A Custom Heating & Air Conditioning, Inc. v. Kabbage, Inc. et al

Filing 157

MEMORANDUM Opinion and Order Signed by the Honorable Harry D. Leinenweber on 1/18/2018. Mailed notice(las, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

A CUSTOM HEATING & AIR
CONDITIONING, INC.,
Individually and on Behalf
of All Others Similarly
Situated,
Case No.

16 C 2513

Plaintiff,
Judge Harry D. Leinenweber
v.
KABBAGE, INC.; GULFCO
LEASING LLC; MICHAEL HENRY;
And JOHN DOES 1-12,
Defendants.

MEMORANDUM OPINION AND ORDER

Defendant Kabbage, Inc. moves [ECF No. 104] to strike the
class allegations from Plaintiff’s First Amended Complaint (the
“FAC”)[ECF No. 52].

For the reasons stated herein, Kabbage’s

Motion

but

is

granted,

Plaintiff

A

Custom

Heating

&

Air

Conditioning, Inc., is granted leave to amend its Complaint.
I.
This
procedural

opinion

presumes

background

June 16, 2017 opinion.
ECF No. 89.)

BACKGROUND
familiarity

described

at

with

length

the
in

factual
this

and

Court’s

(Ct. Mem. Op. and Order, June 16, 2017,

The short version is this:

Plaintiff A Custom

Heating & Air Conditioning, Inc. (“Plaintiff”) sued Defendant

Kabbage,

Inc.

Defendants

(“Kabbage”),

sent

or

caused

among
to

be

others,
sent

claiming

to

Plaintiff

that
fax

advertisements in violation of the Telephone Consumer Protection
Act, as amended by the Junk Fax Protection Act of 2005, 47
U.S.C. § 227 (together, “the Act” or “the TCPA”).

Plaintiff

pursued other causes of action as well, but this Court dismissed
them for failure to state a claim under Rule 12(b)(6).
Mem. Op. and Order, June 16, 2017.)
Court

to

strike

the

TCPA

class

(Ct.

Now, Kabbage moves the
action

allegations

from

Plaintiff’s FAC.
II.
“The

standard

for

LEGAL STANDARD
evaluating

motions

to

strike

class

allegations is the same as the standard for certifying a class
under Rule 23.”

Everett v. Baldwin, No. 13 C 04697, 2016 WL

8711476, at *4 (N.D. Ill. Jan. 15, 2016) (citations omitted).
An

exhaustive

here.

class

certification

analysis

is

not

necessary

Rule 23(c)(1)(A) requires courts to determine whether to

certify an action as a class action “[a]t an early practicable
time.”

Cholly v. Uptain Grp., Inc., No. 15 C 5030, 2017 WL

449176, at *3 (N.D. Ill. Feb. 1, 2017).

Though a court might

often find this determination not practicable at the pleading
stage, “sometimes the complaint will make it clear that class
certification

is

inappropriate.”
- 2 -

Pumputiena

v.

Deutsche

Lufthansa, AG, No. 16 C 4868, 2017 WL 66823, at *8 (N.D. Ill.
Jan. 6, 2017).

That is the case here, but not for the reason

put forth by Kabbage.
III.

DISCUSSION

Before addressing the ultimate shortcoming of Plaintiff’s
proposed
raised

class,

by

the

however,
parties.

the

Court

Namely,

addresses

whether

the

another
D.C.

issue

Circuit’s

recent decision in Bais Yaakov of Spring Valley v. FCC, 852 F.3d
1078, 1079 (D.C. Cir. 2017) - which opined that the Act does not
impose

an

opt-out

notice

requirement

on

solicited

faxes

and

further that the Act does not empower the FCC to impose such a
requirement - is binding authority in the Seventh Circuit.

The

Court finds that it is.
A.

Whether Yaakov Controls in the Seventh Circuit

The heart of Kabbage’s objection to the class allegations
is Plaintiff’s proposed class definition:
All persons who were sent one or more
telephone facsimile messages on or after
four years prior to the filing of this
action,
that
advertised
the
commercial
availability of property, goods, or services
offered by Defendants, that did not contain
an opt-out notice that complied with federal
law.
(FAC ¶ 26.)
its

The trouble here is imprecision.

proposed

class

as

a

group

- 3 -

of

Plaintiff defines

persons

who

received

advertisements lacking TCPA-compliant opt-out notices.
cries

foul

because,

as

the

Court

earlier

Kabbage

observed,

the

definition fails to distinguish between those class members that
gave

prior

permission

to

Defendants

to

receive

advertisements and those members that did not.

such

(See, Ct. Mem.

Op. and Order, June 16, 2017, at 3.)
According
Plaintiff’s

to

Kabbage,

class

this

“impossible

recent D.C. Circuit opinion.

to

lack

of

certify”

definition
in

the

renders

wake

of

a

In Yaakov, the D.C. Circuit ruled

on thirteen consolidated petitions for review originally filed
in multiple courts of appeals seeking to set aside the FCC’s
Solicited Fax Rule.

Yaakov, 852 F.3d at 1079.

Before the FCC

issued the Solicited Fax Rule (the “Rule”) in 2006, the TCPA
required opt-out notices only for unsolicited faxes.
expanded this requirement to solicited faxes as well.
C.F.R.

§ 64.1200(a)(4)(iv)

(codification

of

the

The Rule
See, 47

Solicited

Fax

Rule).

But months ago, Yaakov stated that the Act does not

empower

the

FCC

to

impose

an

opt-out

notice

requirement

on

solicited faxes and that the TCPA itself does not impose that
requirement.

Yaakov, 852 F.3d at 1080-83.

Yaakov is not controlling here.

Plaintiff claims

Instead, Plaintiff points to

Ira Holtzman, C.P.A. v. Turza, 728 F.3d 682 (7th Cir. 2013), in
which, according to Plaintiff’s telling of the case, the Seventh
- 4 -

Circuit

held

that

the

TCPA

imposes

requirement for solicited faxes.

the

opt-out

notice

(See, Pl.’s Resp. to Kabagge’s

Mot. to Strike at 14, ECF 120.)
Thus, the issue is whether, in the Seventh Circuit, opt-out
notices

are

required

solicited.

If

even

Yaakov

for

those

advertisements

controls,

then

those

that

are

members

of

Plaintiff’s proposed class (if any) who received only solicited
faxes have no valid claim against Defendants.
This issue has been the source of recent disagreement in
this District, and two opposing camps have emerged.

The first

camp has held that Turza indeed stated that opt-out notices are
required

on

District.

solicited
See,

faxes

Orrington

and

v.

that

Scion

this

Dental,

rule

binds

Inc.,

No.

our

17-CV-

00884, 2017 WL 2880900, at *2 (N.D. Ill. July 6, 2017) (holding
that
still

under

binding

required

precedent

under

the

in

TCPA,

Turza,
even

“opt-out

for

notices

solicited

are

faxes”);

Physicians Healthsource, Inc. v. Allscripts Health Sols., Inc.,
No. 12 C 3233, 2017 WL 2391751, at *2 (N.D. Ill. June 2, 2017)
(same).

The

second

camp

has

held

that

not

only

is

Yaakov

controlling in this District, but also that Turza does not even
stand for the proposition — as Plaintiff suggests — that opt-out
notices must be included on even solicited faxes.

See, Alpha

Tech Pet Inc. v. LaGasse, LLC, No. 16 C 4321, 2017 WL 5069946,
- 5 -

at *3 (N.D. Ill. Nov. 3, 2017) (stating that Yaakov is binding
outside

of

the

D.C.

involve

solicited

Circuit,

faxes”);

and

that

Brodsky

v.

“Turza

does

not
Ins.

HumanaDental

even
Co.,

No. 10-CV-03233, 2017 WL 3704824, at *4, 8-9 (N.D. Ill. Aug. 28,
2017) (same).

This Court agrees with the second camp.

The D.C. Circuit is not the Seventh, and decisions of that
court

are

District.

not

typically

binding

on

decisions

made

in

this

As Kabbage correctly observes, however, Yaakov is not

a typical case.

(See, Kabbage’s Mem. in Supp. of Mot. to Strike

(“Kabbage’s Mem.”) at 7 n.4, ECF 105.)

The Yaakov court ruled

on thirteen consolidated petitions for review of an FCC decision
concerning

the

Solicited

Fax

Rule

from

multiple

courts

of

appeals, a consolidation which transformed the D.C. Circuit into
the “sole forum for addressing . . . the validity of the FCC’s
rule.”
Inc.,

Sandusky Wellness Ctr., LLC v. ASD Specialty Healthcare,
863

F.3d

460,

467

(6th

Cir.

2017)

(quoting

Peck

v.

Cingular Wireless, LLC, 535 F.3d 1053, 1057 (9th Cir. 2008)), as
corrected on denial of reh’g en banc (Sept. 1, 2017).
purpose

behind

such

consolidation

—

improving

The

judicial

efficiency and guaranteeing uniformity across circuits — would
be undone if courts outside of D.C. continued to follow contrary
precedent.

See, id.

- 6 -

But as Judge John Blakey described in detail in Brodsky v.
HumanaDental Ins. Co., No. 10-CV-03233, 2017 WL 3704824, at *8-9
(N.D.

Ill.

anyway.

Aug.

28,

2017),

Turza

is

not

contrary

to

Yaakov

The relevant portions of the TCPA cited in Turza “never

mention solicited messages at all; instead, they refer to the
FCC’s ability to promulgate additional rules regarding opt-out
notices (such as the Solicited Fax Rule).”
3704824, at *8.

Brodsky, 2017 WL

Turza and Yaakov are not at odds over whether

solicited faxes require an opt-out notice, and Yaakov’s holding
that such notices are not required is binding in the Seventh
Circuit.
B.

Kabbage’s Motion to Strike

Given that Yaakov controls, the Court now considers whether
Plaintiff’s proposed class meets the requirements of Rule 23.

A

party seeking class certification must prove by a preponderance
of the evidence that its proposed class meets all requirements
of Rule 23.

Messner v. Northshore Univ. HealthSystem, 669 F.3d

802, 811 (7th Cir. 2012).
requirements:

First, Rule 23(a) sets forth four

(1) the class is so numerous that joinder of all

members is impracticable (numerosity); (2) there are questions
of law or fact common to the class (commonality); (3) the claims
or defenses of the representative parties are typical of the
claims

or

defenses

of

the

class
- 7 -

(typicality);

and

(4)

the

representative parties will fairly and adequately protect the
interests

of

the

class

(adequacy).

FED. R. CIV. P.

23(a).

Plaintiffs who meet this initial burden must also prove that the
proposed

class

Rule 23(b).
the

satisfies

one

of

the

three

requirements

of

Where, as here, the plaintiff seeks money damages,

plaintiff

must

meet

the

requirements

of

Rule

23(b)(3),

namely that questions of law or fact common to the members of
the

class

predominate

over

any

questions

affecting

only

individual members (predominance), and that a class action is
superior to all other available methods for fair and efficient
adjudication

of

P. 23(b)(3);

the

see,

controversy
Physicians

(superiority).
Healthsource,

FED. R. CIV.
Inc.

v.

A-S

Medication Sols., LLC, 318 F.R.D. 712, 720 (N.D. Ill. 2016).
Kabbage
proposed

asserts,

class

however

cannot

satisfy

obliquely,
Rule

that

23(b)’s

Plaintiff’s
predominance

requirement and so the class allegations should be struck from
Plaintiff’s

FAC.

argument is this:

(See,

Kabbage’s

Mem.

at

4.)

Kabbage’s

Yaakov killed the TCPA cause of action for

any class members who received only solicited faxes, and given
the

ambiguity

of

the

class

definition,

class may well contain such members.

Plaintiff’s

proposed

Accordingly, if Plaintiff

moved to certify the proposed class, “the Court would have to
individually evaluate each proposed class member to determine
- 8 -

whether

that

class

member

provided

valid

consent

contacted” and thus received only solicited faxes.

to

be

(Kabbage’s

Reply at 3, ECF No. 124.)

Kabbage contends that such a thicket

of

consent”

bars

Plaintiff

responds

“individual

(Kabbage’s

issues

Mem.

at

of

8.)

class

certification.

that

if

Kabbage

contends some proposed class members gave consent to receive the
alleged at-issue faxes (Kabbage’s Reply at 4-7), Kabbage must
produce evidence demonstrating as much (Pl.’s Resp. in Opp’n to
Mot. to Strike at 4, ECF No. 120).
“misses the point.”

Kabbage says this rejoinder

(Kabbage’s Reply at 3.)

The Court agrees

with Plaintiff.
“Courts determine whether issues of individualized consent
defeat commonality and predominance in . . . TCPA cases on a
case-by-case
available

to

F.R.D. at 725.

basis
prove

after

evaluating

consent.”

the

Physicians

specific

evidence

Healthsource,

318

Where the defendant only makes “vague assertions

about consent . . . individualized issues regarding consent will
not predominate over common questions of law or fact so as to
prevent class certification.”

Id.

Kabbage has not presented any specific evidence of consent
by any class member and argues instead that the very specter of
possible consent by any class member demands an individualized
inquiry too burdensome for the Court to bear if it certifies
- 9 -

Plaintiff’s proposed class.
reasoning.

Case law disapproves of Kabbage’s

See, e.g., G.M. Sign, Inc. v. Finish Thompson, Inc.,

2009 WL 2581324, at *6 (N.D. Ill. Aug. 20, 2009) (certifying a
TCPA

class

objections

over
when

defendant’s
no

evidence

predominance
in

the

and

record

commonality

indicated

that

individual issues of consent would subsume common issues and
noting that consent issues thus remained “hypothetical”).
Kabbage’s

predominance

argument

fails,

but

Plaintiff’s

proposed class cannot be certified for another reason.

In light

of Yaakov and the ambiguity as to whether the proposed class
excludes those members that solicited faxes, the proposed class
cannot meet Rule 23(a)’s typicality requirement.
“A plaintiff's claim is typical if it arises from the same
event or practice or course of conduct that gives rise to the
claims of other class members and his or her claims are based on
the same legal theory.”
Cir. 1998).

Keele v. Wexler, 149 F.3d 589, 595 (7th

“Typicality requires ‘enough congruence between the

named representative’s claim and that of the unnamed members of
the class to justify allowing the named party to litigate on
behalf of the group.’”

Physicians Healthsource, 318 F.R.D. at

723 (quoting Rosen Family Chiropractic, S.C. v. Chi-Town Pizza
on Division St., Inc., No. 11 C 6753, 2015 WL 638522, at *3 (N.D
Ill.

Feb.

13,

2015))

(citation
- 10 -

omitted).

Finally,

“[c]ourts

faced with an overbroad class definition may deny certification
for want of typicality.

McGarvey v. Citibank (S. Dakota) N.A.,

No. 95 C 123, 1995 WL 404866, at *4 (N.D. Ill. July 5, 1995).
Plaintiff

alleges

that

it

received

an

unsolicited

advertisement from—or one caused to be sent by—Defendants.
¶ 17.)

But

if,

as

the

proposed

class

definition

fax
(FAC

currently

allows, the class contains members who received only solicited
faxes,

there

will

not

claims and Plaintiff’s.
723.

be

“enough

congruence”

between

their

Physicians Healthsource, 318 F.R.D. at

Indeed, there will be no congruence at all, given that

post-Yaakov, the members that received only solicited faxes have
no TCPA claim against Defendants.

The class definition is thus

overbroad, encompassing members who do not share a viable claim
with the representative Plaintiff.

If, as Plaintiff contends

elsewhere in its FAC (see FAC ¶ 24), all of the proposed class
members received only unsolicited faxes, the class definition
should say so.
Yaakov
class.

indeed

spelled

doom

for

the

Plaintiff’s

proposed

But Yaakov is not the death knell for every class the

Plaintiff might propose.
Plaintiff

to

amend

its

Kabbage argues that any attempt by
class

definition

would

be

“futile,”

(Kabbage’s Reply at 1), because even re-framing the class to
comply explicitly with Yaakov would not dispel the requirement
- 11 -

on the Court to make an individual inquiry into consent.

But as

already discussed, Kabbage cannot destroy Plaintiff’s chances at
class

certification

by

summoning

hypothetical

consent

issues

while failing to produce any specific evidence demonstrating the
actual existence of those issues.

G.M. Sign, Inc., 2009 WL

2581324, at *6.
Accordingly,

striking

the

class

action

allegations

is

appropriate, but so is granting Plaintiff leave to amend its
FAC.
IV.

CONCLUSION

For the reasons stated herein, Kabbage’s Motion to Strike
Class

Allegations

granted leave

to

[ECF

No.

104]

is

amend

its

Complaint

granted.
and

its

Plaintiff
proposed

class

definition.

IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court
Dated: 1/18/18

- 12 -

is