Court Opinion

ID: 3187246
Source: CourtListenerOpinion
Date Created: 2016-03-21 18:03:25.111932+00
Date Added: 2024-06-11T07:39:03.062525
License: Public Domain

In the

    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________
Nos. 14-3728 & 15-1793
BRIDGEVIEW HEALTH CARE CENTER, LTD., an Illinois corpora-
tion, individually and as the representative of a class of
similarly-situated persons,
                                            Plaintiff-Appellant,
                               v.

JERRY CLARK, d/b/a Affordable Digital Hearing
                                         Defendant-Appellee.
                     ____________________

        Appeals from the United States District Court for the
            Northern District of Illinois, Eastern Division
        No. 09-cv-05601 — Maria G. Valdez, Magistrate Judge.
                     ____________________

   ARGUED NOVEMBER 5, 2015 — DECIDED MARCH 21, 2016
               ____________________

   Before FLAUM, MANION, and ROVNER, Circuit Judges.
    MANION, Circuit Judge. This appeal arises out of unsolic-
ited fax ads that were blasted across multiple states in viola-
tion of the Telephone Consumer Protection Act (TCPA). While
the parties agree that the TCPA was violated, they dispute
who was responsible for sending the fax ads: Jerry Clark,
whose Affordable Digital Hearing company was advertised
2                                         Nos. 14-3728 & 15-1793

in the faxes, or the Business to Business Solutions (B2B) mar-
keting company that actually sent the faxes. After Bridgeview
Health Care Center received an Affordable Hearing ad in the
Chicago area, Bridgeview brought this class-action lawsuit
against Clark.
    When the district court granted partial summary judg-
ment in the plaintiffs’ favor, Clark was held liable for violating
the TCPA by authorizing fax ads to plaintiffs within 20 miles
of Affordable Hearing. The district court also conducted a
bench trial on Clark’s liability to plaintiffs more than 20 miles
from Affordable Hearing, however, and concluded that Clark
was not liable to them. These cross-appeals ask how far his
liability extends. We affirm.
                          I. Background
    Jerry Clark runs Affordable Digital Hearing, a small com-
pany in Terre Haute, Indiana. In June 2006, Clark received
calls from B2B employee Conor Melville. 1 Melville told Clark
that B2B could market Affordable Hearing’s services by fax-
ing advertisements to potential business customers. Although
Clark said that he was not interested, Melville placed a fol-
low-up call, assuring Clark that many local businesses were
using fax advertisements. As a result, Clark agreed to give the
fax-advertising program a try. Clark edited and approved the
language of the ad.
   Clark verbally instructed B2B to send about 100 faxes to
local businesses within a 20-mile radius of Terre Haute. He
did not know what it cost to send a fax, but thought the

    1We use Melville’s real name, but he told Clark that his name was
Kevin Wilson.
Nos. 14-3728 & 15-1793                                          3

quoted $279 was a reasonable charge for this quantity of ad-
vertisements. Because he trusted that Melville would send the
100 faxes as authorized, Clark never asked to see the list of fax
numbers that B2B was using. Clark did not realize that B2B
actually faxed 4,849 ad flyers to businesses across Indiana, Il-
linois, and Ohio. According to B2B’s records, it faxed Clark a
letter stating that it would send 6,000 ads on his behalf, but
the record shows that Clark neither received nor saw this let-
ter.
    After Bridgeview received a fax ad at its location outside
Chicago, it sued under the TCPA, which, unbeknownst to
Clark, outlaws unsolicited fax ads. This litigation was over-
seen in district court by Magistrate Judge Maria Valdez, who
certified all fax recipients as a class. In granting summary
judgment for class members located within 20 miles of Terre
Haute, she gave the statutory penalty of $500 per recipient to
32 recipients within that 20-mile radius. This resulted in a
$16,000 judgment against Clark. Judge Valdez then conducted
a bench trial on Clark’s liability to recipients, including
Bridgeview, who were more than 20 miles away. This bench
trial resulted in a judgment that Clark is not liable for the junk
faxes sent more than 20 miles from Terre Haute.
   Bridgeview now challenges the trial outcome, along with
one of Judge Valdez’s evidentiary rulings at trial. Clark cross-
appeals her rulings on class certification.
                         II. Discussion
   These appeals raise four issues: Bridgeview appeals two of
the district court’s rulings and Clark appeals two. We begin
with the arguments made by appellant Bridgeview.
4                                       Nos. 14-3728 & 15-1793

    A. Agency Liability: Faxes Sent Outside the 20 Miles
   Bridgeview first appeals the outcome of the bench trial,
where Judge Valdez found Clark not liable for the fax ads sent
more than 20 miles outside Terre Haute. Because there was a
bench trial, we review the court’s legal conclusions de novo
and review factual findings for clear error. Cerros v. Steel
Techs., Inc., 288 F.3d 1040, 1044 (7th Cir. 2002).
    The TCPA makes it illegal to send an unsolicited fax ad-
vertisement unless (1) the sender and recipient have an estab-
lished business relationship, (2) the recipient voluntarily
made its fax number available through specified means, or (3)
the fax ad contained a statutorily compliant notice. 47 U.S.C.
§ 227(b)(1)(C). When Affordable Hearing’s faxes went out, its
advertisements were in violation of the TCPA.
    The fax sender is defined in federal regulations as either
the person “on whose behalf” the unsolicited ad is sent or the
person whose services are promoted in the ad. 47 C.F.R.
§ 4.1200(f)(10). When a third party acted on the sender’s be-
half, district courts in this circuit previously analyzed the
sender’s liability under a combination of agency and direct-
liability theories. See Bridgeview Health Care Ctr. v. Clark, 2015
WL 1598115, at *4 (N.D. Ill. Apr. 8, 2015) (collecting citations).
In 2013, a Federal Communications Commission ruling
known as Dish Network, 28 F.C.C.R. 6574 (2013), stated that
sellers may be liable for third-party telemarketing calls made
on the sellers’ behalf. This led district courts, including the
court below in this case, to find the same in the junk-fax con-
text. Bridgeview, 2015 WL 1598115, at *4 (collecting citations).
Yet in response to a query from the Eleventh Circuit, the FCC
has clarified that Dish Network is inapplicable to junk faxes. Id.
at *5; see also Palm Beach Golf Ctr.-Boca, Inc. v. John G. Sarris,
Nos. 14-3728 & 15-1793                                             5

D.D.S., P.A., 781 F.3d 1245, 1255 (11th Cir. 2015) (vacating the
Eleventh Circuit’s original opinion on this matter and super-
seding the earlier case). While the FCC letter does not bind
this court, we recognize that Dish Network addressed third-
party telemarketing calls, and that federal regulations define
sellers in the telemarketing-call context differently than in the
junk-fax context. Compare 47 C.F.R. § 64.1200(f)(11) with 47
C.F.R. § 64.1200(f)(10). We therefore hold that Dish Network is
inapplicable to junk-fax cases like this one.
     In determining what theory should govern Clark’s liabil-
ity, the trial court correctly rejected strict liability by recogniz-
ing that it would lead to “absurd results.” Id. at *7. The court
observed that “[t]he very notion of advertising one’s goods
entails that one must do something to advertise them.” Id. The
question in this particular case is thus whether the Affordable
Hearing ads were faxed “on Defendant’s behalf.” Id. at *8.
While the district court appeared hesitant to label this an
agency theory, likely because of uncertainty created by Dish
Network, the court effectively affirmed its previous agency
finding: it wrote that Clark did not “direct” B2B to send faxes
beyond the 20-mile radius and that there is “no sense in which
the faxes sent beyond Terre Haute were sent on [Clark’s] be-
half.” Id. We recognize this for what it is: an agency analysis.
   In applying the regulatory definition of a fax sender, we
hold that agency rules are properly applied to determine
whether an action is done “on behalf” of a principal. See 47
C.F.R. § 64.1200(f)(10). There are three types of agency: (1) ex-
press actual authority, (2) implied actual authority, (3) appar-
ent authority. See Moriarty v. Glueckert Funeral Home, Ltd., 155
F.3d 859, 866 (7th Cir. 1998). If Clark was acting as the princi-
pal to B2B’s agent, he would have made B2B his agent in one
6                                               Nos. 14-3728 & 15-1793

of these three ways, but it is clear that that none of them ap-
plies here. 2
    First, Clark did not confer express actual authority on B2B.
See id. For this type of agency to exist, Clark must have di-
rectly spoken or written to B2B, telling it to send nearly 5,000
fax ads across multiple states. The record establishes that
Clark told B2B it should send 100 faxes within 20 miles of
Terre Haute. Instead, B2B sent 4,849 faxes across three Mid-
western states. Because B2B expressly contradicted Clark’s ac-
tual instructions, this is clearly not express actual agency.
    Second, there was no implied actual authority. Implied au-
thority is inherently contained in the agent’s position. Id.
While express actual authority is proven through words, im-
plied actual authority is established through circumstantial
evidence. Id. Nothing about fax marketing inherently calls for
sending thousands of advertisements. And nothing about fax
marketing inherently demands sending these ads to states

    2 We also note the potential pleading problem in Bridgeview’s com-
plaint. The plaintiff’s agency claim ordinarily must appear on the face of
the complaint: it is fundamental that a plaintiff “must plead and prove in
order to win.” See Ashcroft v. Iqbal, 556 U.S. 662, 673 (2009). It appears that
Bridgeview’s complaint fails to plead agency liability at all, whether by
mentioning B2B or even hinting that Clark might be responsible for an-
other party’s actions. See Dkt. 1-2 at 2–14. In closely similar litigation,
brought against another business that was exposed to TCPA liability
through B2B fax blasting, a federal court found that this same pleading
flaw was fatal to the plaintiff’s ability to claim an agency relationship. The
Siding & Insulation Co. v. Alco Vending, Inc., 2015 WL 1858935, at *7 (N.D.
Ohio Apr. 22, 2015). But here, we decline to decide whether Bridgeview’s
complaint failed to present an agency claim, because conducting an
agency analysis demonstrates that Bridgeview’s agency claim fails even if
it was properly pleaded.
Nos. 14-3728 & 15-1793                                          7

where the advertiser does not do business. We thus find it im-
possible to conclude that implied actual authority exists here.
    This leaves only apparent authority. To create apparent au-
thority, the principal must speak, write, or otherwise act to-
ward a third party. Id. His conduct must make the third party
reasonably believe that he has consented to an action done on
his behalf by someone purporting to act for him. Id. In this
case, the plaintiffs would be in the position of the third party,
if apparent authority existed. But this, too, is more than
Bridgeview can prove on this record. Clark did nothing to cre-
ate an appearance that B2B had authority to send faxes on be-
half of either Affordable Hearing or Clark himself. In fact, the
fax-ad copy was the only way Clark could have communi-
cated with the recipients, because their identities were un-
known to him. And the ad did not even reference B2B. In
short, B2B made an independent decision to blast faxes across
multiple state lines.
    On this record, the trial court did not err in concluding that
Clark was not liable for faxes sent outside the 20-mile radius
on which he expressly instructed B2B. We therefore affirm the
district court’s ruling at trial, which found in Clark’s favor re-
garding faxes sent more than 20 miles from Terre Haute.
   B. Impeachment: Prior Inconsistent Statement
    Bridgeview urges that one of Clark’s interrogatory an-
swers was inconsistent with his trial testimony and that, by
denying Bridgeview’s impeachment attempt, Judge Valdez
committed reversible error. We review the trial court’s eviden-
tiary rulings for abuse of discretion. Wilson v. City of Chicago,
758 F.3d 875, 881–82 (7th Cir. 2014). Reversal is only permitted
8                                         Nos. 14-3728 & 15-1793

if no reasonable person would agree with the ruling and if any
error likely affected the outcome of trial. Id. at 882.
    When impeaching a witness with his own prior incon-
sistent statement, the examiner introduces a pretrial state-
ment made by the witness to show that it is inconsistent with
what the witness said at trial. 1 McCormick on Evid. § 34 (7th
ed.). The earlier statement need not be true. Instead, “talking
one way on the stand and another way previously is blowing
hot and cold, raising a doubt as to the truthfulness of both
statements.” Id. We therefore examine Clark’s statements for
their consistency.
    This is the interrogatory question on which Bridgeview re-
lies: “If the defendant instructed any person to construct, de-
velop, purchase, or otherwise use a list of persons and/or tel-
ephone numbers to send any facsimile transmission ... de-
scribe in detail all directions and/or instructions ... ” In his in-
terrogatory answer, Clark wrote, “Not Applicable.” Clark
gave no “directions and/or instructions” to construct a list of
people and phone numbers, so “Not Applicable” was a rea-
sonable response. At trial, Clark testified that he instructed
B2B to send only 100 faxes within 20 miles of Terre Haute.
Though Bridgeview claims these statements conflict, the in-
terrogatory specifically requested any instructions on which
individuals should receive Clark’s ads (“a list of persons
and/or telephone numbers”), while Clark’s trial testimony
was on the scope of the ad blast (100 recipients within 20
miles). There is no inconsistency on which to impeach Clark.
Because the trial judge did not abuse her discretion, we de-
cline to reverse.
Nos. 14-3728 & 15-1793                                       9

   C. Class Certification: The Subclass
    Clark urges that plaintiffs within 20 miles of Terre Haute
should have been classified as a separate subclass. Because
district courts have “broad leeway” in certification decisions,
we review for abuse of discretion. Amchem Prods. v. Windsor,
521 U.S. 591, 630 (1997).
    Under Federal Rule of Civil Procedure 23(c)(5), a class
may be divided into subclasses “[w]hen appropriate.” The
purpose of subdivision is to protect divergent interests. Fed.
R. Civ. P. 23(c)(4) advisory committee’s notes to 1966 and 2003
amendments. There is no mandate to automatically subdivide
classes. Instead, the key is whether the class representative
adequately represents class members’ interests. In re Brand
Name Prescription Drugs Antitrust Litig., 115 F.3d 456, 457–58
(7th Cir. 1997). If not, subclass members may seek a new rep-
resentative or other appropriate changes. Id.
    Clark argued that the district court should have created a
subclass of plaintiffs within 20 miles of Terre Haute, as dis-
tinct from class members more than 20 miles away. He urges
that, because Bridgeview was outside the 20-mile radius he
authorized, it could not adequately represent the plaintiffs
within 20 miles. As Clark admits, however, only 24 businesses
received the 32 faxes sent within 20 miles. (B2B sent some ads
to duplicate fax numbers.) Thus, the vast majority of recipi-
ents were outside that 20-mile radius, which contradicts
Clark’s argument that Bridgeview might be overly distracted
by advocating arguments unique to Bridgeview. Instead,
Bridgeview was in the same position as the vast majority of
fax recipients.
10                                        Nos. 14-3728 & 15-1793

     Further, every class member had the same interest: to ob-
tain the $500-per-recipient penalty for faxes violating the
TCPA. Certainly, Bridgeview (along with all the other plain-
tiffs more than 20 miles outside Terre Haute) was unable to
prove agency. For plaintiffs within 20 miles, agency was es-
tablished at summary judgment, and they won. For plaintiffs
outside 20 miles, a trial was required, and they lost. The fact
that Bridgeview faced an added hurdle in its claim, however,
did not prevent the district court from finding that
Bridgeview could adequately represent plaintiffs within 20
miles of Terre Haute.
    We therefore conclude that the district court did not abuse
its discretion in certifying one class.
     D. Decertification: Reversing the $16,000 Judgment
    Finally, Clark contends that the district court erred in de-
clining to decertify the class, limit liability to plaintiffs within
20 miles of Terre Haute, and vacate the money judgment. He
bases these requests on the fact that he is not liable to
Bridgeview. Once again, we review the district court order for
abuse of discretion. Amchem Prods., 521 U.S. at 630.
    We recognize that lumping all plaintiffs into one class cre-
ates outcomes that don’t seem to add up: the named plaintiff
has lost, while some class members (who didn’t try to sue in
the first place) win a judgment that the named plaintiff cannot
collect. Clark owes a $16,000 class-action award even though
he is not liable to the class representative. And while
Bridgeview cannot collect anything, Bridgeview’s counsel
will be paid from the award going to recipients within 20
miles of Terre Haute. For a small business that was just exper-
imenting with a different marketing approach, and had no
Nos. 14-3728 & 15-1793                                         11

idea it was breaking the law, this is a strange and even unfair
result. It could have been worse, however, and the law allows
this split-level result.
    We have previously written that, “[i]n this age of email
and other Internet communication systems, faxes are used by
businesses for little else besides advertising.” CE Design Ltd.
v. King Architectural Metals, Inc., 637 F.3d 721, 725 (7th Cir.
2011). Fax paper and ink were once expensive, and this may
be why Congress enacted the TCPA, but they are not costly
today. See id. at 726. As a result, what motivates TCPA suits is
not simply the fact that an unrequested ad arrived on a fax
machine. Instead, there is evidence that the pervasive nature
of junk-fax litigation is best explained this way: it “has blos-
somed into a national cash cow for plaintiff’s attorneys spe-
cializing in TCPA disputes.” Yuri R. Linetsky, Protection of “In-
nocent Lawbreakers”: Striking the Right Balance in the Private En-
forcement of the Anti “Junk Fax” Provisions of the Telephone Con-
sumer Protection Act, 90 Neb. L. Rev. 70, 97 (2011). We doubt
that Congress intended the TCPA, which it crafted as a con-
sumer-protection law, to become the means of targeting small
businesses. Yet in practice, the TCPA is nailing the little guy,
while plaintiffs’ attorneys take a big cut. Plaintiffs’ counsel in
this case admitted, at oral argument, that they obtained B2B’s
hard drive and used information on it to find plaintiffs. They
currently have about 100 TCPA suits pending. Congress likely
should have targeted the marketing firms, rather than their
unsuspecting clients. Nevertheless, we enforce the law as
Congress enacted it. We thus review whether the class should
be decertified, as Clark urges here.
12                                        Nos. 14-3728 & 15-1793

    In declining to decertify, the district court wrote that de-
certification would not ultimately affect Clark’s liability. Its or-
der relied on a footnote in East Texas Motor Freight Systems v.
Rodriguez, a Supreme Court case. East Texas states that “claims
of the class members would not need to be mooted or de-
stroyed because subsequent events or the proof at trial had
undermined the named plaintiffs’ individual claims.” E. Tex.
Motor Freight Sys. Inc. v. Rodriguez, 431 U.S. 395, 406 n.12
(1977). In Walters v. Edgar, this court expressed caution about
the East Texas “dictum.” Walters v. Edgar, 163 F.3d 430, 433 (7th
Cir. 1998). Walters is distinguishable from this case, however,
because the named plaintiffs in Walters lacked standing. Id.
Bridgeview had standing to sue. And here, because “the proof
at trial had undermined” Bridgeview’s claims, the Supreme
Court’s language directly applies. See E. Tex., 431 U.S. at 406
n.12. Decertification would not affect Clark’s liability to any
plaintiff, while the judgment is already limited to class mem-
bers within 20 miles of Terre Haute. We thus conclude that the
district court did not abuse its discretion in declining to de-
certify the class.
                         III. Conclusion
     The district court’s rulings are hereby AFFIRMED.