Last week, the Seventh Circuit issued a decision in Physicians Healthsource, Inc., v. A-S Medication Solutions, LLC, a case that could have important implications for fax marketing. The court found that the consent required under the Telephone Consumer Protection Act (TCPA) to send an unsolicited fax advertisement must satisfy highly specific standards and potentially cannot be transferred as part of a corporate transaction.
As background, the Junk Fax Prevention Act, which amended the TCPA, generally prohibits sending unsolicited advertisements to a “telephone facsimile machine” without the recipient’s prior express invitation or permission unless the sender has an “established business relationship” with the recipient. To rely on an established business relationship, the fax must meet certain requirements, including that it contain an opt-out notice that satisfies certain statutory and regulatory requirements.
In Physicians Healthsource, the defendant acquired a company through a corporate transaction and, as a result, acquired its customer fax list. The defendant proceeded to send faxes to the telephone numbers on that customer list, advertising its services. Plaintiff received such a fax and brought a class action suit.
The defendant conceded that the faxes were advertisements and that the established business relationship did not apply, in part because it failed to provide an opt-out notice. The case thus turned on whether the fax recipients had provided the defendant with “prior express permission or invitation” to receive advertisements by fax.
The court concluded that it was bound by the FCC’s prior interpretation of the statutory term “prior express permission or invitation.” Notably, this is the same question that was at issue in PDR Network, LLC v. Carlton & Harris Chiropractic Inc., which we discussed here. The Supreme Court remanded PDR Network without deciding the question.
The Seventh Circuit then held that to obtain prior express permission or invitation, the recipient “must affirmatively and explicitly give the advertiser permission to send it fax advertisements on an ongoing basis.” That is, the court held that it is insufficient for a recipient to permit or invite the receipt of faxes generally—instead, the recipient must specifically permit or invite the receipt of advertisements. Moreover, under the court’s ruling, a sender cannot rely on consent to send a single fax as the basis for sending additional faxes to the same number without securing prior express permission to do so for each additional fax or otherwise on an ongoing basis.
Applying that standard, the court found that the evidence the defendant put forth that it or the company it acquired had obtained prior express permission or invitation to send the faxes at issue was insufficient. At most, according to the court, the defendant had permission to send faxes “generally” or to send “product information,” both of which were insufficient to fax advertisements. Also insufficient was evidence that the sender had a “general practice” of obtaining permission to send faxes. The court also found that negative options (i.e., presuming consent but providing an opt out) are insufficient to prove express permission.
Although the court found that neither the defendant nor the company it had acquired had prior express permission or invitation to send the faxes at issue, the court nevertheless went on to consider whether—if the target company had lawfully obtained prior express permission or invitation—such prior express permission or invitation would have been transferrable. The court concluded it would not have been, although this finding could be considered dicta. The court did find, however, that the established business relationship is transferable.