emcasco as the sole source of recovery. Appellant’s App. vol. II at 476.