TCPA Family Feud – Survey Says: Second Circuit Rejects Third Circuit and Holds that a Faxed Invitation to Participate in a Market Research Survey in Exchange for Money Does Not Constitute an “Advertisement” Under the TCPA

Author: Thomas Blatchley

The Second Circuit recently affirmed a District Court dismissal, holding as a matter of first impression that an unsolicited faxed invitation to participate in a market research survey in exchange for money does not constitute an “unsolicited advertisement” under the Telephone Consumer Protection Act. See Bruce Katz, M.D., P.C. v. Focus Forward, LLC, 22 F.4th 368 (2d Cir. 2022). Looking to the statutory text, legislative history and FCC implementation, the Second Circuit rejected a recent Third Circuit decision and found that invitations to participate in a survey, without more, are not advertisements under the TCPA.

Plaintiff’s Complaint alleged that that on or about September 12, 2019, and October 25, 2019, Defendant sent Plaintiff two unsolicited faxes seeking participants in market research surveys, in violation of the TCPA, as amended by the Junk Fax Prevention Act. Both faxes explained that Defendant was “currently conducting a market research study and “offer[ed] an honorarium of $150 for [the recipient’s] participation in a . . . telephonic interview.” Plaintiff filed a putative class action alleging violations of the TCPA, seeking both injunctive relief and statutory damages. Defendant filed a Rule 12(b)(6) motion to dismiss, arguing that an unsolicited faxed invitation to participate in a market research survey does not constitute an “unsolicited advertisement under the TCPA. The District Court agreed and granted the motion to dismiss.

The TCPA, as amended by the JFPA, prohibits the use of “any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement.” An “unsolicited advertisement” is defined by the statute 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.” Additionally, in 2006 the FCC promulgated a rule that construes the TCPA specifically proscribing any faxed surveys “that serve as a pretext to an advertisement,” which the Second Circuit previously considered in Physician’s Healthsource, Inc. v. Boehringer Ingelheim Pharmaceuticals, Inc., 847 F.3d 92, 96 (2d Cir. 2017) (held that an unsolicited fax promoting a free event could serve as a pretext for an advertisement, but only where the event had a “commercial nexus to a firm’s business, i.e., its property, products or services.”).

This appeal, as a matter of first impression, centered on the interpretation of what constitutes an “unsolicited advertisement” under the TCPA. Specifically, whether a fax inviting the recipient to take a survey in exchange for money constitutes an “advertisement” under the TCPA.

The Second Circuit began its analysis by recognizing that a split panel of the Third Circuit recently held in Fischbein v. Olson Research Group, 959 F.3d 559 (3d Cir. 2020) that such faxes are advertisements, reasoning that “an offer of payment in exchange for participation in a market survey is a commercial transaction, so a fax highlighting the availability of that transaction is an advertisement under the TCPA.” Not surprisingly, the plaintiff urged the Second Circuit to adopt Fischbein’s reasoning and conclusion. The defendant (and the District Court) relied on multiple district court decisions holding the opposite. Those decisions essentially concluded that mere invitations to participate in a survey, without more to render them a pretext for advertising, should not themselves be viewed as prohibited advertisements under the TCPA.

The Second Circuit agreed with the District Court that the subject faxes were not facially “advertisements” under the TCPA. Looking to the plain language of the TCPA, specifically the meaning of “unsolicited advertisement” (see definition above), the Court found that faxes seeking a recipient’s participation in a survey plainly do not advertise the commercial availability or qualify of any property, goods or services, and therefore cannot be “advertisements” under the TCPA. Notably, the Second Circuit disagreed with the majority opinion in Fischbein on whether the faxes could be construed as advertising the availability of a service. The Second Circuit, rejecting the Third Circuit interpretation, found that the TCPA neither prohibits communications advertising the availability of an opportunity nor does it prohibit communications advertising communications advertising the availability of transactions that are commercial in character. The TCPA simply prohibits communications advertising the “availability . . . of any property, goods or services.” Finally, the Second Circuit found that the legislative history of the TCPA and the FCC’s implementation of that law supported the defendant’s position that the faxes are not advertisements.

In summary, the Second Circuit held that a faxed invitation to participate in a market research survey in exchange for money does not constitute an “advertisement” under the TCPA. The decision is a significant victory for TCPA fax defendants, at least in the Second Circuit, and sets the stage for a continued Circuit split.

Why You Should Wait to File a Motion for Summary Judgment in a “Hunstein” Claim – The Lessons of Khimmat

Author: Andrew Schwartz

Anyone who defends debt collectors is well aware of the Hunstein line of cases in the 11th Circuit. In the modified (Hunstein 1 and Hunstein 2, and, at-the-moment vacated Hunstein 2, pending en banc review) the 11th Circuit determined that the use of a letter vendor by a debt collector to print and mail collection letters to consumer could be deemed prohibited communication in violation of Section 1692c(b) of the Fair Debt Collection Practices Act (“FDCPA”).1 The 11th Circuit decisions seemingly ignored the intent and purpose of Section 1692c – to prevent embarrassment to a consumer through communications to friends, family members and employers. As a result, “Hunstein” lawsuits spread like dandelions.

However, until Khimmat v. Weltman, Weinberg and Reis Co., LPA, Civ. No. 2:21-CV-02944-JDW, 2022 WL 356561, at *1 (E.D. Pa. Feb. 7, 2022) no court has addressed the material claims in Hunstein (beyond dicta critical of Hunstein).

In the context of a motion for judgment on the pleadings, the Honorable Joshua D. Wolson in the United States District Court for the Eastern District of Pennsylvania, discerned that a debt collector’s use of a letter vendor could be a violation of 1692c(b) of the FDCPA.2

The decision examines whether the process of sending of consumer data to a letter vendor for the purposes of printing, folding and mailing a letter is a communication in connection with the collection of any debt with any person. The Court held that the transfer of data was a communication and that this communication was in connection with the collection of a debt. Finally, the Court left open whether the communication was to a person (i.e., whether the letter vendor perceives the content of the “communication” – whether a human read the information provided by the debt collector) and left this issue for further development of the record and summary judgment.

The Court addresses the FTC and CFPB’s indirect approval of the use of letter vendors by debt collectors. The conclusion of the Court seems correct in that the FTC and CFPB have not expanded on their general acknowledgment of the use of letter vendors to the conclusion that the use of such vendor comports with the FDCPA. It is this part of the decision that truly begs the question of when the CFPB is going take on the task of promulgating directives as to the lawful use of letter vendors. These directives are long overdue and should have been addressed in Regulation F. One can only hope that the CFPB addresses this issue with no further delay.

While this decision is unhelpful, it has some exceptional flaws. Most glaringly, when faced with the permissible use of telegram companies by a debt collector versus the use of a letter vendor, the court draws the incongruous conclusion that telegram companies are wire-based, regulated utilities and, as such, the transfer of data from a debt collector to a telegram company is different than that transfer of the same data via computer to a letter vendor. In reality, this is a distinction with no difference.

1 Hunstein is premised on a motion to dismiss standard, not a summary judgment standard.
2 Again, under the motion to dismiss standard.

Are Lost Sleep and Annoyance Enough to Convey Standing?

Author: Melissa Manning

An ongoing question in consumer protection litigation is, how concrete does an injury need to be in order to confer standing?

Well, according to a recent Northern District of Illinois decision, a mere “sense of indignation,” “lost sleep” and “aggravated annoyance” won’t cut it. (Side note: This is probably for the best or the makers of Wordle might be in for a world of hurt.)

In Milisavljevic v. Midland Credit Management, LLC et al, 1:19-cv-08449, Milisavljevic was sued in state court after failing to make required payments towards his credit card debt. When he then filed no responsive pleading, defendant debt buyer sent Milisavljevic a copy of its filed motion for default judgment and an unsigned proposed judgment order. Thinking that the unsigned order meant he already lost in state court, Milisavljevic didn’t respond and a judgment order was indeed entered against him. Plaintiff then retained counsel to vacate the default judgment and file a purported class action against defendants for violations of the FDCPA alleging that defendants regularly present draft orders of judgment to the Illinois courts that are different than those they send to consumers in connection with the motions of default judgments they file in collection cases.

Unfortunately for Milisavljevic, the Court found that his allegations of  “severe emotional distress,” and “lost sleep” were not sufficient to confer standing under Article III. Quoting the Seventh Circuit in Gunn v. Thrasher, Buschmann & Voelkel, P.C., 982 F.3d 1069, 1072 (7th Cir. 2020) “the Supreme Court has never thought that having one’s nose out of joint and one’s dander up creates a case or controversy.”

What’s a five letter word for the Seventh Circuit’s response to dubious injury allegations: snark.