Wednesday, July 23, 2003
Court of Appeal Upholds ‘Junk Fax’ Law, Revives Class Actions
By KENNETH OFGANG, Staff Writer/Appellate Courts
A federal law banning the sending of unsolicited advertisements by fax is constitutional, and can be enforced by private citizens through class actions in state court, the Court of Appeal for this district ruled yesterday.
Div. One reinstated two actions against several companies that are accused of sending thousands of “junk faxes” to businesses that did not want to receive them. The Telephone Consumer Protection Act bans using “any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine.”
Defendants in the two suits include DataMart Information Services Corporation and Fax.com, Inc.—companies that send massive numbers of faxes for a fee. Because the TCPA authorizes statutory damages of $500 per violation, the defendants face millions of dollars in liability if the court grants class certification on remand.
The defendants also include companies that hired the junk fax firms to advertise their products.
Los Angeles Superior Court Judge Ann Kough—who has since retired—rejected constitutional arguments against the act, but ruled that private enforcement actions are not available in California because the Legislature has not authorized them. The Court of Appeal, however, said that no such legislation is required.
Kough based her ruling on the act’s unusual jurisdictional provisions. Attorneys general may sue for injunctive relief, and/or to collect damages on behalf of victims in their states, and such actions must be brought in federal court. But private citizens may not sue in federal courts, and may sue in state courts only “if otherwise permitted by the laws or rules of court of a State.”
Kough reasoned that because there is no law or rule of court explicitly allowing such suits in California, they are prohibited. But Justice Robert Mallano, writing for the Court of Appeal, said that such suits are permitted because no law prohibits them.
That interpretation, Mallano reasoned, is consistent with congressional intent. He cited a statement by the legislation’s sponsor, Sen. Ernest Hollings, D-S.C., indicating that the provision for suits in state courts was designed to make litigation more affordable, while respecting the states’ constitutional independence.
Mallano also noted that all appellate courts that have considered the issue, with the exception of one panel of the Texas Court of Appeals, have reached the same view.
Turning to the constitutional question, Mallano said the act is a reasonable restriction on commercial speech and passes First Amendment muster.
“We conclude, after examining the restrictions imposed by the TCPA and the evidence supporting the Act’s passage, that the government has a substantial interest in regulating unsolicited fax advertisements,” the justice wrote.
He cited evidence that at the time of the federal law’s passage in 1991, many states were considering junk fax laws because of complaints that the unsolicited ads were costing their recipients millions of dollars.
Mallano rejected arguments that the public interest in junk fax regulation had lessened over time because of technological advances, such as machines that print faxes at lesser cost, auto-redial, dual access memory, “toner saver,” and reduced-price machines.
While such advances are “all well and good,” the justice said, owners of older models who are paying 15 cents a page to print faxes they do not want should not be required to replace their machines. “And fax advertisements sent to the latest generation of fax machines, like those sent in 1991, still impose costs on the recipient for printing and business disruptions,” he wrote.
One of the defendants, Fax.com, got a double-dose of bad news yesterday. Attorney General Bill Lockyer, an amicus in the case heard by Div. One, sued the company in U.S. District Court in San Diego, seeking more than $15 million in penalties for violations of TCPA.
“Fax.com, with high-level technology and low-level respect for the law, runs a 24-hour privacy invasion operation that continually spews unsolicited faxes and prerecorded phone calls,” the attorney general said in a statement. “Junk faxes cost consumers, businesses and taxpayers tens of millions of dollars every year. Consumers’ privacy, choice and pocketbooks have to be protected. With this action, and through our other efforts to fight spam and quiet telemarketers, that’s exactly what my office intends to do.”
Fax.com, based in Aliso Viejo, has boasted of a capacity to send millions of faxes in a single day, Lockyer noted.
The company has been a target of numerous enforcement actions, including one by the Federal Communications Commission, which is seeking $5.4 million in penalties against Fax.com and its principals, and another by the Washington, D.C. law firm of Covington & Burling, which claims Fax.com sent it more than 1,600 junk faxes in a single week in 2001.
Lockyer’s suit is similar to one by the attorney general of Missouri, who sued Fax.com and another company, American BlastFax. That case was thrown out by a district judge, but the Eighth Circuit reversed in March, finding the statute constitutional.
The case is Kaufman v. ACS Systems, Inc., B155804.
Copyright 2003, Metropolitan News Company