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Lyngaas v. Curaden Ag

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

May 23, 2019

BRIAN LYNGAAS, D.D.S., individually and as the representative of a class of similarly situated persons, Plaintiff,
v.
CURADEN AG, et al. Defendants.

         OPINION & ORDER (1) GRANTING IN PART AND DENYING IN PART CURADEN AG'S MOTION FOR SUMMARY JUDGMENT (DKT. 60); (2) DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (DKT. 62); (3) GRANTING PLAINTIFF'S MOTION TO CERTIFY CLASS (DKT. 63); (4) DENYING WITHOUT PREJUDICE DEFENDANTS' MOTION TO EXCLUDE PLAINTIFF'S EXPERT WITNESS (DKT. 67); AND (5) DENYING PLAINTIFF'S MOTION TO POSTPONE RULING ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (DKT. 68)

          MARK A. GOLDSMITH UNITED STATES DISTRICT JUDGE.

         In this case, Plaintiff Brian Lyngaas contends that Defendants Curaden AG and Curaden USA Inc. are liable under the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, for sending him unsolicited fax advertisements. Lyngaas has moved for summary judgment against both Defendants (Dkt. 62), and seeks to certify a class of similarly-situated individuals (Dkt. 63). He has also filed a motion asking the Court to postpone ruling on his summary judgment motion until the Court has ruled on the class certification motion (Dkt. 68). Curaden AG has also filed for summary judgment (Dkt. 60), and seeks to exclude Lyngaas' expert witness (Dkt. 67). Because oral argument will not aid the decisional process, the motions will be decided based on the parties' briefing. See E.D. Mich. LR 7.1(f)(2); Fed.R.Civ.P. 78(b). For the reasons that follow, the Court (1) denies without prejudice Defendants' motion to exclude Lyngaas' expert witness; (2) grants in part and denies in part Curaden AG's motion for summary judgment;[1] (3) denies Lyngaas' motion for summary judgment; (4) grants Lyngaas' motion to certify class; and (5) denies Lyngaas' motion to postpone ruling on his motion for summary judgment.

         I. BACKGROUND

         This case arises out of two faxes received by Plaintiff Brian Lyngaas, a dentist whose practice is located in Livonia, Michigan. Plaintiff's Statement of Material Facts (“PSMF”) ¶ 1 (Dkt. 62). On March 8, 2016 and March 28, 2016, Lyngaas received faxes advertising the Curaprox Ultra-Soft CS 5460 toothbrush. Id. ¶ 3. Lyngaas contends that these faxes were sent in violation of the TCPA.

         Defendant Curaden AG, a Swiss entity, manufactures toothbrushes, including the Curaprox Ultra-Soft 5460. Id. ¶ 10. The faxes at issue in this case were sent at the direction of its wholly-owned, U.S.-based subsidiary, Defendant Curaden USA, Inc. See id. ¶ 6. Curaden USA employee Diane Hammond created the fax advertisements, both of which state that an order of toothbrushes should be emailed to diane@curaproxusa.com or ordered online at www.curaproxusaprofessional.com. Id. ¶¶ 64-65.

         Curaden USA is authorized to promote Curaden AG products, including the Curaprox Ultra-Soft 5460, throughout the United States. Id. ¶¶ 13, 15. Curaden AG authorized Curaden USA to use its trademarks, images, graphics, and pictures when promoting Curaden AG products. Id. ¶ 16. Curaden AG had the right to approve all marketing done by its distributors, Deposition of Clifford zur Nieden, Ex. 1 to Pl. Mot. for Summ. J., at 26 (Dkt. 62-2), but Curaden USA did not need prior approval from Curaden AG to use its marketing materials, 11/13/2017 Johnson Dep., Ex. 2 to Pl. Mot. for Summ. J., at 43 (Dkt. 62-3).

         Curaden USA did not send the faxes itself, but instead paid a company called AdMax Marketing to do so. Komniey Dep., Ex. 3 to Pl. Mot for Summ. J., at PageID.1368, 1373 (Dkt. 62-4). Curaden USA purchased the database and target list that was used in the fax campaigns. PSMF ¶ 66.[2] AdMax Marketing, in turn, hired a company called WestFax to send the faxes. Id. ¶ 58.

         Chad Komniey, the owner of AdMax Marketing, explained that WestFax is a service provider that has a platform to broadcast faxes. Komniey Dep. at 12, 83-85. To use WestFax's broadcasting service, Komniey would visit WestFax's website, upload the list of numbers to which the faxes would be sent, and schedule the time and date to be sent. Id. at 85. After the faxes were sent, Komniey would receive an email showing the summary of the transmissions. Id. at 86. He would then go to WestFax's website, log into his account, and then download a report that showed which faxes were successful and which failed. Id. at 86-87.

         The parties dispute how many of these faxes were successfully sent. Lyngaas' expert, Christopher Lee Howard, opined:

It is my experience that fax systems report a successful transmission as a result of having received an “MCF” (message confirmation signal) from the receiver at the end of T.30 Phase D. Therefore, there are no instances of “false positives.”
Every fax receiver which employs ITU T.30 and confirms the receipt of a fax is inherently “equipment which has the capacity to transcribe text or images (or both) from an electronic signal received over a regular telephone line onto paper” as stipulated by the Telephone Consumer Protection Act.

Howard Report, Ex. 12 to Pl. Mot. for Summ. J., at 3 (Dkt. 62-13). By reviewing the reports generated by WestFax, Howard concluded that the faxes were sent to 33, 226 recipients on March 8, 2016, and to 32, 678 recipients on March 28, 2016. Id.

         Lyngaas now seeks to certify a class of individuals who received unsolicited faxes advertising the Curaprox Ultra-Soft CS 5460 in March of 2016, as well as summary judgment against both Defendants.[3] Curaden AG also seeks summary judgment, and both Defendants seek to exclude Howard's report.

         II. MOTION TO EXCLUDE PLAINTIFF'S EXPERT

         Defendants seek to exclude the testimony of Lyngaas' expert, Christopher Lee Howard. Howard has worked for over eighteen years as a fax consultant, is a developer of fax software, and has designed and developed fax applications as well as a software modem. Howard Report at 1. Defendants argue that Howard must be excluded because his export report fails to comply with Federal Rule of Civil Procedure 26. Federal Rule 26 provides that an expert report must contain:

(i) a complete statement of all opinions the witness will express and the basis and reasons for them;
(ii) the facts or data considered by the witness in forming them;
(iii) any exhibits that will be used to summarize or support them;
(iv) the witness's qualifications, including a list of all publications authored in the previous 10 years;
(v) a list of all other cases in which, during the previous 4 years, the witness testified as an expert at trial or by deposition; and
(vi) a statement of the compensation to be paid for the study and testimony in the case.

Fed. R. Civ. P. 26(a)(2)(B)(i)-(vi). Defendants argue that Howard's expert report does not contain his opinions or the bases and reasons for them; the facts he relied upon to draft his report, including the ITU T.30 document he states he relied upon; the list of all publications he has authored in the previous ten years; or a list of cases in which he testified as an expert. Defs. Mot. to Exclude Expert at 3-4.

         Howard's report does contain his opinions and the reasons for them - he explains that he examined the lists of fax broadcasts and determined that a fax was successfully transmitted to 33, 226 individuals on March 8, 2016 and that another fax was successfully transmitted to 32, 678 recipients on March 28, 2016. Howard Report at 3. Howard stated that “[i]t is my experience that fax systems report a successful transmission as a result of having received an ‘MCF' (message confirmation signal) from the receiver at the end of T.30 Phase D. Therefore, there are no instances of ‘false positives.'” Id. In his deposition, Howard further explained:

ITUT.30 is the document which describes fax protocol, the signals and information that go between two fax machines in order to communicate those pages. . . . [I]f you understand ITUT.30 protocol and how it works, that message confirmation signal indicates a positive signal from the receiver that it believes that that page was received complete. So there's no question whether or not the recipient got it or not because the recipient confirmed that it did. . . . [T]here's no other way for a fax confirmation to occur. So when you have a summary report that says, you know, 30, 000 faxes were received by the recipients, the only way that that could be stated is through the MCF signal.

Howard Dep., Ex. 3 to Defs. Mot. to Exclude Expert, at 32-34 (Dkt. 67-4).

         While the report is not deficient for failing to supply opinions, it is deficient in other respects. It is missing ITU T.30, the document upon which Howard relies. It also omits one deposition, Pl. Resp. to Mot. to Exclude Expert at 14 (Dkt. 72), which was required by Rule 26 (a)(2)(B)(v). Regarding the omission of certain blogs, Lyngaas contends that Howard did not need to disclose them because his employer, not Howard, is the “author.” Id. at 12. The Court disagrees. Because Howard wrote the blog postings, he is the “author” under a common understanding of the word. See Author, Merriam-Webster, available at www.merriam-webster.com/disctionary/author (“the writer of a literary work (such as a book)”). Thus, his report falls short of the Rule 26(a)(2)(B)(iv) requirement as well.

         Lyngaas urges the Court not to exclude Howard's report entirely, but instead to re-open his deposition. The Court agrees that this is appropriate, and will re-open discovery for this limited purpose. Howard must furnish to Defendants a revised export report no later than June 3, 2019 containing the omitted information; if Defendants wish, they may take Howard's deposition no later than June 13, 2019. Defendants' motion is therefore denied without prejudice.

         III. MOTIONS FOR SUMMARY JUDGMENT

         A. Standard of Review

         A motion for summary judgment under Federal Rule of Civil Procedure 56 shall be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A genuine dispute of material fact exists when there are “disputes over facts that might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “[F]acts must be viewed in the light most favorable to the nonmoving party only if there is a ‘genuine' dispute as to those facts.” Scott v. Harris, 550 U.S. 372, 380 (2007). “Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

         Once the movant satisfies its initial burden of demonstrating the absence of any genuine issue of material fact, the burden shifts to the nonmoving party to set forth specific facts showing a triable issue of material fact. Scott, 550 U.S. at 380; Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts, ” Scott, 550 U.S. at 380 (quoting Matsushita, 475 U.S. at 586), as the “mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment, ” id. (quoting Anderson, 477 U.S. at 247-248) (emphasis in original); see also Babcock & Wilcox Co. v. Cormetech, Inc., 848 F.3d 754, 758 (6th Cir. 2017) (“A mere scintilla of evidence or some metaphysical doubt as to a material fact is insufficient to forestall summary judgment.”).

         B. Summary Judgment as to Curaden AG

         The TCPA provides that it “shall be unlawful for any person within the United States, or any person outside the United States if the recipient is within the United States . . . to use any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine.” 47 U.S.C. § 227(b)(1)(C). Curaden AG does not dispute that the March 8, 2016 and March 28, 2016 faxes received by Lyngaas constitute “unsolicited advertisements” within the meaning of the statute. However, the parties dispute several other issues that bear on summary judgment: whether this Court lacks personal jurisdiction over Curaden AG; whether Curaden AG is liable as a “sender” of the faxes; and whether Curaden AG can be held liable for Curaden USA's actions under an alter ego theory. The Court will address each argument in turn.

         1. This Court has jurisdiction over Curaden AG

         Nearly two years ago, Curaden AG argued in its motion to dismiss that it was not subject to this Court's jurisdiction. While the Court denied Curaden AG's motion, Lyngaas v. Curaden AG, No. 17-10910, 2018 WL 1251754 (E.D. Mich. Mar. 12, 2018), Curaden AG now argues that discovery has revealed that the Court does not have personal jurisdiction over it. Def. Mot. for Summ. J. at 16. Curaden AG is mistaken.

         The Court previously found that Curaden AG was subject to Michigan's long-arm statute, Michigan Compiled Laws § 600.715(2), because “it created Curaden USA and authorized it to market . . . Curaden AG's toothbrushes in the entire United States including Michigan, ” id. at *4, and “any nexus between business transaction and tort shall allow limited personal jurisdiction to operate, ” id. (quotations and alterations omitted). This is still the case. Curaden AG argues that it did not “do or cause to be done” the acts that resulted in a tort; it only entered into a distribution agreement with Curaden USA, which is not tortious. Def. Mot. for Summ. J. at 16-17. But as this Court already found, Michigan Compiled Laws § 600.715(2) “has been interpreted broadly, ” and “Curaden AG caused consequences to occur in Michigan that resulted in an action for tort” when it created Curaden USA and authorized it to market Curaden AG's toothbrushes throughout the entire United States, including Michigan. Id.

         This Court also found that the exercise of jurisdiction over Curaden AG comported with due process, because (i) Curaden AG purposefully availed itself of the privilege of acting in Michigan, (ii) the cause of action arose from Curaden AG's activities there, and (iii) the acts of Curaden AG or the consequences it caused had a substantial enough connection with Michigan to make the exercise of jurisdiction over it reasonable. Id. at *5, *8.

         Curaden AG now claims that it did not purposefully avail itself of the privilege of acting in Michigan. Def. Mot. for Summ. J. at 18. Curaden AG points to certain testimony from Dale Johnson and Clifford zur Nieden to show that Curaden USA had some freedom regarding its market activities. Dale Johnson, for example, testified that Curaden USA does not “clear with [Curaden AG] or talk to them about what our marketing activities are.” 11/13/2017 Johnson Dep. at 28. In support, Curaden AG cites two Sixth Circuit cases - Smith v. Home Depot USA, Inc., 294 Fed.Appx. 186 (6th Cir. 2008), and Bridgeport v. Still N the Water Publishing, 327 F.3d 472 (6th Cir. 2003). But this Court already found that those cases support the opposite position, that Curaden AG did indeed purposefully avail itself of the privilege of acting in Michigan. Lyngaas, 2018 WL 1251754, at *5-*6. Even though Curaden USA has freedom to decide how to market the products, this does not negate the Court's prior conclusion that

Curaden USA has the obligation to market products throughout the United States. Curaden AG was not “merely aware that their distributor was likely to market the product in all fifty states, ” but rather “the parties' contract required it.” Bridgeport, 327 F.3d at 480. Curaden USA was not merely given the rights to market products in the United States; it was to use its “best endeavors” to do so. Curaden USA was to promote the sale of Curaden AG's products “throughout the Territory, ” i.e. throughout the United States. Further, the Sixth Circuit has established that “advertising is among the activities that constitute ‘reaching out' to forum state residents.” Bridgeport, 327 F.3d at 481 (quoting Creech v. Roberts, 908 F.2d 75, 79 (6th Cir. 1990)).

Lyngaas, 2018 WL 1251754, at *6.

         With respect to the final two due process considerations noted above, Curaden AG again puts forth arguments that this Court rejected in connection with the motion to dismiss. For the reasons set forth in that opinion, the Court again finds that the exercise of jurisdiction over Curaden AG comports with due process.[4]

         2. There is an issue of fact as to whether Curaden AG is a “sender” of the faxes

         Turning now to the merits of the TCPA claim, Curaden AG argues that it is not a “sender” of the faxes, as defined by the FCC regulation: “the person or entity on whose behalf a facsimile unsolicited advertisement is sent or whose goods or services are advertised or ...


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