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No Willful Violation

Lower Court Rightly Granted Summary Judgment in TCPA Fax Case: 9th Circuit

The U.S. District Court for Northern California didn’t err by granting summary judgment to Telephone Consumer Protection Act plaintiffs True Health Chiropractic and McLaughin Chiropractic Associates for collectively receiving 13 unsolicited fax ads from McKesson promoting medical software products, said a 9th U.S. Circuit Court of Appeals panel's memorandum Wednesday (docket 22-15732). The district court properly held that McKesson failed to show that the plaintiffs consented to receive faxed ads, it said.

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The district court also didn’t abuse its discretion in decertifying the plaintiffs’ proposed class of others who received McKesson faxes sent by an online fax service like Slingshot, said the memorandum. The court correctly found that it was bound by the FCC’s December 2019 declaratory ruling on an Amerifactors Financial petition, it said. The ruling determined that the TCPA doesn’t apply to faxes received through an online fax service, it said.

Under the Hobbs Act, federal appeals courts have exclusive jurisdiction to enjoin, set aside, suspend or determine the validity of all final FCC orders, said the memorandum. The 9th Circuit disagrees with the plaintiffs’ argument that the Amerifactors declaratory ruling was neither an FCC order nor final, it said.

It doesn’t matter that the FCC’s Consumer and Governmental Affairs Bureau, rather than the full commission, issued the Amerifactors ruling because Congress authorized the FCC to delegate any of its functions, said the memorandum. Under that authorization, the FCC has delegated to the bureau the authority to issue declaratory rulings in matters pertaining to consumers and governmental affairs, it said. Orders issued on delegated authority have the same "force and effect" as orders of the full commission, and the Amerifactors ruling “is one such order,” it said.

The Amerifactors ruling is a final FCC order under the Hobbs Act, said the memorandum. The ruling was a product of the commission’s administrative process, it said. The FCC, through the bureau, received a petition from Amerifactors for a declaratory ruling, sought public comment, and issued the ruling “through its general rulemaking authority to carry out the TCPA,” it said. The ruling “fixes a legal relationship” by clarifying that an online fax service isn’t a stand-alone fax machine, and it thus falls outside the scope of the TCPA’s “statutory prohibition,” it said.

The Amerifactors declaratory ruling, as a final FCC order, is subject to judicial review under the Hobbs Act, but only by the federal appeals courts, not the district courts, said the memorandum. The Amerifactors ruling “applies retroactively to the faxes at issue here,” it said. As a result, the Amerifactors ruling was “binding on the district court,” it said.

The district court was bound by the Amerifactors ruling to grant summary judgment to McKesson on any class claims for faxes received through an online fax service because the ruling “makes clear” that the TCPA doesn’t apply to such faxes, said the memorandum. In a decision that the plaintiffs don’t challenge on appeal, the district court found that the plaintiffs “had no viable methodology for distinguishing class members who had received faxes on a stand-alone fax machine and those who had received them through an online fax service,” it said.

This meant that the plaintiffs couldn’t prevail on their class claims unless the district court disagreed with the Amerifactors ruling, which it had no jurisdiction to do, said the memorandum. The district court accordingly didn’t abuse its discretion by dividing the class and decertifying the stand-alone fax machine class, it said. Nor did it err by granting summary judgment sua sponte to McKesson on the online fax services class, it said. That left only the plaintiffs’ individual claims for which they could show that they received an unsolicited faxed ad on a stand-alone fax machine, it said.

The district court also didn’t abuse its discretion by denying treble damages to the plaintiffs for McKesson’s willful and knowing TCPA violations “on their remaining individual claims,” said the memorandum. The 9th Circuit agrees with the 11th Circuit in its 2015 decision in Lary V. Trinity Physician Financial Insurance Services that the “willful and knowing” standard “requires more than merely intentional or volitional action,” it said.

In other contexts, the 9th Circuit has construed “willfully” as requiring awareness that an action constitutes a legal violation and “knowingly” as requiring awareness of the facts that constitute a legal violation, said the memorandum. In the context of the Fair Credit Reporting Act, the U.S. Supreme Court has held that a willful violation includes not only knowing violations of a standard but also reckless ones, it said. SCOTUS has found that conduct is reckless if it’s not only a violation under a reasonable reading of the statute’s terms but also shows that a defendant ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless, it said.

Applying that standard here, McKesson didn’t “willfully or knowingly violate the TCPA,” said the memorandum. Though the FCC in 2008 cited McKesson for sending one or more unsolicited ads to stand-alone fax machines in violation of the TCPA, that citation didn’t explain “which of McKesson’s faxes violated the TCPA or why,” it said.

That warning didn’t establish that, when it sent the faxes to the plaintiffs, McKesson knowingly violated the TCPA or ran a risk of violating the TCPA that was substantially greater than the risk associated with a “merely careless” reading of the TCPA, said the memorandum. The district court thus didn’t abuse its discretion in concluding that McKesson didn’t willfully or knowingly violate the TCPA, it said.