Antitrust Law Daily Wrap Up, PRIVACY—7th Cir.: Company on whose behalf unauthorized fax ad sent not subject to TCPA liability, (Jun 17, 2016)

By Michael Menzhuber, J.D., LL.M.

A district court did not err in providing jury instructions that did not impose Telephone Consumer Protection Act (TCPA) strict liability on the company on whose behalf an unauthorized fax advertisement was sent, according to the U.S. Court of Appeals in Chicago. The district court also did not abuse its discretion in admitting testimony from the owner of the marketing company that sent the fax regarding her prior operation of a diploma mill (Paldo Sign and Display Company v. Wagener Equities, Incorporated, June 16, 2016, Rovner, I.).

After entering into an agreement with Market Research Center (MRC) to provide advertisement services for Wagener Equities, Inc., MRC sent out a fax on behalf of the company to thousands of recipients. Although the agreement provided that MRC would not sent out any ads unless the company’s owner, Daniel Wagener, returned a copy of the ad with the words "ad ok" and a client number written on the ad, Wagener was never sent the ad for approval.

One of the recipients of the fax, Paldo Sign and Display Company (Paldo), filed suit against Wagener and his company under the TCPA, and a district court subsequently certified a class of more than ten thousand plaintiffs who received the ad. The class action was decided in favor of Wagener and his company after the jury determined that the company never authorized the fax and that Wagener did not directly participate in the fax transmission. On appeal, Paldo challenged the jury instructions regarding sender liability and also contended that the district court abused its discretion by allowing testimony by MRC’s owner, Caroline Abraham, that she had previously operated a diploma mill.

After the district court granted partial summary judgment prior to the trial, the only issue for the jury was whether Wagener and his company qualified as "senders" of the fax, even though it did not actually transmit the fax. Paldo claimed an error in the jury instructions, which required a finding that Wagener directly participated in sending the faxes or that the company authorized the sending of the faxes, because the statutes and regulations impose a strict liability on the entity on whose behalf a fax is sent. The appellate court disagreed because: (1) it had previously rejected a reading of the regulations that would impose strict liability; and (2) Paldo did not argue that the faxes were sent under Wagener’s implied or apparent authority.

Paldo also argued that the district court abused its discretion in allowing testimony by Abraham that she had previously operated a diploma mill. Paldo argued that the testimony should have been excluded under Federal Rules of Evidence 404(a), which generally prohibits evidence of a person’s character to prove that on a particular occasion the person acted in accordance with that character, and Federal Rules of Evidence 608(b), which prohibits the use of extrinsic evidence to prove instances of a witness’s conduct in order to attack the witness’s character for truthfulness.

The appellate court disagreed. It noted that Rule 404(a) contains an exception for evidence admitted under Federal Rules of Evidence 607 and 608(a) and that the evidence admitted came squarely between these two rules because Abraham’s testimony was highly relevant to her character for untruthfulness and her credibility was the key to Paldo’s case.

The appellate court also determined that Paldo’s argument that the evidence violated Rule 608(a) missed the mark because it was limited to Abraham’s own admissions. It also determined that the district court did not abuse its discretion under Federal Rules of Evidence 403, which provides that a court may exclude relevant evidence if its probative value is substantially outweighed by the danger of unfair prejudice, because it limited Abraham’s testimony to one brief instance of her prior conduct.

The case is No: 15-1267.

Attorneys: Phillip A. Bock (Bock, Hatch, Lewis & Oppenheim, LLC) for Paldo Sign and Display Co. Anne-Marie Foster (R. Connor & Associates, PC) for Wagener Equities, Inc.

Companies: Paldo Sign and Display Co.; Wagener Equities, Inc.

Cases: Privacy IllinoisNews IndianaNews WisconsinNews