Small v. KMart Holding Corporation et al

Filing 22

ORDER Denying Defendants' Motion to Dismiss or, in the Alternative, to Strike Class Action Allegations 13 . Signed by District Judge Denise Page Hood. (LSau)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
JONATHAN SMALL, individually and as
representative of a class of similarly-situated
persons,
Plaintiff,
v.

Case No. 12-CV-11062
Honorable Denise Page Hood

KMART HOLDING CORPORATION, KMART
PHARMACIES, INC., KMART OF MICHIGAN,
INC., KMART CORPORATION, SEARS
BRANDS, LLC and JOHN DOES 1-10,
Defendants.
/
ORDER DENYING DEFENDANTS’ MOTION TO DISMISS OR, IN THE
ALTERNATIVE, TO STRIKE CLASS ACTION ALLEGATIONS
I.

INTRODUCTION
This action involves the Telephone Consumer Protection Act. Now before the Court is

Defendants’ Motion to Dismiss, or, in the Alternative, to Strike Class Action Allegations. For
the reasons stated below, Defendants’ Motion to Dismiss is DENIED.
II.

STATEMENT OF FACTS
On or about April 3, 2008 and April 8, 2008, Plaintiff received two unsolicited facsimile

messages from Defendants.1 Both faxes are from Kmart Pharmacy and solicited business. The
April 11, 2008 facsimile stated at the bottom: “If you wish to be removed from our fax
distribution list, let us know and we will do so. Feel free to call us at any time with questions you
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The exhibits show that the faxes are dated for April 3 and April 11, 2008. There is no
fax from April 8, 2008.

may have.” The April 3 fax does not include this message or any similar message.
Plaintiff alleges that Defendants sent the same or similar facsimiles to more than 39 other
individuals in connection with their work or operations. He further alleges that Defendants knew
or should have known that he had not expressed consent to receive the faxes. Plaintiff alleges
that he has no reasonable means of avoiding the facsimiles and they did not display a proper opt
out notice as required by 64 C.F.R. § 1200. Plaintiff alleges that he was damaged due to loss of
toner, ink, paper, and time.
Plaintiff requests statutory damages of $500 for each facsimile pursuant to the Telephone
Consumer Protection Act (“TCPA”), 42 U.S.C. § 227 and that a class is certified under Fed. R.
Civ. P. 23.
III.

LAW & ANALYSIS
A.

Standard of Review

A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of the plaintiff’s complaint.
Accepting all factual allegations as true, the court will review the complaint in the light most
favorable to the plaintiff. Eidson v. Tennessee Dep’t of Children's Servs, 510 F.3d 631, 634 (6th
Cir. 2007). To survive a motion to dismiss, the complaint must state sufficient “facts to state a
claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007). The complaint must demonstrate more than a sheer possibility that the defendant’s
conduct was unlawful. Id. at 556. Claims comprised of “labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Id. at 555. Rather, “[a] claim has
facial plausibility when the plaintiff pleads factual content that allows the court to draw the

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reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
556 U.S. 662, 129 S. Ct. 1937, 1949 (2009).
B.

Failure to State a Claim

Defendants first argue that the Court should dismiss Plaintiff’s Complaint because it
provides no factual support for its allegations. For example, Plaintiff alleges that the faxes did
not include a valid opt out notice but the April 11, 2008 fax did include an opt-out notice.
Further, Plaintiff alleges that the faxes were “part of Defendants’ work or operations to market
Defendants goods or services which were performed by Defendants and on behalf of
Defendants.” [Docket No. 1, Pg ID 3, ¶ 12] Defendants argue that there are no specific
allegations as to any individual Defendant.
The TCPA makes it illegal for any person “to use any telephone facsimile machine,
computer, or other device to send, to a telephone facsimile machine, an unsolicited
advertisement.” 42 U.S.C. § 227(b)(1)(C). There are three exceptions: (1) the sender has an
established relationship with the recipient; (2) the number was received through voluntary
communication or a directory or the like on the Internet and the recipient agreed to make the
number available; or (3) the fax contains notice on the first page that is clear and conspicuous
that the recipient may request their name to be removed and that failure to comply within 30
days is unlawful. Id., 47 C.F.R. § 64.1200(a)(4). A sender is defined as “the 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.” 47 C.F.R. § 64.1200(f)(10). The TCPA
creates a private right of action to recover actual loss or $500 for each violation. 47 U.S.C. §
227(b)(3)(B). “The TCPA is essentially a strict liability statute which imposes liability for
erroneous unsolicited faxes.” Alea London Ltd. v. Am. Home Servs., 638 F.3d 768, 776 (11th Cir.
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2011). The Court may award treble damages if the defendant willfully or knowingly violated the
TCPA. 47 U.S.C. § 227(b)(3). Otherwise, intent is not required.
The Court finds that the Complaint is sufficient. Plaintiff has alleged that the Defendants
sent the faxes; that Plaintiff did not give his permission to receive such faxes; there was an
insufficient opt-out notice;2 and there was no established business relationship between Plaintiff
and Defendants. Defendants are on notice of the allegedly offensive conduct: the two faxes sent
on April 3 and 11, 2008. There is only one count comprised of two separate violations. The
Defendants do not have to guess as to who did what. The faxes were both sent from Kmart
Pharmacy. Defendants’ motion to dismiss is denied.
C.

Motion to Strike Class Allegations

Defendants argue that Plaintiff’s class action allegations should be stricken because
Plaintiff cannot maintain a class action under Michigan law. A private action may be brought
pursuant to the TCPA “if otherwise permitted by the laws or rules of court of a State, . . . in an
appropriate court of that State.” 47 U.S.C. at § 227(b)(3). Michigan Court Rule 3.501(A)(5)
provides that for “[a]n action for a penalty or minimum amount of recovery without regard to
actual damages imposed or authorized by statute may not be maintained as a class action unless
the statute specifically authorizes its recovery in a class action.”
In Shady Grove Orthopedic Associates v. Allstate Insurance Company the Supreme
Court, interpreting a New York court rule that prohibited class actions that sought penalties or
statutory minimum damages, noted “that [Federal Rule of Civil Procedure 23] permits all class

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The opt-out notice on the April 11th fax indicated that the sender could be contacted but
did not state that the request must be complied with within 30 days. There may also be a
question as to whether the notice was “clear and conspicuous.”
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actions that meet its requirements, and a State cannot limit that permission by structuring one
part of its statute to track Rule 23 and enacting another part that imposes additional
requirements.” 130 S.Ct 1431, 1439 (2010). The Supreme Court found that “a Federal Rule
governing procedure is valid whether or not it alters the outcome of the case in a way that
induces forum shopping.” Id. at 1448.
Defendants urge the Court to apply the reasoning in the Second Circuit decision Holster
v. Gatco, Inc., 618 F.3d 214 (2d Cir. 2010). The question before that court was whether a TCPA
class action may be maintained in federal court when New York procedure barred the action.
The Holster court considered the impact of the recent Supreme Court case of Shady Grove
Orthopedic Associates v. Allstate Insurance Co., 130 S.Ct 1431 (2010). Holster, 618 F.3d at
216–17. The Court of Appeals explained that Shady Grove did not resolve the relationship
between the TCPA and whether there is a federal cause of action. Id. The court noted that this is
a question of statutory interpretation and found that Congress intended some but not all state
court rules to define a cause of action for TCPA. Id. at 217. The Second Circuit concluded that
“Congress intended to give states a fair measure of control over resolving problems that the
TCPA addresses” and the ability to define when a class controls is within this intention. Id. at
218.
However, the Court does not find the reasoning in Holster persuasive. In Mims v. Arrow
Financial Services, LLC, 132 S.Ct. 740 (2012), the Supreme Court held that the TCPA conferred
federal question jurisdiction. In light of Mims, there is “no room” for Defendants’ requested
result because, as Rule 23 regulates procedure, any substantive purpose underlying a state law
limiting class actions is irrelevant. Knepper v. Rite Aid Corp., 675 F.3d 249 (3d Cir. 2012);
Weitzner v. Sanofi Pasteur, Inc., 2012 U.S. Dist. LEXIS 67016, *28 (M.D. Pa. May 14, 2012)
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(noting that “now that the TCPA has recognized federal question jurisdiction, there is no room
for a court to determine that any state class action law could preclude the application of Rule 23
to a TCPA class action”); see also American Copper & Brass, Inc. v. Lake City Indus. Prods.,
2012 U.S. Dist. LEXIS 102207 (W.D. Mich. July 24, 2012) (finding that, in light of the Supreme
Court’s decisions in Shady Grove and Mims, Rule 3.501 was not a bar to whether a class could
be certified under the TCPA); Jackson's Five Star Catering, Inc. v. Beason, 2012 U.S. Dist.
LEXIS 113759, 10–13 (E.D. Mich. July 26, 2012) (finding reasoning in Holster unpersuasive
and rejecting Defendants’ argument that Rule 3.501 applied). The Court has jurisdiction to
consider a claim arising under the TCPA and is required to apply Rule 23 to determine whether
the action may be maintained as a class, notwithstanding the existence of Rule 3.501. Rule 23
regulates procedure irrespective of its effect on state created rights. The Court finds that Rule
3.501 is not a bar to this action.
IV.

CONCLUSION
Accordingly,
IT IS ORDERED that Defendants’ Motion to Dismiss [Docket No. 13, filed May 11,

2012] is DENIED.
S/Denise Page Hood
Denise Page Hood
United States District Judge
Dated: March 20, 2013
I hereby certify that a copy of the foregoing document was served upon counsel of record on
March 20, 2013, by electronic and/or ordinary mail.
S/LaShawn R. Saulsberry
Case Manager
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