American Home Services, Inc. v. a Fast Sign Co

• Court: Court of Appeals of Georgia
• Decided: July 11, 2013
• Docket: A11A0719
• Status: Published

Opinion

FOURTH DIVISION PHIPPS, C. J., ANDREWS, P. J. and McFADDEN, J.

NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. http://www.gaappeals.us/rules/

July 11, 2013

In the Court of Appeals of Georgia A11A0719. AMERICAN HOME SERVICES, INC. v. A FAST SIGN COMPANY, INC.

MCFADDEN, Judge.

This is an appeal from the judgment entered in class action litigation involving

the Telephone Consumer Protection Act of 1991, 47 USC § 227 (“TCPA”). In

October 2003, A Fast Sign Company, Inc. d/b/a Fastsigns (“Fastsigns”) filed a class

action complaint against American Home Services, Inc. (“AHS”), alleging that AHS

had violated the TCPA by sending unsolicited facsimile advertisements to fax

machines. The trial court certified the proposed class, and we affirmed that

certification. American Home Svcs. v. A Fast Sign Co., 287 Ga. App. 161 (651 SE2d

119) (2007). The trial court then granted partial summary judgment to Fastsigns. The court

found that the evidence was undisputed that AHS contracted with Sunbelt

Communications, Inc. to send 318,000 fax advertisements to fax machines belonging

to businesses and individuals throughout metro Atlanta. The court found that AHS

sent six particular faxes that were actually received, but that whether AHS sent other

faxes was an issue of fact. It held that AHS’s violation of the TCPA was willful and

knowing. It also held that the businesses with which AHS had an established business

relationship, which can be a defense to allegations of a TCPA violation, had been

removed from the class, so that the established business relationship defense was not

in issue. Finally, the court held that the class was entitled to an award of attorney fees,

the amount of which would be determined later.

The court then conducted a bench trial to determine the number of faxes sent,

ultimately determining that AHS had sent 306,000 unsolicited fax advertisements to

fax machines. Based on that finding, the court entered judgment against AHS for

$459 million, calculating the award by multiplying 306,000 by $1,500, the statutory

amount of damages per knowing or willful violation of the TCPA. AHS appealed, and

in American Home Svcs. v. A Fast Sign Co., 310 Ga. App. 315 (713 SE2d 396)

(2011), we vacated the judgment and remanded, holding that the trial court

2 erroneously entered judgment based on the number of fax advertisements sent, rather

than the number received. Id. at 317-318 (1). The Supreme Court granted Fastsigns’

petition for certiorari and reversed our judgment, holding that under the TCPA, “a

sender is liable for the unsolicited advertisements it attempts to send to fax machines,

whether or not the transmission is completed or received by the targeted recipient.”

A Fast Sign Co. v. American Home Svcs., 291 Ga. 844, 847 (734 SE2d 31) (2012).

The Supreme Court remanded the case for our consideration of AHS’s remaining

enumerations of error, which we had not addressed given our ruling vacating and

remanding the judgment. Id. at 847-848. We now vacate our opinion, adopt the

Supreme Court’s opinion as our own, and address AHS’s remaining enumerations of

error.

AHS argues that the evidence does not support the judgment. We find that

some evidence supports the judgment. Nonetheless, the judgment must be vacated

and the case remanded because the judgment does not exclude fax recipients who

were excluded from the class, and it does not comply with OCGA § 9-11-23 (c)

because it does not describe the class. Since the evidence presented at the bench trial

is sufficient to support the judgment, we conclude that any trial court error regarding

an alleged admission in judicio and the application of a negative spoliation inference

3 was harmless. We also hold that “willful or knowing” as used in the TCPA means that

the violator knew that he was doing the act in question, even if he did not know his

act was a violation of the statute. We hold that the trial court did not err by requiring

AHS to prove any established business relationships in order to invoke the

established business relationship defense. We reject AHS’s argument that the trial

court granted the claimants a windfall recovery in excess of the statutory maximum

amount of damages. Finally, we decline to address AHS’s argument that the judgment

violates the common law and constitutional due process.

(a) Some evidence supports the trial court’s judgment regarding the sending

of faxes.

“In a bench trial, as here, the trial court sits as the trier of fact and the court’s

findings will not be set aside unless clearly erroneous. Since the clearly erroneous test

is the same as the any evidence rule, an appellate court will not disturb the factual

findings of the trial court when there is any evidence to sustain such findings.”

Brandenburg v. All-Fleet Refinishing, 252 Ga. App. 40, 41 (555 SE2d 508) (2001)

(citation omitted). “[T]his holds true even if the findings are based upon

circumstantial evidence and the reasonable inferences which flow from them.”

Roscoe v. State, 286 Ga. 325, 327 (687 SE2d 455) (2009) (citation omitted).

4 Fastsigns introduced into evidence the five contracts AHS entered with Sunbelt

for Sunbelt to send 318,000 fax advertisements over the course of ten months. It

introduced the testimony of Wendell Driver, the founder of AHS, who said that he

assumed the faxes had been sent and that he had no reason to think otherwise. Driver

testified that AHS received business because of the fax advertisements and that he

thought the faxes were effective. Driver also testified that AHS paid Sunbelt in

accordance with the contracts. Driver testified that AHS never provided Sunbelt with

anything in writing from any potential recipients authorizing the sending of the fax

advertisements and that he did not deny that all faxes sent on behalf of AHS were

unsolicited by the recipients.

Fastsigns’ computer expert testified that he was familiar with Sunbelt’s

operations from his work in a number of cases involving Sunbelt. He had examined

the hard drives from Sunbelt’s computers in Atlanta, and determined that the fax log

files intentionally had been deleted and purged. But he was able to retrieve from the

hard drives Sunbelt’s database of fax numbers, and based on his experience with

Sunbelt, he was confident that those were the numbers to which Sunbelt sent faxes

on behalf of AHS. The expert testified that Sunbelt had the capacity and capability

to fulfill the contracts it had entered with AHS. He also testified that Sunbelt’s

5 standard business practice was not to obtain permission from potential recipients

before sending faxes. Finally, he testified that based on his experience with Sunbelt,

in his opinion it was “much more likely than not” that Sunbelt had fulfilled its

contracts with AHS. Fastsigns previously had introduced at the summary judgment

stage the affidavits of six class members, who testified that they had received AHS

faxes. This is some evidence to support the trial court’s judgment.

(b) Any trial court error regarding an alleged admission in judicio and the

application of a spoliation negative inference was harmless.

AHS argues that the trial court erred in relying on what it found to be an

admission in judicio in reaching its judgment. It argues that the trial court also erred

in relying on a negative inference because of Sunbelt’s spoliation of evidence. We

conclude that any error was harmless.

In the “statement of material facts” section of its brief to this court in the class

certification appeal, AHS wrote that, “On behalf of AHS, Sunbelt sent approximately

306,000 fax advertisements to potential customers in the Atlanta area.” AHS argues

that the trial court erred in treating this statement as an admission in judicio and in

relying on it in making its factual finding that AHS sent 306,000 faxes. It argues that

the trial court also erred in applying to it a negative inference because of Sunbelt’s

6 spoliation of evidence, the fax logs. But given the trial court’s explicit finding that

the evidence admitted at trial showed that it was more likely than not the unsolicited

faxes had been sent to fax machines, any error in its reference to the alleged

admission in judicio and the spoliation inference is harmless. “An appellant must

show harm as well as error to prevail on appeal; error to be reversible must be

harmful.” In the Interest of S. N. H., 300 Ga. App. 321, 329 (4) (685 SE2d 290)

(2009) (citation omitted).

(c) Nonetheless, the judgment must be vacated because it does not take into

account those recipients excluded from the class and it does not comply with OCGA

§ 9-11-23.

As noted above, Fastsigns introduced evidence that AHS sent 318,000 faxes.

The trial court found that the evidence showed AHS sent 306,000 faxes. (AHS does

not complain about this discrepancy, which is in its favor.) But the trial court’s

judgment does not appear to take into account those fax recipients who were excluded

from the class: 375 persons with whom AHS had established business relationships,

the judges of all trial and appellate courts in the state of Georgia and an undetermined

number of AHS and Sunbelt employees and agents. No evidence was presented at the

bench trial on these numbers.

7 Further, OCGA § 9-11-23 (c) (3) required the trial court to describe in the

judgment the members of the class, but it did not. Accordingly, as Fastsigns concedes,

the judgment does not comply with OCGA § 9-11-23 (c).

For these reasons, the judgment must be vacated. The trial court must

determine and then exclude from its calculation those fax recipients who were

excluded from the class. It then must re-enter the judgment in accordance with OCGA

§ 9-11-23 (c) (3). Jones v. Forest Lake Village Homeowners Assn., 304 Ga. App. 495,

500-501 (1) (c) (696 SE2d 453) (2010).

2. The meaning of “willful or knowing” in the TCPA.

The TCPA provides for recovery of either actual damages or $500 per

violation, but allows a court “in its discretion” to increase the award up to a maximum

of treble damages if the defendant “willfully or knowingly violated” the statute. 47

USC § 227 (b) (3). “Willfully” and “knowingly” are not defined in the TCPA.

AHS argues that, in order to impose treble damages, the trial court was required

to find that knew that its actions violated the TCPA, not simply that it willfully or

knowingly sent the faxes. The FCC, in interpreting another provision of the TCPA,

has held that “‘[w]illful’ in this context means that the violator knew that he was

doing the act in question. . . . A violator need not know that his action or inaction

8 constitutes a violation; ignorance of the law is not a defense or mitigating

circumstance.” In re Dynasty Mortgage, 22 FCC Rcd 9453, 9470, n. 86 (citations

omitted). “[T]he interpretation of a statute by an administrative agency which has the

duty of enforcing or administering it is to be given great weight and deference.”

Center for a Sustainable Coast v. Coastal Marshlands Protection Comm., 284 Ga.

736, 741 (2) (670 SE2d 429) (2008) (citation omitted).

Other courts have held the same. See Stewart v. Regent Asset Mgmt. Solutions,

2011 U.S. Dist. LEXIS 50046 (N.D. Ga. 2011); Sengenberger v. Credit Control Svcs.,

2010 U.S. Dist. LEXIS 43874 (N.D. Ill. 2010); Charvat v. Ryan, 879 NE2d 765, 770-

771 (Ohio 2007) (concluding that knowledge of the TCPA is not required to find

either a willful or knowing violation in support of treble damages). See also Cox v.

Garvin, 278 Ga. 903, 906 (607 SE2d 549) (2005) (in interpreting the term “willfully”

in the context of securities statutes, Georgia Supreme Court declined “to adopt a

requirement that the person intended to violate the law; the key is that the person

intended to do the act prohibited by statute;” court found that its interpretation was

in accordance with agency’s interpretation, the interpretations of other state courts,

and the remedial purpose of the statutes).

9 We conclude that a plaintiff “need not prove that defendant had knowledge of

the TCPA’s provisions in order to establish that the defendant willfully or knowingly

violated the TCPA.” Stewart, 2011 U.S. Dist. LEXIS 50046 at 19. AHS admitted that

it hired Sunbelt to send advertising faxes on its behalf. This is sufficient to make the

violation “willful” within the meaning of the statute. See Sengenberger, 2010 U.S.

Dist. LEXIS 43874 at 17.

3. The burden of proving an established business relationship.

AHS argues that the trial court erred by requiring it to prove that it had an

established business relationship with the fax recipients instead of requiring Fastsigns

to prove that AHS did not have an established business relationship with the fax

recipients. In its order granting Fastsigns partial summary judgment, the trial court

found that AHS had not provided any evidence establishing a triable issue on the

established business relationship defense, noting that all entities for whom AHS had

records or knowledge of an established business relationship had been excluded from

the class.

In its brief to this court in the class certification appeal, AHS argued that class

certification was inappropriate because Fastsigns had not excluded all proposed class

members who had an established business relationship with AHS, but only those with

10 a documented established business relationship. AHS asserted in its brief that this

argument did not go to the burden of proof on the issue, but rather only to the issue

of class certification. But the issue regarding the burden of proof was encompassed

within AHS’s argument: it essentially argued that Fastsigns had the burden of proving

with whom AHS had established business relationships, so that those individuals

could be excluded from the class. Absent such proof, AHS argued, the proposed class

lacked commonality and it was error to certify it.

In our opinion affirming the class certification, we rejected that argument.

American Home Svcs., 287 Ga. App. 161, cert. denied. Relying on a recent

clarification of the Federal Communications Commission, we held “that an advertiser

seeking to invoke the established business relationship exemption to TCPA liability

bears the burden of demonstrating the existence of any such established business

relationship.” Id. at 163 (citing Rules and Regulations Implementing the Telephone

Consumer Protection Act of 1991, 71 FR 25967-01 (May 3, 2006)). We affirmed the

certification of the class, which excluded those with whom AHS had shown an

established business relationship, implicitly rejecting the argument that AHS makes

here. This is the law of the case, and we are bound by it. OCGA § 9-11-60 (h) (“[A]ny

ruling by the Supreme Court or the Court of Appeals in a case shall be binding in all

11 subsequent proceedings in that case in the lower court and in the Supreme Court or

the Court of Appeals as the case may be.”). We observe that the holding is consistent

with the principle that “the burden of proving justification or exemption under a

special exception to the prohibitions of a statute generally rests on one who claims

its benefits.” FTC v. Morton Salt Co., 334 U.S. 37, 44-45 (I) (68 SCt 822, 92 LEd

1196) (1948).

4. The judgment did not grant a windfall recovery in excess of the statutory

maximum amount of damages.

AHS argues that the judgment must be reversed because it awards damages

exceeding the statutory maximum of $1,500 per knowing or willful violation. 47 USC

§ 227 (b) (3). We agree that 47 USC § 227 (b) (3) permits a person or entity to

recover no more than $1,500 in damages for each willful and knowing violation.

But we do not agree that the judgment, as entered, awards persons or entities,

other than the class representative, more than that amount. The trial court

awarded $45,000 to the class representative and then held that, after fees and

expenses had been deducted, “[a]ll remaining sums shall be distributed equally

to the remaining class members of the certified class.” Contrary to AHS’s

argument, the court did not “award[] claimants equal shares in a $459,000,000

12 fund”; it awarded class members an equal share in the class fund after the

distribution to the class representative and the payment of attorney fees and

costs. In other words, the court did not order that all the remaining sums would

be distributed equally among those class members who made a claim, simply

that it would be distributed among all members of the class. It is of course likely

that not all class members will make a claim, thereby leaving undistributed

amounts in the class fund. The trial court’s judgment did not address this

contingency -- which has not yet occurred -- and therefore it is not before us in

this appeal.

5. Common law and due process.

AHS argues that the judgment is excessive and violates the common law.

But this is a statutory proceeding, and AHS does not explain how the common

law overrides the statute. It also argues that the judgment violates due process.

We will not rule on a constitutional question unless it clearly appears in the

record that the trial court distinctly ruled on the point. Atlanta Independent

School System v. Lane, 266 Ga. 657 (1) (469 SE2d 22) (1996); Ogletree v. State,

211 Ga. App. 845, 846 (1) (440 SE2d 732) (1994). AHS does not point to any trial

court ruling on this issue.

13 Judgment vacated and case remanded. Phipps, C. J., and Andrews, P.J.,

concur.