HOTELS CAN’T COMPLAIN ABOUT SOLICITED FAXES, EVEN WHEN THEY DON’T REQUIRE AN OPT-OUT NOTICE

The Eleventh Circuit was asked in Gorss Motels, Inc. v. Safemark Systems, LP, 2019 WL 3384191 (11th Cir. July 26, 2019), to decide whether a fax recipient provided prior express permission to receive faxes from a sender under the TCPA and, if so, whether the faxes needed to contain opt-out notices under an agency regulation.  The plaintiffs were hotel operators who agreed in their franchise agreements that Wyndham affiliates could offer assistance with purchasing items for their hotels and provided their fax numbers.  The defendants were Wyndham affiliates who sent two faxes.

The plaintiff hotels appealed the grant of summary judgment to the defendants, and that appeal was consolidated with the previous appeal from the denial of class certification (the district court had denied the motion to stay the case pending appeal of denial of class certification and ordered summary judgment before the Eleventh Circuit had ruled on the class certification question).

In an opinion by Judge William Pryor, joined by Judges Newsom and Branch, the Eleventh Circuit began with the summary judgment appeal.  First, the court affirmed the district court’s holding that the faxes were not unsolicited.  This turned on whether the fax recipient gave “prior express invitation or permission” to receive the fax.  The Eleventh Circuit consulted dictionaries to define “permission,” and then looked to the FCC’s guidance.  In the plaintiff hotels’ franchise agreements, the hotels had agreed that Wyndham “may offer optional assistance to [them] with purchasing items used at or in the Facility,” and that Wyndham “affiliates may offer this service on [Wyndham’s] behalf,” and the hotels had provided their fax numbers.  With these facts, the court easily decided that the hotels expressly agreed to receive the faxes.

The court rejected the hotels’ argument that this was only implied permission.  While express permission must be “clear[] and unmistakabl[e],” it does not require that a recipient state specifically that his permission includes faxed advertisements.  Nor was this the “mere distribution of [the hotels’] fax numbers,” which the federal regulations explain do not constitute express permission.  That occurs, the court explained, when a business lists its fax number publicly, not when it provides it in a specific agreement for a specified use.

Second, the court explained that the faxes were not required to contain opt-out notices.  The hotels argued that the district court erred in holding that the faxes need not contain opt-out notices because the Hobbs Act vests the courts of appeal with exclusive jurisdiction to set aside agency orders.  The Commission promulgated a regulation in 2006 that required senders of solicited faxes to include an opt-out notice.  After it faced several challenges and was held unlawful by the District of Columbia Circuit, the Commission eliminated the rule, and the new rule (eliminating the solicited-fax rule) took effect while this appeal was pending.  The Eleventh Circuit rejected the hotels’ argument that the new rule applied only prospectively, granting that such changes in rules can “pose thorny questions.”  Ultimately though, when the Commission eliminated the solicited-fax rule, “both its rationale and its actions made clear that the rule could no longer be enforced against defendants, not even for past violations.”  The Commission’s stated rationale was based not merely on policy but upon finding “that the rule [was] unlawful.”

Affirming the summary judgment appeal in favor of the defendants, the court did not need to address the class certification question.

So holding, the court did not need to decide whether the district court violated the Hobbs Act by refusing to apply the since-repealed rule.  But Judge Pryor wrote separately, again joined by both Judges Newsom and Branch, to explain that the Eleventh Circuit precedent interpreting the Hobbs Act to require district courts to treat agency orders interpreting federal statutes as binding precedent “ignores the statutory context, generates absurd results, and raises serious constitutional doubts.”  Citing opinions of Justices Thomas and Kavanaugh in PDR Network, LLC v. Carlton & Harris Chiropractic, Inc., 139 S. Ct. 2051, 2056–57, 2062–66 (2019) (Thomas & Kavanaugh, JJ., concurring), Judge Pryor’s concurrence urged the Eleventh Circuit to “correct [its] mistake en banc” in “the earliest appropriate case.”

Posted by Keith Emanuel.

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