I. Background
A. Factual Background
The Court has described the allegations and procedural history of this case in a prior published Opinion. See Bais Yaakov of Spring Valley v. ETS ,
The following facts are taken from the Parties' statements pursuant to Local Civil Rule 56.1, specifically Defendant's 56.1 Statement (Def.'s Rule 56.1 Statement ("Def.'s 56.1") (Dkt. No. 249) ), Plaintiff's 56.1 Response and Counterstatement (Pl.'s Rule 56.1 Response and Counterstatement ("Pl.'s 56.1") ("Pl.'s 56.1 Counter") (Dkt. No. 269) ), and Defendant's Counterstatement (Def.'s Rule 56.1 Counterstatement ("Def.'s 56.1 Counter") (Dkt. No. 276) ), and the admissible evidence submitted by the Parties.
Bais Yaakov is a religious corporation and a high school. (Decl. of David Sussman ("Sussman Decl.") ¶ 1 (Dkt. No. 65).) ETS is a non-profit corporation known for its role in administering the SAT, PSAT, and AP exams. (Def.'s 56.1 ¶ 1.) ETS owns the rights to various educational products and services, including Criterion, which is a web-based application that evaluates a student's writing skills and provides diagnostic feedback and a holistic score. (Id. ¶ 2.)
In 2008, ETS entered into an exclusive distribution agreement ("Distribution Agreement") with Houghton Mifflin Harcourt Publishing Company ("HMH"), pursuant to which HMH obtained the exclusive right to distribute, market, and advertise Criterion in the K-12 school market in the United States. (Id. ¶ 4.) ETS and HMH signed the Distribution Agreement on June 25, 2008, and that initial contract spanned the time period of June 25, 2008 to December 31, 2011. (Id. ¶ 5.) The Distribution Agreement was extended through December 31, 2012 by amendment dated December 30, 2011. (Id. ¶ 6.) This Distribution Agreement was operative on November 15, 2012 when the fax at issue in this litigation (the "HMH Fax" or "Fax") was sent. (Id. ¶ 7.)
Pursuant to the Distribution Agreement, ETS agreed not to sell Criterion in the K-12 school market in the United States-only HMH could do so. (Id. ¶ 8.) HMH agreed to "comply with any and all applicable laws, regulations and other rules in the performance of its obligations under this agreement, including regulations relating to the marketing of the service." This included the TCPA. (Id. ¶ 9.) ETS did not itself advertise or market its Criterion Service to the K-12 market in the United States. Instead, ETS relied solely on HMH to do so. (Pl.'s 56.1 Counter ¶ 4.) The Distribution Agreement granted HMH the exclusive right to market Criterion. (Def.'s 56.1 ¶ 12.) HMH was also solely responsible for signing up new customers for ETS's Criterion Service, and for sending to ETS completed and signed subscriber agreements, which enabled ETS to activate new customers' accounts. (Pl.'s 56.1 Counter ¶ 7.) The Distribution Agreement did not address HMH undertaking any specific forms of marketing, and it made no mention of marketing by facsimile (or "fax"). (Def.'s 56.1 ¶ 13.) The Distribution Agreement provided that HMH would "use commercially reasonable efforts to promote the use and sale of Criterion," (Decl. of Andrew S. Kleinfeld, Esq. ("Kleinfeld Decl.") Ex. E, at § 5.1 (Distribution Agreement between ETS and HMH ("Distribution Agreement") ) (Dkt. No. 250-5) ), and "establish the marketing strategy ... [and] develop and distribute marketing and promotional materials," (id. §§ 5.1(i)-(ii) ).
The Distribution Agreement provided that HMH would "only make such representations about [Criterion] as have been expressly approved, in writing and in advance, by ETS, or which are contained in other materials provided by ETS," (Distribution Agreement § 5.1(viii) ), and "provide ETS with all new messaging to ensure it does not make product claims not supported by ETS research," (id. § 5.1(ix) ). ETS in turn agreed to "us[e] reasonable efforts to review all new messaging submitted by [HMH]." (Id. § 4.1(vii).)
2. The HMH Fax Campaign
In or about November 2012, HMH decided to market the Criterion product by facsimile through Riverside Publishing Inc. ("Riverside Publishing"), a division of HMH. (Kleinfeld Decl. Ex. G, at 33-36, 102-104 (Deposition Testimony of Idy Spezzano ("Spezzano Dep.") ) ); Decl. of Aytan Y. Bellin, Esq. ("Bellin Decl.") Ex. A, at 39 (Deposition Testimony of Susan Yetman ("Yetman Dep.") (Dkt. No. 265-1).)
On November 7, 2012, ETS learned that HMH intended to market Criterion by fax, when Laurel Kaczor ("Kaczor"), of HMH, emailed Susan Yetman ("Yetman"), a Criterion account manager at ETS.
ETS made no other comment, internally or externally, on the opt-out language of the HMH Fax. (Def.'s 56.1 ¶ 34.)
Yetman testified that HMH "would not have been able to send the document in the form that it was in when it was reviewed if it was not correct as to its representation of Criterion," and that if Haller had not approved it, HMH would have had to revise it. (Yetman Dep. 49.) Idy Spezzano ("Spezzano"), an HMH employee, supervised the creation of the HMH Fax, and wrote and edited the advertisement with other HMH employees, including Kaczor. (Spezzano Dep. 33-36.) Spezzano offered conflicting testimony regarding her understanding of whether HMH needed ETS's approval. She testified that even if ETS had told HMH that they did not want it to do the fax campaign, "[HMH] would have done it anyway." (Spezzano Dep. 367-68.)
In preparing its fax campaign for its sending of the HMH Fax, HMH executed a data license agreement with Market Data Retrieval ("MDR") pursuant to which HMH obtained a list of recipient names and associated fax numbers. (Def.'s 56.1 ¶ 23.) ETS did not pay any money to MDR in connection with HMH's data license agreement with MDR. (Id. ¶ 24.) ETS was not involved with HMH's relationship with MDR in connection with the HMH Fax or the HMH fax campaign, nor did ETS have any knowledge of this relationship. (Id. ¶ 25.)
HMH contracted with WestFax to send the HMH Fax to the intended recipients. (Id. ¶ 28.) ETS did not participate in the HMH-WestFax engagement or pay any money to WestFax in connection with that engagement. (Id. ¶ 29.) ETS had no interaction with WestFax regarding the HMH Fax or the HMH fax campaign. (Id. ¶ 30.)
Kaczor, who had previously provided Spezzano a list of states to which Kaczor recommended the Criterion Fax be sent, reported ETS's response to HMH's Spezzano by e-mail. (Pl.'s Counter ¶ 22.) Spezzano had Debbie Pangilinan, another HMH employee, retrieve the fax numbers of the K-12 schools in those 10 states from HMH's "Sales Force" database, which contained that information. (Id. ¶ 23.) The final fax list was reduced to the fax numbers of the K-12 schools from seven of those 10 states, and contained more than 22,000 entries. (Id. ¶ 24.) Melissa Pearson, an HMH employee, uploaded the Criterion Fax and the Criterion Fax list to the website of WestFax with instructions to transmit the Criterion Fax on November 15, 2012. (Id. )
On November 15, 2012, WestFax successfully transmitted the Criterion Fax to 17,710 fax numbers on the fax list. (Id. ¶ 25.) WestFax provided HMH a specific list of the fax numbers to which WestFax did not attempt to transmit or did not successfully transmit the Criterion fax. (Id. ¶ 26.)
Other than Yetman and Haller, no one at ETS was aware of the HMH fax campaign until ETS was named a defendant in this lawsuit in August 2015. (Def.'s 56.1 ¶ 39.) Prior to this litigation, no one from ETS's marketing department was aware of or involved in the HMH fax campaign. (Id. ¶ 40.) Prior to this litigation, no one at ETS was aware of how many entities received the HMH Fax, the names of the recipients of the HMH Fax, or where they resided. (Id. ¶ 41.) HMH never informed ETS of the results of the HMH fax campaign or whether any of the fax recipients ever contacted HMH. (Id. ¶ 42.) In fact, HMH never informed ETS that the HMH Fax was sent. (Id. ¶ 43.)
3. Language of the HMH Fax
The text of the HMH fax reads:
How do you know if the school programs you spend money on really work? Would you be interested in a writing program that could prove you've made a difference in your district? The Criterion Online Writing Evaluation service for grades 4-12 can provide you proof of your district's progress. This web-based, comprehensive instructional tool helps students plan, write, and revise essays.
(Pl.'s 56.1 Counter ¶ 10; SAC Ex. A ("HMH Fax").) The HMH Fax described
The HMH Fax directed recipients to the Riverside Publishing website. (Def.'s 56.1 ¶ 44; HMH Fax.) The HMH Fax identified Kaczor as the person to contact for more information regarding Criterion, and provided a phone number and fax number for Kaczor. (HMH Fax.) The HMH Fax did not include contact information for ETS. (Def.'s 56.1 ¶ 50.)
HMH received communications from recipients of the HMH Fax requesting to opt out from receiving future faxes. (Id. ¶ 52.) ETS received no communications from HMH Fax recipients, nor was ETS even aware that HMH had received any opt-out requests. (Id. ¶ 53.)
Plaintiff recognized that HMH was the sender of the HMH Fax. (Id. ¶ 54.) In his Declaration, Rabbi David Sussman ("Sussman"), the Executive Director of Bais Yaakov, stated that "[o]n or about November 27, 2012, Plaintiff received an unsolicited fax advertisement on its fax machine ... sent by Defendants [HMH and Laurel Kaczor]." (Sussman Decl. ¶ 3.) Sussman testified that he initially believed HMH was the sender of the fax because the language of the fax read, " 'If you do not wish to receive faxes from Houghton Mifflin Harcourt in the future,' which implies that HMH sent the fax, not ETS." (Kleinfeld Decl. Ex. S, at 93 (Deposition of David Sussman ("Sussman Dep.") ) Sussman further testified that ETS was added as Defendant in this case because discovery revealed that HMH had sent the fax advertisements on ETS's behalf and that ETS was working in conjunction with HMH. (Bellin Decl. Ex. E, at 55-56 (Deposition of David Sussman ("Sussman Dep.").)
4. Plaintiff's Damages
Sussman testified that he was at the Bais Yaakov offices when the fax came through. He was the first and only person to notice it. He read the fax at that time but did not give it to anyone else to read
Sussman testified that he knew that there were statutory damages available under the TCPA and that apart from those any loss that Plaintiff incurred was "not worth mentioning." (Id. at 103.) The only category of damages Plaintiff identified in response to Defendant's interrogatories, are statutory damages. (Kleinfeld Decl. Ex. T, at 3-4 (Pl.'s Reply to Def.'s Interrog.).)
5. Pre-Existing Relationship Between Plaintiff and Defendant
ETS has had a business relationship with Plaintiff dating from at least 1977, when Plaintiff sent ETS contact information so that ETS could update its mailing list "for the purpose of sending out testing program information which [ETS] believe[d] [would] be of interest to school personnel." (Def.'s 56.1 ¶ 62.) ETS's business relationship with Plaintiff was related to the school's administration of the SAT exam and other tests. (Id. ¶ 63.)
In the context of this established business relationship, Plaintiff voluntarily provided its fax number to ETS on March 17, 2005 as part of a form that Esther Pilchik ("Pilchik"), the school's secular principal responsible for arranging the SAT and other tests, faxed to ETS to update its contact information. (Id. ¶ 64.) Plaintiff admitted that by filling out the March 2005 form in which it provided ETS its fax number, Plaintiff provided ETS with permission to communicate with it. (Id. ¶ 65.) Pilchik has the authority to give Plaintiff's fax number to ETS. (Id. ¶ 66.) Sussman testified that if one of Plaintiff's two principals gave out the school's fax number, that constituted permission or an invitation to communicate by fax with Plaintiff. (Id. ¶ 67.)
There is no evidence that the permission Plaintiff provided to ETS to communicate by fax was ever withdrawn. (Id. ¶ 68.) ETS kept Plaintiff's fax number in its customer file, and ETS exchanged faxes with Plaintiff as a part of that business relationship. (Id. ¶ 69.) However, Plaintiff never gave prior express permission or invitation to ETS, HMH, or anyone else to send Plaintiff
Plaintiff made payments to ETS in connection with the purchase and sale of standardized testing services, and these payments began at least as early as November 13, 1999. (Def.'s 56.1 ¶ 70.) Plaintiff made a payment of $ 494 to ETS on December 28, 2012 relating to exam administration, approximately six weeks after the HMH Fax was sent. (Id. ¶ 71.)
6. Plaintiff's Knowledge Regarding the Opt-Out Notice
Plaintiff has initiated fourteen putative class action lawsuits under the TCPA since 2011. (Def.'s 56.1 ¶ 73.) Sussman testified that Plaintiff has received more than $ 150,000 from TCPA lawsuits brought on its behalf. (Id. ¶ 95.) Plaintiff has never attempted to opt out of receiving future faxes from HMH, ETS, or any other entity since first filing a TCPA lawsuit, including following its receipt of the HMH Fax. (Id. ¶ 74.) No one at Plaintiff read the Opt-Out Notice on the HMH Fax to determine if it was possible to opt-out of receiving future faxes. (Id. ¶ 76.)
Plaintiff alleges that the Opt-Out Notice on the HMH Fax violated the TCPA and regulations thereunder in six ways. Specifically, Plaintiff alleges the Opt-Out Notice:
A. fails to provide a facsimile number to which the recipient may transmit an opt-out request;
B. fails to provide a domestic contact telephone number to which the recipient may transmit an opt-out request;
C. fails to provide a cost-free mechanism to which the recipient may transmit an opt out request;
D. fails to state that a recipient's request to opt out of future fax advertising will be effective only if the request identifies the telephone number(s) of the recipient's telephone facsimile machine(s) to which the request relates;
E. fails to state that the sender's failure to comply with an opt-out request within 30 days is unlawful; and
F. fails to state that a recipient's opt-out request will be effective so long as that person does not, subsequent to making such request, provide express invitation or permission to the sender, in writing or otherwise, to send such advertisements.
(Def.'s 56.1 ¶ 77; SAC ¶ 15.) Plaintiff has initiated lawsuits prior to receiving the HMH Fax alleging each of these six violations of the TCPA's opt-out requirements. (Def.'s 56.1 ¶ 78.)
The Parties dispute whether Defendant provided a domestic contact telephone number to which the recipient may transmit an opt-out request. (Def.'s 56.1 ¶ 85; Pl.'s 56.1 ¶ 85.) The HMH Fax Opt-Out Notice read as follows: "If you do not wish to receive faxes from Houghton Mifflin Harcourt in the future, and/or if you would prefer to receive communication via email, please contact your representative. Upon your request, we will remove you from our fax transmissions within 30 days." (HMH Fax.) Plaintiff correctly points out that the Opt-Out Notice itself specifically does not include a telephone numbers or communication mode through which to contact the representative. (Pl.'s 56.1 ¶ 85.) The text of the fax itself, however, includes a "1-800" fax number to which to send the fax form back to, as well as Kaczor's "1-877" telephone number and email address. (HMH Fax.)
The Parties also dispute whether Defendant provided a cost-free mechanism by which a recipient may transmit an opt-out request. (Def.'s 56.1 ¶ 88; Pl.'s 56.1 ¶ 88.)
The Parties do not dispute whether the Opt-Out Notice "[D] state[d] that a recipient's request to opt out of future fax advertising will be effective only if the request identifies the telephone number(s) of the recipient's telephone facsimile machine(s) to which the request relates; [E] fail[ed] to state that the sender's failure to comply with an opt-out request within 30 days is unlawful; and [F] fail[ed] to state that a recipient's opt-out request will be effective so long as that person does not, subsequent to making such request, provide express invitation or permission to the sender, in writing or otherwise, to send such advertisements." (Def.'s 56.1 ¶ 77.) Having reviewed the Fax and the Opt-Out Notice, the Court notes that the Opt-Out Notice did not in fact include these aforementioned instructions and warnings.
B. Procedural History
The procedural history of this case is extensive. The original Complaint was filed on July 2, 2013, naming Houghton Mifflin Harcourt Publishers, Inc. ("HMH Publishers"), an entity separate from HMH, and Kaczor as Defendants. (See Compl. (Dkt. No. 1).) On July 11, 2013, Plaintiff filed a motion to certify the class and stay the decision on the motion until discovery was completed. (See Dkt. Nos. 5-9.) Those motions were terminated by the Court for failure to follow the Court's individual practices. (See Dkt. No. 10.) At a subsequent conference, the motions were reinstated, (see Dkt. (minute entry for Sept. 13, 2013) ), but briefing was stayed pending developments in TCPA caselaw in the Second Circuit. (See Dkt. No. 20.)
On August 13, 2014, Plaintiff sought leave to file a motion to amend the Complaint to add ETS as a Defendant. (See Dkt. No. 44.) On September 5, 2014, Defendants HMH Publishers and Kaczor wrote a letter to the Court seeking leave to file a motion to dismiss the case and to compel arbitration. (See Dkt. No. 47.)
The Court held a pre-motion conference on October 2, 2014. (See Dkt. (minute entry for Oct. 2, 2014).) On November 2, 2014, Plaintiff filed an Amended Complaint, with the consent of HMH Publishers and Kaczor, to add HMH as a Defendant. (See Am. Compl. (Dkt. No. 55).)
On November 3, 2014, HMH Publishers, HMH, and Kaczor filed a motion to compel arbitration. (See Dkt. No. 56.) The same day, Plaintiff filed a motion to amend its Amended Complaint to add ETS as a Defendant. (See Dkt. No. 59.) Oral argument on all pending motions was held on July 14, 2015. (See Dkt. (minute entry for July 14, 2015).) Thereafter, the Court granted Plaintiff's motion to amend and granted Defendants' motion to compel arbitration. (See Dkt. No. 78.)
On August 5, 2015, Plaintiff filed the currently operative Second Amended Complaint, adding ETS as a Defendant. (See SAC.) That same day Plaintiff filed another motion for class certification, seeking certification of a subclass of individuals to whom ETS sent or caused to be sent, on or about November 15, 2012, at least one solicited or unsolicited facsimile advertisement substantially identical to the one sent to Plaintiff. (See Dkt. No. 81.)
On October 13, 2015, the Parties submitted, and the Court endorsed, a stipulation dismissing the Action against HMH Publishers, HMH, and Kaczor. (See Dkt. No. 99.) On November 13, 2015, the Parties executed a stipulation, endorsed by the Court, staying the case until the Supreme Court's decision in Campbell-Ewald ,
On February 1, 2016, ETS filed a motion to dismiss the SAC for failure to state a claim pursuant to Federal Rules of Civil Procedure 8(a) and 12(b)(6). (See Dkt. No. 106.) Two days later, ETS filed a letter motion requesting leave to file a Motion to allow it to deposit an amount with the Court in full satisfaction of Plaintiff's individual claim, have the Court enter judgment against ETS, and dismiss the case for lack of subject matter jurisdiction. (See Dkt. No. 110.) After a conference was held on March 8, 2016, ETS filed its motion to dismiss for lack of subject matter jurisdiction on March 18, 2016. (See Dkt. No. 127.)
On May 8, 2017, the Court denied Defendant's motions to dismiss for lack of jurisdiction and for failure to state a claim. (See Opinion & Order (May 8, 2017) ("May 8, 2017 Opinion") (Dkt. No. 233).) On May 22, 2017, ETS filed an Answer to the SAC. (See Dkt. No. 234.) On June 26, 2017, the Court informed the Parties that it would hold the motion for class certification as pending while a writ of certiorari was sought by Plaintiff in a case it was litigating in the United States Court of Appeals for the D.C. Circuit in Bais Yaakov of Spring Valley v. FCC ,
On July 11, 2017, the Court denied without prejudice Plaintiff's motion to certify a subclass, terminated the stay in the case, and directed to parties to submit a proposed case management schedule. (See Dkt. No. 240.) The Court based its decision to deny certification on the ruling of the D.C. Circuit in Bais Yaakov of Spring Valley ,
On July 19, 2017, the Court issued a Motion Scheduling Order for Defendant's Motion for Summary Judgment and held that no further discovery would take place at that time. (See Dkt. No. 243.) ) On August 17, 2017, Plaintiff filed a motion for reconsideration of the Court's denial of its the motion for class certification. (Dkt. No. 244.)
On September 1, 2017, Defendant filed the present Motion for Summary Judgment, accompanying papers and exhibits, and a Rule 56.1 Statement. (See Not. of Mot.; Defendant's Mem. of Law. in Supp. of Mot. for Summ. J. ("Def.'s Mem.") (Dkt. No. 248); Def.'s 56.1; Kleinfeld Decl.) On November 6, 2017, Plaintiff filed its Opposition to the Motion with the accompanying memorandum of law, exhibits, and a response to Defendant's Rule 56.1 Statement. (Pl.'s Mem. in Opp'n to Mot. for
On February 21, 2018, Defendant informed the Court that the Supreme Court denied Plaintiff's petition for writ of certiorari of the D.C. Circuit's order in Bais Yaakov of Spring Valley ,
Since filing their documents in support of and in opposition to the pending Motion, the Parties have submitted numerous letters alerting the Court to new authority addressing the legal questions in this case. (See Dkt. Nos. 290-93, 296-302.)
II. Discussion
A. Standard of Review
Summary judgment is appropriate where the movant shows that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; see also Psihoyos v. John Wiley & Sons, Inc. ,
"However, when the burden of proof at trial would fall on the nonmoving party, it ordinarily is sufficient for the movant to point to a lack of evidence to go to the trier of fact on an essential element of the nonmovant's claim," in which case "the nonmoving party must come forward with admissible evidence sufficient to raise a genuine issue of fact for trial in order to avoid summary judgment." CILP Assocs., L.P. v. PriceWaterhouse Coopers LLP ,
"On a motion for summary judgment, a fact is material if it might affect the outcome of the suit under the governing law." Royal Crown Day Care LLC v. Dep't of Health & Mental Hygiene ,
B. Standing
1. Article III Standing
"The jurisdiction of federal courts is defined and limited by Article III of the Constitution," and "the judicial power of federal courts is constitutionally restricted to 'cases' and 'controversies.' " Flast v. Cohen ,
"Congress's authority to create new legal interests by statute, the invasion of which can support standing, is beyond question." Strubel v. Comenity Bank ,
a. Injury-in-Fact
Defendant argues that Plaintiff did not allege any actual damages, monetary
In Spokeo , the Supreme Court, addressing whether the plaintiff had standing to asserts a claim under the Fair Credit Reporting Act ("FCRA"), held that while "a bare procedural violation, divorced from any concrete harm, [would not] satisfy the injury-in-fact requirement of Article III,"
Recently, in Strubel , a case brought pursuant to the Truth In Lending Act ("TILA"), the Second Circuit applied Spokeo in addressing whether a plaintiff alleging mere procedural violations of TILA lacked standing. See
"Read together, Spokeo and Strubel reaffirm the long-standing principle that Congress can recognize new interests-either tangible or intangible-through legislation and confer private rights of action to protect those interests." Bautz ,
The Second Circuit approvingly cited Palm Beach Golf Center-Boca in a recent summary order in a TCPA case involving a prerecorded voicemail message, concluding that the plaintiff's receipt of the voicemail "demonstrates more than a bare violation and satisfies the concrete-injury requirement for standing," because the alleged contact was exactly the type of contact from which the TCPA was intended to protect consumers. Leyse v. Lifetime Entm't Servs., LLC ,
One court in the Second Circuit has expressly held in a TCPA case that the receipt of a fax constitutes concrete injury under Article III. See Gorss Motels, Inc. v. Sysco Guest Supply, LLC , No. 16-CV-1911,
It is true that courts across the country have varied in determining whether a small number of alleged TCPA violations constitute a concrete injury. Defendant
"In summary it is clear there exists ample case law supporting the proposition that the TCPA has created a legally cognizable interest in protecting individuals and entities from unwanted faxes, and that the violation of the statute creates a real and not abstract harm." Gorss Motels, Inc. ,
b. Traceability
In addition to establishing an injury-in-fact, a plaintiff must allege that the injury "is fairly traceable to the challenged conduct of the defendant." Spokeo ,
The TCPA and its implementing regulations carve out an exemption for a sender that has an EBR with a fax recipient.
The regulation states that for an opt-out notice to be effective it must "(A) [be] clear and conspicuous and on the first page of the advertisement;" (B) "state[ ] that the recipient may make a request to the sender of the advertisement not to send any future advertisements to a telephone facsimile machine ... and that failure to comply, within 30 days, with such a request ... is unlawful;" (C) "set[ ] forth the requirements for an opt-out request under paragraph (a)(4)(v) of this section;" and (D) include (1) "[a] domestic contact telephone number and facsimile machine number,"
The regulations define an EBR in the fax context as:
a prior or existing relationship formed by a voluntary two-way communication between a person or entity and a business or residential subscriber with or without an exchange of consideration, on the basis of an inquiry, application, purchase or transaction by the business or residential subscriber regarding products or services offered by such person or entity, which relationship has not been previously terminated by either party.
ETS argues that it meets the EBR exception because the record shows that Bais Yaakov and ETS have had a continuing business relationship dating back to 1977, and that this relationship involved the purchase of ETS products and services in administering the SAT and other exams. (Def.'s Mem. 20 (citing Sussman Dep. 128-30; Def.'s 56.1 ¶¶ 62-63).) In March 2005, Bais Yaakov provided ETS its fax number via fax, and continued to do so through the start of the litigation. (See Def.'s 56.1 ¶¶ 64, 69-72.) Plaintiff made a payment of $ 494 to ETS on December 28, 2012 relating to exam administration, approximately six weeks after the HMH Fax was sent. (Id. ¶ 71.) ETS argues that therefore under
Plaintiff correctly points out, however, that "an EBR does not, by itself, 'privilege' the sending of an unsolicited advertisement; the sender must satisfy two additional conditions in order to send such a fax advertisement-one of which is to include a TCPA-compliant opt-out notice, which ETS did not do." (Pl.'s Mem. 29.) While the TCPA permits a fax advertiser to send unsolicited fax advertisements when all three of the conditions in
The Court concludes that ETS's Opt-Out Notice did not meet all three requirements of
The facts that ETS's Opt-Out Notice did not contain the required language, and that the school suffered a loss of paper, ink, time, and annoyance are sufficient to show that the alleged injury, namely the receipt of the unsolicited fax, is traceable to ETS sending the fax. See Gorss Motels ,
2. Prudential Standing
Defendant also argues that Plaintiff does not have prudential standing and falls outside the zone of interests the TCPA seeks to protect because "the TCPA was not intended to protect opportunistic serial plaintiffs bent on shaking down corporations with frivolous claims." (Def.'s Mem. 22-23.)
"To have statutory standing a plaintiff's complaint must fall within the zone of interests protected by the law invoked." Germain v. M & T Bank Corp. ,
Defendant cites Stoops ,
The TCPA's purpose is to protect individuals from telephonic and fax messages that invade their privacy. See Mims v. Arrow Fin. Servs., LLC ,
Plaintiff received Defendant's unsolicited fax advertisement on the school's only fax machine, during school hours, and accordingly lost paper, toner, and time, and suffered annoyance. (Sussman Dep. 103.) Plaintiff suffered the kind of nuisance and invasion of privacy Congress intended to protect individuals from in passing the TCPA. See Leyse v. Bank of Am. Nat'l Ass'n ,
C. Liability Under the TCPA
1. The Test to Determine "Sender" Under the TCPA
The TCPA provides in pertinent part that a person or entity may not "use any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement."
The Second Circuit has not yet ruled on what the appropriate approach or test is for determining the meaning of "sender" under the TCPA or for determining when a fax has been sent on behalf of a person or entity for TCPA purposes. However, the Seventh Circuit has applied agency law principles to determine the meaning of "sender" under the TCPA. See Bridgeview Health Care Ctr., Ltd. v. Clark ,
The Sixth and Eleventh Circuits, on the other hand, have looked to a number of factors to determine whether a fax advertisement has been sent on behalf of a person or entity for TCPA purposes, including "the degree of control that the latter entity [the person on whose behalf the fax advertisements were sent] exercised over the preparation of the faxes, [and] whether the latter entity approved the final content of the faxes as broadcast." Siding & Insulation Co. v. Alco Vending, Inc. ,
The Eleventh Circuit's reasoning in Palm Beach Golf Center-Boca is instructive. The court addressed whether a person or entity whose services are advertised in an unsolicited fax, and on whose behalf the fax is transmitted, may be held liable directly under the TCPA even though the person did not physically transmit the fax.
At least one court in the Second Circuit has cited the multi-factor test approvingly. Gorss Motels ,
Defendant argues that it was not a "sender" as defined by
The Court adopts the multi-factor analysis approach outlined by the Sixth and Eleventh Circuits in Siding & Insulation Co . and Palm Beach Golf Center-Boca for several reasons. First, the Seventh Circuit's decisions in Bridgeview did not adequately consider the letter the FCC submitted to the Eleventh Circuit in Palm Beach Golf Center-Boca , specifically the portions of the letter explaining that agency law principles were not to apply in the TCPA unsolicited fax context. See Bridgeview ,
Second, the faxes at issue in Bridgeview were sent before the FCC amended its definition of "sender" in
The Court considers Defendant's warning that "applying a strict liability approach under the FCC's regulation would lead to absurd results and unfair enforcement of the TCPA." (Def.'s Mem. 6.) Defendant cites Comprehensive Health Care Sys. ,
The factors include, but are not limited to, "the degree of control that [the person on whose behalf the fax advertisements were sent] exercised over the preparation of the faxes, [and] whether the ... entity approved the final content of the faxes as broadcast," Siding & Insulation Co. ,
Circumstances to be considered include, but are not limited to, the degree of input and control over the content of the fax(es), the actual content of the fax(es), contractual or expressly stated limitations and scope of control between the parties, privity of the parties involved, approval of the final draft of the fax(es) and its transmission(s), method and structure of payment, overall awareness of the circumstances (including access to and control over facsimile lists and transmission information), and the existence of measures taken to ensure compliance and/or to cure non-compliance with the TCPA.
Cin-Q Auto., Inc. ,
2. Application
There are several factors that tend to show that HMH did not send the Fax on ETS's behalf. ETS did not participate in generating the idea for the HMH Fax, determine the recipients and reach of the HMH fax campaign, draft the HMH Fax, engage or pay MDR and WestFax, physically send the HMH Fax, or direct any other person or entity to send the fax. (Def.'s 56.1 ¶¶ 20-30.) Indeed, the Distribution Agreement provided that HMH would "establish the marketing strategy ... [and] develop and distribute marketing and promotional materials." (Distribution Agreement §§ 5.1(i)-(ii).) Furthermore, it is undisputed that ETS had no knowledge as to where the HMH Fax was to be sent, or even that it was actually sent out. (Def.'s 56.1 ¶¶ 41, 43.) ETS did not provide HMH with the names of any potential recipients. (Id. ¶ 41.) ETS received no after-the-fact reports on the HMH Fax, nor did ETS have any contact with recipients seeking to opt out. (Id. ¶¶ 42, 53.) One HMH employee even testified that HMH would have sent the HMH Fax even if ETS had forbidden it from doing so. (Spezzano Dep. 367-368; Def.'s 56.1 ¶ 16.)
There are, however, also several factors that tend to show that HMH did send the Fax on behalf of ETS. First, ETS expected HMH to market its Criterion Service. The Distribution Agreement provided that HMH would "use commercially reasonable efforts to promote the use and sale of Criterion." (Distribution Agreement § 5.1.) HMH was solely responsible for signing up
Given ample evidence to support both sides' positions, the Court concludes that the "the question of on whose behalf the fax advertisement was sent is a question to be decided by a jury." Palm Beach Golf Center-Boca ,
Viewing the evidence in the light most favorable to Plaintiff and drawing all reasonable inferences in its favor, the Court is not able to conclude that no reasonable jury could find that the HMH Fax was sent on behalf of ETS. Therefore, the Court denies Defendant's Motion for Summary
D. Liability Under New York's GBL § 396-aa(1)
Defendant also argues that Plaintiff's New York's GBL § 396-aa(1) claim should be dismissed because ETS did not "initiate" the HMH Fax, because Plaintiff has a long-standing business relationship with ETS, and because the claims is time barred.
GBL § 396-aa provides that it is "unlawful ... to initiate the unsolicited transmission of telefacsimile messages promoting goods or services for purchase by the recipient of such messages," but the section "shall not apply to telefacsimile messages sent to a recipient with whom the initiator has a prior contractual or business relationship." GBL § 396-aa(1).
The Parties agree that ETS had a business relationship with Plaintiff dating from at least 1977, when Plaintiff sent ETS contact information so that ETS could update its mailing list "for the purpose of sending out testing program information which [ETS] believe[s] will be of interest to school personnel." (Def.'s 56.1 ¶ 62.) ETS's business relationship with Plaintiff was related to the school's administration of the SAT exam and other tests. (Id. ¶ 63.) Plaintiff made payments to ETS in connection with the purchase and sale of standardized testing services, and these payments began at least as early as November 13, 1999. (Id. ¶ 70.) And, Plaintiff made a payment of $ 494 to ETS on December 28, 2012 relating to exam administration, approximately six weeks after the HMH Fax was sent. (Id. ¶ 71.) The Court therefore concludes that Plaintiff and Defendant had a "prior contractual or business relationship," and that this relationship, which is not contested by the Parties, serves as a complete defense to Plaintiff's GBL § 396-aa claim. "Unlike the TCPA, GBL § 396-aa only requires 'a prior contractual or business relationship' to avoid liability under the statute." Graduation Source, LLC ,
Accordingly, the Court grants summary judgment to Defendant with respect to Plaintiff's GBL § 396-aa claim.
III. Conclusion
For the foregoing reasons, the Court denies Defendant's Motion for Summary Judgment with respect to Plaintiff's TCPA claims and grants the Motion with respect to Plaintiff's New York's GBL § 396-aa claim. The Clerk of Court is respectfully directed to terminate the pending Motion. (Dkt. No. 247.) The Court will hold a Status Conference on April 24, 2019 at 11:00 a.m.
SO ORDERED.
Notes
Plaintiff submitted one document containing both its 56.1 Response and 56.1 Counterstatement at Dkt. No. 269. To avoid confusion with respect to paragraph numbering, the Court references Plaintiff's Response and Counterstatement separately.
Where the Parties identify disputed facts but with semantic objections only or by asserting irrelevant facts, which do not actually challenge the factual substance described in the relevant paragraphs, the Court will not consider them as creating disputes of fact. See Baity ,
Where possible, the Court has relied on the undisputed facts in the Parties' 56.1 submissions. However, direct citations to the record have also been used where relevant facts were not included in any of the Parties' Rule 56.1 submissions, or where the Parties did not accurately characterize the record.
Defendant inaccurately states that "[t]he Distribution Agreement contained no provision allowing ETS to approve or reject the marketing plans developed by HMH." (Def.'s 56.1 ¶ 15.) The Distribution Agreement did not expressly provide for review of HMH's "marketing plans," but it clearly provided for review of marketing materials by ETS. (See Distribution Agreement §§ 4.1(vii), 5.1(viii)-(ix).)
Defendant inaccurately states that "the only approval rights retained by ETS involved protections for ETS's trademarks, in the event HMH used them in marketing Criterion, and HMH's description of the Criterion service." (Def.'s 56.1 ¶ 17 (citing Distribution Agreement §§ 3.1.2, 3.1.3, 5.1(viii).) ) Defendant correctly cites provisions of the Agreement that indeed give ETS approval rights over HMH's use of its logos and trademarks. However, these were not the only approval rights ETS retained. As Defendant itself points out, ETS also retained approval rights over ETS's representations and statements about Criterion. (Def.'s 56.1 ¶ 21 (citing Distribution Agreement §§ 5.1(viii)-(ix) ) ).
Defendant points to § 15.4 to state that the Distribution Agreement did not create an agency relationship, a joint venture, or partnership, between HMH and ETS. (Def.'s 56.1 ¶¶ 10-11.) Plaintiff counters that regardless of how the Distribution Agreement characterized the relationship between HMH and ETS, whether HMH was an agent of ETS, or in a partnership or joint venture with ETS, when it engaged in the Criterion fax campaign, is a question of law. (Pl.'s 56.1 ¶¶ 10-11.) The Court here describes the provisions of the Distribution Agreement as factual background and does not , in this section, draw any legal conclusions about the nature of the relationship between HMH and ETS based on this description alone.
Defendant inaccurately cites to Spezzano's deposition testimony to state that Riverside Publishing was a subsidiary of HMH, when she actually testified that she believed it was a division of HMH. (Compare Def.'s 56.1 ¶ 20; Spezzano Dep. 32-33, 102-03.)
Elsewhere, Defendant describes Kaczor as a Riverside Publishing employee. (Def.'s 56.1 ¶ 45.)
Defendant characterizes this communication as not providing ETS "with any information regarding potential recipients of the HMH Fax." (Def.'s 56.1 ¶ 26.) Plaintiff points out that HMH did inform ETS that it would send the fax to schools in 10 states. (Pl.'s 56.1 ¶ 26.)
The Court cites directly to the record because the Parties disagree almost entirely about the proper characterization of communications between ETS and HMH. (See Def.'s 56.1 ¶¶ 32-33, 35-36; Pl.s' 56.1 ¶¶ 32-33, 35-36.) Defendant inaccurately stated in its 56.1 that "HMH asked ETS to approve its use of ETS's logo and to verify that the description of Criterion in the HMH Fax was accurate." (Def.'s 56.1 ¶ 32). Defendant also inaccurately represented that "HMH did not ask ETS to review the opt-out language on the HMH Fax." (Def.'s 56.1 ¶ 35.) Nothing in the email exchange between Kaczor and Yetman indicates ETS's review was limited only to the use of the logo and the description of the product, and not the opt-out language. (See Nov. 7-12 Kaczor-Yetman Emails; Nov. 7-9 Kaczor-Yetman Emails.)
The Parties dispute whether ETS's review of the HMH Fax constituted a "role in drafting" the Fax. Defendant states that "ETS had no role in drafting any part of the HMH Fax, nor did ETS request that HMH draft the HMH Fax." (Def.'s 56.1 ¶ 22.) Plaintiff disputes this characterization, pointing out that ETS knew HMH was going to send out a fax advertisement promoting the Criterion System to schools in 10 states, and ETS reviewed and approved the Criterion Fax. (Pl.'s 56.1 ¶ 22.) Semantics aside, what is clear from the email exchanges between Yetman, Kaczor, and Haller, and Kaczor and Spezzano's testimony, is that ETS reviewed and approved the contents of the HMH fax, although it did not provide any substantive feedback or require that any changes be made to the fax.
Defendant correctly points out that the HMH Fax does not state that it is from ETS, (Def.'s 56.1 ¶ 50), and that the text of the HMH Fax does not make any reference to ETS, (id. ¶ 51). Plaintiff counters that "[t]he ETS logo is at the top of the Criterion Fax as part of the 'branding' of ETS's Criterion Service, which ETS desired to make sure that people associated the Criterion Service with ETS." (Pl.'s 56.1 ¶ 51 (citing Bellin Decl. Ex. D, at 25, 33-34 (Deposition of Pamela Treves ("Treves Dep.") ).) The portions of deposition transcript cited to, however, do not support this exact proposition. Treves testified that ETS did not do its own marketing, but instead used distributors to market and sell its product, so that ETS "ma[d]e its money" through royalties. HMH was the distributor responsible for marketing the Criterion product. (Treves Dep. 25-26.) Trevers testified that ETS expected HMH to do "everything they can to effectively grow the business." (Id. at 34.)
The Parties submitted different portions of Sussman's deposition transcript as exhibits at Dkt. Nos. 250 and 265. Where the Parties include different portions of transcript, the Court will cite directly to the transcript rather than to separate exhibits.
The Court cites directly to the record because the Parties disagree almost entirely about the proper characterization of the harm or damages Plaintiff suffered as a result of receiving the HMH Fax. (See Def.'s 56.1 ¶¶ 56-61; Pl.s' 56.1 ¶¶ 56-61.)
Plaintiff stated that it seeks "statutory damages under the TCPA of at least $ 61,985,000, or $ 185,955,000 if the Court finds that Defendant's [actions] ... were willful and/or knowing," on behalf of itself and proposed class A and B, for the 17,710 copies of the fax sent by Defendant. (Pl.'s Reply to Def.'s Interrog. 3.) Plaintiff also stated that "Defendant is also liable to Plaintiff and proposed Class C for statutory damages under N.Y. Gen. Bus. L. [ ] § 396-aa for being the sender of the Fax .... The amount of the statutory damages is $ 100 per Fax." (Id. at 4.)
Plaintiff expressed a desire to certify other subclasses, but requested that the Court defer any decision on those Motions. Plaintiff did not brief any certification issues with respect to the remaining subclasses. (See Dkt. No. 81.)
On August 9, 2018, well after the Parties submitted their briefs, counsel for ETS submitted a letter to the Court alerting it to new authority related to standing under the TCPA. (See Letter from Sharyl A. Reisman, Esq., to Court (Dkt. No. 296).) In St. Louis Heart Center, Inc. v. Nomax, Inc. ,
The Parties spend much effort analogizing the Opt-Out Notice here to the various deficient notices found to either constitute or not constitute concrete injury in Strubel ,
The Second Circuit concluded that two of the plaintiff's disclosure challenges demonstrated concrete injury, specifically the required notices that certain identified consumer rights pertain only to disputed credit card purchases not yet paid in full, and a consumer dissatisfied with a credit card purchase must contact the creditor in writing or electronically. Strubel ,
[t]hese procedures afford [ ] protection by requiring a creditor to notify a consumer ... of how the consumer's own actions can affect his rights with respect to credit transactions. A consumer who is not given notice of his obligations is likely not to satisfy them and, thereby, unwittingly to lose the very credit rights that the law affords him. For that reason, a creditor's alleged violation of each notice requirement, by itself, gives rise to a "risk of real harm" to the consumer's concrete interest ....
By contrast, the Second Circuit concluded that two of the plaintiff's disclosure challenges failed to demonstrate concrete injury, specifically the required notices that cardholders wishing to stop payment on an automatic payment plan had to satisfy certain obligations, and that the bank was statutorily obliged not only to acknowledge billing error claims within 30 days of receipt but also to advise of any corrections made during that time. Id. at 191-94. With respect to the automatic payment plan, the court concluded that because the bank did not offer an automatic payment plan and because plaintiff did not allege she participated in such a plan, there was "no risk of harm at all." Id. at 192.
With respect to the billing error notice, the court concluded that because the plaintiff conceded that "she never had reason to report any billing error in her credit card statements .... she does not-and cannot-claim concrete injury." Id. at 193. The Second Circuit expressly stated, however, that it did not mean "to suggest that a consumer must have occasion to use challenged procedures to demonstrate concrete injury from defective notice." Id. Instead, the Second Circuit reasoned, "the allegedly flawed notice [did not cause the plaintiff's] credit behavior to be different from what it would have been had the credit agreement tracked the pertinent 30-day notice," and found this scenario distinguishable from the two procedural violations it concluded did present concrete injury, because there, the court could "reasonably assume that defective notices about a consumer's own obligations raise a sufficient degree of real risk that the unaware consumer will not meet those obligations." Id.
Defendant argues that because Plaintiff "never even read the opt-out provision, never tried to opt out, and knew anyway how to opt out if it had wanted to," Plaintiff does not state an injury-in-fact. (Def.'s Mem. 21.) In particular, Defendant argues that the Opt-Out Notice here is more akin to the two notices the Second Circuit concluded did not constitute concrete injury, because here too "(1) [Plaintiff] never tried to exercise its right under the opt-out notice, (2) the alleged defects did not alter [Plaintiff's] behavior in any way ( [because] it never even read the opt-out clause and knew how to opt out anyway), and (3) there is no evidence [Defendant] failed to act as a result of the alleged notice deficiencies [as it never] denied anyone the right to opt out." (Id. at 22.)
Plaintiff argues that the Opt-Out Notice here is like the two deficient notices in Strubel that did constitute concrete injury, because Defendant did not include the specific requirements of a successful opt-out notice pursuant to
The Court finds that Plaintiff's application of Strubel is correct. That Plaintiff did not attempt to opt out is not outcome-determinative. The Strubel court made clear that "a consumer must have occasion to use challenged procedures to demonstrate concrete injury from defective notice."
The Court is mindful of the fact that Plaintiff does appear in numerous TCPA lawsuits and that it may be unlikely that Plaintiff is simply unlucky in being a purported victim of TCPA violations, but it remains the case that Plaintiff does operate as a going concern.
Also in that letter, the FCC stated that principles of agency, apparent authority and ratification, which the FCC had previously ruled applied to TCPA causes of action for illegal telemarketing telephone calls and text messages, do not apply to TCPA causes of action for illegal fax advertising under
Plaintiff argues that the Court does not have the jurisdiction to and should not strike down the second half of
In Siding & Insulation Co. , the claim that the fax was sent on behalf of the defendant found support from the facts that that the defendant knew the fax transmitter had sent faxes on its behalf before and obtained customers for defendant that way, that the defendant provided information to be include in the advertisements, and that the fax advertisements promoted the defendant's services.
Because the Court concludes that the Parties' prior business relationship is a total defense to Plaintiff's GBL § 396 claim, it need not address Defendant's other arguments.