Blitz v. Agean, Inc.,
2012 NCBC 20.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF
JUSTICE
COUNTY OF DURHAM SUPERIOR COURT DIVISION
05 CVS 441
JONATHAN BLITZ, on behalf of himself
and all others similarly situated,
Plaintiff,
ORDER & OPINION
v.
AGEAN, INC.,
Defendant.
Margulis Law Group by Max G. Margulis for Plaintiff.
Brown, Crump, Vanore & Tierney, LLP by W. John Cathcart, Jr. and Scott
Brown for Defendant.
Murphy, Judge.
{1} THIS MATTER is before the Court upon Plaintiff Jonathan Blitz’s
(“Blitz”) Motion for Class Certification. After hearing from the parties on August
16, 2011, and having considered the matters of record and contentions of counsel,
the Court, in the exercise of its discretion, DENIES Plaintiff’s Motion for Class
Certification, finding as follows:
I.
PROCEDURAL BACKGROUND
{2} On January 28, 2005, Plaintiff filed his first Complaint in this case.
Two Amended Complaints were subsequently filed on February 11, 2005 (“First
Amended Complaint”) and June 8, 2010 (“Amended Complaint”) respectively. (First
Am. Compl. 5; Am. Compl. 9.)
{3} On October 6, 2006, Plaintiff filed a Motion to Amend Class Definition
and moved for class certification (“First Motion for Class Certification”) on October
17, 2006. (Mt. Am. Class Definition 2, 7.)
{4} This Court denied Plaintiff’s Motion for Class Certification on June 25,
2007. On June 2, 2009, the North Carolina Court of Appeals affirmed in part,
reversed in part, and remanded this Court’s Order & Opinion denying Plaintiff’s
First Motion for Class Certification. See Blitz v. Agean, Inc., 197 N.C. App. 296,
677 S.E.2d 1 (N.C. Ct. App. 2009), aff’ing in part, rev’ing in part Blitz v. Agean, Inc.,
2007 NCBC 1 (N.C. Super. Ct. Jun. 25, 2007), http://www.ncbusinesscourt.net/opin
ions/2007%20 NCBC%2021.pdf.
{5} On May 18, 2011, Plaintiff filed an Amended Motion for Class
Certification. (Am. Mt. for Class Certif. 13.) Defendant filed its Response on June
17, 2011, and this Court held a hearing on August 16, 2011.
II.
STATEMENT OF FACTS
{6} Plaintiff is a resident of Durham County, North Carolina. (Am. Compl.
¶ 7.)
{7} Defendant is a North Carolina corporation that operates two
restaurants known as Papa’s Grille and Front Street Café in Durham, North
Carolina. (Am. Compl. ¶ 8; Br. in Supp. of Am. Mt. for Class Certif. 1.) Over the
course of its operation, Papa’s Grille has, on average, served between 120 and 160
meals per day, and more than 500,000 meals during its twelve-year existence. (Def.
Second Supplemental Answers to Pl.’s Second Set of Interrog. 5.)
{8} Papa’s Grill has received numerous inquiries concerning its hours of
operation, menus, accommodations, and capacity; and multiple requests that Papa’s
Grille fax or e-mail its menus and other materials relating to the restaurant or its
services. (Def. Second Supplemental Answers to Pl.’s Second Set of Interrog. 4–5.)
Papa’s Grill maintains a computer database (“Customer List”) of individuals who
have made inquiries about the restaurant and/or requested to receive faxes. (Def.
Second Supplemental Answers to Pl.’s Second Set of Interrog. 5–6; Def.’s Resp. to
Pl.’s First Mt. for Class Certif. 5; Blitz, 197 N.C. App. at 311,
677 S.E.2d at 10.)
{9} In April 2004, Defendant purchased from InfoUSA a list of
approximately 983 business fax numbers in the three zip codes surrounding Papa’s
Grille (the “ InfoUSA List”) and contracted with Concord Technologies, Inc., to send
faxes to the numbers on the list. (Pl.’s Br. in Supp. of Am. Mt. for Class Certif. 1.)
{10} Defendant did not, however, maintain any records documenting that it
had obtained express prior invitation or permission to send faxes to the individuals
on its Customer List, and Defendant was not certain whether it supplemented the
fax list it acquired from InfoUSA with numbers from its own customer list acquired
through the regular course of business.
{11} During 2004, Concord Technologies successfully faxed 7,000 of
Defendant’s fax advertisements to the numbers on the list acquired from InfoUSA.
(Pl.’s Mem. Supp. First Mt. for Class Certif. 1–2.)
{12} Plaintiff received five (5) of the fax transmissions. (Pl.’s Br. in Supp. of
Am. Mt. for Class Certif. 1.)
{13} The Amended Complaint alleges that Defendant’s fax transmissions
violated the Federal Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227,
which, inter alia, prohibits the transmission of “unsolicited advertisements” to fax
machines. (Am. Compl. ¶ 2.)
{14} Plaintiff seeks certification on behalf of a class alleging that Defendant
violated the TCPA when its agent, Concord Technologies, allegedly faxed thousands
of unsolicited advertisements throughout 2004. (Am. Compl. ¶¶ 4, 22–23.)
{15} Plaintiff defines the class as “[t]he holders of the 978 telephone
numbers contained in the InfoUSA database Exhibit LL between the dates of
February 1, 2004, and December 31, 2004, inclusive.” (Br. in Supp. of Am. Mt. for
Class Certif. 8.)
{16} As provided in the TCPA, Plaintiff is seeking for each proposed class
member $500 in statutory damages per fax, injunctive relief, and any other relief
the Court may deem just and proper. (Am. Compl. 7.)
III.
CLASS CERTIFICATION STANDARD
{17} In North Carolina, class actions are governed by Rule 23 of the North
Carolina Rules of Civil Procedure (“Rule 23”). N.C.R. Civ. P. 23. Rule 23(a)
provides that “[i]f persons constituting a class are so numerous as to make it
impracticable to bring them all before the court, such of them, one or more, as will
fairly insure the adequate representation of all may, on behalf of all, sue or be
sued.” N.C.R. Civ. P. 23(a). “Whether a proper ‘class’ under Rule 23(a) has been
alleged is a question of law.” Crow v. Citicorp Acceptance Co., 319 N.C. 274, 280,
354 S.E.2d 459, 464 (1987).
{18} “The party seeking to bring a class action under Rule 23(a) has the
burden of showing that the prerequisites to utilizing the class action procedure are
present.” Id. at 282,
354 S.E.2d at 465.
{19} “[A] ‘class’ exists under Rule 23 when the named and unnamed
members each have an interest in either the same issue of law or of fact, and that
issue predominates over issues affecting only individual class members.” Id. at 280,
354 S.E.2d at 464.
{20} When determining whether common issues predominate over issues
affecting only individual class members, a court must look to see whether the
individual issues are such that they will predominate over common ones as the
focus of the litigants’ efforts. See Harrison v. Wal-Mart Stores, Inc., 170 N.C. App.
545, 550–54,
613 S.E.2d 322, 327–29 (2005) (discussing whether common or
individual issues predominated in the case).
{21} In addition to finding the existence of a class, the court must also find
that the class meets the requirements for class certification which prescribe that: (1)
the named representatives must establish that they will adequately represent the
interests of all members located both inside and outside the jurisdiction, (2) there
must be no conflict of interest between the named and unnamed members of the
class, (3) the named parties must have a genuine personal interest in the action, (4)
the class must be so numerous as to make it impracticable to bring each member
before the court, and (5) adequate notice must be given to the class members. Crow,
319 N.C. at 282–84, 354 S.E.2d at 465–66.
{22} Even where the requirements for class certification under Rule 23(a)
are met, “it is within the trial court’s discretion to determine whether ‘a class action
is superior to other available methods for the adjudication of the controversy.’”
Harrison, 170 N.C. App. at 548,
613 S.E.2d at 326 (quoting Crow,
319 N.C. at 284,
354 S.E.2d at 466). When deciding whether to grant certification, “‘[t]he trial court
has broad discretion . . . and is not limited to consideration of matters expressly set
forth in Rule 23 or in’ case law.”
Id. at 548 n.2,
613 S.E.2d at 326 (quoting Crow,
319
N.C. at 284,
354 S.E.2d at 466).
{23} “Class actions should be permitted where they are likely to serve
useful purposes such as preventing a multiplicity of suits or inconsistent results.
The usefulness of the class action device must be balanced, however, against
inefficiency or other drawbacks.” Crow, 319 N.C. at 284,
354 S.E.2d at 466.
{24} Among the potential drawbacks the trial court may consider in its
discretion are matters of equity. Id. at 284,
354 S.E.2d at 466 (citing Maffei v. Alert
Cable TV, Inc.
316 N.C. 615, 617,
342 S.E.2d 867, 870 (1986)). As this Court has
previously held, class actions can be used “to put greater financial pressure on
defendants to settle with the individual plaintiff[,] . . . [thus judicial oversight]
reduces the incentive to plaintiff's counsel to misuse the class action device solely in
an effort to leverage a settlement.” Lupton v. Blue Cross & Blue Shield,
1999
NCBC 3, ¶¶ 10–11 (N.C. Super. Ct. June 14, 1999),
http://www.ncbusinesscourt.net/opinions/1999%20NCBC %203.htm.
{25} When reviewing whether class certification was appropriate in this
matter, the North Carolina Court of Appeals held that:
claims brought pursuant to the TCPA are not per se inappropriate for
class actions. Decisions whether to certify TCPA claims for class
actions should be made on the basis of the particular facts presented
and theories advanced, and the ‘trial court has broad discretion in
determining whether class certification is appropriate, and is not
limited to those prerequisites which have been expressly enunciated in
either Rule 23 or in Crow.’
Blitz, at 311–12, 667 S.E.2d at 11 (quoting Nobles v. First Carolina Commc’ns, Inc.,
108 N.C. App. 127, 132,
423 S.E.2d 312, 315 (1992)).
IV.
CONCLUSIONS OF LAW
{26} Under the relevant version of the TCPA in force at the time
Defendant’s alleged actions occurred, it was unlawful for any person within the
United States “to use any telephone facsimile machine, computer, or other device to
send an unsolicited advertisement to a telephone facsimile machine . . . .” 47 U.S.C.
§ 227(b)(1)(c) (2004) (emphasis added). The TCPA provides that a recipient may
bring “an action to recover for actual monetary loss . . . or to receive $500 in
damages for each . . . violation.”
Id. at § 227(b)(3)(B).
{27} The term unsolicited advertisement, as used in the statute, means
“any material advertising the commercial availability or quality of any property,
goods, or services which is transmitted to any person without that person’s prior
express invitation or permission.” Id. at § 277(a)(4).
{28} When class certification is sought in TCPA cases:
violations of § 277(b)(1)(C) . . . are not per se unsuitable for class
resolution. But, . . . there are no invariable rules regarding the
suitability of a particular case filed under this subsection of the TCPA
for class treatment; the unique facts of each case generally will
determine whether certification is proper. This of course means that
plaintiffs must advance a viable theory employing generalized proof to
establish liability with respect to the class involved, and it means too
that . . . courts must only certify class actions . . . when such a theory
has been advanced.
Blitz, 197 N.C. App at 305, 677 S.E.2d at 7 (quoting Gene & Gene LLC, v. BioPay
LLC,
541 F.3d 318, 328 (5th Cir. La. 2008) (emphasis added).
{29} “The primary issue . . . in this case, and the primary issue courts from
other jurisdictions have [faced] . . . when dealing with class certifications involving
the TCPA, is whether, . . . individualized issues concerning whether sent fax
advertisements were ‘unsolicited’ predominate over issues of law and fact common
to the proposed class members.” Blitz, 197 N.C. App. at 303,
677 S.E.2d at 6.
{30} When considering whether questions common to the class will
predominate the court may “consider ‘how a trial on the merits would be conducted
if a class were certified.’” Gene & Gene LLC, 541 F.3d at 326 (quoting Bell Atl.
Corp. v. AT&T Corp.,
339 F.3d 294, 302 (5th Cir. 2003)). The process of evaluating
how a trial would proceed “‘entails identifying the substantive issues that will
control the outcome, assessing which issues will predominate, and then determining
whether the issues are common to the class, a process that ultimately prevents the
class from degenerating into a series of individual trials.’”
Id. (citation omitted.)
However, this Court finds persuasive like others, that the presence of a
predominating common question is not the end of the analysis. A court’s attempt at
preventing a class action from degenerating into a series of individual trials also
requires it to determine whether it is likely that the answers to those common
questions will be consistent among class members. “[A] common question is not
enough when the answer may vary with each class member and is determinative of
whether the member is properly part of the class.” Carnett’s, Inc. v. Hammond,
610
S.E.2d 529, 532 (Ga. 2005).
V.
DISCUSSION
{31} As a threshold matter, Plaintiff argues that the question of whether
consent was obtained is a “potential defense that may be raised by Defendant[,] . . .
[and] a court is proscribed from considering defenses . . . in adjudicating a motion
for class certification.” (Pl.’s First Mt. for Class Certif. n.2.) However, this is not
the law in North Carolina. To the contrary “[i]t [is] Plaintiff’s burden to show the
fax advertisements sent to the class were unsolicited.” Blitz, 197 N.C. App. at 311,
677 S.E.2d at 10. Even if this were not the case, implicit in an assessment of how a
trial would operate under a particular class definition, is an evaluation of how
potential defenses would affect whether common questions predominate over
inquiries individual to each class member. This court finds persuasive, like other
courts, that “the ‘predominance of individual issues necessary to decide an
affirmative defense may preclude class certification.’” Gene & Gene LLC,
541 F.3d
at 327 (quoting In re Monumental Life Ins. Co.,
365 F.3d 408, 420 (5th Cir. 2004)).
{32} Looking now at Plaintiff’s proposed class definition, it becomes
apparent that the definition does not explicitly exclude owners of fax numbers who
had previously consented to receive faxes. (Pl.’s Br. in Supp. of Mt. for Class Certif.
6.) Currently, the class is defined as “[t]he holders of the 978 telephone numbers
contained in the InfoUSA database Exhibit LL between the dates of February 1,
2004 and December 31, 2004, inclusive.” (Pl.’s Br. in Supp. of Mt. for Class Certif.
6.) As noted above, the InfoUSA List contains names that Defendant argues were
included on Defendant’s Customer List, and the Customer List contained
individuals and organizations that had made inquiries into Papa’s Grille and
requested the restaurant to send faxes. (Def.’s Resp. to Pl.’s First Mt. for Class
Certif. 4–5; Def.’s Answer to Interrog. 5–6.) Failure to exclude the numbers of
authorizing owners means that by definition, “the proposed class [is] open to
persons who ha[ve] given express prior invitation or permission to Defendant to
receive fax advertisements.” Blitz, 197 N.C. App. at 311,
677 S.E.2d at 10. While
not conclusive regarding the Court’s determination, this broad definition must be
considered when determining the amount of time and inquiry that will be required
to establish whether the individuals within the class definition are entitled to be
members of the class. See
id. (citing Carnett’s, Inc.,
610 S.E.2d 529).
{33} This Court turns next to an analysis of how a trial on the merits would
be conducted. Under the facts of this case, an analysis must include an assessment
of how consent, or lack of consent, would be established at trial. The court in Blitz
cited as persuasive cases where plaintiff proceeded with “a theory of generalized
proof of invitation or permission.” Blitz, 197 N.C. App. at 311,
677 S.E.2d at 11.
One of the cases particularly relevant to this Court’s evaluation is Kavu v. Omnipak
Corp. In Kavu, plaintiff proposed a class defined as “[a]ll persons who received an
unsolicited advertisement . . . via facsimile from Defendant during the period of
time defined by the applicable statute of limitations.” Kavu v. Omnipak Corp.,
246
F.R.D. 642, 646 (W.D. Wash. 2007). When reviewing the trial court’s certification of
a class, the court in Kavu found that the question of consent could be easily shown
by common proof and would not require individualized evidence.
Id. at 647. The
court stated that this was possible because Defendant had “obtained all of the
recipients’ facsimile numbers from the Manufacturers’ News database. Therefore,
whether the recipients’ inclusion in the Manufacturers’ News database constitute[d]
express permission to receive advertisements via facsimile [was] a common issue.”
Id. Simply put, certification was possible because the presence of a fax number
within a single source would indicate whether consent was given.
{34} Logically, the rationale for certification in Kavu is weakened when
there is more than one source that could show consent, as was the case in Gene &
Gene LLC, v. BioPay, LLC. In Gene, the Defendant “culled fax numbers from
purchased databases but also . . . various other sources--from information submitted
by merchants through BioPay’s website, from information submitted at trade shows
BioPay attended, and also from lists of companies with which BioPay or its affiliates
had an established business relationship.” Gene & Gene LLC, 541 F.3d at 328. The
Defendant in Gene & Gene, LLC, convincingly asserted throughout discovery that
because consent had been obtained for some of the numbers that had not been
provided by the purchased database “no class-wide proof [was] available to decide
consent and only mini-trials c[ould] determine th[e] issue.”
Id. at 329.
{35} Here, Plaintiff has offered three questions that he argues would be
common to all class members: “1. [w]hether Defendant’s fax is an advertisement; 2.
[w]hether Defendant violated the TCPA by faxing th[e] advertisement[s] without
first obtaining express invitation or permission to do so; and 3. [w]hether Plaintiff
and other class members are entitled to statutory damages.” (Pl.’s Br. in Supp. of
Mt. for Class Certif. 9.) It is apparent to this Court that the answers to Plaintiff’s
second question will be a focal point of the litigants’ evidence, and likely direct the
outcome of the case. See Harrison, 170 N.C. App. at 550–53, 613 S.E.2d at 327–28.
{36} While in Kavu, consent could be determined by deciding “whether the
inclusion of the recipients’ fax numbers in the purchased database indicated their
consent to receive fax advertisements.” Gene & Gene LLC, v. BioPay LLC, 541 F.3d
at 328. Here, as was the case in Gene & Gene, LLC, there could be more than one
source from which consent might be shown. As the Blitz court noted on appeal,
Defendant was unsure whether “it had supplemented the [InfoUSA L]ist with fax
numbers it ha[d] acquired through its normal course of business dealings.” Blitz,
197 N.C. App. at 311,
677 S.E.2d at 10. In addition, consent could be shown for fax
numbers owned by individuals on both the InfoUSA List and Defendant’s Customer
List because the Customer List includes individuals who had made inquiries about
the restaurant and requested to receive faxes. (Def.’s Resp. to Pl.’s First Mt. for
Class Certif. Ex. B; Def.’s Second Supplemental Answer to Pl.’s Second Set of
Interrog. 5.) Because there is no common source from which the Court can
determine consent, Plaintiff is left in the position of proving whether “Defendant . . .
obtain[ed] express invitation or permission” for each number. (Pl.’s Br. in Supp. of
Mt. for Class Certif. 9.) This would have the Court conducting individual inquiries
into each number and result in the type of mini-trials that class actions are
designed to avoid. The facts of this case leave Plaintiff unable to articulate a theory
of generalized proof, and as a result, will focus the litigants’ efforts on individual
questions of whether each class member consented rather than any common
questions the class might share.
{37} Lastly, this Court must consider the equities and drawbacks involved
in certification of the proposed class. Plaintiff has alleged: (1) that Defendant sent
fax advertisements through its agent Concord Technologies, Inc. to over 900 fax
numbers; (2) that Defendant transmitted these faxes to each number at least 10
times during 2004; and (3) that over 7,000 of these fax were successfully
transmitted. (Pl.’s Br. in Supp. of Mt. for Class Certif. 1–5; Pl.’s Mem. in Supp. of
First Mt. for Class Certif. 1–2.) These transmissions were of an ad/coupon which
the customer could redeem for a free lunch at Papa’s Grille and an announcement of
the opening of Front Street Café. (Pl.’s Br. in Supp. of Mt. for Class Certif. 1–5.)
{38} Thus far, Plaintiff is the only recipient who has come forward, or has
been identified, to participate in this action. The likelihood that, in 2012, a singlepage fax recipient would remember receiving a transmission in 2004, or have
retained the alleged transmission, is extremely remote. Without class certification,
as currently pled, Plaintiff at best might be entitled to a grand total of $2500 in
statutory damages for the five transmissions he received. As a result, the
significance of this lawsuit to Plaintiff rests primarily on its settlement value. (See
Tr. of Hr’g at 26, Blitz v. Agean, Inc., 05 CVS 441 (Aug. 16, 2011) (The Court was
struck by Counsel for Plaintiff’s inappropriate but telling statement that “[w]hat
[Defendant] fails to say is that they are being defended very ably by the insurance
company that they had insurance with when these actions took place.”) (emphasis
added). “‘Unfortunately, the (class action) remedy itself provide[s] opportunity for
abuse, which [is] not neglected. Suits [are] sometimes . . . brought not to redress
real wrongs, but to realize upon their nuisance value.’” Lupton, 1999 NCBC 3, ¶ 10
(quoting Cohen v. Beneficial Loan Corp.,
337 U.S. 541, 549–50,
69 S.Ct. 1221, 1227,
93 L.Ed 1528 (1949)). As articulated in Lupton, equity does not condone using the
class action procedure simply for leverage in settlement. See Lupton v. Blue Cross
& Blue Shield,
1999 NCBC 3, ¶¶ 10–11.
VI.
CONCLUSION
{39} Because Plaintiff has failed to provide a theory of generalized proof
that allows for common questions to predominate over individual inquiries, they
have failed to establish the existence of a class and therefore do not meet Crow’s
requirements for class certification. The Court, therefore, does not reach the
question of whether Plaintiff has met the other requirements for certification under
Crow. Further, after analyzing the equitable considerations for certification in this
case, the Court, in the exercise of its discretion, concludes that Class certification in
this case would principally serve to provide Plaintiff with inappropriate leverage in
settlement negotiations. Thus, even if the elements of Crow were met, certification
would be unjust on equitable grounds.
{40} For the reasons noted above, it is hereby ORDERED
ORDERED that Plaintiff’s
Motion for Class Certification is DENIED.
DENIED
SO ORDERED,
ORDERED this the 11th day of April, 2012.
