A federal appeals court has shot down a gambit by a company attempting to swat down a junk fax class action lawsuit by depositing with the court a payment it believed to satisfy the claims of the lawsuit’s lead plaintiff, as judges said they did not believe the attempt to use a seeming loophole in a recent landmark U.S. Supreme Court ruling is different enough from the very act the nation’s high court wouldn’t fly under the law.
On June 20, a three-judge panel of the U.S. Seventh Circuit Court of Appeals in Chicago overturned the decision of U.S. District Judge Edmond E. Chang, who had found a payment of about $3,600 from defendant Bisco Inc., a Schaumburg-based seller of dental supplies, was enough to pull the plug on the class action brought by a dental practice, which had claimed they had received a faxed ad without consent.
The Seventh Circuit judges, however, found Chang’s ruling had been “premature,” saying the judge’s approval of Bisco’s “risky assumption” was based on a faulty application of both the Supreme Court’s rules and the court’s ruling in the case of Campbell-Ewald v. Gomez.
The case landed in Chicago’s federal court in 2015, when Birmingham, Ala., dental practice Fulton Dental LLC filed suit against Bisco, alleging the faxed ad they received from Bisco was a violation of the federal Telephone Consumer Protection Act.
In that complaint, Fulton Dental sought to expand the lawsuit to include a class of additional plaintiffs who they believed had also received unsolicited “junk faxes” from Bisco.
In the lawsuit, plaintiffs asked the court to award statutory damages of $500-$1,500 per violation.
While the case was pending, the U.S. Supreme Court rendered its Campbell-Ewald decision, declaring in the 6-3 ruling that defendants could not essentially cut short a class action lawsuit by getting out in front of the court proceedings by offering the lead plaintiff and the likely class representative a smaller offer to satisfy the statutory damages and court costs related to the alleged violations of laws like the TCPA.
However, in the decision, the high court majority indicated the decision would not address “whether the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.”
Citing that language, Bisco then moved quickly to deposit about $3,600, which it believed would satisfy the highest possible judgment Fulton Dental could be awarded individually, plus its legal fees and court costs, paying the funds into the federal court’s registry.
Specifically, Bisco deposited the funds under Federal Rule of Civil Procedure 67, which permits parties to deposit funds with the court, distinguishing the offer from those found invalid under Campbell-Ewald, which had been offered under Rule 68.
Thus, Bisco argued its deposit, under Campbell-Ewald, “mooted Fulton’s claim and at the same time destroyed Fulton’s ability to serve as a class representative.”
Judge Chang agreed, dismissing Fulton’s case, and prompting the appeal.
In its opinion, the Seventh Circuit panel said the dismissal was improper, as the appeals judges found Bisco’s deposit was little more than a technical maneuver to sidestep the Supreme Court’s findings.
“From a broader perspective, we see no principled distinction between attempting to force a settlement on an unwilling party through Rule 68, as in Campbell-Ewald, and attempting to force a settlement on an unwilling party through Rule 67,” the judges wrote. “In either case, all that exists is an unaccepted contract offer, and as the Supreme Court recognized, an unaccepted offer is not binding on the offerree.”
Citing the reasoning of Justice Clarence Thomas in Campbell-Ewald, the judges noted the high court held “a plaintiff was entitled to deny that the tender was sufficient to satisfy his demand and accordingly go on to trial.”
“That is just what Fulton is trying to do: it is saying that its suit is about more than the statutory damages to which it believes it is entitled; it is also about the additional reward that it hopes to earn by serving as the lead plaintiff for a class action,” the judges wrote.
The judges remanded the case to Judge Chang for further proceedings.
The opinion was authored by Chief Circuit Judge Diane Wood, with judges Joel Flaum and Ilana Rovner, concurring.
Fulton Dental is represented in the action by attorneys with the firms of Broderick & Paronich P.C., of Boston; Law Office of Matthew Mccue, of Natick, Mass.; and the Burke Law Offices, of Chicago.
Bisco is defended by the firm of Harrison & Held, of Chicago.