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Sawyer v. KRS Biotechnology, Inc.

United States District Court, S.D. Ohio, Western Division

May 30, 2018

WILLIAM P. SAWYER d/b/a SHARONVILLE FAMILY MEDICINE, Plaintiff,
v.
KRS BIOTECHNOLOGY, INC., et al., Defendants.

          Dlott, J.

          REPORT AND RECOMMENDATION

          STEPHANIE K. BOWMAN UNITED STATES MAGISTRATE JUDGE.

         Plaintiff filed this case against Defendant as a putative class action under the “junk fax” provision of the Telephone Consumer Protection Act of 1991 (“TCPA”), 47 U.S.C. § 227(b)(1)(C). On March 29, 2018, the presiding district judge referred all pretrial and post-judgment motions and procedures to the undersigned magistrate judge. (Doc. 31).

         Currently pending is Plaintiff's motion for class certification, pursuant to Rule 23, Fed.R.Civ.P. Counsel presented oral argument at a hearing held on May 14, 2018. For the reasons that follow, the undersigned now recommends that Plaintiff's motion be DENIED.

         I. Background

         Plaintiff William Sawyer, M.D., d/b/a as Sharonville Family Medicine (“Sawyer”), is a primary care practice located in Sharonville, Ohio. Plaintiff has a telephone number that is used to receive faxes. Defendant KRS Biotechnology, Inc. (“KRS”) is a Florida compounding pharmacy with nearly 90 employees and a principal place of business in Boca Raton, Florida. Defendant KRS[1] sent an unsolicited one-page advertisement to Sharonville Family Medicine on October 9, 2015. The fax promoted KRS's IV infusion sets and/or other products and services (“Infusion Kit Fax”). (Doc. 1 at ¶¶3, 14). Defendant admits that KRS and Sawyer had no prior business relationship, and that KRS did not seek or obtain permission from Sharonville Family Medicine to send the Infusion Kit Fax prior to doing so. Although Defendant admits TCPA liability with regard to Plaintiff Sawyer (Doc. 24 at 5), it maintains that the fax sent to Sawyer was in violation of KRS's established business practices, and vigorously disputes the allegation that it sent any unsolicited faxes to anyone other than Sawyer.

         KRS's telecommunications services provider in October 2015 was called RingCentral. In response to a subpoena, RingCentral produced KRS's call and fax log data in the form of an excel spreadsheet. The fax log contains information concerning the number of fax transmissions, the phone numbers dialed, and whether the transmissions were successful. On most days, the fax log reflects the transmission of only about a dozen faxes. However, on a few days in 2015, KRS transmitted tens of thousands of faxes. KRS was able to transmit such a large number of faxes, a practice referred to as “fax blasting, ”[2] by using one or more employee's computer(s) to send an image to a database of fax numbers through RingCentral.

         Based upon the fax log, the largest number of outgoing fax transmissions occurred on October 8 and October 9, 2015 when KRS allegedly transmitted a total of 34, 773 outbound faxes, 99.4% of which originated from the same number as the number used to send Plaintiff the Infusion Kit Fax. KRS disputes that it faxed 34, 773 copies of the Infusion Kit Fax, but admits it transmitted between 1, 000 and 10, 000 of that advertisement. It maintains that the remainder of the 34, 773 faxes were business communications. The fax log reflects only that a fax was transmitted, not the content of the fax.

         Plaintiff's complaint also alleges that the Infusion Kit Fax did not display a “proper opt-out notice.” (Doc. 1 at ¶17). Refining the definition of the putative class in its motion for class certification, Plaintiff seeks to represent 34, 773 recipients of faxes transmitted by KRS, defined as:

All subscribers of accounts (or other persons/entities) associated with the (1) fax numbers listed in the RingCentral spreadsheet (2) that were successfully sent a fax from KRS Biotechnology (3) from the phone number (888) 502-2050; (4) with a “start time” of October 8 or October 9, 2015.

(Doc. 23 at 11-12; compare to Doc. 1 at ¶17 (broader definition of proposed class in complaint)). In addition to Plaintiff's claims under the TCPA, Plaintiff seeks relief under the Ohio Deceptive Trade Practices Act, Ohio R.C. § 4165.01-.04, based upon a portion of the content of the Infusion Kit Fax.

         II. Analysis

         A. Standard of Review for Class Certification

         “The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” Sandusky Wellness Center, Inc. v. ASD Specialty Healthcare, Inc., 863 F.3d 460, 466 (6th Cir. 2017), cert. denied, 138 S.Ct. 1284 (2018) (quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348 (2011)(internal quotation marks omitted). The plaintiff who seeks class certification must “affirmatively demonstrate” compliance with the provisions of Rule 23. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. at 350. The plaintiff must “satisfy through evidentiary proof” both the four factors listed in Rule 23(a) (numerosity, commonality, typicality, and adequate representation), and at least one of the provisions of Rule 23(b). Comcast Corp. v. Behrend, 569 U.S. 27, 133 S.Ct. 1426, 1432 (2013).

         In determining whether to certify a class, the trial court is required to conduct a “rigorous analysis” and “to probe behind the pleadings.” Dukes, 564 U.S. at 350-51. At the same time, so long as it is exercised within the framework of Rule 23, a trial court retains “broad discretion” in deciding whether to certify a class. In re American Med. Sys., Inc., 75 F.3d 1069, 1079 (6th Cir.1996)(additional citations omitted). In the case presented, Plaintiff argues that this Court should certify a class of 34, 773 members based upon his proof of the four factors set forth in Rule 23(a), plus two factors under Rule 23(b)(3), which requires a plaintiff to show the “superiority” of litigating through the mechanism of a class action, and the “predominance” of common issues among the class members. (See Doc. 25 at 2, acknowledging that Plaintiff must show a total of “six prerequisites”).

         Out of the six prerequisites, the most salient, and the one on which both parties focus, is predominance. Under Rule 23(b)(3), Plaintiff must affirmatively show and the trial court must find “that the questions of law or fact common to class members predominate over any questions affecting only individual members.” Id. Defendant urges this Court to deny class certification primarily based on the Sixth Circuit's analysis of the predominance issue in Sandusky Wellness. Despite initially failing to cite that decision, Plaintiff proclaims in its reply memorandum that “Sandusky Wellness demonstrates - perhaps better than any other single decision - the propriety of class certification in this case.” (Doc. 25 at 2). Because the undersigned agrees that the resolution of the predominance issue under Sandusky Wellness is controlling, the undersigned will focus on that issue prior to review of any other prerequisite.

         B. A Brief Overview of the TCPA and the Junk Fax Provision

         Private litigation under the TCPA has increased significantly in the federal courts in recent years.[3] In 2010, the Sixth Circuit joined the Seventh Circuit and held that federal-question jurisdiction exists over private TCPA actions. See Charvat v. EchoStar Satellite, LLC, 630 F.3d 459, 463-465 (6th Cir. 2010). Although other Circuits had initially held that state courts had exclusive jurisdiction over private actions, the Supreme Court resolved the Circuit split in favor of federal-question jurisdiction in Mims v. Arrow Financial Serv., LLC, 132 S.Ct. 740, 747 (2012)(discussing Circuit split and holding that federal and state courts have concurrent jurisdiction over private suits arising under the TCPA).

         The provision under which Plaintiff proceeds in this case, the Junk Fax Prevention Act of 2005, [4] was added to the TCPA in order to prohibit the use of “any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement, ” unless certain conditions are met. 47 U.S.C. § 227(b)(1)(C). A fax is “unsolicited” if it is sent to persons who have not given their “prior express invitation or permission, in writing or otherwise” to receive it. Id., §227(a)(5). While the future of the fax remains a subject of academic debate, case law suggests that the old-school fax is not yet on its last breath, particularly in the health care field. See Bais Yaakov of Spring Valley v. Federal Communications Com'n, 852 F.3d 1078, 1079 (D.C. Cir. 2017)(“Believe it or not, the fax machine is not yet extinct.”).

         A year after the Supreme Court confirmed the existence of federal-question jurisdiction over private TCPA suits, the Seventh Circuit blithely declared in a junk fax case that “[c]lass certification is normal in litigation under § 227, because the main questions, such as whether a given fax is an advertisement, are common to all recipients.” Ira Holtzman, C.P.A. v. Turza, 728 F.3d 682, 684 (7th Cir. 2013). In Sandusky Wellness, however, the Sixth Circuit cautioned that “[w]hile class certification may be ‘normal' under the TCPA…, that does not mean it is automatic.” Sandusky Wellness, 863 F.3d at 473 (quoting appellant's citation to Turza). Indeed, evolving case law under the TCPA in general, and the junk fax provision in particular, suggests that the Seventh Circuit's proclamation of class certification as “normal” was premature, and that future junk fax cases face steeper hurdles in proving that they should be prosecuted as class actions rather than the “usual” course in which a claim is prosecuted solely on behalf of the individual named party.[5] Dukes, 564 U.S. at 348.

         C. A Seminal Rule 23(b)(3) Case Focusing on Consent

         1. The Facts and Focus of Sandusky Wellness

         The plaintiff in Sandusky Wellness was a chiropractic clinic. Similar to the allegations presented by Plaintiff herein, [6] Sandusky alleged that the Defendant, a pharmaceutical distributer, violated the TCPA by sending an unsolicited one-page fax advertisement that lacked a proper “opt-out” notice. Sandusky sought to certify a putative class of more than forty thousand fax recipients of the same fax. The district court denied Sandusky's motion for class certification, and the Sixth Circuit affirmed. The Sixth Circuit began its analysis with a brief historical overview of the junk fax provision of the TCPA. Because the predominance issue is driven by that history, the undersigned begins with a similar review.

         Congress granted to the Federal Communications Commission (FCC) the authority to promulgate rules implementing the TCPA. In 2006, the FCC promulgated the “Solicited Fax Rule, ” that required both unsolicited and solicited faxes “to include opt-out notices.” Sandusky Wellness, 863 F.3d at 463 (emphasis added). As Sandusky Wellness noted, “[t]he import of the TCPA's damage scheme [allowing up to $1, 500 per fax for willful violations] combined with the FCC's Solicited Fax Rule meant vast exposure to liability for businesses that used fax machines to advertise.” Id. After Mims confirmed the existence of federal-question jurisdiction over private TCPA claims, federal courts saw an increase in class-action complaints based in part on the Rule, since cases seeking millions of dollars could be filed if the recipient could prove that the opt-out notice was not sufficiently “clear and conspicuous, ” regardless of whether any recipient had solicited or consented to the fax.

         “Concerned by this specter of crushing liability, businesses (and courts) began to question whether the FCC possessed the authority to promulgate the Solicited Fax Rule given that the text of the TCPA appeared to reach only unsolicited faxes.” Id. at 464. To the dismay of those businesses, the FCC doubled down, standing by its Solicited Fax Rule in 2014. See Id. (citing Order, Petitions for Declaratory Ruling, Waiver, and/or Rulemaking Regarding the Commission's Opt-Out Requirements for Faxes Sent with the Recipient's Prior Express Permission, 29 F.C.C.R. 13, 998, 14, 005 (2014)(“2014 Order”)). Nevertheless, the 2014 Order granted retroactive waivers of liability to the petitioners, and the FCC encouraged others to seek similar waivers.

         The defendant in Sandusky Wellness, doing business as Besse Medical AmerisourceBergen Specialty Group (“Besse”), regularly advertised through fax blasting. Following the 2014 Order, Besse sought and obtained a retroactive FCC waiver for “solicited” faxes. Prior to obtaining that waiver, however, Besse had purchased a list of physician fax contact information from a notorious third-party data provider.[7] Besse later learned that the purchased list included some current or former customers with whom it had established business relationships, as well as those like Sandusky with whom Besse had no prior relationship.

         Sandusky sued Besse on the basis of its receipt of a 2010 unsolicited fax advertisement that included an allegedly inadequate opt-out notice. The trial court denied Sandusky's motion for class certification after concluding that the proposed class failed to satisfy Rule 23(b)(3), because both class member identity and consent would require too much individualized inquiry. With respect to consent, the trial court held that the FCC's retroactive waiver would require individual inquiries on whether each class member had consented to receipt of the fax. Sandusky Wellness Center, LLC v. ASD Specialty Healthcare, Inc., 2016 WL 75535 at *4 (N.D. Ohio Jan. 7, 2016); see also Sandusky Wellness, 863 F.3d at 465 (summarizing trial court's holding).

         In the meantime, after the FCC issued its 2014 Order, several businesses sought judicial review of that 2014 Order in multiple circuit courts. The Multidistrict Litigation Panel assigned petitions challenging the Solicited Fax Rule to the D.C. Circuit, which became “the sole forum for addressing…the validity of the FCC's rule[].” Id., 863 F.3d at 467 (quotation marks and citation omitted). In March 2017 (after the trial court in Sandusky Wellness issued its decision), “a split panel of the D.C. Circuit struck down the Solicited Fax Rule, holding it ‘unlawful to the extent that it requires opt-out notices on solicited faxes.'” Sandusky Wellness, 863 F.3d at 464 (quoting Bais Yaakov of Spring Valley v. FCC, 852 F.3d 1078, 1083 (D.C. Cir. 2017)).

         With the benefit of the D.C. Circuit's decision, the Sixth Circuit in Sandusky Wellness held that “the district court was correct to conclude that individualized questions of consent prevent common questions from predominating under Rule 23(b)(3).” Id. at 466. However, rather than relying on the FCC's retroactive waiver as the trial court had, the appellate court affirmed on the alternative grounds of the ruling set forth in Bais Yaakov. Thus, the Sixth Circuit found that the invalidation of the Solicited Fax Rule “altogether confirms that Besse cannot be liable to any individuals who solicited” the fax, and that “questions of consent present individualized issues counseling against class certification.” Id. at 467 (holding that the decision striking down the Solicited Fax Rule binds the Sixth Circuit).

         The elimination of the Solicited Fax Rule and Sandusky Wellness represent a sea change in the availability of class certification for junk fax cases filed under the TCPA. When the Solicited Fax Rule was still in effect, putative classes could more easily satisfy the “predominance” requirement, as there was no need for individualized inquiry on the issue of consent so long as a plaintiff challenged the sufficiency of the defendant's “opt-out” language, even if the fax was sent to those with an established business relationship.[8] In Sandusky Wellness, however, the Sixth Circuit clarified that where a defendant has demonstrated more than a “speculative” dispute about whether some portion of those who received the fax consented to receipt, class certification should be denied.

         The Sandusky Wellness court began with the following general guidance on how to determine whether class-wide issues or issues requiring more individualized inquiries are predominant under Rule 23(b)(3).

In discerning whether a putative class meets the predominance inquiry, courts are to assess “the legal or factual questions that qualify each class member's case as a genuine controversy, ” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623m 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997), and assess whether those questions are “subject to generalized proof, and thus applicable to the class as a whole, ” Bridging Cmtys., Inc. v. Top Flite Fin. Inc., 843 F.3d 1119, 1124 (6th Cir. 2016) (internal citation omitted). “If the same evidence will suffice for each member to make a prima facie showing, then it becomes a common question.” [citation omitted]. Plaintiffs need not prove that every element can be established by classwide proof. Bridging Cmtys., 843 F.3d at 1124. But the key is to “identify[ ] the substantive issues that will control the outcome, ” in other words, courts should “consider how a trial on the merits would be conducted if a class were certified.” Gene & Gene, LLC v. BioPay, LLC, 541 F.3d 318, 326 (5th Cir. 2008) (quotation marks omitted).

Sandusky Wellness, 863 F.3d at 468

         In Sandusky Wellness, Besse had produced evidence that “several thousand” individuals on the purchased list of “intended fax recipients” were “current or former Besse customers.” Id. 863 F.3d at 468. Besse's evidence included more than 450, 000 pages of various forms where customers had provided fax number information. The district court found that limiting the class to those who had not consented to receipt of faxes “would require manually cross-checking 450, 000 potential consent forms against the 53, 502 potential class members.” Id., at 469 (quoting district court opinion). Relying heavily on a Fifth Circuit decision in which consent issues also predominated and class certification was denied, see Gene & Gene, LLC v. BioPay, LLC, 541 F.3d 318, 326 (5th Cir. 2008), the Sixth Circuit in Sandusky Wellness agreed:

Here, if Sandusky's 40, 343-member class were certified, the district court would be tasked with filtering out those members to whom Besse was not liable - those individuals who solicited the Prolia fax. Regardless of other questions that may be common to the class, identifying which individuals consented would undoubtedly be the driver of the litigation. See id. In other words, “one substantive issue undoubtedly will determine how a trial on the merits will be conducted if the proposed class is certified.” Id. at 327. “This issue…is whether [Besse's] fax advertisements were transmitted ...

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