Lyngaas v. Curaden AG

          OPINION & ORDER CONTAINING FINDINGS OF FACT AND CONCLUSIONS OF LAW FOLLOWING BENCH TRIAL AND DIRECTING SUBMISSION OF PROPOSED JUDGMENT

          MARK A. GOLDSMITH UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         In this class action, Plaintiff Brian Lyngaas, D.D.S., on behalf of himself and similarly situated class members, asserts that on March 8 and March 28, 2016, he received unsolicited fax advertisements from Defendants Curaden AG and Curaden USA, in violation of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227. The Court conducted a non-jury trial on September 18 and September 19, 2019. The parties have submitted post-trial briefs and proposed findings of fact and conclusions of law (Dkts. 118, 119, 120), as well as responses to the post-trial briefing (Dkts. 123, 124). Defendants contend that Lyngaas did not meet his burden of proving the total number of unsolicited faxes allegedly sent class-wide. They also contend that Lyngaas did not establish that Curaden AG was a sender of faxes within the meaning of the TCPA.

         As discussed below, Lyngaas has established that Curaden USA violated the TCPA by sending two unsolicited fax advertisements to him individually and by broadcasting the advertisements in two mass fax campaigns. However, because Lyngaas has not established the total number of faxes successfully sent class-wide, the Court requires a claims administration process that affords potential class members the opportunity to establish their receipt of Curaden USA's unsolicited fax advertisements. As for Curaden AG, Lyngaas has failed to establish its liability under the TCPA. In accordance with the direction set forth below, a judgment will be entered embodying these rulings.

         II. BACKGROUND FACTS

         On March 8 and March 28, 2016, Lyngaas, a dentist whose practice is located in Livonia, Michigan, received faxes advertising the Curaprox Ultra-Soft CS 5460 toothbrush. Joint Final Pretrial Order (“JFPO”), Stipulation of Fact (“SoF”) ¶ 1 (Dkt. 114). Lyngaas owns and operates a fax machine for use within his dental practice, and he did not expressly invite or permit either Defendant to send him any advertisement by fax. Id. at ¶¶ 11-12.

         Curaden AG is a Swiss entity that manufactures toothbrushes, including the Curaprox Ultra-Soft 5460. Id. at ¶ 2. Curaden USA is a subsidiary of Curaden AG. Patrice LeMaire Dep. at 30.^[1] Curaden USA is authorized to promote Curaden AG products, including the Curaprox Ultra-Soft 5460, throughout the United States, SoF ¶ 5. While Curaden AG has a form Distribution Agreement, which it uses as a template for written agreements with its subsidiary distributors, it never executed such a written agreement with Curaden USA. Id. at ¶ 20. At all times relevant, Curaden USA has operated on an oral agreement with Curaden AG. Id. at ¶ 21.

         Although Curaden USA and Curaden AG have an oral agreement, many of the tenets of the written Distribution Agreement that was exchanged-but not executed-have been observed by the parties. Id. For example, Curaden USA acted as Curaden AG's exclusive distributor of Curaden products within the United States, consistent with § 2.1 of the Distribution Agreement. Trial Tr. II at 78 (Dkt. 116). However, some of the provisions of the Distribution Agreement were not observed. Clifford Zur Nieden Dep. at 13; LeMaire Dep. at 53-54. Under the Distribution Agreement, Curaden AG had the right to approve all marketing materials developed by its distributors. Distribution Agreement at §§ 5.7, 5.8, Pl. Trial Ex. 9 (Dkt. 121-5). However, this right was never enforced, and Curaden USA never presented its advertising materials to Curaden AG for review or approval. Zur Nieden Dep. at 16-17, 46; Trial Tr. II at 83-84, 123-124.

         Richard Thomas is the managing director of Curaden UK, Curaden AG's distributor in the United Kingdom. Zur Nieden Dep. at 21; Trial Tr. II at 97-98. Thomas served as an advisor to Curaden AG subsidiaries, including Curaden USA. Dale Johnson Dep. at 83; Trial Tr. II at 98, 103. Curaden USA did not seek Thomas's approval on marketing or business plans, nor did it seek Thomas's approval of the advertisements before directing that they be sent. Trial Tr. II at 98, 103, 135; 3/8/16 E-mails, Pl. Trial Ex. 19 (Dkt. 121-11).

         Curaden USA purchased a database, or “target list, ” of fax numbers to be used in a fax campaign. SoF ¶ 9. The target lists contain tens of thousands of fax numbers connected to dental professionals. Target Lists, Pl. Trial Exs. 17, 18, 20, 21 (Dkts. 121-9, 121-10, 121-12, and 121-13). Curaden USA did not send the faxes itself, but instead hired a company called AdMax Marketing (“AdMax”) to do so. SoF ¶ 8. AdMax Marketing's primary business is “fax blasting, ” or fax broadcasting. Id. at ¶ 24. AdMax, in turn, had hired a company called WestFax to send the faxes but did not disclose to Curaden USA that it had hired WestFax. Id. at ¶ 9.

         Curaden USA employee Diane Hammond created the two fax advertisements at issue in this case. Id. at ¶¶ 4, 30. Both advertisements promoted the Curaprox Ultra-Soft CS 5460 toothbrush, were directed to “dental professionals, ” and provided Curaden USA's contact information, including a fax number, phone number, e-mail address, website, and social media accounts. 3/8/16 Fax, Pl. Trial Ex. 2 (Dkt. 121-1); 3/28/16 Fax, Pl. Trial Ex. 3 (Dkt. 121-2). This contact information was connected to and was exclusively maintained by Curaden USA. Trial Tr. II at 86-88, 91-93. The advertisements did not mention Curaden AG and referred all communications to Curaden USA. SoF ¶ 39. Curaden USA did not provide these advertisements to Curaden AG for review before directing that the faxes be sent. Trial Tr. II at 105-106; Zur Nieden Dep. at 45-46.

         On February 23, 2016, Dale Johnson, Curaden USA's vice president and managing director, approved the advertisement and directed Hammond to arrange to have the faxes broadcasted; Hammond, in turn, instructed Curaden USA employee Magen James to have the faxes sent to the attached target list of “close to 46, 000” fax numbers purchased by Curaden USA. 3/8/16 E-mails, Pl. Trial Ex. 19. On March 8, James directed AdMax to send the faxes that day. Id. Likewise, on March 23, 2016, Hammond instructed James to send out an updated version of the advertisement to an attached list of over 46, 000 fax numbers. 3/28/16 E-mails, Pl. Trial Ex. 38 (Dkt. 121-15). James again directed AdMax to broadcast the faxes the following Monday, March 28, 2016. Id. Accordingly, the faxes were sent at the direction of Curaden USA. SoF ¶ 3. Once the faxes were transmitted, AdMax invoiced Curaden USA, and Curaden USA paid the invoices. Id. at ¶ 38. All communications regarding the creation and transmission of the advertisements were between Curaden USA and AdMax. Id.

         III. DISCUSSION

         A. Jurisdiction

         As an initial matter, Curaden AG contends that this Court lacks personal jurisdiction over it under either Michigan's long-arm statute or Federal Rule of Civil Procedure 4(k)(2), as the elements of due process are not met. Specifically, Curaden AG argues that (1) it did not purposely avail itself of the privilege of acting in Michigan because it did not require that Curaden USA target its marketing efforts toward dental practices in Michigan; (2) Lyngaas's claims do not arise out of Curaden AG's alleged contacts with Michigan because Curaden AG was not involved in sending the faxes; and (3) it is unreasonable to exercise jurisdiction over Curaden AG because Curaden AG was not involved in sending the faxes.

         Curaden AG has previously advanced the same arguments before the Court in its motion to dismiss for lack of personal jurisdiction, see Def. Mot. to Dismiss at 18-21 (Dkt. 16), and in its motion for summary judgment, see Def. Mot. Summ. J. at 18-25 (Dkt. 60). The Court rejected these arguments in its opinions resolving these motions, holding that its exercise of personal jurisdiction over Curaden AG comports with due process. See 3/12/18 Op. at 8-15 (Dkt. 44); 5/23/19 Op. at 7-9 (Dkt. 89). For the reasons set forth in those opinions, the Court's exercise of jurisdiction over Curaden AG does not violate principles of due process.

         Additionally, Defendants contend that under Bristol-Myers Squibb Co. v. Cal. Superior Court, __U.S.__, 137 S.Ct. 1773 (2017), the Court lacks jurisdiction over the claims of any class members residing outside of Michigan. Again, Defendants advanced the same argument in their opposition to Lyngaas's motion for class certification. Defs. Resp. to Mot. for Class Certification at 6-10 (Dkt. 73). The Court rejected that argument in its opinion granting Lyngaas's motion for class certification, stating that it “has jurisdiction over the claims brought by unnamed class members, whether they received faxes in Michigan or out-of-state.” 5/23/19 Op. at 34-37. For the reasons set forth in that opinion, the Court has jurisdiction over the claims of all unnamed class members.

         B. The TCPA

         Lyngaas's and the unnamed class members' claim arises from Defendants' alleged violation of the TCPA, 47 U.S.C. § 227.^[2] Under the TCPA,

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 -

(C) to use any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement . . . .

47 U.S.C. § 227(b)(1)(C). An “unsolicited advertisement” is defined as “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission, in writing or otherwise.” § 227(a)(5).

         1. The Faxes Were Advertisements

         It is uncontested by Defendants that the two faxes at issue in this case qualify as “advertisements.” The parties stipulate that “[t]he faxes depict products which Curaden USA sells in the United States” and that Lyngaas “received faxes advertising the Curaprox Ultra-Soft CS 5460 toothbrush.” SoF ¶¶ 1, 28; 3/8/16 Fax, Pl. Trial Ex. 2 (Dkt. 121-1); 3/28/16 Fax, Pl. Trial Ex. 3 (Dkt. 121-2). Consistent with the above definition, the faxes advertise the commercial availability of the Curaprox toothbrush and are, therefore, subject to the TCPA.

         2. The Established Business Relationship Exemption And The Express Permission Defense Do Not Apply

         The TCPA sets forth an exemption to its restrictions where the following conditions are met: (1) a fax was sent to a recipient with whom the sender has an established business relationship, (2) the sender obtained the recipient's fax number either through a voluntary communication of the number or through a public source on which the recipient voluntarily made the number available, and (3) the fax contained an opt-out notice meeting the requirements of 47 U.S.C. § 227(b)(2)(D). § 227(b)(1)(C). This exemption, however, does not apply in this case. First, the parties stipulate that the notices contained within the two faxes at issue do not meet the requirements of § 227(b)(2)(E), SoF ¶ 36, compliance with which is necessary to apply the exemption under § 227(b)(2)(D)(iii). Second, Defendants do not contend they had established business relationships with any class members.

         As for the defense of express permission, although Defendants previously indicated their intent to present such a defense, see JFPO at 12, they advanced no argument during trial or in their post-trial briefing regarding any class member granting express permission to receive the faxes. Therefore, neither the established-business-relationship exemption nor the express-permission defense applies in the present case.

         3. “E-Faxes” Are Actionable

         Defendants dispute whether a TCPA violation may be established if an advertisement is received by a computer as an “e-fax, ” as opposed to receipt by a traditional fax machine. Under the TCPA, it is unlawful “to use any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement . . . .” 47 U.S.C. § 227(b)(1)(C) (emphasis added). Relying on this language, Defendants maintain that Lyngaas cannot establish that each class member received the faxes on a fax machine as opposed to a computer. The Court previously rejected this argument, stating that “the Court agrees with Lyngaas that the TCPA covers claims brought by individuals who received an unsolicited e-fax advertisement.” 5/23/19 Op. at 30. For the reasons set forth in that opinion, the Court again holds that e-faxes are actionable under the TCPA.

         4. Receipt Of A Fax May Be Established Through Evidence Of Successful Transmission

         The parties dispute whether a plaintiff must demonstrate that a fax was received to succeed on a TCPA claim. Case law on this question is mixed. In Holtzman v. Turza, 728 F.3d 682, 684 (7th Cir. 2013), the defendant objected to class certification on the ground that individual issues predominated, as each putative class member “must prove that his fax machine or computer received the fax.” The Seventh Circuit stated that the defendant was “right on the law but wrong on the facts, ” because the fax broadcasting service supplied logs reporting which faxes were delivered successfully. Id. at 685 (emphasis added). Thus, electronic confirmation of a successful fax transmission sufficed as proof of receipt. Id. Similarly, the Sixth Circuit evaluated a defendant's challenge to a class definition incorporating “[a]ll persons who were successfully sent a facsimile . . . .” Am. Copper & Brass, Inc. v. Lake City Indus. Prods., Inc., 757 F.3d 540, 542 (6th Cir. 2014). The defendant argued that “a fax might be ‘successfully sent' without being received by its intended recipient.” Id. at 545. The Sixth Circuit held that the evidence adduced by the plaintiff did not support such a distinction, as the plaintiff's expert opined that “successful transmissions of a complete fax were successfully sent to and received by 10, 627 unique fax numbers.” Id. Likewise, the Sixth Circuit has since found that an expert report establishing the number of successful fax transmissions was adequate to establish receipt of the faxes. Imhoff Investment, L.L.C. v. Alfoccino, Inc., 792 F.3d 627, 634 (6th Cir. 2015).

         Other cases have expressly held that “[t]he TCPA ‘does not specifically require proof of receipt.'” City Select Auto Sales, Inc. v. David Randall Assocs., Inc., 296 F.R.D. 299, 309 (D.N.J. 2013) (quoting CE Design Ltd. v. Cy's Crabhouse N., Inc., 259 F.R.D. 135, 142 (N.D. Ill. 2009)). But ultimately City Select and CE Design premised their conclusions on the same ground as the case law cited above-fax logs indicating successful transmission provided circumstantial evidence that the plaintiffs received the faxes. Id.; CE Design Ltd., 259 F.R.D. at 142. Similarly, another case states, “[G]iven the plain reading and statutory intent of the TCPA, a violation of the TCPA simply requires that an unsolicited fax be sent, not that Plaintiff must prove that it was received, ” as Congress intended to make evidence of transmission of a fax sufficient to state a claim under the statute. Bridgeview Health Care Ctr. Ltd. v. Clark, No. 09 C 5601, 2013 WL 1154206, at *3 (N.D. Ill. Mar. 19, 2013) (internal quotation marks omitted). The court rejected the defendant's contention that a plaintiff was required to prove receipt to demonstrate injury-in-fact and noted that “the attempt to transmit an unsolicited facsimile can be injurious either by tying up the recipient's phone or fax line or, for repeated attempts, by prompting a potential recipient to turn off the fax machine altogether when it would otherwise remain on.” Id. at *3 nn.3-4; see also Am. Copper, 757 F.3d at 544 (“[U]nsolicited fax advertisements impose costs on all recipients, irrespective of ownership and the cost of paper and ink, because such advertisements waste the recipients' time and impede the free flow of commerce.”).

         The authority, therefore, is mixed regarding whether a plaintiff must prove actual receipt of a fax. However, the case law uniformly holds that a plaintiff may establish receipt of a fax through evidence of its successful transmission. Because Lyngaas established his claim through receipt of faxes, as class members will have to do as well, the Court need not determine whether proof of actual receipt is necessary.

         C. Curaden AG Is Not Liable As A “Sender”

         The parties dispute whether Curaden AG is subject to liability under the TCPA as a “sender” of the faxes, as defined by an FCC regulation: “the person or entity [1] on whose behalf a facsimile unsolicited advertisement is sent or [2] whose goods or services are advertised or promoted in the unsolicited advertisement.” 47 C.F.R. § 64.1200(f)(10). Lyngaas contends that (1) Curaden AG is strictly liable for the transmission of the faxes because the faxes advertised a toothbrush manufactured by Curaden AG, or alternatively, that (2) the faxes were sent on behalf of Curaden AG, given its involvement in Curaden USA's advertising.

         Lyngaas relies heavily on Siding & Insulation Co. v. Alco Vending, Inc., 822 F.3d 886 (6th Cir. 2016), in arguing that the FCC definition of “sender” imposes strict liability on defendants whose goods or services are advertised in a fax, regardless of whether the defendant was responsible in some capacity for sending the fax. In Alco, the Sixth Circuit considered whether retroactive application of the FCC's definition of “sender”-promulgated in 2006- would impermissibly expand a party's liability for conduct occurring prior to 2006. Id. at 892. Before 2006, TCPA liability for sending unsolicited faxes was limited to parties “on whose behalf facsimiles [were] transmitted.” Id. at 893 (internal quotation marks omitted). Under the new FCC definition, the Sixth Circuit determined that a party whose goods or services were advertised could be held strictly liable, thus expanding TCPA liability. Id. at 892. Because retroactive application of the FCC regulation would have increased the defendant's liability, the Sixth Circuit concluded, “Alco therefore cannot be held liable simply because its goods or services were advertised in the offending faxes.” Id. at 896. Applying the interpretation set forth in Alco, Lyngaas maintains that Curaden AG may be considered a “sender” simply because the faxes advertised its product.

         The Sixth Circuit, however, reevaluated the scope of TCPA liability under the FCC definition in Health One Medical Center v. Mohawk, Inc., 889 F.3d 800 (6th Cir. 2018). In that case, a pharmaceutical wholesaler sent to the plaintiff unsolicited faxes advertising discount prices on various drugs, including one manufactured by Bristol-Meyers Squibb (“Bristol”) and another manufactured by Pfizer. Id. at 801. Although Bristol and Pfizer knew nothing about the faxes, the plaintiff argued they were liable as senders under the TCPA because the faxes “advertised or promoted” their drugs. Id. The Sixth Circuit rejected this argument, explaining “the regulation does not purport to impose liability upon parties that did not ‘send' the fax at all.” Id. at 802 (emphasis in original). Rather, “the regulation purports to allocate liability in cases where the party that physically sends (i.e., dispatches) the fax ...