Physicians Healthsource, Inc. v. A-S Medication Solutions, LLC
950 F.3d 959
| 7th Cir. | 2020Background
- AMS bought part of Allscripts’ business (including a customer fax-number database) and, in February 2010, sent an automated fax-advertisement to thousands of numbers; 11,422 deliveries incl. PHI’s. AMS did not obtain prior express permission and the fax lacked an opt-out notice.
- PHI filed a putative class action under the TCPA; the district court certified the class, found AMS and its CEO Hoff jointly and severally liable for 11,418 faxes, and entered a $5,709,000 judgment ($500 per fax).
- AMS moved for various post-judgment remedies, sought leave to file a sur-reply, and challenged the need for an evidentiary hearing on damages; the district court denied those requests and adopted a distribution plan requiring notice by fax and mail.
- On appeal AMS challenged liability, the denial of a sur-reply, entry of judgment without a damages hearing, denial of motions to amend, and the distribution procedure.
- The Seventh Circuit affirmed: (1) defendants bear the burden to prove prior express permission (an affirmative defense); (2) AMS failed to prove consent as required by the FCC standard; (3) consent obtained by Allscripts did not transfer to AMS on purchase; (4) entry of judgment was proper once number of faxes and recipient numbers were established; and (5) the court’s distribution plan satisfied due-process concerns.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who bears burden to prove prior express permission under TCPA? | Defendants must prove permission as an affirmative defense. | Permission is an element the plaintiff must negate. | Defendants bear the burden to prove prior express invitation or permission. |
| What showing constitutes "prior express permission" for ongoing fax ads? | Consent must be affirmative and explicit that providing a fax number permits receiving fax advertisements. | Broad or general consent (e.g., to receive "product information" or past faxes) suffices. | Permission must explicitly convey ongoing consent to receive fax advertisements; the submitted affidavits were insufficient. |
| Can prior express permission to one entity transfer to a purchaser (AMS) after asset acquisition? | Permission should transfer or be transferable with customer lists. | Transferability is allowed when assets/customers are acquired. | Permission is not transferable; purchaser must rely on EBR (with opt-out notice) or obtain its own consent. |
| Was entry of judgment and denial of evidentiary hearing/sur-reply appropriate? | Court had sufficient, undisputed records of how many faxes and recipient numbers; no hearing needed; no new evidence in PHI’s reply. | AMS said identity disputes and new reply material required a sur-reply and hearing. | Denial of sur-reply and no hearing on damages were proper; statutory damages may be entered once number of faxes and numbers are established (fax logs suffice). |
| Did the district court’s distribution plan protect defendant’s due process and ensure recipients entitled to recover? | Notice by fax and mail with verification is adequate; unclaimed funds procedures acceptable. | Plan risks paying persons without standing; defendant has interest in ensuring at least one person per fax has standing. | Distribution plan was adequate: notice to fax numbers and addresses plus verification requirement ensures at least one person per fax with standing will be validated. |
Key Cases Cited
- True Health Chiropractic, Inc. v. McKesson Corp., 896 F.3d 923 (9th Cir. 2018) (holds prior express permission is an affirmative defense on which defendants bear the burden)
- CE Design Ltd. v. King Architectural Metals, Inc., 637 F.3d 721 (7th Cir. 2011) (discusses consent by publishing a fax number and context for express permission)
- Travel 100 Grp., Inc. v. Mediterranean Shipping Co. (USA) Inc., 889 N.E.2d 781 (Ill. App. Ct. 2008) (consent explicitly authorizing marketing dissemination can constitute prior express permission)
- Ira Holtzman, C.P.A. v. Turza, 728 F.3d 682 (7th Cir. 2013) (statutory damages under TCPA can be awarded once plaintiffs establish number of faxes and receipt connection; fax logs suffice)
- Gager v. Dell Fin. Servs., LLC, 727 F.3d 265 (3d Cir. 2013) (treats the TCPA as remedial and construes silences in favor of consumer protection)
- Physicians Healthsource, Inc. v. Boehringer Ingelheim Pharm., Inc., 847 F.3d 92 (2d Cir. 2017) (interprets TCPA to favor consumer protections regarding what plaintiffs must plead)
- Mullins v. Direct Digital, LLC, 795 F.3d 654 (7th Cir. 2015) (defendant’s due-process interests implicated when individual damages calculations affect total liability)
- Dr. Robert L. Meinders, D.C., Ltd. v. UnitedHealthcare, Inc., 800 F.3d 853 (7th Cir. 2015) (district courts must allow a party to respond when new facts or arguments appear in a reply on summary judgment)