Creative Montessori Learning Center v. Ashford Gear LLC

Filing 323

Memorandum Opinion and Order signed by the Honorable Robert W. Gettleman on 3/3/2014: Plaintiff's motion for partial summary judgment 263 is denied. Status hearing is set for 4/2/2014 at 9:00 a.m. Mailed notice (gds)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CREATIVE MONTESSORI LEARNING
CENTER,
Plaintiff,
v.
ASHFORD GEAR, LLC,
Defendant.

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No. 09 C 3963
Judge Robert W. Gettleman

MEMORANDUM OPINION AND ORDER
Plaintiff Creative Montessori Learning Center, individually and on behalf of all others
similarly situated, has brought a class action complaint against defendant Ashford Gear, LLC,
alleging violations of the Telephone Consumer Protection Act, 42 U.S.C. § 227 (“TCPA”) and
conversion. Both counts are premised on the allegation that defendant sent, or authorized the
sending of, an unsolicited facsimile advertisement to plaintiff and the class it represents.1 On
April 19, 2011, the court denied defendant’s motion for summary judgment, concluding that
whether defendant instructed B2B (the entity that conducted the alleged fax campaign) to send
facsimiles only to a list of customers provided by defendant remained in dispute (Doc. 157). The
parties have not conducted any further discovery since the court issued that order. Nonetheless,
despite the continued existence of this contested issue of material fact, plaintiff has now moved
for summary judgment on the TCPA count. For the reasons described below, plaintiff’s motion
is denied.

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The court has certified a class consisting of “all persons having no established business
relationship with Ashford Gear, LLC who received one or more unsolicited faxes in June 2006
regarding the “Rollee Pollee” self-contained napping station, offering “order 30 Rollee Pollees
by June 30, 2006 and Get 6 FREE!” and identifying [phone] as the number to call to stop
receiving faxes.

FACTS
As noted by the court in its April 19, 2011, order, few of the underlying facts of this case
are undisputed. What is clear from the record is that defendant is a small business located in
California that sells textiles, including a specialty blanket for preschoolers called the “Rollee
Pollee.” Sometime in 2006 defendant entered into some sort of an arrangement with a fax
broadcasting company called “Business 2 Business Solutions” (“B2B”). That business was run
by Caroline Abraham from her home in New York. Abraham worked with a Romanian
company called Macaw which sometimes used the marketing name Maxileads. One of Macaw’s
or B2B’s sales persons called himself Kevin Wilson and is Abraham’s nephew.2 Wilson
somehow came into contact with Brian Reeves, one of defendant’s owners. They had a series of
telephone conversations in which they entered into an arrangement for B2B to conduct a fax
advertising campaign for defendant. Reeves and defendant prepared a draft advertisement for
the Rollee Pollee blanket that was to be faxed to potential pre-school customers of defendant.
Reeves sent that draft advertisement to B2B. The ad went through several revisions, with B2B
adding a legal disclaimer at the bottom, and a final version was ultimately approved by Reeves.
According to B2B records, it sent a first set of 5,362 faxes on June 7, 2006 and a second
set of faxes on June 14-15, 2006. In total, the fax was sent 22,222 times to 14,579 persons and
entities.
On June 27, 2006, the Florida Attorney General sent a “cease and desist” letter to
defendant demanding that it stop sending illegal fax advertisements. Defendant faxed that letter

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Apparently “Kevin Wilson” is an alias, and his real name is Conor Melville. See
Bridgeview Health Care Center Ltd. v. Clark, 2013 WL 1154206, *1 n.2 (N.D. Ill. Mar. 19,
2013).
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to B2B. Reeves spoke with Wilson who explained why B2B thought the Florida Attorney
General was incorrect. Defendant then informed the Florida Attorney General’s office that its
faxes were legal.
B2B did not follow its regular payment procedure in its dealings with defendant.
Defendant sent to B2B one check payable to Maxileads in the amount of $28. The check was to
pay for membership in B2B’s “Priority Club,” not for payment of any actual fax service. B2B’s
regular payment procedure was to send clients a “payment letter” instructing the client on what
to pay, how to pay, and the number of faxes for which the client would pay. B2B made a record
of sending that payment letter with a “PDate” entry in an electronic table kept by Abraham.
There is no entry in that electronic table for defendant, suggesting that no such letter was sent.
Defendant claims to have never received such a letter.
B2B typically required client approval before sending the faxes. The approval process
consisted of an approval by the client of the advertisement, as well as payment. B2B was
provided payment in three ways: (1) receipt of the payment itself; (2) a copy of a void check
showing the client’s bank information from which B2B would print a fax check to take payment;
or (3) if the client was going to mail a check, B2B would request that a hard copy be faxed to it
and B2B would take the customer’s word that the check would be mailed.
It is undisputed that none of the three payment methods was followed in the instant case.
Instead, without providing defendant an invoice, estimate or payment letter, B2B on June 7,
2006, faxed the ad to a list of fax numbers that B2B had purchased from a third party. The
following day, without notice to defendant, Abraham created a check in the amount of $542
payable to B2B using defendant’s bank information found on the $28 check made payable to

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Maxileads. It is undisputed that defendant has never issued a check to B2B, and never
specifically approved a broadcast to a list of potential recipients supplied by B2B. In fact, as
noted in the court’s April 19, 2011, order, Reeves testified that he expected B2B to send the
faxes to a customer list he had provided, but could not identify that list, where it came from,
when it was produced, or when he “gave it” to B2B. B2B has no electronic record of ever
receiving such a list.
On June 14, 2006, B2B sent a second fax campaign to over 19,000 fax numbers. That
same day Abraham prepared a second check payable to B2B in the amount of $792 using the
bank information from defendant’s check to Maxileads. Defendant instructed its bank to refuse
payment on that check. The bank returned the check to B2B and assessed a service charge.
Defendant has never paid for the second set of faxes.
DISCUSSION
Summary judgment is appropriate only when the material facts are undisputed and
demonstrate that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56. The
moving party bears the initial burden of asserting the absence of a genuine issue of material fact,
Celotex Corp. v. Catrett, 447 U.S. 317, 323 (1986), and must support that assertion by citing to
materials in the record. Fed. R. Civ. P. 56(c). A genuine issue of material fact exists when “the
evidence is such that a reasonable jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Plaintiff moves for summary judgment on its TCPA claim. To prevail on this claim
plaintiff must show that: (1) defendant used a telephone facsimile machine, a computer or other
device to send one or more faxes to plaintiff’s facsimile machine; (2) the faxes sent contain

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materials advertising the commercial availability or quality of any property, goods, or services;
and (3) plaintiff did not give prior express invitation or permission for defendant to send the
faxes.” Hinman v. M and M Rental Ctr., Inc., 596 F. Supp.2d 1152, 1158 (N.D. Ill. 2009).
Defendant challenges plaintiff’s ability to establish the first element.3 Obviously,
defendant itself did not actually send the faxes. Thus, defendant argues that plaintiff must, but
cannot, establish that defendant is vicariously liable for B2B’s actions.
Plaintiff argues that defendant is liable as the sender because the faxes were sent on its
behalf, citing 47 C.F.R. § 64.1200(f)(8), which defines a sender as “[t]he person or entity on
whose behalf a facsimile unsolicited advertisement is sent or whose goods or services are
advertised or promoted in the unsolicited advertisement.” FCC regulations state that under the
TCPA “the entity or entities on whose behalf facsimiles are transmitted are ultimately liable for
compliance with the ruling banning unsolicited facsimile advertisements. In the Matter of Rules
and Regulations Implementing the Telephone Consumer Protection Act of 1991, F.C.C. R.
12391, 12407 (Aug. 7, 1995). Courts in this district have relied on the FCC’s interpretation “to
conclude that defendants cannot escape liability simply by hiring an independent contractor to
send unsolicited facsimiles on their behalf.” Bridgeview Health Care Center, 2013 WL 1154206
at *4 (and cases cited therein). The TCPA “creates a form of vicarious liability making an entity
liable when a third party sends unsolicited communications on its behalf in violation of the Act.”
Id.

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There is no dispute that one or more faxes were sent, that the faxes advertise defendant’s
goods, or that the plaintiff did not give prior express permission for defendant to send the faxes.
Defendant does challenge plaintiff’s computation and evidence as to the actual number of faxes
sent.
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Plaintiff argues that, once B2B became defendant’s agent for any purpose, the TCPA
confers strict liability for all facsimiles sent on defendant’s behalf. Defendant counters that §
277b of the Act incorporates rather than abrogates basic agency principles, meaning that the
TCPA makes the entity liable only for facsimiles sent within the agent’s scope of authority.
This court agrees with defendant’s position. In particular, the court agrees with
Magistrate Judge Valdez’s thoughtful analysis reaching that conclusion in Broadview Health
Care Center, Id. at *5. As correctly noted in Bridgeview Health Care Center, “nothing in the
language of § 227(b) indicates that notions of agency law are not applicable.” Id. Indeed, since
Broadview Health Care Center was issued, the FCC has confirmed that construing the
“prohibitions contained in § 227(b) to incorporate agency principles” is consistent with its own
administrative precedent. In the Matter of Joint Petition Filed by Dish Network LLC, 28 F.C.C.
R. 6574, 6589 ¶ 38 (“Dish Network”).
Plaintiff relies on ¶¶ 46 and 47 of Dish Network to support its argument that defendant is
vicariously liable based simply on its approval of the contents of the advertisement. In
particular, plaintiff argues that ¶46 indicates that apparent authority may be shown by evidence
that the seller approved, wrote, or reviewed the outside entity’s telemarketing scripts, and that
evidence of this kind “should be sufficient to place upon the seller the burden of demonstrating
that a reasonable consumer would not sensibly assume that the telemarketer was acting as the
Seller’s authorized agent.” Those two paragraphs in Dish Network are offered for guidance
only, however, and the FCC has agreed that they have no binding effect on courts, are not
entitled to deference under Chevron USA Inc. v. NRDC, Inc., 467 U.S. 838 (1984), and that their

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“force is dependent entirely on [their] power to persuade.” Dish Network LLC v. Federal
Communications Commission, __ Fed. Appx. ___, 2014 WL 323660 (D.C. Cir. 2014).
Whatever persuasive power the two guideline paragraphs possess does not carry the day
for plaintiff’s position. Paragraph 47 demonstrates the problem in the instant case by indicating
“we do not think that an action taken for the benefit of a seller by a third-party retailer, without
more, is sufficient to trigger the liability of a seller under § 227(b). However, we see no reason
that a seller should not be liable under [§ 227(b)] . . . when it has authorized the telemarketer to
market its goods or services.” (Emphasis added)
As noted previously, the issue of what consent, if any, Reeves gave to B2B to send any of
the faxes remains hotly contested. Plaintiff argues that simply by approving the final version of
the ad and discussing sending a list to B2B of persons who had previously given consent to
receive the ad demonstrates that B2B had apparent authority when it acted, at least from the
vantage of the recipients. Plaintiff’s argument begs the question. Plaintiff could not act with
apparent authority if it never had any authority to act. And there is a genuine dispute as to
whether defendant ever authorized B2B to start the faxing process. Defendant never sent B2B a
check for payment, or ever authorized Abraham to create her own checks, and Abraham testified
that receipt of payment was the final step in the approval process.
Plaintiff also argues that defendant ratified B2B’s actions when defendant spoke with the
Florida Attorney General’s office and indicated its position that the faxes were legal. Yet, there
simply is no undisputed evidence to support plaintiff’s theory that defendant ratified B2B’s
actions. It is unclear whether Reeves knew B2B had sent faxes to customers other than to the list

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he claims to have given it, and defendant outright refused to pay for the second set of faxes,
indicating its lack of consent or ratification.
Consequently, because a genuine issue remains as to what, if any, authorization
defendant ever gave to B2B to act in any capacity, plaintiff has not established vicarious
liability. Plaintiff’s motion for summary judgment is denied.
CONCLUSION
For the reasons described above, plaintiff’s motion for summary judgment is denied.
This matter is set for a report on status on April 2, 2014, at 9:00 a.m.

ENTER:

March 3, 2014

__________________________________________
Robert W. Gettleman
United States District Judge

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