Judge: 'Professional plaintiffs' dishonesty dooms $200M junk fax class action

By Jonathan Bilyk | Jun 6, 2017

A federal judge has shot down an attempt by a “professional class action plaintiff” chiropractic firm and their lawyers to pursue a junk fax class action worth potentially $200 million, saying the lack of honesty, at best, or sloppiness, at best, by the plaintiffs and their lawyers doomed their attempt to lead the lawsuit against a marketing company the judge noted had sent tens of thousands of junk fax ads.

A federal judge has shot down an attempt by a “professional class action plaintiff” chiropractic firm and their lawyers to pursue a junk fax class action worth potentially $200 million, saying the lack of honesty, at best, or sloppiness, at best, by the plaintiffs and their lawyers doomed their attempt to lead the lawsuit against a marketing company the judge noted had sent tens of thousands of junk fax ads.

On June 2, U.S. Magistrate Judge Jeffrey Cole, ruling in Chicago federal court, denied the request by plaintiffs Ohio-based Physicians Healthsource Inc. and chiropractors John Ruch and Jeffrey Elwert to certify a class of potentially thousands of other plaintiffs in an action against defendant Allscripts Healthcare Inc., over accusations the company’s mass fax advertising practices violated the federal Telephone Consumer Protection Act.

“At worst, perjury has been committed. That’s certainly a serious credibility problem – and one that pertains directly to the facts of the case – which counsels against finding the plaintiff an adequate class representative,” Judge Cole wrote. “At best (and this is unlikely), one or both of the doctors are merely lackadaisical participants in this litigation, who ‘don’t really think too much’ about their responsibility to give truthful answers in discovery – even though the questions and answers related to the operation of their own company and their own case.

“But that explanation is unacceptable. False answers to simple questions were given not because of mistake or uncertainty, but because the Doctors thought it was helpful to their case to do so.”

The case had landed in federal court five years ago, when Ruch and Elwert accused Allscripts of sending them three dozen junk fax ads, allegedly in violation of the TCPA. The plaintiffs are represented by attorneys with the firms of Bock, Hatch, Lewis & Oppenheim LLC, of Chicago; Anderson & Wanca, of Rolling Meadows; the Margulis Law Group, of Chesterfield, Mo.; and Montgomery Rennie & Jonson, of Cincinnati.

According to court records, Physicians Healthsource is a regular, repeat plaintiff in such TCPA class actions, teaming with its current legal team to file at least 18 different TCPA junk fax class action lawsuits in federal courts in Illinois, Indiana, Michigan, Missouri, California, Pennsylvania, New Jersey, Connecticut, Massachusetts, North Carolina and Florida.

In response to the lawsuit, Allscripts has claimed it had permission to send the faxes, and asked the court for summary judgment in its favor.

However, in a separate ruling, Judge Cole said he wasn’t buying that argument, noting Allscripts sends out “blizzards” of fax ads, in batches of thousands, for any number of products and promotions, including offers of free beach towels or butter cookies to businesses that buy office supplies or other products.

The judge also noted Allscripts transmitted thousands of fax ads just two days after signing off on a deal to settle a prior TCPA junk fax class action. That deal included a payment of $600,000 in fees to plaintiffs’ lawyers – including many of the same lawyers now representing Physicians Healthsource.

Judge Cole denied Allscripts request for summary judgment.

In this more recent lawsuit, the judge noted damages could rise to as much as $200 million under the TCPA, as each junk fax could be worth $500-$1,500 in statutory damages.

Judge Cole noted the threat of such damages seems “draconian,” particularly in light of the modern software used to send and receive fax transmissions, leaving the recipient of such junk faxes with almost no perceptible harm from receiving the faxes.

However, the judge said, as the TCPA has not kept pace with technology, the law remains “what it is and thus is to be enforced as Congress intended and not evaded by judicial action” to tamp down class actions and outsized judgments.

Yet, while acknowledging Allscripts alleged junk fax practices, the judge said he could not allow Physicians Healthsource and its current batch of lawyers to proceed with this class action, saying their conduct in this case renders them unable to “adequately represent” the class.

He specifically pointed to “false” responses given by the plaintiffs in discovery, in which the plaintiffs denied they were customers of Allscripts or that it had sent a fax to Allscripts in March 2009 – denials which were later contradicted by Ruch in deposition testimony.

“When pressed by defense counsel, he (Ruch) claimed he didn’t recall if he was supposed to confirm the facts to which he was sharing under oath,” the judge said. “After all, he said, he didn’t know whose responsibility it was to do that.

“When that proved an unconvincing dodge and he was forced to concede that many of the answers to the interrogatories that he reviewed were false, he blithely sought to account for the falsity of many of the answers he ultimately admitted having reviewed, by saying said he just ‘didn’t really think too much about it.’”

The judge said such an admission was “an extraordinary statement by someone who, in essence, is a professional litigant in junk fax cases.”

“If Dr. Ruch is telling the truth, it would not appear that plaintiff is directing the litigation, as it must, but rather is leaving it to the lawyers, with little regard for the truth and accuracy of what they do – or of what they say under oath,” Judge Cole wrote. “A plaintiff who seeks to be the class representative cannot simply shift its duties to class counsel. Nor, can putative class counsel’s obligations be disregarded as cavalierly as did Dr. Ruch and Dr. Elwert. Figurehead plaintiffs are not permitted.”

Further, the judge indicated he was troubled by a deal between Physicians Healthsource and its lawyers from the Montgomery Rennie firm to use money collected from its current class action to cover any damages an arbitrator may order Physicians Healthsource to pay as a result of a counterclaim brought by Allscripts against Phyisicans Healthsource in North Carolina court. In that related action, Allscripts alleged Physicians Healthsource breached a software licensing agreement by allowing a former employee to sublicense that software.

“Thus, the plaintiff swore that one of his class action Law Firms and the plaintiff had put the class on the hook for a benefit that inured solely to the plaintiff, further undermining plaintiff’s adequacy as class representative,” the judge wrote.

“… If Dr. Ruch is telling the truth about the prior existence and the source of payment of damages, the class would not be represented by counsel or a class representative having the candor and disinterestedness that the law requires,” the judge wrote. “If Dr. Ruch is not telling the truth, and there was no such deal … it is obvious that his Firm is not an adequate class counsel. If he is telling the truth and his lawyers assured him that any arbitration award against the plaintiff would come out of the class recovery, the lawyers cannot be deemed to be adequate class counsel.”

The judge said he would allow the plaintiffs to continue their lawsuit as individual plaintiffs, if they wished.

Allscripts is represented in the action by the attorneys with the firm of Sidley Austin LLP, of Chicago.

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Anderson + Wanca Bock & Hatch LLC Sidley Austin LLP U.S. District Court for the Northern District of Illinois

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