Heyl Royster


Heyl Royster


A Potential Business Nightmare - The TCPA and Uninvited Facsimiles


All businesses should be aware of the existence of the Telephone Consumer Protection Act of 1991, the "TCPA." This statute, as enforced by the Federal Communications Commission, makes it unlawful to fax an unsolicited advertisement unless the sender has an established business relationship with the recipient, the recipient consents to such communication, and the advertisement contains an opt-out notice. 47 U.S.C. § 227(b)(1)(C) (2000). The TCPA applies not only to faxed advertisements, but also to unwanted text messages and the use of an automatic telephone dialing system in a manner prohibited by the statute.

The TCPA has formed the basis for a myriad of class action lawsuits, because it allows for statutory recovery of $500 for each and every violation of the statute, with treble damages if the defendant willingly and knowingly committed the violation. Standing alone, this $500 figure appears minimal, but class action plaintiff's attorneys have "clients" on the lookout for uninvited faxes and if one is received, through the use of class action lawsuits and discovery, the TCPA allows those attorneys to seek discovery and identify each and every similar fax in an effort to expand the class of recipients. The implications can be immense-in one case, an Illinois estate planning attorney sent more than 200 CPAs a targeted monthly fax called the "Daily Plan-It," which purported to give advice but which also contained information about the attorney's services. Based on a finding that over 8000 such faxes were sent over a period of several months, the federal trial judge granted summary judgment in favor of the class plaintiffs in an amount exceeding $4 million, and that award was upheld on appeal by the 7th Circuit. Ira Holtzman, C.P.A. & Assocs. v. Turza, 728 F. 3d 682 (7th Cir. 2013).

Because many small and medium businesses cannot shoulder the effects of such a large judgment, the TCPA plaintiff's bar typically targets the faxers' insurance policies in an effort to maximize recovery and extort settlements. One strategy is for the class plaintiff's attorney to achieve a consent judgment with the insured defendant-faxer to agree not to pursue the faxer's personal assets, and then attempt to collect the agreed consent judgment from any insurance proceeds available. In 2013, the Illinois Supreme Court ruled that the $500 per violation damage provision was insurable under the "personal and advertising injury" portions of a general liability policy. Standard Mutual Ins. Co. v. Lay, 2013 IL 114617. In response to this decision, however, beginning in 2006, insurance companies have begun to implement exclusions into their policies which expressly exclude coverage for TCPA and other statutory claims, and such exclusions have been recently upheld in Illinois. G.M. Sign Inc. v. State Farm Fire & Cas. Co., 2014 IL App (2d) 130593. Businesses should review their policies for the existence of such an exclusion.

Insurance implications aside, the TCPA can present a nightmare for unwary businesses and its implications must be kept in mind before any material that arguably might be deemed advertising is electronically disseminated to entities that have not invited such advertising.