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Compressor Engineering Corp. v. Manufacturers Financial Corp.

United States District Court, E.D. Michigan, Southern Division

September 13, 2017

Compressor Engineering Corporation, Plaintiff,
Manufacturers Financial Corporation, et al., Defendants.


          Sean F. Cox, United States District Court Judge

         In an Opinion & Order issued on April 7, 2016, this Court certified this Telephone Consumer Protection Act (“TCPA”) case as a class action. Discovery has closed and the matter is now before the Court on: 1) Plaintiff's Motion for Summary Judgment; and 2) Defendants' Motion for Summary Judgment. The motions have been fully briefed and the Court heard oral argument on the motions on September 7, 2017.

         As explained below, the law pertaining to TCPA cases has developed over the several years during which this case has been pending before this Court. It is now undisputed that Defendants cannot be held liable for the offending faxes in this case on a strict liability basis. In order to prevail on the TCPA claims asserted against Defendants, Plaintiff and the Class must establish, among other things, that the fax ads were sent “on behalf of” Defendants. In a TCPA decision issued on May 9, 2016, the Sixth Circuit set forth the multi-factor “on behalf of” standard that the parties agree applies to the fax ads at issue in this case.

         As to Defendant Charity Marketing, LLC, there is no evidentiary basis for imposing liability against that entity. This Defendant is entitled to summary judgment as to the claims asserted by Plaintiff and the Class.

         As to Defendant Richard Stephens (the individual who owns the two corporate Defendants), Plaintiff's Counsel acknowledges that there is no Sixth Circuit authority that supports Plaintiff's position that Stephens can be held personally liable under the TCPA. Several district courts that have addressed the personal-liability issue have concluded that individuals acting on behalf of a corporation may be held personally liable for violations of the TCPA where they had “direct, personal participation in or personally authorized the conduct found to have violated the statute.” But here, Plaintiff has failed to produce evidence that Stephens had such involvement. Thus, Stephens is also entitled to summary judgment in his favor as to Plaintiff and the Class.

         Finally, as to the remaining Defendant, the Court concludes that it is also entitled to summary judgment because Plaintiff and the Class cannot produce sufficient evidence at trial such that a reasonable jury could conclude that the two fax ads at issue in this case were sent “on behalf of” Defendant Manufacturers Financial Corporation.

         Accordingly, the Court shall deny Plaintiff's Motion for Summary Judgment and grant Defendants' Motion for Summary Judgment.


         This case, filed in 2009, has a lengthy history that need not be repeated here. This Court's April 7, 2016 Opinion & Order contains a broad overview of the case. (D.E. No. 107).

         On April 7, 2016, this Court certified the following class in this TCPA case:

All persons or entities who were sent one or more faxes on November 29, 2005, or November 30, 2005, that contained a “Remove” Hotline number of (718) 645- 2018, Ext 2234 and a “Complaint” Hotline number of (718) 645-2021, Ext 232. and offered either a “Limited Release Refinance Program” with a toll free number of (800) 264-3898 or a “Fast Track Approval for Licensed Brokers! [sic] that included contact information for Julia Kahn.”

(Id. at Pg ID 3871).

         The Sixth Circuit issued a TCPA decision, Siding and Insulation Co. v. Alco Vending, Inc., 822 F.3d 886 (6th Cir. 2016), on May 9, 2016. Plaintiff's counsel were aware of that decision, as class counsel Phillip Bock was also plaintiff's counsel in that case and was involved in the appeal.

         This Court approved the class notice in this case in an order issued on June 6, 2016. Thereafter, a few class members opted out.

         The Court held a Status Conference on September 13, 2016. At that conference, Plaintiff's counsel advised that the only additional discovery desired was the deposition of Caroline Abraham. On September 13, 2016, this Court issued an order that provided that Plaintiff's Counsel shall take the deposition of Caroline Abraham by December 14, 2016. (D.E. No. 124). The order also allowed the parties to file summary judgment motions by that date.

         At the request of the parties, the Court later extended the date for filing summary judgment motions until May 2, 2017. (See 3/21/17 Minute Entry). Thereafter, both parties filed summary judgment motions. The motions reflect that Plaintiff's Counsel did not depose Caroline Abraham in this action, despite efforts to do so.

         Plaintiff's Motion for Summary Judgment stresses that district courts often grant summary judgment motions in TCPA cases. The motion asserts that the evidence is “un-refuted” and that the Court should grant summary judgment “in favor of Plaintiff and the Class for the 14, 125 unsolicited fax advertisements Defendants sent to them, ” and “enter summary judgment in favor of the Class and against Defendants in the amount of $7, 062, 500 in statutory damages for Defendants' violations of the TCPA” and issue an appropriate injunction.

         The body of Plaintiff's Motion for Summary Judgment contains the following argument sections:

A. Defendants violated the TCPA
1. The faxes at issue are “advertisements” for Defendants; business
2. Defendants' fax advertisements were “unsolicited”
3. Defendants' advertisements were successfully sent by fax to 14, 137 different telephone numbers
B. The Class is entitled to statutory damages under the TCPA
C. The Court should enjoin Defendants from sending unsolicited fax advertisements to Michigan consumers

(D.E. No. 140 at Pg ID 5711). Although the motion includes a sentence acknowledging that in order to prevail Plaintiff and the Class must show that “Defendants' faxes were sent on their behalf” (Id. at Pg ID 5715), and Plaintiff's Counsel was aware of the Sixth Circuit's decision in Siding & Insulation Co., and that its “on behalf of” standard applies to the fax ads at issue in this case, Plaintiff's motion for summary judgment does not include a section on that issue. It does not even cite Siding & Insulation Co. or discuss the standard of liability set forth in that case.

         In opposing Plaintiff's Motion for Summary Judgment, Defendants stress that Plaintiff did not depose Caroline Abraham in this case and that they presumably cannot produce her for trial.

         Defendants filed their own Motion for Summary, which asserts that all three Defendants are entitled to summary judgment. Among other things, Defendants contend that, based upon the Sixth Circuit's decision in Siding & Insulation Co., Plaintiff and the Class cannot establish that the faxes at issue were “sent on behalf of” the three Defendants (MFC, Stephens, and Charity Marketing LLC).

         The evidence produced by the parties is rather extensive, and includes all of the following.

         The Sole Named Plaintiff

         Plaintiff Compressor Engineering Corporation (“Plaintiff” or “Compressor”) is the sole named Plaintiff and Class Representative in this case. It is undisputed that Compressor received a single fax ad, the one that it attached as an exhibit to the Complaint. (See D.E. No. 1 at Pg ID 11). As will be explained later, this is “Fax Ad Two.”

         The Three Named Defendants

         There are three different named Defendants in this action: 1) Manufacturers Financial Corporation (“MFC”); 2) “Charity Marketing, LLC”; and 3) Richard Stephens.

         1. Defendant Richard Stephens

         Defendant Richard Stephens (“Stephens”) is an individual, who was the President and sole owner of MFC and Charity Marketing, LLC.

         2. Defendant MFC

         MFC was a Michigan corporation and Stephens was its sole shareholder, President, and Treasurer throughout its duration. (Stephens Dep. at 8-9). MFC had two locations, Farmington Hills and Grosse Pointe, Michigan. (Id.). MFC was a financial company that offered residential and commercial mortgages. (Id. at 10). Stephens testified that MFC began in 1991 and operated until 2007 or 2008. (Id. at 9).

         Stephens testified that all advertising at MFC was supposed to go through him. (Stephens Dep. at 22).

         It is undisputed that MFC employed Julia Kahn and Larry Brundage as loan officers and account executives and that MFC's telephone numbers were (248) 427-0800 and (248) 427-9800 (a fax line). (D.E. No. 144 at Pg ID 6193). Stephens testified that Kahn “wasn't an ad man, she was just a loan officer.” (Stephens Dep. at 53). Stephens testified that MFC itself did not engage in fax marketing. (Stephens Dep. at 36).

         Stephens testified that he does not recall: 1) him or anyone else at MFC communicating with a fax marketing company to send fax ads on behalf of MFC; 2) having communicated with someone named Kevin Wilson; or 3) any communications with a company called B2B in New York regarding fax advertising. (Stephens Dep. at 40-41). Stephens does not recall anyone at MFC having authorized Kahn to work with Charity Marketing Services, LLC to create a fax advertising campaign. (Id. at 71).

         Stephens testified that MFC “engaged marketing companies, ” such as Charity Marketing Services, LLC, and those marketing companies “could have had a fax campaign.” (Id. at 37).

         Stephens recalls that Charity Marketing Services, LLC did some “lender to broker industry” faxes, wherein it faxed “rate sheets” to brokers. (Id. at 38-42).

         Stephens testified that he does not recall ever having employed a person named Jim Busch or Joseph Busch. Stephen does not recall the name Joseph Busch as anyone he ever communicated with. Stephens does not know if Charity Marketing Services, LLC or Ernie Feigelman employed a person by that name. (Stephens Dep. at 32, 38-39, 48, 56, 57).

         3. Defendant Charity Marketing, LLC

         Stephens also owned and operated Charity Marketing, LLC. (Stephens Dep. at 13-16). During the 2005-2006 time period, that entity engaged in marketing services, specifically direct mail and telemarketing. (Id. at 13).

         The entity was located in Farmington Hills, Michigan and had its own bank account, at Metrobank. (Id. at 14). Stephens testified that Charity Marketing LLC did not have a bank account at Flagstar bank, and Stephens was the only person authorized to sign checks for the entity. (Id. at 14-15). The entity performed work for MFC (Id. at 24), had no employees and hired independent contractors. (Id. at 14). It is undisputed that Charity Marketing, LLC never operated under the name Charity Marketing Services, LLC. (D.E. No. 144 at Pg ID 6193).

         Stephens testified that Charity Marketing, LLC never performed any fax campaigns that utilized fax blasts. (Stephens at 84).

         Cast Of Other Characters - None Of Whom Are Parties

         There are other persons and entities that were involved in the events surrounding the fax ads at issue in this case.

         Yuliya Kahn

         Non-party Yuliya Kahn was hired by Stephens as a loan officer for MFC. (Kahn Dep. at 14-16). Kahn's native language is Russian and when Stephens hired her, Kahn's “social skills and language skills were very limited.” (Id. at 20). Kahn worked exclusively with residential mortgages (Id. at 11) and was hired at MFC to obtain residential mortgage business from her friends and family in the Russian community in Michigan. (Id. at 20).

         Kahn testified that she “created flyers for” MFC and that Stephens “saw my flyers.” (Id. at 22). Kahn testified that she does not recall if Stephens approved of the flyers or the language or descriptions she put in them, but also testified that she would not have created a flyer without his approval. (Id. at 22). Kahn testified that she created such “flyers” while working at MFC and mailed them to her friends and family, and passed them out in neighborhoods. (Id. at 21). Kahn did other advertising for herself while employed by MFC, such as putting her own ad in the “Yellow Russian Pages.” (Id. at 22)

         Kahn testified that all the advertising she did was with the knowledge and approval of Stephens. (Id. at 23). But Kahn testified that her work “wasn't so much advertisement as you think, ” explaining that she did two or three flyers and “that was it. It wasn't a big campaign.” (Id. at 23). As to her flyers, Kahn testified: “[s]o if I sent it to anybody, I usually had to talk to someone to get the fax number or e-mail address or anything, or mail address.” (Id. at 23).

         Kahn testified: “I was never involved in any marketing with anybody but my Russian single people.” (Id. at 28). Kahn testified that she does not know if MFC engaged in fax advertising:

Q. Okay. At any point in time while you worked at Manufacturers Financial had they or did they engage in fax advertising?
A. I can't remember that. And I wouldn't even know, probably, even if they did.

(Kahn Dep. at 33-34). Kahn further testified that she does not have any recollection of having spoken to or corresponded with a fax marketing company in New York, or a marketing company by the name of Business to Business Solutions, or a company named Maxileads or Macaw. (Id. at 32).

         Kahn testified that she was not “someone who was involved in anything that had to do with the company. I was pretty much working for myself.” (Id. at 32-33). Kahn further testified:

Q. Okay. Did you, from time to time, follow up on interaction with marketing or advertising companies that Mr. Stephens asked you to call or follow through and communicate with?
A. No. He would never ask me. At that time my English wasn't even that good.
Q. Okay.
A. They wouldn't understand what I'm saying.
Q. Okay.
. . . .
Q. While you were working at Manufacturers Financial did Manufacturers Financial ever purchase lists of names or telephone numbers?
A. I don't remember. And again, I wasn't involved, so they wouldn't tell me what they do.
Q. During the period of time that you worked for Manufacturers Financial did Manufacturers Financial maintain a database of names and phone numbers or fax numbers of people that they were - had contracted or were hoping to contact about their lending products?
A. It wasn't available to me it they did. I have no idea.
Q. Do you know of or have ever worked with anyone at Compressor Engineering?
A. No. Is a Russian person there? Maybe it's somebody Russian there, then, you know, they could have contacted me, but other than that, I wouldn't know who they are.

(Id. at 33-34).

         During her deposition, Kahn was shown various documents provided to Plaintiff by Abraham and Kahn testified that she does not remember seeing the documents, that she has “no idea who Kevin Wilson is, ” and that the handwriting on most of the documents does not look like her handwriting. (Id. at 36-49).

         Caroline ...

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