In a significant decision regarding the applicability of the Telephone Consumer Protection Act of 1991 (“TCPA”), the D.C. Court of Appeals recently held that the TCPA does not impose strict liability on a person or entity whose goods or services are advertised in an unsolicited fax. Instead, the Court ruled that the Act may impose vicarious liability on a person or entity on whose behalf unsolicited fax ads were sent, regardless as to who actually sent the faxes.

In FDS Rest., Inc. v. All Plumbing, Inc., No. 16-CV-1009, 2020 D.C. App. LEXIS 111 (Mar. 26, 2020), FDS Restaurant filed a class action lawsuit against All Plumbing, alleging that All Plumbing sent FDS and other similarly persons unsolicited advertisements via fax in violation of the TCPA.  The faxes were sent by a third-party, purportedly on behalf of All Plumbing. The Act prohibits “junk faxes,” as it “unlawful for any person” to “use any telephone facsimile machine, computer, or other device to send” an unsolicited fax advertisement, unless the sender and the recipient have an established business relationship, the sender obtained the recipient’s fax number through certain permissible means, the ad provides specific identifying information regarding the sender, and the ad contains a conspicuous opt-out notice that meets particular requirements.” 47 U.S.C. § 227(b)(1)(C), (b)(2)(D)-(E), (d)(1)(2) (2006). The statute does not define the terms “send” or “sender.”

Initially, the trial court denied FDS’ motion for class certification, concluding that FDS failed to meet the requirements of Rule 23.  Then at trial, in determining what standard of liability to apply, the trial court rejected an agency law approach and strict liability theory, and instead, applied a “on behalf of” test. The trial court held that because the evidence only established that All Plumbing authorized the third-party to send faxes in another jurisdiction, FDS failed to meet its burden to show that the fax it received in the District of Columbia was sent “on behalf of” All Plumbing. Therefore, the Court ruled in favor of All Plumbing on FDS’ TCPA violation claim.

On appeal, the DC Court of Appeals affirmed. First, the Court looked to the Sixth and Seventh Circuits and ruled that a strict liability approach is inappropriate for determining liability for fax transmissions that violate the TCPA.  The Court of Appeals also found nothing in the TCPA or its legislative history, including the FCC record, that indicates an intent to impose strict liability for the sending of unsolicited fax ads.

Next, the Court of Appeals concluded that agency law should be applied to determine whether a person or agency may be vicariously liable for the actions of a third-party, such as a fax broadcaster, that sends unsolicited facts ads on its behalf. The Court reasoned that there was no meaningful difference between a traditional agency law analysis and a “on whose behalf” standard.  The Court further concluded that in this instance and based on the evidence, the third-party went outside the scope of its relationship with All Plumbing.  Therefore, the faxes were not sent “on behalf of” All Plumbing and no vicarious liability could be imposed.

Finally, the Court of Appeals reviewed the trial court’s class certification decision and ruled that the trial court did not abuse its discretion in denying class certification. The Court ruled that FDS could not satisfy the commonality element, among others, as the trial court properly noted that “the claims of Virginia recipients may differ from one another depending on whether they were the types of business or located in the zip codes that may have been authorized.” Accordingly, “[t]his is the kind of situation that would ‘require in-depth factual determinations about different individuals to determine whether [a TCPA violation occurred] in a given case,’ which defeats commonality.”

This decision is one of the rare favorable decisions for businesses under the TCPA.  The decision makes clear that strict liability should not be imposed, but the decision offers some protection if a third-party vendor goes outside of the scope of the communication directives given by a business. Nonetheless, businesses must remain mindful of potential liability for authorizing unsolicited faxes and telephone calls to potential customers.