Written by Thomas R. Houlihan

Tom practices in the area of complex civil litigation and appellate practice; commercial law; insurance litigation; business torts and municipal law.

Legal Ramifications for Sending Junk Faxes

Many businesses find “junk faxes” to be a nuisance.  Unlike junk mail, where an advertiser bears the cost of the advertisement, a receiver of an unsolicited fax pays for the cost of paper and toner.  Further, unsolicited faxed advertisements can tie up a fax machine when it is needed for legitimate business purposes. 

The United States Congress addressed these concerns in the Telephone Consumer Protection Act of 1991 (“TCPA”) in 1991.  The primary thrust of the TCPA was to curb aggressive telemarketing, and it placed substantial limitations on the methods and hours that telemarketers could use in order to market their products over the phone.  Almost as an afterthought, the TCPA also enacted a provision, 47 U.S.C. §227(b)(1)(C), directed at curbing unsolicited faxes.  That provision states that:

It shall be unlawful for any person within the United States--

* * *

to use any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine; or

An “unsolicited advertisement” is defined in subsection §227(A)(4) 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.”  Therefore, it is perfectly appropriate to send unsolicited letters, jokes, recipes, or other materials over a fax machine – the TCPA is only implicated when a solicitation for goods or services is made.   Further, it is perfectly appropriate to send a fax solicitation when the receiver has given the sender permission to send such solicitations.   

The TCPA at §227(d)(1)(B), also requires that every sender of facsimiles in the United States include a statement, either on the first page, or in the margin of every page, of the following information:

          1.          The date and time it is sent;
          2.          Name of the business or individual sending the message; and     3.          The fax number of the sending machine.

The TCPA further authorizes the recipient of a fax sent in violation of the statute (or a regulation promulgated under the statute) to sue the sender in state court to seek $500 in statutory damages for each violation. 47 U.S.C. §227(b)(3). The law also allows the court to treble these damages if it finds the sender violated the statute "willfully" or "knowingly".

By the time the TCPA was passed, many companies had integrated “blast faxing” as a core marketing tactic, and there was great resistance to change within the industry.  As a result, an explosion of lawsuits erupted over junk faxes.  In 2001, a Hooters restaurant in Augusta, Georgia was hit with a $12 million class-action verdict, when a jury found that the restaurant knowingly violated the statute with promotional faxes to 1,321 local businesses.  A large scale sender of junk faxes, Fax.com, was repeatedly sued by government agencies and private individuals, including a $2.2 trillion class-action suit.  Fax.com, and several other blast-fax companies, were eventually forced out of business.  As a result, many companies moved outside of the United States, in order to continue broadcasting into the United States.

To counter foreign corporations blast faxing into the United States, Congress amended the TCPA in the CAN-SPAM Act of 2003. This amendment made it illegal to not only send junk faxes from within the United States, but also to send them into the United States from outside the country.     

The most common defense raised by unsolicited senders in response to these suits was that the fax was permissible because the fax recipient had invited the fax by publishing its fax number.  The Federal Communications Commission (FCC) chimed in on this issue and issued a set of rules clarifying the concept of “prior express invitation or permission” in this context.  7 F.C.C.R. 8752, n. 87, 1992 WL 690928 (1992).  Under the FCC’s construction of the TCPA, an advertiser may send faxes advertising goods and services to persons or companies with whom it has an “established business relationship.”   

A great deal of litigation then took place over the issue of what, exactly, constituted an “established business relationship.”  Courts’ rulings on the issue were inconsistent, and varied across the United States.  To further complicate matters, several courts found that the FCC did not have authority to issue regulations under the TCPA.

As a result of all of this confusion, Congress passed the Junk Fax Prevention Act of 2005 (JFPA).  The JFPA made three important changes to the TCPA: (1) the FCC was expressly provided authority to issue regulations concerning junk faxes, (2) a detailed definition of the “established business relationship” exception was codified, and (3) and senders must put in place an “opt-out” system. 

The JFPA retained the essential character of the TCPA - the statute is one of strict liability; even if one sends an unsolicited advertisement by fax by accident, minimal liability of $500 per page attaches, and damages may also be trebled at the court's discretion upon a finding that the violation was willful or knowing.  The JFPA clarified that the only real defense for the sender is that the transmission was protected by the “established business relationship” exception created by the JFPA and fleshed out by new regulations and comments promulgated by the FCC in 2006 (21 FCC Rcd 3787, 3800-3818). 

To qualify for the established business relationship exception, the sender:

·                    Must have an established business relationship with the recipient, arising out of “voluntary, two-way communication”;

·                    Must have received the recipient's fax number voluntarily from the recipient within the context of the business relationship; 

·                    A notice on the first page of the unsolicited advertisement which provides the recipient a method to opt-out of unsolicited facsimile advertisements;

·                    A domestic contact telephone number to opt out;

·                    A facsimile machine number to opt out;

·                    At least one of the mechanisms for transmitting an opt-out request must be cost-free, such as a toll-free fax or phone;

·                    The opt-out mechanisms must be available 24 hours a day, 7 days a week;

·                    The notice must be clear and conspicuous and on the first page of the advertisement;

·                    The opt-out notice must be distinguishable from the advertising material through, for example, use of bolding, italics, different font, or the like, and

·                    The sender must honor all opt-out requests within a reasonable period of time, but in no event greater than thirty days.

If a sender fails to comply with any of these provisions, then it cannot utilize the established business relationship exception.

Therefore, under existing law, unless a sender can demonstrate an established business relationship under the above standard, a sender of an unsolicited fax advertisement faces liability of at least $500 per page, and that amount could be trebled to $1,500 if the court finds a “knowing” violation of law.

Because liability is easy to prove, and because damages are presumed, the TCPA has spawned a cottage industry of lawyers who prosecute junk fax cases.  Typically, these junk fax lawyers will send a demand letter seeking around $4,500 for each junk fax.  While the TCPA only provides for $500 for a violation, subject to trebling, junk fax lawyers make several arguments for more damages:

·                    That damages are available for technical defects in the fax, such as failure to list the date and time of transmission in the margin of the fax;

·                    That damages for technical violations can be “stacked” on top of damages for inappropriately sending the fax;

·                    That additional damages are available under the Ohio Consumer Sales Practices Act;

·                    That damages are separately available under the TCPA and JFPA; and

·                    That the sender is at risk for a class-action lawsuit.

Against this backdrop, the Ohio Supreme Court recently considered Culbreath v. Golding Ents., L.L.C. (2007), 114 Ohio St.3d 357, 872 N.E.2d 284.  In Culbreath, a gentleman’s club sent an unsolicited fax advertisement to a law firm, and the fax failed to include (1) the name of the transmitter of the fax, (2) the date and time it was sent, and (3) the number from which the fax was delivered.  The law firm sued, seeking several types of damages.  First, the firm claimed damages for sending the unsolicited fax.  Second, it sought additional damages because the fax was technically deficient for failing to contain identifying information.  Third, the firm claimed that the violation of the TCPA was also a violation of Ohio’s Consumer Sales Practices Act, which entitled the firm to additional damages and attorney fees. 

The Ohio Supreme Court disagreed, and found that, while the law firm may be entitled to $500-$1,500 for receiving the unsolicited fax, it could not seek additional damages because the fax was technically deficient.  In fact, the Supreme Court found that no private right of action existed for technical defects.  Id. at ¶ 20.  Further, the Court found that the Consumer Sales Practices Act did not apply to a business-to-business dispute of this nature.  It should be noted that the Culbreath case arose before the JFPA was enacted, and did not consider its terms.  Because the JFPA expressly made the “established business relationship” defense dependent upon satisfying the technical requirements of the statute, it appears that a technically deficient fax will result in liability in the future.  However, the reasoning employed by the Culbreath court indicated a dim view of multiplying damages under the TCPA, so it is unlikely that Ohio courts in the future will adopt any rules which allow separate damages for separate technical deficiencies. Id. at ¶ 18. 

Therefore, the Culbreath case eliminated some of the favorite arguments advanced by the cottage industry of junk fax lawyers.  Further, although it was not addressed in the Culbreath case, the argument that the TCPA and JFPA provide separate damages remedies is not well founded.  The JFPA amended the TCPA, and does not operate independently from it.  See JFPA, PL 109-21, July 9, 2005, 119 Stat 359.

As the law currently stands in Ohio, the exposure of the sender of a junk fax appears to be limited to $500 per faxed page, subject to trebling for a knowing violation of the law, plus the risk of a class action.  The class action risk is a real risk.  Recently, DirecTV and PrimeTV settled a multi-state junk fax class action by issuing subscription coupons, but ended up paying $8.5 million for the plaintiffs’ attorney fees.   

Due to the threat of a class action, and despite the Culbreath case, we have been advising our clients not to engage in any facsimile advertisement.  The JFPA’s new opt-out requirements are difficult to comply with, and one mistake in the text of an advertising fax can void the sender’s “established business relationship” defense.  If that error is repeated 100 or 1000 times through a blast-fax campaign, the liability could be truly staggering.  Fax advertisement is just too risky. 

For additional information on this Legal Update and other legal related issues, please contact Thomas Houlihan at Amer Cunningham Co., L.P.A.   He can be reached by calling 330/762-2411 or by e-mail at houlihan@amer-law.com.