MATTHEW N. FULTON, D.D.S., P.C., individually and as the representative of a class of similarly situated persons, Plaintiff-Appellant, v. ENCLARITY, INC.; LEXISNEXIS RISK SOLUTIONS, INC.; LEXISNEXIS RISK SOLUTIONS GA, INC.; LEXISNEXIS RISK SOLUTIONS FL, INC.; JOHN DOES 1–12, Defendants-Appellees.
No. 17-1380
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
Decided and Filed: November 2, 2018
RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit I.O.P. 32.1(b) File Name: 18a0247p.06
Before: GIBBONS, WHITE, and STRANCH, Circuit Judges
COUNSEL
ON BRIEF: Phillip A. Bock, David M. Oppenheim, BOCK, HATCH, LEWIS & OPPENHEIM, LLC, Chicago, Illinois, for Appellant. Tiffany Cheung, Benjamin F. Patterson, MORRISON & FOERSTER LLP, San Francisco, California, Joseph R. Palmore, Bryan J. Leitch, MORRISON & FOERSTER LLP, Washington, D.C., for Appellees.
STRANCH, J., delivered the opinion of the court in which WHITE, J., joined. GIBBONS, J. (pg. 11), delivered a separate dissenting opinion.
JANE B. STRANCH, Circuit Judge. Plaintiff Matthew N. Fulton, DDS, P.C., a dental practice in Linden, Michigan, brings this suit on behalf of itself and others similarly situated. Fulton alleges that it received a fax from Defendants in September 2016 that was an unsolicited advertisement under the Telephone Consumer Protection Act (TCPA),
I. BACKGROUND
This lawsuit stems from a fax Fulton‘s dental practice received on September 7, 2016.1 The fax provided in pertinent part:
Re: Fax Number Verification for Delivery of Patient PHI (Internal ID: 34290748)
The purpose of this Fax Verification Request is to help preserve the privacy and security of your patients’ Protected Health Information (“PHI“), as defined by the Health Insurance Portability and Accountability Act (“HIPAA“). LexisNexis is seeking your cooperation to verify or update your information. We validate and update the fax in our system so our clients can use them for clinical summaries, prescription renewals, and other sensitive communications. Verifying the practice address, phone number[,] and your secure fax number(s) for this location will minimize the potential privacy risks that could arise from information sent to an unsecured location. As part of our effort to assure that the [sic] transmission of PHI, it is vital to verify the information for Dr. Matthew Norman Fulton, DDS is accurate. This information will be verified once each year.
Fulton attached the LexisNexis Provider FAQs as an exhibit to the complaint. The FAQs indicate that the “system” referred to in the fax is the Master Provider Referential Database. Defendants explain that providers’ contact information will be licensed to their “customer base,” which is comprised of “health insurance plans, preferred provider organizations, pharmacy network companies, pharmacy benefit managers, property and casualty insurance carriers, retail pharmacies, government entities, as well as life sciences companies (pharmaceutical and medical device manufacturers).” (R. 1-3 at PageID 35) According to the FAQs, Defendants “have compiled the largest, most accurate database of medical provider business and professional demographic data in the United States.” (Id. at PageID 36) The FAQs also indicate what will happen to providers’ verified contact information:
Our customers use provider information in a variety of ways, including communicating patient prescription data, validating provider identity for claims payments, reimbursing providers for medical bills, updating provider directories, renewing prescriptions, researching health care practitioners to invite them to become part of a provider network, sending important notifications, such as product recalls, and other uses.
(Id. at PageID 37) Validating one‘s contact information, the FAQs state, will “help to drive more business to you.” (Id. at PageID 40)
Other portions of Defendants’ website promote the advantages of using Defendants’ “ProviderLookup” product, which is their “Web-based, real-time provider information search service” that uses the information in the Master Provider Referential Database. (R. 1-4 at PageID 43) In other words, the contact information gathered by faxes like the one Fulton received is used to build the Master Provider Referential Database, which Defendants sell to their customer base through ProviderLookup.
Fulton also contended that the fax was “a pretext to increase awareness and use of Defendants’ proprietary database service and increase traffic to Defendants’ website.” (Id.) According to Fulton, “Defendants consolidate healthcare provider contact information into their proprietary Master Provider Referential Database, a commercially available product or service that Defendants sell or lease to their subscribers and licensees.” (Id. at PageID 8) The complaint set forth class allegations, including that Defendants sent the same fax that Fulton received to at least 39 other similarly situated individuals.
Defendants responded to the complaint by filing a motion to dismiss for failure to state a claim pursuant to
II. DISCUSSION
A. Standard of Review
We review de novo the grant of a motion to dismiss under
B. The Sandusky Decision
We begin by clarifying this court‘s decision in Sandusky, 788 F.3d 218. The district court‘s opinion is founded upon its interpretation of Sandusky, which it understood as compelling its holding that the TCPA claim fails unless the commercial nature of the fax is evident from the face of the fax. The district court also adopted the Defendants’ argument that Sandusky requires a fax to “propose a commercial exchange between the sender and the recipient” to trigger TCPA coverage. These holdings reflect an improper understanding of Sandusky and impose undue restrictions on TCPA claims.
Sandusky, a summary judgment decision, addressed two faxes sent to a chiropractor by Medco Health Solutions, a benefit manager that acted “as an intermediary between health plan sponsors (often employers) and prescription drug companies.” 788 F.3d at 220. The faxes contained notifications of certain drugs included in Medco‘s “formulary,” the list of drugs
The plaintiff in Sandusky also asked that the faxes be interpreted in the context of Medco‘s previous business, a mail-order pharmacy, and Medco‘s history of noncompliance with state laws when operating that pharmacy. Id. at 225. We declined to factor in this “extraneous and speculative down-the-stream evidence” for the purpose of determining whether “Medco might financially benefit from these faxes several locks down the stream of commerce.” Id. Sandusky stands for the proposition that in this situation, an “ancillary, remote, and hypothetical economic benefit later on does not convert a noncommercial, informational communication into a commercial solicitation.” Id. at 225. But nowhere does Sandusky confine a court‘s consideration of TCPA claims to the face of the challenged fax. To the contrary, Sandusky repeatedly surveyed “the record evidence” for proof of a financial benefit to Medco and, in so doing, went beyond the faces of the two faxes. Id.; see also id. at 222 (reviewing the record evidence). Sandusky also acknowledged that a fax could be an advertisement without overtly offering a product or service for sale, such as offers for free seminars that turn out to be pretext for a later solicitation. Id. at 225 (citing Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991; Junk Fax Prevention Act of 2005, 71 Fed. Reg. 25,967, 25,973 (May 3, 2006)). Finding a fax to be pretext for a subsequent advertising opportunity
Sandusky thus does not entail the two requirements imposed by the district court: that the fax must propose a direct commercial transaction between the sender and the recipient and that courts are constrained to examining only the face of the fax. In contravention of such requirements, Sandusky recognizes that the fax “need not be an explicit sale offer” and that the “best ads” are sometimes not “so overt,” and then concludes that TCPA coverage is accorded where the fax is “an indirect commercial solicitation, or pretext for” such a solicitation.” Id. at 225. This understanding of the TCPA is buttressed by the text of the statute itself, which likewise lacks the requirements imposed by the district court. See
This clarification of Sandusky governs our analysis. The district court misconstrued Sandusky when it disregarded the exhibits attached to Fulton‘s complaint. The exhibits are part of the record, and we may consider them when evaluating Fulton‘s TCPA claim. And we may do so without converting Defendants’ motion to dismiss into one for summary judgment. Commercial Money Ctr., Inc. v. Ill. Union Ins. Co., 508 F.3d 327, 335–36 (6th Cir. 2007) (explaining that courts may consider documents “referred to in the pleadings” and “integral to the claims . . . without converting a motion to dismiss into one for summary judgment“). Under this circuit‘s precedent, “documents attached to the pleadings become part of the pleadings and may be considered on a motion to dismiss.” Id. (citing
C. Unsolicited Faxes Under the TCPA
The TCPA prohibits sending a fax that is an “unsolicited advertisement” unless, among other requirements, the fax has a satisfactory opt-out notice. See
The TCPA creates a private right of action for recipients of unsolicited advertisements, which provides for statutory damages of $500 per violation and for injunctive relief to prevent future violations.
Whether a fax constitutes an unsolicited advertisement is a question of law. See Sandusky, 788 F.3d at 221. The TCPA defines an unsolicited advertisement as “any material advertising 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.”
The Commission concludes that facsimile messages that promote goods or services even at no cost, such as free magazine subscriptions, catalogs, or free consultations or seminars, are unsolicited advertisements under the TCPA‘s definition. In many instances, “free” seminars serve as a pretext to advertise commercial products and services. Similarly, “free” publications are often part of an overall marketing campaign to sell property, goods, or services. For instance, while the publication itself may be offered at no cost to the fascimile recipient, the products promoted within the publication are often commercially available. Based on this, it is reasonable to presume that such messages describe the “quality of any property, goods, or services.” Therefore, facsimile communications regarding such free goods and services, if not purely “transactional,” would require the sender to obtain the recipient‘s permission beforehand, in the absence of an [established business relationship].
71 Fed. Reg. at 25973. According to Fulton‘s complaint, providing verified contact information paves the way for Defendants’ customers to “send additional marketing faxes to recipients.” (R. 1 at PageID 5) This allegation finds some support in the FAQs, which confirm that Defendants’ customers use the system to “invite [providers] to become part of a provider network” and “send[] important notifications,” among “other uses.” (R. 1-3 at PageID 37) The
The Second Circuit recently considered whether a TCPA plaintiff who claimed that a fax was pretextual had satisfied the
The decision in Boehringer centered on the alleged “commercial nexus” between the free dinner offered in the fax and the defendant‘s “business, i.e., its property, products, or services.” Id. at 96. According to Fulton, that same nexus exists here: The fax solicits information to verify its system of provider information, which Defendants make commercially available to other health care organizations, who may subject Fulton to future unsolicited advertising.
Taking the complaint‘s allegations as true and drawing all inferences in Fulton‘s favor, as we must at the motion to dismiss stage, we find that Fulton has adequately alleged that the fax
D. Fulton‘s State Law Claim
After dismissing Fulton‘s TCPA claim, the district court dismissed Fulton‘s state law conversion claim. The district court concluded that “[b]ecause no federal law claim remains before the Court, and because this case is in its preliminary stages, the court concludes that the litigation of Plaintiff‘s state law claim would most appropriately be conducted in state court.” Fulton, 2017 WL 783499, at *5. Because Fulton stated a TCPA claim over which the district court had original jurisdiction, Fulton‘s conversion claim also remains before the district court.
III. CONCLUSION
For the foregoing reasons, we REVERSE the judgment in favor of Defendants and REMAND Fulton‘s TCPA and conversion claims for further proceedings consistent with this opinion.
JULIA SMITH GIBBONS, Circuit Judge, dissenting. I agree with the majority‘s analysis of Sandusky‘s import and its assessment of the district court‘s errors. But I disagree with its legal conclusion that the fax at issue was an unsolicited advertisement under TCPA.
The majority holds that Fulton has plausibly alleged that the fax was an unsolicited advertisement, because “it alleged that the fax served as a pretext to send Fulton additional marketing materials.” (Majority at 2.) However, I respectfully disagree on this point. In its complaint, Fulton alleges that if it updated its contact information as requested by the fax, it would then have agreed to Enclarity‘s privacy policy, which in turn would have allowed Enclarity to send promotional material for other products and services. But, as Enclarity refutes, this argument is highly speculative. There are no alleged facts suggesting that Enclarity would have used, or even intended to use, this fax as a stepping stone to future solicitations of Fulton. Moreover, as Enclarity points out, Fulton is able to manage any of its communications preferences and opt out of receiving any future faxes from Enclarity. A conclusory allegation stating that Enclarity sent this request for information as a pretext to advertise is not sufficient to survive a motion to dismiss. See Ashcroft v. Iqbal, 556 U.S. 662 (2009) (stating that “a complaint must contain sufficient factual matter,” and that it will not suffice “if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement‘” (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007))).
Thus, I believe the fax was not an advertisement under the TCPA because its primary purpose was to improve the service and not to solicit business or sales from, or through, Fulton. Accordingly, we should affirm the district court‘s decision based on alternative reasoning.