MADISON HEIGHTS, Mich. (Legal Newsline) – A small business in Michigan recently survived a class action lawsuit that it said threatened to shut it down.
In December, Magna Chek, a company that offers non-destructive testing, settled a class action brought by an Illinois chiropractor who received one of the company’s fax advertisements.
Though the faxes contained a notice that provided a 24/7 phone number for recipients who wished to stop receiving them, the plaintiff said they weren’t compliant with the Telephone Consumer Protection Act because they did not express that opt-out requests must be honored within 30 days and because he did not solicit them.
Magna Chek had contracted with WestFax, Inc., to draft the disclaimer and believed the faxes fully complied with the TCPA.
But William Pollack and his attorneys at Edelman, Combs, Latturner & Goodwin in Chicago disagreed and filed a five-count federal class action against it in February 2014.
The original faxes contained an opt-out notice at the bottom of the page and included a toll-free phone number that was available 24 hours a day.
Magna Chek - which employs approximately 35 individuals, has been in business for 44 years and averages approximately $2 million in gross sales – said it turned to faxes when other forms of advertising proved to not be cost-effective.
The notice at the bottom of its faxes simply stated, “If you wish to be removed, please call (the phone number).”
Among the plaintiff’s arguments were that the notice did not satisfy the requirements of the TCPA because it did not disclose that opt-out requests must be honored within 30 days, Magna Chek said.
“The putative class action against Magna Chek… ‘converts an opt-out mechanism designed to shield recipients from unsolicited faxes into a sword allowing savvy recipients of solicited faxes to extract massive damages on the basis of nonexistent injuries,’” Magna Chek’s petition to the Federal Communications Commission says, citing a Purdue Pharma petition.
“Essentially a person could call Jimmy John’s, request a menu be faxed to him, then sue Jimmy John’s under the TCPA for failure to comply with each of the specific requirements…”
Magna Chek sought a ruling from the FCC in March.
Executive Vice President Scott Bucholz testified that if the company would have been found to have violated the TCPA, its potential liability would “substantially exceed its net worth and annual gross sales, thereby forcing Magna Chek out of business.”
The company’s petition said it was only a “minor technical violation” that threatened to bankrupt it.
“Not only will the (medical devices, automotive and trucking) industries lose a critical safety partner if Magna Chek closes its doors, but nearly 40 residents of the Detroit metropolitan area will lose their jobs and be forced to join the already overburdened ranks of the unemployed,” the petition says.
The petition also says the faxes the company sends are not unsolicited. The company compiled its mailing list through customers, trade show contacts and opt-in lists purchased from various vendors.
On Oct. 30, the FCC granted a retroactive waiver of compliance with the opt-out notice requirements for solicited faxes.
The FCC said companies like Magna Chek were led to confusion regarding the opt-out notice requirements.
“(W)e find that granting a retroactive waiver would serve the public interest,” the FCC wrote.
“The record in this proceeding demonstrates that a failure to comply with the rule – which as noted above could be the result of reasonable confusion or misplaced confidence – could subject parties to potentially substantial damages, as well as possible liability under the Communications Act.”
Any terms of any settlement between Pollack and Magna Chek were not disclosed in the Dec. 9 stipulation of dismissal. A class was never certified in the case.
As a result of its ordeal, Magna Chek’s short opt-out notice has grown much longer.
It reads: “If you no longer wish to receive faxes from Magna Chek, you may request that we not send faxes to your telephone fax machine(s). In order for your request to be valid, (i) the request must clearly identify the fax number(s) to which the request relates; (ii) the request must be communicated to us by calling 888-876-1394 or by sending a fax to 248-597-0440; and (jii) you must not have subsequently provided express permission, whether written or unwritten, to us to transmit faxes to the fax number(s) identified in the request. Our failure to comply with a proper request within 30 days is unlawful."
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