Mccall Law Firm, PLLC v. Crystal Queen, Inc.
Mccall Law Firm, PLLC v. Crystal Queen, Inc.
Opinion of the Court
Before the Court is defendants Rudolf Galan, Adriana Galan, and Crystal Queen, Inc.'s (collectively, "Crystal Defendants") motion to strike class allegations (Dkt. No. 59). Plaintiff McCall Law Firm, PLLC ("McCall") timely filed its response to the motion (Dkt. No. 64). For the reasons set forth below, the Court denies the Crystal Defendants' motion.
I. Relevant Background
McCall is a law firm located in Pope County, Arkansas (Dkt. No. 4, ¶ 1). Individual defendants Mr. and Ms. Galan are residents of Ontario, Canada. On January 30, 2015, McCall originally filed this action against Crystal Queen, Inc., d/b/a Crystal Training, a Canadian corporation, in the Circuit Court of Pope County, Arkansas (Dkt. No. 1, ¶ 1). On September 21, 2015, McCall filed its amended class action complaint in that court to add defendants Mr. and Ms. Galan (See id. ). On December 3, *11282015, Crystal Training removed the case to this Court with the consent of separate defendants Mr. and Ms. Galan (Id. , Exhibit 2).
McCall's amended class action complaint alleges that all defendants violated the Telephone Consumer Protection Act of 1991 ("TCPA"), codified at
After their motions to dismiss were denied by the Court, Mr. and Ms. Galan filed their answers to the amended class action complaint (Dkt. Nos. 41, 42). In their answers, Mr. and Ms. Galan both asserted multiple affirmative defenses, including lack of standing, constitutional violations, and class defects (Id. ).
Counsel for all defendants filed a motion to withdraw as counsel on October 3, 2017 (Dkt. Nos. 55, 56). In the same motion, counsel informed the Court that a motion to strike class allegations was imminent (Id. ¶¶ 3-4). The Court granted the motions to withdraw and directed Mr. and Ms. Galan to inform the Court whether they would proceed pro se ; the Court also directed Crystal Training to procure new counsel or risk a default judgment (Dkt. No. 58, at 2).
Former counsel for Crystal Defendants, Ms. Wymore, filed the present motion to strike class allegations (Dkt. No. 59) on October 24, 2017. Neither the Galans nor Crystal Training have informed the Court about their future plans for acquiring legal representation.
II. Standard of Review
The present motion is styled as a motion to strike, which is governed by Federal Rule of Civil Procedure 12(f). As an initial matter, the Court notes that "striking a party's pleadings is an extreme measure, and, as a result ... motions to strike under Fed. R. Civ. P. 12(f) are viewed with disfavor and are infrequently granted." Stanbury Law Firm v. I.R.S. ,
[There] appears to be a general judicial agreement, as reflected in the extensive case law on the subject, that [motions to strike] should be denied unless the challenged allegations have no possible relation or logical connection to the subject matter of the controversy and may cause some form of significant prejudice to one or more of the parties to the action. Any doubt about whether the challenged material is redundant, immaterial, impertinent, or scandalous should be resolved in favor of the non-moving party.
5C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1382 (3d ed. 2009).
The Court construes the Crystal Defendants' standing and constitutional arguments as a motion for judgment on the pleadings pursuant to Rule 12(c). See Fed. R. Civ. P. 12(h) (noting that "a defense of failure to state a claim ... may be made *1129... by motion for judgment on the pleadings").
A court will grant a Rule 12(c) motion for judgment on the pleadings if a plaintiff has "[f]ailed to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(h)(2)(C). A motion for judgment on the pleadings is subject to the same standard as is a Rule 12(b)(6) motion to dismiss. NanoMech, Inc. v. Suresh ,
III. Discussion
A. McCall Has Alleged A Concrete Injury-In-Fact
Relying upon the recent decision from the Supreme Court, Spokeo, Inc. v. Robins , --- U.S. ----,
Standing is a jurisdictional issue, so the Court addresses it first. In order to establish standing, McCall "must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Spokeo ,
Per Spokeo , Article III standing requires a "concrete" injury, rather than a "conjectural or hypothetical" one. Spokeo ,
The Court also reaffirmed that "intangible injuries" can qualify as "concrete injuries."
In some cases, a statutory violation by itself may not qualify as a "concrete" injury. For example, the plaintiff in Spokeo alleged that the defendant published inaccurate information about him in violation of the Fair Credit Reporting Act ("FCRA"). The Court noted that although this was a technical violation of the plaintiff's rights, it may have resulted "in no harm."
The Crystal Defendants argue that the injuries McCall seeks to vindicate through the TCPA would be "too de minimis to give rise Article III standing." (Dkt. No. 60, at 2). The Court interprets this as an argument that the harm alleged by McCall does not qualify as "concrete" under Spokeo. For support, the Crystal Defendants cite Hernandez v. Path, Inc. , No. 12-CV-01515 YGR,
Several courts have found that statutory violations of the TCPA constitute "concrete" injuries that confer Article III standing. See e.g. , Progressive Health and Rehab Corp. v. Strategy Anesthesia, LLC ,
*1131O.P. Schuman & Sons v. DJM Advisory Grp. LLC , CIVIL ACTION No. 16-3563,
Construing the pleadings liberally, the Court finds that McCall has alleged a concrete injury-in-fact sufficient to confer Article III standing. Actions to remedy a nuisance or an invasion of privacy have long been heard by American courts. See Restatement (Second) of Torts § 652(B) (Am. Law Inst. 1977). The legislation itself and the legislative records surrounding the enactment of the TCPA demonstrate that Congress intended to protect citizens from the loss of their fax machines during the transmission of unsolicited facsimile advertisements. See Pub. L. 102-243, § 2 ¶ 12; H.R. Rep. No. 102-317, at 10 (1991). The TCPA creates a substantive right to be free from unsolicited facsimile advertisements. Congress identified such advertisements as a concrete harm and provided citizens with a means to redress that harm. This Court defers to Congress's judgment to elevate this "concrete, de facto injur[y] previously inadequate in law" to the status of a legally cognizable injury. Spokeo ,
The statutory violation alleged by McCall in this matter is not "a bare procedural violation, divorced from any concrete harm." See Spokeo ,
B. Striking McCall's Class Allegations Is Premature
The Crystal Defendants urge this Court to strike McCall's class allegations "because [McCall] cannot meet the requirements of Rule 23(a)(2)-(4)" and because "[McCall] cannot establish that a class action is the superior method of adjudicating this controversy under Rule 23(b)(3)." (Dkt. No. 60, at 6). At this time, the Court declines to strike McCall's class allegations.
While Federal Rule of Civil Procedure 23(c)(1)(A) requires that the Court determine whether to certify a class "[a]t an early practicable time," the "propriety of class action status can seldom be determined on the basis of pleadings alone." Walker v. World Tire Corp., Inc. ,
The Crystal Defendants argue that McCall's class allegations should be struck because mini-trials will be required to determine liability for each class member and because the Crystal Defendants are insolvent and therefore judgment proof (Dkt. No. 60, at 6-8). Specifically, the Crystal Defendants argue that McCall cannot establish that each class member suffered a common injury-receiving an unsolicited fax advertisement-without conducting a mini-trial for each recipient of each fax sent by the Crystal Defendants to determine which faxes were unsolicited.
The Eighth Circuit Court of Appeals recently reversed a district court's denial of class certification in a case where the proposed class members received unsolicited fax advertisements without an opt-out notice. Sandusky Wellness Center, LLC v. Medtox Scientific, Inc. ,
With this precedent in mind and after examining the pleadings, it appears, construing McCall's complaint liberally, that McCall has alleged facts sufficient to survive the present motion to strike class allegations. The second amended complaint claims that, on January 15, 2016, McCall received an unsolicited fax transmission on its fax machine "advertising Crystal Training's upcoming QuickBooks and Excel Training Classes ...." (Dkt. No. 4, ¶ 14 (internal quotation omitted) ). McCall argues that the fax advertisement in question did not contain an "Opt-Out Notice that complies with the requirements of 47 C.F.R. 64.1200(a)(4)(iii) and (iv)." (Id. ¶ 16). McCall claims that, "[u]pon information and belief," the Crystal Defendants sent identical fax transmissions "to hundreds, if not thousands, of telephone facsimile machines ...." (Id. ¶ 22).
McCall's alleged class is similar to the one alleged in Sandusky : the proposed class consists of individuals who received unsolicited facsimile advertisements without an opt-out notice. Rule 23(a)(2)'s commonality *1133requirement appears, construing the pleadings liberally, to be satisfied because each class member allegedly received an unsolicited fax advertisement without an opt-out notice. Rule 23(b)(3)'s predominance requirement is met because McCall's complaint raises questions of law, including whether each fax violates the TCPA, and fact, including whether each class member received an unsolicited fax, that predominate over individual issues. McCall also sufficiently alleges facts regarding the numerosity and adequacy requirements of Rule 23(a). While the Crystal Defendants' arguments are well-taken, given McCall's allegations and the procedural posture of this case, the Court is not satisfied that it is appropriate to deny class certification at this time. Instead, the Court will allow McCall to proceed with discovery to develop the factual issues. Accordingly, the Court denies the Crystal Defendants' Rule 12(f) motion to strike class allegations.
C. The TCPA's Damages Provision Is Constitutional
The Crystal Defendants contend that the TCPA's damages provision violates the Fifth, Eighth, and Fourteenth Amendments of the United States Constitution. The Court construes these arguments as a motion for judgment on the pleadings. The Court declines to find the TCPA's damages provision unconstitutional at this stage of the litigation.
1. It Is Premature To Rule On The Crystal Defendants' Eighth Amendment Argument
The Crystal Defendants argue that the TCPA's remedy violates the Eighth Amendment of the United States Constitution because it is grossly excessive and disproportionate (Dkt. 60, at 12-14). Under Section 227(b), "[a] person or entity" may bring an action to recover the greater of either the "actual monetary loss" from a violation of § 227(b) or "to receive $500 in damages for each such violation."
2. The TCPA's Damages Provision Is Not Facially Unconstitutional
The Crystal Defendants attack the damages provision of the TCPA under the due process clauses of the Fifth and Fourteenth Amendments of the United States Constitution (Dkt. No. 60, at 10-12). At the outset, the Court notes that the Fourteenth Amendment's protections do not govern the TCPA, which is a federal statute. See Bolling v. Sharp ,
At this stage of the litigation, the Crystal Defendants' due process challenge must fail. Due process rights are violated by statutory penalties only where the penalty prescribed is "so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable."
*1134Warner Bros. Entertainment, Inc. v. X One X Productions ,
Unfortunately for the Crystal Defendants, the Eighth Circuit has found that the guidelines governing the constitutionality of punitive damages awards are not applicable to statutory damages awards. Capital Records, Inc. v. Thomas-Rasset ,
Based upon the limited pleadings and filings in this case, the Court is not satisfied that the TCPA's statutory damages provision violates the Due Process clause of the Fifth Amendment. After a class is certified or damages are determined, if that occurs, the Crystal Defendants will have the opportunity to show that the statutory damages are in fact "so severe and oppressive" as to be unconstitutional.
D. The TCPA's Damages Provision Does Not Violate The First Amendment
The Crystal Defendants also argue that the "size of the penalties that can be imposed on speech" under the TCPA violate the First Amendment of the United States Constitution (Dkt. No. 60, at 14). Under controlling Eighth Circuit precedent, the Crystal Defendants' challenge to the TCPA must fail. See Missouri ex rel. Nixon v. American Blast Fax, Inc. ,
In Missouri ex rel. Nixon , the Eighth Circuit held that the TCPA's ban on unsolicited facsimile transmissions was a constitutional regulation of commercial speech under the Central Hudson Gas & Elec. Corp. v. Public Service Commission of New York test.
[W]e ask as a threshold matter whether the commercial speech concerns unlawful activity or is misleading. If so, then the speech is not protected by the First Amendment. If the speech concerns lawful activity and is not misleading, however, we next ask "whether the asserted governmental interest is substantial." If it is, then we "determine whether the regulation directly advances the governmental *1135interest asserted," and finally, "whether it is not more extensive than is necessary to serve that interest." Each of these latter three inquires must be answered in the affirmative for the regulation to be found constitutional.
Thompson v. W. States Med. Ctr. ,
First, the court in Missouri ex rel. Nixon held that the TCPA serves a substantial government interest by "restricting unsolicited fax advertisements in order to prevent the cost shifting and interference such unwanted advertising places on the recipient." Id. at 654. Second, the Eighth Circuit found that the TCPA directly advanced this interest because it "plac[es] restrictions on those responsible for a large portion of the problem ...." Id. at 658. On the third Central Hudson prong, the Eighth Circuit pronounced that the TCPA achieved a "reasonable fit between the means it adopts and the ends it seeks to serve." Id. at 660. Missouri ex rel. Nixon is binding authority, and the Court follows that decision. The Court notes similar decisions by other circuit courts, including Destination Ventures, Ltd. v. FCC ,
The Crystal Defendants argue that "[t]he TCPA's draconian remedial provisions and wildly disproportionate damages chill protected speech ...." (Dkt. No. 60, at 14). The Court interprets this as an argument that the TCPA's damages provision violates the third prong of the Central Hudson test. The Court disagrees. The Crystal Defendants are essentially arguing that Congress should have adopted a less restrictive alternative remedy. Central Hudson does not require that Congress adopt the least restrictive possible remedy. See Thompson ,
The TCPA's goal of preventing the cost shifting of fax advertising reasonably fits with the TCPA's remedy - a ban on unsolicited facsimile advertising - as advertisers may still legally use telephone solicitation, direct mail, or in-person solicitation. See Missouri ex rel. Nixon , 323 F.3d at 659. While Congress could have enacted a less restrictive regulation, such as a "do not fax list," it instead created a scheme that places the burden of unsolicited facsimile advertisements upon senders, rather than on consumers. Id. This Court is persuaded that Congress's damages provision under the TCPA reasonably "fits" the goals of the TCPA. Accordingly, the Court holds that, on its face, the TCPA's ban on facsimile advertisements is a constitutional regulation of commercial speech. Based on the limited pleadings and filings in this case, the Court is not satisfied that the hypothetical damages the Crystal Defendants face under the TCPA violate the First Amendment.
IV. Conclusion
For the reasons set forth herein, the Court denies (1) the Crystal Defendants' motion to strike class allegations and (2) the other relief sought by the Crystal Defendants, which the Court construes as motions for judgment on the pleadings.
So ordered this the 20th day of September, 2018.
Reference
- Full Case Name
- MCCALL LAW FIRM, PLLC, on behalf of itself and all other entities and persons similarly situated v. CRYSTAL QUEEN, INC.
- Cited By
- 1 case
- Status
- Published