I.  Federal Appeals Court Finds

Unsolicited Fax Ban Constitutional

 

      The Telephone Consumer Protection Act (TCPA) prohibits the sending of unsolicited faxes.  It makes it unlawful for any person “to use any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine.”  47 U.S.C. Sec. 227 (b)(1)(C).  Businesses on the receiving end claim that unsolicited fax advertisements shift the advertising costs to them and prevent them from conducting business by tying up their fax machines.  Fax advertisers counter that they have a First Amendment right to advertise. 

      Before 2002, most courts that analyzed the constitutionality of this provision found it constitutional, including the U.S. Court of Appeals for the Ninth Circuit and federal district courts in Texas and Indiana.  See Destination Ventures Ltd. v. FCC, 46 F.3d 54 (9th Cir. 1995); Texas v. American Blast Fax, Inc., 121 F. Supp. 2d 1085 (W.D. Tex. 2000); Kenro, Inc. v. Fax Daily, Inc., 962 F. Supp. 1162 (S.D. Ind. 1997).  However, two courts in 2002 ruled that the TCPA anti-fax provisions were unconstitutional -- but a federal appeals court decision in March 2003 reversed the more important of these two opinions.

 

State of Missouri v. American Blast Fax, Inc.   

      The State of Missouri brought action under the TCPA against two fax businesses, American Blast Fax, Inc., a Texas corporation, and Fax.com, Inc., a Delaware corporation, for transmitting unsolicited advertisements to Missouri businesses and residents.  State of Missouri v. American Blast Fax, Inc., 196 F. Supp. 2d 920 (E.D. Mo. 2002).

      The companies countered that the application of the TCPA to unsolicited faxes was unconstitutional under the First Amendment.  Surprisingly to some, Judge Stephen Limbaugh agreed with the companies after conducting a hearing that featured many government witnesses.

      Because the case clearly concerned commercial speech, Judge Limbaugh applied the familiar four-part test for restrictions on commercial speech developed by the U.S. Supreme Court in Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557 (1980).    

      The State of Missouri and the United States, which intervened to defend the constitutionality of the law, argued that the law supported two substantial governmental interests: (1) that recipients not have to bear the advertising costs of unsolicited junk faxes; and (2) that unsolicited fax advertisements not prevent businesses from utilizing their fax machines for their desired business purposes.

      Judge Limbaugh noted that under the Supreme Court’s 1993 decision in Edenfield v. Fane, 507 U.S. 761 (1993), the government bears the burden of justifying its restrictions on commercial speech.  “A governmental body seeking to sustain a restriction on commercial speech must demonstrate that the harms it recites are real,” Judge Limbaugh wrote, citing Edenfield.  “The burden cannot be satisfied by mere speculation or conjecture.”

      “It is obvious from the legislative history that Congress did not consider any studies or empirical data estimating the cost of receiving a fax or the number of unsolicited fax advertisements an average business receives in a day before enacting the TCPA,” Judge Limbaugh wrote.  “The reports are glaringly void of any statistical data in reference to unsolicited fax advertisements.”

      The court contrasted the lack of evidence with the two-year study on the negative impact of attorney advertisements crucial to the Supreme Court’s narrow 5-to-4 ruling upholding a 30-day ban on attorney solicitation letters in Florida Bar v. Went-For-It, Inc., 515 U.S. 618 (1995).  Judge Limbaugh questioned whether the government had even shown enough to pass the “substantial interest” prong of the Central Hudson test. 

      In any event, the judge said, the anti-fax law failed to “directly advance” the government’s interest, thereby failing the third prong of Central Hudson.  In Rubin v. Coors Brewing Co., 514 U.S. 476 (1995), the Court determined that a government regulation did not directly advance a substantial interest if the legislation allowed other speech that directly countered its interest.  Judge Limbaugh analogized the anti-fax law to Rubin, saying that the TCPA did not directly advance the government’s interest because it allowed unsolicited faxes carrying political messages, jokes, and ads that did not fall within the definition of advertising in the law.

      Finally, Judge Limbaugh noted that the statute was too broad in its sweep and violated the fourth prong of the Central Hudson test.  According to the judge, there were many less speech-restrictive alternatives that would have advanced the government’s interests rather than a speech ban.  These included a “no-fax database” similar to no-call phone solicitation lists; the inclusion of a toll-free opt-out number; and a limit on the hours when such faxes could be received.

      “The government simply fails to meet its burden of demonstrating that the harms it recites are real and that its restriction will in fact alleviate them to a material degree,” Judge Limbaugh wrote.  “Review of the legislative history reveals no evidence that there is a ‘serious problem,’ and the evidence at the hearing only reveals that there is a potential for a serious problem.”

 

Eighth Circuit Opinion

      The case was appealed to the U.S. Court of Appeals for the Eighth Circuit, which reversed in early 2003 in State of Missouri v. American Blast Fax, Inc., No. 02-2705/02-2707, 2003 U.S. App. LEXIS 5469 (8th Cir. March 21, 2003).

      The Eighth Circuit agreed that Central Hudson was the proper legal test, but differed substantially with Judge Limbaugh’s application of that test.  First, the federal appeals court panel determined that the government had shown a substantial governmental interest in the junk-fax ban.  “We do not agree with FC [Fax.com – American Blast Fax was not a party to the appeal] that the Government must produce empirical studies to show the significance of the harm it seeks to remedy, for the Supreme Court has pointed out that it may demonstrate the substantiality of its interest with anecdotes, ‘history, consensus, and simple common sense,’” the panel wrote.

      The Eighth Circuit noted that there was testimony in Congress and before the district court concerning the harms of unsolicited fax advertising, including the shifting of costs to fax recipients.  “The record ... indicates that the costs and amounts of interference resulting from unsolicited fax advertising continue to be significant,” the panel wrote.

      The panel also determined that the restriction on commercial faxes survived the third prong of Central Hudson.  It rejected the contention that the law was unconstitutional because it only banned unsolicited commercial faxes, while allowing unsolicited noncommercial faxes.  The court also rejected the argument that under Rubin, the statute contained inherent inconsistencies in treating faxes differently from live telemarketing calls.  “Because of the cost shifting of fax advertising, it was consistent for Congress to treat unsolicited fax advertisements differently than live telemarketing calls,” the panel wrote.

      Finally, the panel determined that the statute did not violate the fourth prong of Central Hudson.  The fax company had argued that a less speech-restrictive alternative was an opt-out scheme, allowing fax recipients to declare their intention not to receive the faxes.  “The Supreme Court has made it clear that ‘the least restrictive means’ test has no role in the commercial speech context,” the panel wrote.  “We conclude that the TCPA restriction on unsolicited commercial fax advertisements achieves a reasonable fit between the means it adopts and the ends it seeks to serve.” 

 

Rudgayzer & Graft v. Enine, Inc. 

      A New York civil court found Judge Limbaugh’s ruling persuasive in a case filed by Rudgayzer & Graft, a law firm, against Enine, Inc., a company that hired Fax.com to send unsolicited faxes.  The law firm sued after it received one unsolicited fax advertising ”Enine Market Watch.”  Enine made a First Amendment defense, arguing that the TCPA violated its free-speech rights.  Rudgayzer & Graft v. Enine, Inc., 749 N.Y.S.2d 855 (Civil Court of the City of New York, Kings County Sept. 30, 2002).

      The New York court determined this was a “meritorious defense” and “adopt[ed]] the analysis” of Judge Limbaugh.  The court noted that the legislative history of the TCPA contained virtually no evidence of harm caused by unsolicited faxes.

      “The Missouri court concluded, and this court agrees, that banning junk faxes which constitute advertising of property, goods or services, but permitting junk faxes with other advertising, or containing jokes, surveys, or political content, is not clearly advancing the government’s alleged interests,” the New York court wrote.  The court also noted that New York has a state law limiting unsolicited faxes to the time slot between 9 p.m. and 6 a.m., which the court considered a less restrictive alternative.

 

State of Minnesota v. Sunbelt Communications  

      At least one other court issued an opinion dealing with the First Amendment implications of the TCPA, although it is limited.  State of Minnesota v. Sunbelt Communications, 2002 U.S. Dist. LEXIS 18990 (D. Minn. Sept. 30, 2002).  The case arose because Sunbelt Communications, a Nevada business, was sending thousands of unsolicited advertisements for various clients to many Minnesota businesses.  The State of Minnesota filed an action under the TCPA.

      Sunbelt predictably made a First Amendment defense.  The federal district court in Minnesota noted that the Missouri case was on appeal to the Eighth Circuit.  Because the Eighth Circuit governs federal cases out of Minnesota as well, the parties stayed discovery until the appeals court issued its decision.

      The issue for the federal district court was whether to grant an injunction to prohibit Sunbelt Communications from sending faxes pending the outcome of the Eighth Circuit decision. 

      However, the federal judge in Minnesota seemed to disagree heavily with Judge Limbaugh’s decision.  Judge Joan Ericksen Lancaster determined that “the State has met its burden with respect to the cost-shifting argument” and that “the TCPA materially furthers the State’s interests in preventing the invasion of privacy and cost-shifting effects that result from fax advertising, even if it does not eliminate them altogether.”

      The court granted the state a preliminary injunction, concluding that “the State is likely to prevail on its argument that the TCPA’s restrictions on unsolicited fax advertising are constitutional.”

 

Conclusion

      Judge Limbaugh’s ruling that the TCPA provisions relating to fax advertising are unconstitutional created a split in the federal courts.  Its effect was seen in a New York court’s reliance on its reasoning.  However, the Eighth Circuit’s reversal of Judge Limbaugh eliminates a circuit split.  As of now, all federal appeals courts have upheld the TCPA from First Amendment challenges.

 

--David L. Hudson, Jr.