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The Siding and Insulation Co. v. Alco Vending, Inc.

United States District Court, N.D. Ohio, Eastern Division

August 25, 2017




         Arising under the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227(b)(1)(C), this junk fax case is before the Court on two motions: (1) the second motion of plaintiff Siding and Insulation Co. (“plaintiff” or “Siding”) for class certification (Doc. No. 113 [“Mot. Class”]), and (2) the second motion of defendant Alco Vending, Inc. (“defendant” or “Alco”) for summary judgment. (Doc. No. 120 [“MSJ”].) Defendant opposes plaintiff's request for class certification (Doc. No. 118 [“Mot. Class Opp'n”]), and plaintiff has filed a reply. (Doc. No. 121 [“Mot. Class Reply”].) Plaintiff, in turn, opposes defendant's summary judgment motion (Doc. No. 124 [“MSJ Opp'n”]), and defendant has replied. (Doc. No. 125 [“MSJ Reply”].) On June 23, 2017, the Court held a hearing on these motions.[1] For the reasons that follow, defendant's second summary judgment motion and plaintiff's second motion to certify the class are both denied.

         I. Background

         This case is one of a string of lawsuits filed in connection with the activities of a company known as Business to Business Solutions (“B2B”), an entity run by Caroline Abraham out of her home in New York and in concert with a Romanian company known as Macaw (where appropriate, collectively referred to as “B2B/Macaw”), which sold fax advertising services to companies in the United States. “B2B purchased a list of fax numbers from a company called InfoUSA, Inc. For a fee, B2B faxed clients' advertisements to hundreds of numbers from that list, a practice known as ‘fax-blasting.'” Bridging Communities Inc. v. Top Flite Fin. Inc., 843 F.3d 1119, 1122 (6th Cir. 2016) (quotation marks and internal citations omitted). To date, the activities of B2B and Macaw have sparked over 100 lawsuits.[2]Compressor Eng'g Corp. v. Thomas, 319 F.R.D. 511, 517 (E.D. Mich. 2016) (quotation marks and citation omitted).

         Alco, the defendant is this particular case, is in the business of placing and stocking vending machines for its customers. (Doc. No. 120-1 (2010 Deposition of Richard Gajdos [“Gajdos Dep. I”]) at 7-8[3].) At all times relevant to the present litigation, Richard Gajdos was the president of Alco and owned 100% of its stock. (Id. at 7, 11.) Sometime in 2005, Gajdos received one or more unsolicited faxes from B2B offering to send faxes on behalf of Alco advertising its vending machine services. (Gajdos Dep. 1 at 19-20; Doc. No. 120-2 (2016 Deposition of Richard Gajdos [“Gajdos Dep. II”]) at 9-10, 21.) Gajdos contacted B2B and spoke with someone who referred to himself as Kevin Wilson.[4] Wilson explained that B2B had a list of businesses in Alco's area (and with the same area code) that would receive the fax advertisements. He represented that B2B could send faxes to these business “with no problem to” Gajdos. (Gajdos Dep. II at 10, 13.) Wilson sent Gajdos several sample advertisements. Gajdos settled on one particular advertisement, after offering his input on certain content details. (Id. at 10-11, 18-19; Gajdos Dep. I at 22.)

         During the course of their negotiations, Wilson made several representations to Gajdos regarding the nature of the advertising services offered by B2B. He assured Gajdos that B2B already had communicated with the businesses on the recipient list, and that B2B had a right to send them a fax because it “had a business relationship with them.” (Gajdos Dep. I at 23-24; see Gajdos Dep. II at 24.) Wilson also volunteered that the faxes were “100 percent legal, ” reiterating that B2B “had a full and open relationship with” each of the proposed recipients. (Gajdos Dep. I at 25-26; Gajdos Dep. II at 13, 20-21.)[5] B2B/Macaw controlled the list of recipients, though Gajdos admitted that he never asked to see the list and believed it did not contain any of Alco's clients. (Gajdos Dep. I at 23-24; Gajdos Dep. II at 24-25, 44-45; Doc. No. 120-6 (Deposition of Caroline Abraham [“Abraham Dep.”]) at 95-97, 100-01.)

         Gajdos ultimately authorized B2B to transmit the advertisement and paid for this service by faxing a check for $188 to B2B. (Gajdos Dep. I at 11.) Following payment, the initial round of faxes was sent in November 2005 by Macaw working with B2B.

         After this first wave of faxes went out, Gajdos received “a couple” of complaints from attorneys representing recipients who did not consent to receiving the faxes. Some of the attorney letters threatened litigation. Gajdos did not read the letters or complaints, but directed his staff to “refer the complaint[s] right to Mr. Wilson . . . it was [B2B's] job[.]” (Gajdos Dep. II at 48.) For his part, Wilson assured Gajdos “he would have [the complaining businesses] taken off the list. He said he would take care of it.” (Gajdos Dep. at 32, 56.) Gajdos ultimately authorized and paid B2B to send a second wave of fax advertisements that were transmitted in July 2006. Between the two attempts, Macaw successfully sent 7, 055 transmissions to 4, 547 unique fax numbers. (Doc. No. 113-4 (Expert Report of Robert Biggerstaff [“Biggerstaff Ex. Rpt.”]) ¶ 21.)

         Plaintiff was one of the businesses to receive one or more of the faxes sent by B2B/Macaw advertising the services of Alco. On May 24, 2011, plaintiff brought the present action alleging that, by authorizing the faxes, Alco violated the TCPA inasmuch as plaintiff did not invite or give permission to Alco to send the faxes. (Doc. No. 1 (Complaint [“Compl.”]) ¶ 13.) Plaintiff moved for certification of the class of all those who received the allegedly offending faxes, and defendant moved for summary judgment. The motions were referred to the magistrate judge who issued a report and recommendation that summary judgment be granted to defendant and the class certification motion be denied as moot. The Court adopted the R&R and dismissed the action.

         On appeal, the Sixth Circuit reversed. In so ruling, the court found that the magistrate judge and the district court had applied the wrong standard when evaluating Alco's conduct under the TCPA. Because the faxes were sent between November 2005 and July 2006, the court determined that the “on-whose-behalf” standard governed. Siding & Insulation Co. v. Alco Vending, Inc., 822 F.3d 886, 898 (6th Cir. 2016). The court explained that, pursuant to this standard, a plaintiff alleging a violation of the TCPA, 47 U.S.C. § 227(b)(1)(C), “must do more than simply show that the defendant's goods or services were advertised in the offending fax, but need not establish a complete agency relationship between the defendant and the fax broadcaster.” Id. (citing Cin-Q Auto., Inc. v. Buccaneers Ltd. P'ship, No. 8:13-cv-01592-AEP, 2014 WL 7224943, at *1 (M.D. Fla. Dec. 17, 2014) (explaining that the standard is “more forgiving than a blanket application of per se liability but somewhat more stringent than vicarious liability through common law agency[]”)).

         The Sixth Circuit further identified a number of factors that guide a court's consideration of whether a fax broadcaster had sent the transmission “on behalf of” another entity. Id. at 898-99. Applying these factors to the record in this case, the court observed that some of the factors indicate that “B2B did not act on Alco's behalf[, ]” while others “tend to support the conclusion that B2B did in fact act on Alco's behalf.” Id. at 899-901. The court remanded the matter to the district court “to apply the correct legal standard.” Id. at 901. The Sixth Circuit noted that, on remand, the district court could allow further discovery and permit any such “further proceedings as it determines is [sic] necessary to effectuate the standard described above.” Id. It also directed the district court to “reconsider whether, after conducting such proceedings, Siding's motion for class certification remains moot.” Id.

         The case was reassigned to the undersigned pursuant to General Order 2015-12, due to the original judge's retirement. At the request of counsel, the Court permitted the parties to conduct limited discovery before re-briefing plaintiff's request for class certification. (Minutes, dated 6/28/16.) Following this period of discovery, the parties filed the previously mentioned pending motions.

         II. Defendant's Second Summary Judgment Motion

         A. Standard of Review

         Under Fed.R.Civ.P. 56(a), when a motion for summary judgment is properly made and supported, it shall be granted “if 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.” An opposing party may not rely on allegations or denials in its own pleading; rather, by affidavits or by materials in the record, the opposing party must set out specific facts showing a genuine issue for trial. Fed.R.Civ.P. 56(c)(1). Affidavits or declarations filed in support of or in opposition to a motion for summary judgment “must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.” Fed.R.Civ.P. 56(c)(4). A movant is not required to file affidavits or other similar materials negating a claim on which its opponent bears the burden of proof, so long as the movant relies upon the absence of the essential element in the pleadings, depositions, answers to interrogatories, and admissions on file. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

         In reviewing summary judgment motions, the Court must view the evidence in a light most favorable to the non-moving party to determine whether a genuine issue of material fact exists. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); White v. Turfway Park Racing Ass'n, 909 F.2d 941, 943-44 (6th Cir. 1990), impliedly overruled on other grounds by Salve Regina Coll. v. Russell, 499 U.S. 225, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991). A fact is “material” only if its resolution will affect the outcome of the lawsuit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Determination of whether a factual issue is “genuine” requires consideration of the applicable evidentiary standards. Thus, in most civil cases the Court must decide “whether reasonable jurors could find by a preponderance of the evidence that the [non-moving party] is entitled to a verdict[.]” Id. at 252.

         Summary judgment is appropriate whenever the non-moving party fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial. Celotex, 477 U.S. at 322. Moreover, “[t]he trial court no longer has the duty to search the entire record to establish that it is bereft of a genuine issue of material fact.” Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479-80 (6th Cir. 1989) (citing Frito-Lay, Inc. v. Willoughby, 863 F.2d 1029, 1034 (D.C. Cir. 1988)). The non-moving party is under an affirmative duty to point out specific facts in the record as it has been established that create a genuine issue of material fact. Fulson v. City of Columbus, 801 F.Supp. 1, 4 (S.D. Ohio 1992) (citation omitted). The non-movant must show more than a scintilla of evidence to overcome summary judgment; it is not enough for the non-moving party to show that there is some metaphysical doubt as to material facts. Id. (citation omitted).

         B. Governing Law Under the TCPA

         The TCPA makes it unlawful “to use any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement, ” unless certain facts exist. TCPA, 47 U.S.C. § 227(b)(1)(C).[6] An unsolicited advertisement is defined in the TCPA 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.'” Palm Beach Golf Center-Boca, Inc. v. Sarris, 212 F.Supp.3d 1286, 1291 (S.D. Fla. 2016) (quoting 47 U.S.C. § 227(a)(5)). However, the TCPA is silent as to who qualifies as a “sender” of junk faxes. Recognizing this ambiguity, the Federal Communications Commission (“FCC”) issued an order in 1995, clarifying that “the entity or entities on whose behalf facsimiles are transmitted are ultimately liable for compliance with the rule banning unsolicited facsimile advertisements[.]” In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 10 FCC Rcd. 12391, 12407 (1995).

         As the Sixth Circuit explained in its decision remanding the present case, “[t]o decide whether one entity (such as B2B in this case) broadcast a potentially unauthorized fax ‘on behalf of' another entity (such as Alco in this case), courts have considered a variety of factors. These factors include the degree of control that the latter entity exercised over the preparation of the faxes, whether the latter entity approved the final content of the faxes as broadcast, and the nature and terms of the contractual relationship between the fax broadcaster and the latter entity.” Siding, 822 F.3d at 898-99 (citation omitted). The court went on to note that “[o]ne court has summarized the ‘on-whose-behalf' inquiry as follows:

Circumstances to be considered include, but are not limited to, the degree of input and control over the content of the fax(ex), 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.

Id. at 899 (quoting Cin-Q Auto, 2014 WL 7224943, at *7).[7] The Sixth Circuit explained that courts applying the “on-whose-behalf” standard do not apply it “with a layperson's understanding of what that phrase might mean; instead, they treat the phrase ‘on whose behalf' as a term of art that should be interpreted in a way that seeks to hold liable the entity ultimately at fault in causing a TCPA violation.” Id.

         As set forth above, employing the factors identified in its decision of remand, the Sixth Circuit noted that several factors favored a finding that the faxes were not set on behalf of Alco. Specifically, the court found that the factors favoring a finding that B2B did not act on behalf of Alco included that Gajdos had no or limited access to and control over the fax list; that when Gajdos received complaints he contacted Wilson who promised to take care of it; assurances made by B2B to Gajdos that B2B had a full and open relationship with each entity on the list; that a “factfinder could conclude that Alco reasonably relied on these representations in deciding to enter an advertising arrangement with B2B that Alco believed would not violate the TCPA or any other laws[]”; and that the faxes themselves indicated that the message was the property and sole responsibility of B2B. Siding, 822 F.3d at 900. The court noted that these last representations “could be viewed by a factfinder as tending to show that Alco lacked any significant input and control over the content of the fax(es)[.]” Id. (citation omitted).

         Of course, the Sixth Circuit also found that some factors tended to favor a finding that B2B did act on behalf of Alco. The court highlighted the fact that Gajdos admitted Alco obtained clients as a result of the faxes, though the court warned that Gajdos' admission, as a lay person, was not an endorsement that the “on-whose-behalf” standard had been met. The court also found significant the fact that Gajdos provided B2B information about Alco to craft the ad, showing some control. Additionally, the court observed that the faxes clearly promoted Alco's services. Id. at 900-01.

         Finally, the Sixth Circuit instructed that on remand the district court and/or the jury “may take into account the reasonableness of Alco's reliance on B2B's representations that B2B would be solely responsible for the contents of the advertisements and that the faxes would be sent only to businesses that had previously consented to receive fax advertisements from B2B. . . . Alco's efforts to determine whether it was dealing with a reputable company or with a fly-by-night outfit is therefore a relevant factor for the court or a jury to consider.” Id. at 901.

         C. Discussion

         Alco, recognizing that the Sixth Circuit underscored the fact that the term “on whose behalf” is a term of art designed to impose liability on the entity responsible for the TCPA violation, argues that “[a]s between B2B/Macaw and Alco, there is no contest: B2B/Macaw is the source and the party at fault for this violation.” (MSJ at 4133.) However, the standard does not seek to identify the guiltier party. Under the TCPA, “the sender and fax broadcaster may be held jointly and severally liable[.]” In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991 (Junk Fax Prevention Act of 2005), 21 FCC Rcd. 3787, 3808 (2006). In fact, under the TCPA, it is the advertiser who is presumptively liable, and the broadcaster is only jointly liable where it has a “high degree of involvement” in the unlawful activity. Id. While the Court certainly considers B2B/Macaw's role in the alleged violations, it must determine whether Alco is liable regardless of whether B2B/Macaw is too.

         On that note, Alco posits that it was fraudulently induced by B2B/Macaw to purchase their fax advertising services, and that B2B/Macaw made an “independent decision” to send the faxes to entities that it knew had never provided consent to receive such transmissions. (MSJ at 4120.) According to Alco, this action renders B2B/Macaw “‘ultimately responsible' for the violations of the [TCPA]” alleged by plaintiff. (Id.) Applying the factors identified in cases like Cin-Q Auto and the Sixth Circuit's decision in this case, defendant insists that it is entitled to judgment as a matter of law.

         The focal point of Alco's motion is its repeated representation that Wilson promised that B2B/Macaw would only send faxes to entities that had consented to receive them. (MSJ at 4122 [“B2B/Macaw repeatedly provided Alco with written assurance it would only send faxes to persons who had consented.”]; id. at 4132 [“B2B/Macaw promised to provide Alco with the legal service of sending advertising faxes to persons who had consented.”], emphasis in original.) Alco goes so far as to state that “[i]t is also undisputed that Alco explicitly instructed B2B/Macaw to limit the faxing only to persons who had consented to receive fax advertisements.” (Id. at 4120, all emphasis in original.) Defendant misrepresents the testimony in the record.

         In his 2010 deposition, Gajdos testified Wilson told him that B2B “had a list of businesses that they would send the fax to” and that “they already had communications with, that they had the right to send them a fax. They already had a business relationship with them.” (Gajdos Dep. I at 21-24.) He further testified that Wilson assured him that B2B “had their authorization to send a fax[, ]” that B2B had “a full and open relationship with all of the faxes they were sending out[, ]” and that its services were “100 percent legal[.]” (Id. at 25-26, 34.) In his 2016 deposition, Gajdos reiterated that he was told that B2B had a relationship with the intended ...

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