Antitrust Law Daily Wrap Up, PRIVACY—MoCtApp: Claimed Lack of Knowledge of TCPA Violation Precluded Summary Judgment as to Corporate Officer’s Personal Liability for Fax Ad, (Feb 6, 2013)

By Tobias J. Gillett, J.D., LLM.

A corporate officer’s affidavit and deposition testimony, to the effect that the facsimile advertising company he contracted with had assured him that it had the recipients’ consent to send a facsimile advertisement, created a material issue of fact regarding whether the officer knew he would violate the Telephone Consumer Protection Act (TCPA) by transmitting the advertisement, a Missouri appellate court has ruled (Hoops & Associates, P.C. v. Financial Solutions and Associates, Inc., February 5, 2013, Van Amburg, L.).

Financial Solutions and Associates, Inc. contracted with ActiveCore Technologies to send facsimile advertisements to prospective clients in the Saint Louis area. Hoops & Associates, P.C., a recipient of one of the advertisements, filed a class action complaint against Financial Solutions and its president, Michael Grimes, asserting, among other claims, that the advertisement violated the TCPA.

The trial court certified the class and granted it summary judgment, finding that the advertisements did violate the TCPA and that Grimes knew of and participated in the violation. The trial court awarded over $4.8 million in damages, with Grimes 51% personally liable, and Financial Solutions liable for the remaining 49%.

In the present appeal, the appellate court addressed Grimes’s contention that the trial court had erred in granting summary judgment to Hoops on his personal liability when material issues of fact remained regarding whether he knowingly violated the TCPA. The court observed that, with respect to the claims against Financial Solutions, “all the facts needed to recover under the TCPA were admitted and there were no genuine issues of material fact precluding entering summary judgment.”

However, the court concluded that material issues of fact remained regarding Grimes’s personal liability. The court noted “the general rule that if a corporation is found to have violated a federal statute, its officers will not be personally liable solely because of their status as officers,” but also that “if the officer directly participated in or authorized the statutory violations, even though acting on behalf of the corporation, he may be personally liable.”

Hoops argued that Grimes had been highly involved in “creating the advertisement and contacting ActiveCore on behalf of Financial Solutions to send the faxes to potential customers,” and therefore that Grimes should be subjected to personal liability. However, Grimes contended that he had no knowledge that the facsimiles would violate the TCPA, since ActiveCore had assured him that the recipients had consented to their receipt. Grimes submitted an affidavit in support of his deposition testimony to this effect.

The appeals court concluded that the trial court had impermissibly made credibility determinations on the motion for summary judgment in deciding, contrary to this affidavit, that Grimes had “actual knowledge of and participation in an actionable wrong, i.e. violation of the TCPA.” Grimes’s deposition testimony and affidavit “presented a genuine issue of material fact, thereby precluding the entry of summary judgment.”

Since the court concluded that its disposition of the personal liability issue was dispositive of his appeal, the court did not address Grimes’s further contention that the trial court had erred in denying his motion to amend the judgment and decertify the class on the grounds that Hoops had only identified eight class members and had provided no means of identifying other members.

The case is No. ED98687.

Attorneys: Steven W. Koslovsky (Blumenfeld Kaplan and Sandweiss P.C.) for Financial Solutions and Associates, Inc. Max George Margulis for Hoops & Associates, P.C.

Companies: Hoops & Associates, P.C.; Financial Solutions and Associates, Inc.

Cases: Privacy MissouriNews