No Class Action Status for Junk Fax Lawsuit, Says NJ Appeals Court

In a case of first impression in New Jersey which I am dubbing as the "Bakery vs. the Bagelry," the Appellate Division held that a plaintiff could not maintain a class action lawsuit to enforce a private cause of action seeking damages for transmission of an unsolicited fax.  Local Baking Products, Inc. v. Kosher Bagel Munch, Inc., Docket No. A-3923-09T2 (App. Div. 2011).   

In this case, the plaintiff Local Baking Products received an unsolicited one-page fax from defendant Kosher Bagel Munch promoting Bagel Munch's local restaurant in Passaic, New Jersey.   This fax was sent by a marketing company hired by Bagel Munch as part of a "blast fax" campaign advertising Bagel Munch's food services to over 6000 phone numbers - the fax was ultimately received by approximately 4649 fax machines.  

In response to receiving this unsolicited fax, the bakery filed a complaint against Bagel Munch seeking damages for itself and on behalf of all the other approximate 4649 recipients of the same fax - otherwise known as a class action lawsuit - for violations of the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C.A. § 227.    Enacted by Congress in 1991, the TCPA prohibits the use of any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement. . . ."   47 U.S.C.A.  § 227(b)(1)(C).   The TCPA provides for a private cause of action entitling a prevailing plaintiff to receive either actual damages for each violation or $500 for each violation, whichever amount is greater. 47 U.S.C.A. § 227(b)(3).    

At the trial court level, the defendant successfully argued that the bakery could not maintain a class action lawsuit under the TCPA to enforce its private cause of action for damages.   Accordingly, the trial court granted Bagel Munch's motion to dismiss the class action claim for failure to state a cause of action.  The bakery did, however, receive a judgment for $500 in statutory damages as permitted under the TCPA.  On Appeal, the New Jersey Appellate Division affirmed finding that the bakery cannot maintain a class action.

The Appellate Division began its analysis by remarking about the simplicity of the provisions of the TCPA that prohibit the sending of any unsolicited advertisements via facsimile.   After recounting the statutory definition of an unsolicited advertisement set forth in § 227(a)(5), the appeals court identified the TCPA's three exceptions for imposing liability on the sender of an unsolicited fax:    

(1) if a prior business relationship exists between the parties; 

(2) if the recipient voluntarily makes its fax number available for "public distribution"; or 

(3) if the advertisement contains a notice informing the recipient of the ability and means to avoid future unsolicited advertisements.  

47 U.S.C.A. § 227(b)(1)(C).

Reciting the legislative history of the TCPA and ether cases decided in federal courts, the NJ Appellate Division noted that the purpose behind the private cause of action remedy is to allow consumers to appear without an attorney in small claims court and provide a $500 minimum amount of damages without having to prove actual damages.   Specifically, the Appellate Division explained:

The drafters [of the TCPA] recognized that  damages from a single violation would ordinarily amount to only a few pennies worth of ink and paper usage, and so believed that the $500 minimum damage award would be sufficient to motivate private redress of a consumer's grievance through a relatively simple small claims court proceeding, without an attorney.  See 137 Cong. Rec. S16205-06 (daily ed. Nov. 7, 1991) (statement of Sen. Hollings)("[I]t would defeat the purposes of the bill if the attorneys' costs to consumers of bringing an action were greater than the potential damages.").

Class actions are governed by R. 4:32-1 of the New Jersey Court Rules.   This Rule provides that class action certification is appropriate only if:

(1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the
class.

R. 4:32-1(a).

The appeals court explained that the issues in this lawsuit “are whether the proposed class raises ‘questions of law or fact common to the members of the class [that] predominate over any questions affecting only individual members [(commonality and predomination)], and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy [(superiority)].” 

After discussing the standards that governed its analysis of the class action issues, the appeals court rejected the bakery's argument that the trial court’s ruling was inconsistent with United Consumer Financial Services v. Carbo, 410 N.J. Super. 280 (App. Div. 2010), which considered a class action under the Truth-in-Consumer Contract, Warranty and Notice Act.

Acknowledging that no published New Jersey decision had resolved the issue of class actions under the TCPA [though the court did cite several unpublished decisions in New Jersey involving class action certification under the TCPA which are not binding or of precedential pursuant to New Jersey Court Rule 1:36-2],  the Appellate Division looked to decisions from other state and federal courts, finding that there was a “lack of uniformity as to approach and result.”  For example, courts in seven states have published decisions allowing class certification for TCPA claims: Arizona, California, Florida, Indiana, Missouri, North Carolina and Oklahoma.  Whereas, courts in five other states have published decisions denying class action certification under the TCPA:   Colorado, Connecticut, New York, Ohio, and Texas.   The appeals court also noted a split in decisions published by federal district courts.

Expressing its doubt that the plaintiff could satisfy the commonality and typicality requirements of New Jersey Court Rule 4:32-1 governing class actions, the NJ Appellate Division ultimately concluded that the bakery could not satisfy the predominance and superiority factors.  Specifically, the court declared that “a class action suit is not a superior means of adjudicating a TCPA suit.”  The court stressed that by providing consumers with a statutory award of $500, Congress had offered aggrieved parties with an adequate incentive to pursue their claims without having to resort to a class action in order to aggregate many small claims.

Furthermore, the appellate court emphasized out that “[t]he combination of the TCPA’s design and New Jersey’s procedures suggests that the benefit of a class action has been conferred on a litigant by the very nature of the procedures employed and relief obtained.  The cost of litigating for an individual is significantly less than the potential recovery.”  Lastly, the court reasoned that the facts that were necessary to succeed on an individual claim would be identical to the facts needed simply to be identified as a class member.