Blog LenderLaw Watch January 13, 2022

Second Circuit Disagrees With Third Circuit TCPA Ruling Regarding Unsolicited Advertisements

On January 6, 2021, the Second Circuit issued an order criticizing and declining to adopt a Third Circuit ruling regarding the scope of the term “unsolicited advertisement” under the Telephone Consumer Protection Act (TCPA).  In Katz v. Focus Forward, LLC, No. 21-1224-cv, the Second Circuit affirmed the judgment of the Southern District of New York, holding that a “faxed invitation to participate in a market research survey in exchange for money does not constitute an ‘advertisement’ under the TCPA.”

The Plaintiff in Katz is a professional corporation that provides medical services.  Plaintiff received two unsolicited faxes seeking participants in market research surveys from Defendant, a market research company that conducts market surveys and receives payment from its clients for providing them with the information gathered in the surveys.  Plaintiff brought a class action lawsuit against Defendant, challenging the faxes as “unsolicited advertisements” prohibited by the TCPA.

The TCPA prohibits, in relevant part, the use of any “telephone facsimile machine . . . to send, to a telephone facsimile machine, an unsolicited advertisement.”  47 U.S.C. § 227(b)(1)(C).  The Second Circuit acknowledges that it had not explicitly answered the question of whether a fax inviting the recipient to take a survey in exchange for money constitutes an “unsolicited advertisement” under the TCPA.  However, the Second Circuit flatly rejected the Third Circuit’s decision addressing this question directly. The Third Circuit, in Fischbein v. Olson Research Group, 959 F.3d 559 (3d Cir. 2020) (Fischbein), has held that such faxes are advertisements.  The Third Circuit reasoned that an offer of payment in exchange for participation in a market survey is a “commercial transaction,” and that a fax highlighting the availability of that transaction is thus an “advertisement” under the TCPA.

In its criticism of Fischbein, the Second Circuit opines that the Third Circuit relied on an “encyclopedia definition of what constitutes a ‘commercial transaction’ to argue that ‘an offer of payment . . . transforms the . . . market surveys into advertisements,’ rather than focusing on the definition of advertisement that the TCPA and FCC regulations provide.”  The Second Circuit further states that Fischbein effectively rewrites the TCPA to prohibit communications that advertise the availability of an opportunity to exchange goods or services, when the TCPA does not prohibit communications advertising the availability of an opportunity.  Finally, the Second Circuit reasons that the TCPA does not prohibit communications advertising transactions that are “commercial in character,” and instead prohibits communications advertising the availability of “property, goods, or services.”

The Second Circuit stopped short of ruling that any communication offering to pay the recipient is not an advertisement, expressly stating that faxed surveys or other communications offering the recipient both money and services are not necessarily subject to the Court’s holding.

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