Another TCPA Nightmare: CEO of Medical Supply Company Faces Crippling Personal Liability for Faxes Company Sent he Thought Were Legal

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Those of you that received my mid-year TCPA review know that the Third Circuit Court of Appeal has cast serious doubt on the assumption that corporate officers can be held directly liable for TCPA violations committed by their companies. See City Select Auto Sales v. David Randall Associates, 885 F. 3d 154 (3rd Cir. 2018)(wondering aloud whether officers can really be held directly liable for conduct undertaken on behalf of corporations— before ultimately deciding not to rule on the issue.) Despite City Select, however, the rule in most TCPAland courtrooms remains that “an officer may be personally liable under the TCPA if he had direct, personal participation in or personally authorized the conduct found to have violated the statute, and was not merely tangentially involved.” Texas v. Am. Blastfax, Inc., 164 F. Supp. 2d 892, 898 (W.D. Tex. 2001).  And as one CEO found out yesterday, directing such activity can lead to tremendous expense.

In Physicians Healthsource, Inc. v. A-S Medication Solutions LLC, Case No. 12 c 5105, 2018 WL 3993409 (N.D. Ill. Aug. 21, 2018) the Court faced a summary judgment motion from the Plaintiff seeking to resolve issues of liability against Defendants–including personal liability against A-S Solutions CEO Walter Hoff– on a certified class involving 15,666 faxes that allegedly violated the TCPA. Minimum statutory damages for those faxes would amount to $7,833,00.00. Eesh.

The Court reviewed the evidence before it and concluded that the Plaintiff had met its burden of demonstrating the faxes had been sent without prior express consent and that the Defendant had failed to raise a triable issue on the subject. This is true despite the fact that the fax sender claimed to “always ask permission” before sending the faxes. The testimony on the subject demonstrated that the permission did not mention advertisements, however, only informational faxes. In the Court’s view the permission to fax informational messages is not sufficient to qualify as “express permission” to receive advertisements because the customer must “understand that by providing the fax number, he or she is agreeing to receive faxed advertisements.”  Physicians Healthsource, Inc. at *4-5. So the Court granted summary judgment against the faxer and in favor of the class.

The real news, however, is the Court’s treatment of the motion respecting CEO Huff. The Court adopted the American Blastfax, Inc. standard without a mention of City Select. See Physicians Healthsource, Inc. at *8 (citing the rule that “an officer may be personally liable under the TCPA if he had direct, personal participation in or personally authorized the conduct found to have violated the statute, and was not merely tangentially involved.”) The Court then found that Huff had personally participated in the faxes because he dictated the content of the faxes and authorized sending the faxes–noting Huff’s testimony that he “approved” the faxes. This, the Court found, was sufficient to justify personal liability on Huff for the entire exposure (~$7.8MM) owed to the class. Indeed, the Court specifically rejected the argument that the CEO had to know that the faxes would violate the TCPA to face personal exposure. The mere fact that he authorized faxes that turned out to be illegal was sufficient for the Court to impose crippling personal liability.–even though the CEO apparently believed the faxes were perfectly legal and consented.  That’s tough folks. Really tough.

There is a lesson here to be sure.  Its scary out there right now. As TCPAland featured a week ago, individual liability for TCPA violations can destroy lives.  While the law will likely shift to the City Select rationale eventually–I mean, why would a CEO be liable for a TCPA violation by a company but not for every other tort imaginable?–for now courts continue to hold officers directly and personally liable for violations committed by the companies they oversee. And Physicians Healthsource, Inc. is different in that it clearly and directly holds that a CEO is liabile even if he/she does not know that the fax violates the law. It is critical, therefore, that companies seeking to advertise via fax–or using any technology that might be subject to the TCPA–retain experienced and knowledgeable counsel to guide them.


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