USCA4 Appeal: 22-1279 Doc: 40 Filed: 09/06/2023 Pg: 1 of 23
PUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 22-1279
CARLTON & HARRIS CHIROPRACTIC, INC., a West Virginia Corporation, individually and as the representative of a class of similarly situated persons,
Plaintiff - Appellant,
v.
PDR NETWORK, LLC; PDR DISTRIBUTION, LLC; PDR EQUITY, LLC; JOHN DOES,
Defendants - Appellees.
Appeal from the United States District Court for the District of West Virginia, at Huntington. Robert C. Chambers, District Judge. (3:15-cv-14887)
Argued: March 9, 2023 Decided: September 6, 2023
Before DIAZ, Chief Judge, and THACKER and HARRIS, Circuit Judges.
Vacated and remanded by published opinion. Judge Harris wrote the majority opinion, in which Chief Judge Diaz and Judge Thacker joined. Judge Thacker wrote a concurring opinion.
ARGUED: Glenn Lorne Hara, ANDERSON & WANCA, Rolling Meadows, Illinois, for Appellant. Kwaku A. Akowuah, SIDLEY AUSTIN LLP, Washington, D.C., for Appellee. ON BRIEF: D. Christopher Hedges, CALDWELL LUCE DITRAPANO, Charleston, West Virginia, for Appellant. Jeffrey N. Rosenthal, Philadelphia, Pennsylvania, Ana USCA4 Appeal: 22-1279 Doc: 40 Filed: 09/06/2023 Pg: 2 of 23
Tagvoryan, BLANK ROME LLP, Los Angeles, California; Carter G. Phillips, Alice A. Wang, SIDLEY AUSTIN LLP, Washington, D.C., for Appellees.
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PAMELA HARRIS, Circuit Judge:
The plaintiff in this case, a chiropractic office, filed suit under the Telephone
Consumer Protection Act after it received an unsolicited fax offering a free eBook with
information about prescription drugs. The district court dismissed its complaint, holding
that the plaintiff had not alleged that the fax, which tendered a product for free rather than
for sale, was sufficiently commercial to bring it within the statutory prohibition on
“unsolicited advertisements.” We disagree. At this early stage of the litigation, we
conclude, the plaintiff has adequately alleged that the fax offer had the necessary
commercial character to make it an “unsolicited advertisement” under the Act.
Accordingly, we vacate the district court’s order and remand for further proceedings.
I.
For context, we begin with the statutory provisions that govern this case. As
amended by the Junk Fax Prevention Act of 2005, the Telephone Consumer Protection Act
of 1991 (“TCPA” or “Act”) generally prohibits the use of fax machines to send “unsolicited
advertisement[s].” 47 U.S.C. § 227(b)(1)(C). “Unsolicited advertisement” is defined by
the Act as “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, in writing or otherwise.” Id. § 227(a)(5) (emphasis added). The
central issue here is whether a fax that touts the “quality” of a “good[]” that is offered for
free, rather than at a price, can fall within that definition.
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The unsolicited fax in question was received by Carlton & Harris Chiropractic, Inc.,
in its West Virginia office in 2013. It was sent by the defendants in this action, referred to
collectively as PDR Network. 1 As we explained in our first encounter with this case, PDR
Network publishes the Physicians’ Desk Reference, a compilation of medical prescribing
information for certain prescription drugs. Pharmaceutical companies pay PDR Network
to list their drugs in the Physicians’ Desk Reference. Carlton & Harris Chiropractic, Inc.,
v. PDR Network, LLC (PDR I), 883 F.3d 459, 462 (4th Cir. 2018).
PDR Network addressed its fax to Carlton & Harris’s “Practice Manager” and urged
the recipient to “reserve” a “FREE 2014 Physicians’ Desk Reference eBook.” J.A. 31. The
fax provided a link for that purpose, as well as a customer-service phone number and email
address. Below a picture of the eBook were bullet points calling attention to features
thought to appeal to the recipient: The eBook contained the “[s]ame trusted, FDA-
approved full prescribing information” as the hard-copy Physicians’ Desk Reference, but
“[n]ow in a new, convenient digital format,” and it had been “[d]eveloped to support your
changing digital workflow.” Id. At the bottom was a notice that the recipient could “opt-
out of delivery of clinically relevant information about healthcare products and services
from PDR via fax” by calling a listed phone number. Id.
1 The defendants are PDR Network, LLC; PDR Distribution, LLC; PDR Equity, LLC; and John Does 1–10. For present purposes, they do not dispute that they are the senders of the fax.
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Carlton & Harris filed a putative class action complaint against PDR Network
alleging a violation of § 227 of the TCPA. 2 The result was years of extensive and complex
proceedings through multiple courts. Those proceedings focused mostly on administrative
law questions regarding what we called the “2006 FCC Rule,” which implements the
TCPA and treats faxes that “promote goods or services even at no cost” as prohibited
“unsolicited advertisements.” Rules and Regulations Implementing the Tel. Consumer
Prot. Act of 1991; Junk Fax Prevention Act of 2005, 71 Fed. Reg. 25967, 25973 (May 3,
2006); see PDR I, 883 F.3d at 463. For those who are interested, the details may be found
in our two previous opinions in this case and the Supreme Court decision that issued
between them. See PDR I, 883 F.3d 459; PDR Network, LLC v. Carlton & Harris
Chiropractic, Inc., 139 S. Ct. 2051 (2019); Carlton & Harris Chiropractic, Inc. v. PDR
Network, LLC (PDR II), 982 F.3d 258 (4th Cir. 2020).
By the time we issued our second opinion, much of that brush had been cleared
away. Most important, there was no longer a question of Chevron deference: Because the
2006 FCC Rule is interpretive and not legislative, we explained, Chevron deference is
inappropriate. PDR II, 982 F.3d at 264. Instead, whether PDR Network’s fax qualified as
an “unsolicited advertisement” under § 227 turned, first, on the statutory language itself,
and then, if the statute was ambiguous, on whether the 2006 FCC Rule was sufficiently
2 The TCPA includes a private cause of action allowing the recipient of an unsolicited fax advertisement to recover actual monetary losses or statutory damages of $500 for each violation. 47 U.S.C. § 227(b)(3). Statutory damages may be tripled if a court finds that a violation is “willful[] or knowing[].” Id.
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persuasive to merit so-called Skidmore deference. See id. (citing Gonzales v. Oregon, 546
U.S. 243, 256 (2006)). We remanded to the district court to consider that question in the
first instance. Id. at 260.
On remand, Carlton & Harris amended its complaint and PDR Network again
moved to dismiss. The district court granted the motion, holding that PDR Network’s fax
did not constitute an “advertisement” under the TCPA because it offered the eBook for free
and not for sale. Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC (PDR III),
Civ. No. 3:15-14887, 2022 WL 386097, at *7 (S.D. W.Va. Feb. 8, 2022).
The court’s analysis proceeded in two basic steps. First, for the district court, it was
clear from the TCPA’s definition of “unsolicited advertisement” – as relevant, “any
material advertising the commercial availability or quality of any property, goods, or
services” – that a fax could qualify only if it had a “commercial component” or “discernible
commercial purpose.” PDR III, 2022 WL 386097, at *3–5. And second, the district court
concluded, PDR Network’s fax lacked that “requisite commercial aspect” because it
promoted a product – the eBook – that was “not for sale.” Id. at *5. The court did not
doubt that the fax could be said to “speak[] to the quality of the free eBook,” describing its
“convenient digital format” and “trusted, FDA-approved” prescribing information. Id.; see
47 U.S.C. § 227(a)(5). But because the fax “sells nothing,” the court reasoned, it could not
qualify as an “advertisement,” PDR III, 2022 WL 386097, at *5 – and because a “plain
reading of the TCPA’s text” left no ambiguity on that point, there was no occasion to
consider the 2006 FCC Rule, id. at *3.
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The court recognized that the plaintiff’s amended complaint included new
allegations directed at the “required commercial connection under the TCPA” but found
them inadequate. Id. at *7. Carlton & Harris now alleged, for instance, that PDR Network
effectively earned a commission for each successful promotion of an eBook by way of fax,
because the amount paid by drug companies to have their products included in the
Physicians’ Desk Reference turned on the number of eBook versions distributed. But that
kind of “ancillary” financial benefit, the court held, was “too remote” to demonstrate the
necessary commercial nexus. Id. The plaintiff also alleged that the fax was a “pretext” or
prelude for future sales efforts, in that it notified recipients they would continue to receive
faxes “about healthcare products and services from PDR.” J.A. 17. The district court
rejected that theory, too, noting that the only reference to those products and services came
in the context of an opt-out notice. PDR III, 2022 WL 386097, at *7. The court ended
where it began: No “underlying and distant commercial purpose” would change the fact
that the fax “does not offer something for sale.” Id.
II.
We review de novo the district court’s grant of PDR Network’s motion to dismiss
under Federal Rule of Civil Procedure 12(b)(6). PDR I, 883 F.3d at 462. Importantly, at
this stage of the litigation, we “assum[e] as true the complaint’s factual allegations” and
we construe “all reasonable inferences” in favor of the plaintiff, Carlton & Harris. Id.
(internal quotation marks omitted).
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On appeal, PDR Network defends both steps in the district court’s reasoning,
arguing that a fax must be “commercial” to qualify as an “advertisement” under the TCPA
and that Carlton & Harris has not alleged the requisite commercial character. Carlton &
Harris, for its part, disputes both portions of the court’s reasoning, contending that a
prohibited “advertisement” may be entirely non-commercial and that, in any event, it has
adequately alleged that the fax it received was commercial in nature.
As explained below, we agree with the district court and PDR Network in a critical
respect: The TCPA’s general prohibition on unsolicited “advertisements” is best read to
cover only faxes of a commercial nature. But we also agree with Carlton & Harris that the
allegations in its amended complaint suffice to meet that standard at this early stage of the
litigation. We therefore vacate the district court’s order and remand for further
proceedings.
A.
1.
We begin with the statutory text. Again, the TCPA generally prohibits sending via
fax an “unsolicited advertisement.” 47 U.S.C. § 227(b)(1)(C). And, per the statute, the
“advertisement” part of “unsolicited advertisement” means “any material advertising the
commercial availability or quality of any property, goods, or services.” Id. § 227(a)(5).
We conclude that “advertisement,” as used and defined in the TCPA, is limited to faxes
that are “commercial in nature.” Sandusky Wellness Ctr., LLC v. Medco Health Sols., Inc.,
788 F.3d 218, 224 (6th Cir. 2015).
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Our conclusion flows mostly from the “everyday” understanding of the term
“advertise.” Id. at 222. “Advertise” customarily has a distinctly commercial flavor,
invoking a business solicitation, designed to “attract[] clients or customers” and in the
“hopes to make a profit, directly or indirectly.” Id. When “[e]veryday people” hear the
word “advertisement,” they think of “everyday ads,” like those they see on television, id.
– sometimes referred to, tellingly, as “commercials.” What is being transmitted is not just
information, but information with a “commercial nexus” to the sender’s “business.”
Physicians Healthsource, Inc. v. Boehringer Ingelheim Pharms., Inc., 847 F.3d 92, 96 (2d
Cir. 2017). The commercial “concept,” in other words, is “part of the common
understanding of what constitutes an ad.” Sandusky, 788 F.3d at 224.
We recognize, as Carlton & Harris argues, that “advertise” can be used differently,
in a way that does not “implicate a profit seeking motive” and instead means only to call
attention to something. PDR I, 883 F.3d at 472 (Thacker, J., dissenting). But the “context
in which [“advertise”] is used, and the broader context of the [TCPA] as a whole,” Yates
v. United States, 574 U.S. 528, 537 (2015), point to the commercial definition as the one
intended here. First, as the Sixth Circuit emphasized, the “word ‘commercial’ is in the
Act’s definition” itself. Sandusky, 788 F.3d at 224; see 47 U.S.C. § 227(a)(5) (“material
advertising the commercial availability or quality of any property, goods, or services”
(emphasis added)). “So ‘commercial’ must play a role – some role” in defining
advertisement, foreclosing a reading that would jettison the concept entirely. Sandusky,
788 F.3d at 224; see Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, Civ. No.
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3:15-14887, 2016 WL 5799301, at *4 (S.D.W. Va. Sept. 30, 2016). 3 Second, as the district
court has recognized from the start, Congress enacted the TCPA “to combat an explosive
growth in unsolicited facsimile advertising, or ‘junk fax’” – that is, “faxes with a
commercial nature.” PDR I, 883 F.3d at 468 (internal quotation marks omitted) (quoting,
in part, PDR Network, 2016 WL 5799301, at *4). Indeed, this form of “telemarketing”
was targeted in part because use of the recipient’s fax machine shifted “costs of
advertising” from the sender to the recipient, H.R. Rep. No. 102-317, at 10 (1991) – again
invoking the kind of commercial advertising in which a business absorbs costs in the hopes
of ultimate profit.
In reading prohibited “unsolicited advertisements” as reaching only faxes of a
commercial nature, we align ourselves with a broad consensus in the case law. To be sure,
there are differences in the precise formulations adopted by courts in defining “unsolicited
advertisement” under § 227. But on the threshold question of whether a fax
“advertisement” must have commercial character, there is wide agreement: A prohibited
“advertisement” is a “commercial solicitation” – “of, in, or relating to commerce,” with
3 The parties vigorously debate what exactly is modified by the word “commercial” in § 227(a)(5)’s definition – which, again, reaches “material advertising the commercial availability or quality of any property, goods, or services.” According to Carlton & Harris, “commercial” modifies only “availability,” so that any fax “advertising” the “quality” of a product would be covered. PDR Network, on the other hand, reads “commercial” as modifying both “availability” and “quality,” so that the definition would be limited to faxes “advertising” the “commercial availability” or “commercial quality” of a product. Like Carlton & Harris, we have questions about what work the phrase “commercial quality” would do on PDR Network’s reading. But we need not resolve this grammatical puzzle here: Regardless of how the modifier “commercial” is applied, we read the word “advertising” itself to embody a commercial component.
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“profit as the primary aim.” Sandusky, 788 F.3d at 225, 222–23 (internal quotation marks
omitted). There must be a “commercial component,” BPP v. CaremarkPCS Health, LLC,
53 F.4th 1109, 1112 (8th Cir. 2022), or a “commercial nexus” to the sender’s business –
“its property, products, or services,” Boehringer, 847 F.3d at 96. Put simply, “[t]he TCPA
does not bar the unsolicited sending of faxes that lack commercial components.” BPP, 53
F.4th at 1112; see also Florence Endocrine Clinic v. Arriva Med., LLC, 858 F.3d 1362,
1366 (11th Cir. 2017).
2.
In arguing for a broader reading of “unsolicited advertisement” – one that would
extend to any fax that promotes the “quality” of a free good or service, even in the absence
of a commercial nexus or profit motive – Carlton & Harris relies primarily on the 2006
FCC Rule. That Rule, as noted above, treats as “unsolicited advertisements” fax messages
“that promote goods or services even at no cost,” 71 Fed. Reg. at 25973, reasoning that
these “purportedly ‘free’” offers “often have commercial strings attached.” See PDR I,
883 F.3d at 467. According to Carlton & Harris, that is a persuasive interpretation of the
statutory language to which we should defer under Skidmore v. Swift & Co., 323 U.S. 134
(1944). For two reasons, we disagree.
First, the 2006 FCC Rule does not actually support the proposition advanced by
Carlton & Harris: that the term “unsolicited advertisement” in § 227 is properly read to
include purely non-commercial offers of free goods and services, like a fax sent by a charity
alerting potential beneficiaries of their eligibility for free assistance. And we know that
because the 2006 FCC Rule says as much. In declining to carve out an exemption for
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nonprofit organizations from the general ban on “unsolicited [fax] advertisements,” the
Rule clarifies that an exemption would be largely unnecessary, given that “messages that
are not commercial in nature – which many nonprofits send – do not constitute ‘unsolicited
advertisements’” in the first place. 2006 FCC Rule, 71 Fed. Reg. at 25972 (emphasis
added). It seems clear, in other words, that contrary to Carlton & Harris’s understanding,
the 2006 FCC Rule does not contemplate liability for a fax sent with “no objective other
than to give away free goods or services.” Boehringer, 847 F.3d at 102 (Leval, J.,
concurring) (referencing 2006 FCC Rule’s “discussion of how the statute treats
nonprofits”).
There is, of course, also the portion of the Rule on which Carlton & Harris relies,
which does indeed purport to prohibit all unsolicited “offers for free goods and services.”
2006 FCC Rule, 71 Fed. Reg. at 25973; PDR I, 883 F.3d at 467–68 (discussing 2006 FCC
Rule). But we do not understand that rule as resting on agency interpretation of the
statutory term “advertisement” that brings within its scope “messages that are not
commercial in nature” – in part because the agency expressly takes the opposite view
elsewhere in the same Rule, as noted above. See 71 Fed. Reg. at 25972. Instead, as we
explained in PDR I, the 2006 FCC Rule sets out a “prophylactic presumption” that all
“offers for free goods and services” will qualify as “advertisements” under § 227, obviating
the need for a case-by-case inquiry into their commercial nature. 883 F.3d at 467–68.
Because so-called “free” offers so frequently mask commercial purposes, that is, the
agency concluded that the benefits of clarity and ease of enforcement justified a somewhat
“overinclusive” prophylactic rule. Id. That may be a perfectly reasonable approach to
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implementing the TCPA – as we suggested in PDR I – but it is not an agency construction
of the term “advertisement” to which we would defer under Skidmore in answering the
statutory interpretation question before us.
And in any event, we agree with the district court that the statute is clear enough on
this point that there would be no room for deference to an alternative agency construction.
See PDR III, 2022 WL 386097, at *3. Again, we appreciate that the word “advertise,”
standing alone, may have a non-commercial meaning. But as the Supreme Court recently
clarified, we cannot label a statute “ambiguous” and defer to an agency interpretation
without first exhausting “all the traditional tools of construction,” considering the “text,
structure, history, and purpose” of a statutory provision. See Cela v. Garland, __ F.4th __,
__, No. 22-1322, 2023 WL 4831594, at *3 (4th Cir. July 28, 2023) (internal quotation
marks omitted) (quoting Kisor v. Wilkie, 139 S. Ct. 2400, 2415 (2019)). And when we
deploy those tools here and consider the full statutory context, we can discern that the term
“unsolicited advertisement,” as used in the TCPA, does not include offers or solicitations
with no commercial component or purpose. See BPP, 53 F.4th at 1112–13 (giving no
deference to 2006 FCC Rule in part because statutory language is unambiguous as to
requirement of “commercial component[]”). 4
4 PDR Network also argues that we should construe the term “unsolicited advertisement” as limited to commercial faxes to avoid First Amendment issues that otherwise would arise. In enacting the TCPA, PDR Network contends, Congress was mindful of the greater First Amendment protections that apply outside the context of commercial speech, and thus cabined its ban on “junk faxes” to messages of a commercial nature. As detailed above, we reach the same result through ordinary tools of statutory
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B.
Our conclusion that a TCPA-prohibited “unsolicited advertisement” must be of a
commercial nature would have been the end of the matter when this case was first filed: In
filing its initial complaint, Carlton & Harris relied entirely on the 2006 FCC Rule for a
non-commercial reading of “advertisement,” and for several rounds of litigation, the
plaintiff’s case rose or fell on whether a “commercial aim” is required. See PDR I, 883
F.3d at 463. But now Carlton & Harris has amended its complaint, and so we turn to its
alternative argument that it has adequately alleged the necessary commercial component.
As we read the amended complaint and briefs, the plaintiff relies on two allegations
to show that PDR Network’s fax is commercial in nature. First is what we will call the
“commission allegation”: The fax promotes a product – the eBook – on which PDR
Network earns a commission. According to the amended complaint, PDR Network
“receive[s] money from the pharmaceutical companies whose drugs are listed in the
Physicians’ Desk Reference,” and “the amount of money” it receives “turns on how many
copies” of the eBook it can distribute to medical practitioners like Carlton & Harris. J.A.
18. In other words, PDR Network profits when its fax persuades a medical practitioner to
accept the proffered eBook. We appear to be the first court of appeals to consider a
construction, so have no occasion to consider application of the constitutional-avoidance canon. See United States v. Simms, 914 F.3d 229, 251 (4th Cir. 2019).
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commission allegation like this, and at this early stage of the litigation, we conclude that it
is sufficient to establish the requisite commercial element.
Taken as true, as it must be, the plaintiff’s commission allegation describes what we
might colloquially call a product “pitch.” The fax undoubtedly promotes the “quality” of
the eBook, see 47 U.S.C. § 227(a)(5) (defining “unsolicited advertisement” as “any
material advertising the commercial availability or quality of any property, goods, or
services”), as the district court recognized, PDR III, 2022 WL 386097, at *5, extolling the
eBook’s virtues and its benefits for the recipient’s practice. It does so to persuade the
recipient to accept the offer of a free eBook. And critically, as with a classic sales pitch,
the promoter profits if the pitch lands and the offer is accepted. This is not the rare case in
which free products are distributed via fax “without hope of financial gain.” PDR I, 883
F.3d at 468. PDR Network’s business is distribution of the Physicians’ Desk Reference
and an associated “suite of services,” and its business runs, in part, on the money it earns
when a fax solicitation succeeds in placing a digital version of the Physicians’ Desk
Reference with a medical practitioner. J.A. 17. There is, in other words, a straightforward
“commercial nexus” between the fax in question and PDR Network’s “business.” See
Boehringer, 847 F.3d at 96.
The district court saw it differently, holding that the fax did not qualify as a
commercial advertisement because it offered the eBook for free, rather than for sale to the
fax recipient. PDR III, 2022 WL 386097, at *5 (finding that “there is no requisite
commercial aspect” to the fax because it “sells nothing”). PDR Network takes much the
same position on appeal. And we recognize that some (though not all) of the formulations
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offered by courts in holding that TCPA “advertisements” must be “commercial” in nature
emphasize the promotion of “goods or services to be bought or sold.” See Sandusky, 788
F.3d at 222; PDR III, 2022 WL 386097, at *4 (citing cases).
As we have explained already, however, “requiring a fax to propose a specific
commercial transaction on its face takes too narrow a view of the concepts of commercial
activity and promotion.” PDR I, 883 F.3d at 468. We agree, as discussed above, that a fax
must be “commercial” to fall within the TCPA’s definition of “unsolicited advertisement.”
But nothing in the text of the TCPA or in general usage limits the “concept . . . [of]
commercial,” Sandusky, 788 F.3d at 224 (emphasis omitted), to direct sales. See, e.g., id.
at 222 (defining “commercial” as “of, in, or relating to commerce,” “from the point of view
of profit,” and “something that relates to buying and selling” (emphasis added) (internal
quotation marks omitted)). The plaintiff alleges that PDR Network is paid when it places
a free eBook via fax. That the payment comes from a drug company rather than the fax
recipient – that PDR Network is effectively selling space in its Physicians’ Desk Reference
rather than eBooks – does not, we think, strip the transaction of its “commercial” character.
See PDR I, 883 F.3d at 468 (requiring that fax on its face propose specific commercial
transaction “ignores the reality of many modern business models”).
To be clear, it is not PDR Network’s alleged profit motive alone that gives its faxes
the requisite commercial character under the TCPA. A purely informational fax – one that
does not tout the “quality of any property, goods, or services,” 47 U.S.C. § 227(a)(5) –
would not qualify as an “unsolicited advertisement” even if the sender hoped to profit
“through branding, goodwill, or other indirect effects.” BPP, 53 F.4th at 1113. The FCC
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has endorsed that reading, clarifying that faxes “that contain only information, such as
industry news articles, legislative updates, or employee benefit information” are not
prohibited by the TCPA, 2006 FCC Rule, 71 Fed. Reg. at 25973, and courts have relied on
it in rejecting allegations that informational faxes might produce “financial[] benefit” for
their senders “several locks down the stream of commerce,” see Sandusky, 788 F.3d at 225.
But here, at least as alleged, we have not just profit, but also a pitch: PDR Network’s fax
touts the virtues and “quality” of the eBook, and if that pitch is successful, PDR Network
profits by way of commission. It is that combination, we conclude, that makes the fax in
question sufficiently commercial to qualify as an “advertisement” under the TCPA. We
suggested as much in PDR I, see 883 F.3d at 468, and our view has not changed.
So understood, our holding does not conflict with the cases cited by PDR Network,
in which courts have dismissed complaints that allege only a more attenuated or, in the
words of the district court, “ancillary” relationship between a fax and potential profit to the
sender. See PDR III, 2022 WL 386097, at *7. In Sandusky, for instance, the court
considered faxes sent by a pharmacy benefit manager to a chiropractic company, listing
medications available in the health plans of the practice’s patients. 788 F.3d at 220. Those
faxes were not “commercial in nature,” the court concluded, because they were purely
informational and did not offer the recipient a product or service. Id. at 223 (citing 2006
FCC Rule); see PDR I, 883 F.3d at 469 n.5 (distinguishing Sandusky and other cases that
“involve informational faxes rather than offers of free goods or services”). And the
prospect that the sender might nevertheless profit through some “extraneous and
speculative” effect on its business was not enough to convert the informational faxes into
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“advertisements.” Sandusky, 788 F.3d at 225; see also BPP, 53 F.4th at 1113 (rejecting
similar argument). Likewise, a fax asking healthcare recipients to verify demographic data
– but not describing a product or asking recipients to buy anything – is not a prohibited
TCPA “advertisement,” even if the sender uses the data it solicits to populate databases
that it then sells to clients. Robert W. Mauthe, M.D., P.C. v. Optum Inc., 925 F.3d 129,
132–33 (3d Cir. 2019).
We recognize, again, that in distinguishing faxes like these from commercial
“advertisements,” courts sometimes emphasize that they do not propose a sale to the
recipient. See, e.g., Sandusky, 788 F.3d at 222. But what those cases turn on is the absence
of any offer of a product or service, free or otherwise, together with the principle that this
gap cannot be filled by the possibility that the sender “might gain an ancillary, remote, and
hypothetical economic benefit later on.” Id. at 225. Here, by contrast, there is an offer –
indeed, an upfront promotion – of a product, and it is coupled with a direct mechanism by
which the sender will profit if the offer is accepted, in the form of the plaintiff’s
commission allegation. That makes this case different, taking it outside the ambit of
decisions like Sandusky.
Instead, this case more resembles Boehringer, in which the court considered a fax
sent to a medical practice by a pharmaceutical company, offering a free and “informative”
dinner meeting discussing certain physical ailments related to the company’s products. 847
F.3d at 93–94. That fax, like the one at issue here, offered no product for sale to its
recipient. But that did not by itself, the court explained, mean that the fax lacked the
necessary “commercial nexus.” Id. at 95–96; see Sandusky, 788 F.3d at 225 (agreeing that
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“a fax need not be an explicit sale offer” to qualify as an “advertisement”). The plaintiff
had alleged that the defendant would profit from its free offer indirectly, by promoting its
products at the free dinner, which would in turn be enough to make the fax a commercial
“advertisement.” Boehringer, 847 F.3d at 95. Here, too, we have the same critical pairing
of promotion with profit. To be sure, this transaction involves three parties, not two; PDR
Network profits by way of commission payments by drug companies, not fax recipients.
But we see no reason why the “commercial” nature of PDR Network’s pitch for its eBooks
should turn on the number of parties involved in its business model.
Finally, we emphasize that this litigation remains in its early stages. It is still the
case today, as we first observed in PDR I, that Carlton & Harris has yet to take any
discovery, which means that little is known about the “details of PDR Network’s business
model” or even the contents of its eBook. See 883 F.3d at 468; see also Boehringer, 847
F.3d at 95–96 (noting difficulties faced by plaintiffs, pre-discovery, in knowing whether
free fax offer has requisite “commercial purpose”). Carlton & Harris’s commission
allegation may be plausible, see PDR I, 883 F.3d at 468, but that does not mean it will be
borne out by discovery. Instead, discovery may show that there are no commission
payments, nor anything else to support a finding that PDR Network’s free offer is
commercial in nature. Indeed, that is what happened in both Sandusky and BPP, which
affirmed district court grants of summary judgment to TCPA defendants after discovery
had been completed. Sandusky, 788 F.3d at 225 (“[N]o record evidence reliably shows
that there would be . . . a financial benefit from these faxes[.]”); BPP, 53 F.4th at 1113
(finding no record evidence to support “supposed business rationale” under which
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apparently informational fax would in fact have been designed to solicit business). But for
present purposes, we accept as true Carlton & Harris’s commission allegation and find it
adequate, at this preliminary stage, to state a claim that the fax offer of a free eBook is a
commercial “advertisement” subject to the TCPA.
We reach a different result with respect to the plaintiff’s second new allegation: that
PDR Network’s fax is a “pretext” to future advertising. As framed in Carlton & Harris’s
amended complaint, this allegation turns entirely on the opt-out notice at the bottom of the
fax: “To opt-out of delivery of clinically relevant information about healthcare products
and services from PDR via fax, call [listed phone number].” J.A. 31. According to the
plaintiff, because the fax refers to the prospect of future transmissions “about healthcare
products and services from PDR,” and those products and services are commercially
available for sale, the offer of a free eBook is a “pretext” for future commercial advertising.
J.A. 17.
This “pretext” allegation invokes a term of art used by the FCC and TCPA case law.
In its most basic form, a prohibited “pretext” would be a fax advertisement that calls itself
something else – say, a survey – but in fact promotes a product or service for sale. See
2006 FCC Rule, 71 Fed. Reg. at 25973. What Carlton & Harris is alleging – a “‘pretext’
to future advertising,” J.A. 17 (emphasis added) – is somewhat more sophisticated: A fax
that offers a good or service that is free but will be used, once accepted, to promote goods
or services at a cost. The prototypical case law example is the fax at issue in Boehringer,
which allegedly invited doctors to a free dinner seminar at which they would be solicited
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for sales by the drug company that sent the fax. That offer of a free seminar, the court
concluded, was a “pretext” or prelude for a sales promotion, giving it the “commercial
nexus” necessary to qualify as a TCPA “advertisement.” 847 F.3d at 96; see also id. at 98
(Leval, J., concurring); 2006 FCC Rule, 71 Fed. Reg. at 25973 (discussing similar genre
of “‘free’ seminars [that] serve as a pretext to advertise commercial products and
services”). Offers of free goods, too, can serve as a pretext for a subsequent solicitation.
See 2006 FCC Rule, 71 Fed. Reg. at 25973 (describing fax that offers free publication that
in turn includes product promotions). Either way, the basic idea is the same: Acceptance
of a free good or service is leveraged into an opportunity for a sales pitch, giving the free
fax offer a “commercial pretext.” Boehringer, 847 F.3d at 95.
We have no reason to doubt the legal viability of this pretext theory. It has been
endorsed by other courts, see, e.g., Boehringer, 857 F.3d at 97; Sandusky, 788 F.3d at 225;
but see Mauthe, 925 F.3d at 135 (leaving question open), and regularly applied by the FCC,
see, e.g., Presidential Who’s Who DBA Presidential Who’s Who, Inc., 25 FCC Rcd. 13759
(2010) (concluding that fax offering recipients free listing in directory was an “unsolicited
advertisement” because free listing was then leveraged for subsequent sales pitch for
directory). But in any event, we agree with the district court that even under that theory,
the pretext allegation in this case, centered on the fax’s opt-out notice, falls short of
“creat[ing] the required underlying commercial nexus.” PDR III, 2022 WL 386097, at *7.
The problem for the plaintiff is that the factual allegation in its amended complaint
does not match the legal theory it is relying on. Carlton & Harris does not allege that
accepting the eBook would open the door to future advertising – that the eBook itself, for
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instance, contains promotions for PDR Network products, cf. 2006 FCC Rule, 71 Fed. Reg.
at 25973, or that it would otherwise serve as a prelude to subsequent solicitations. Instead,
Carlton & Harris alleges something like the opposite: that regardless of whether it accepts
the free eBook offer and even if it does nothing at all, it will receive future promotional
faxes, per the quoted opt-out notice. J.A. 17. But the point of the pretext theory, again, is
that the free offer takes on a commercial character because its acceptance will lead to a
subsequent sales pitch, see Boehringer, 847 F.3d at 95–96, and here, on the plaintiff’s own
account, the free eBook offer has nothing to do with the future sales promotions referred
to in the opt-out clause. However annoying the hypothesized future faxes may be, that is,
they cannot convert a prior and unrelated free offer into something “commercial” under the
pretext theory.
III.
For the reasons given above, the district court’s order is vacated and the case
remanded for proceedings consistent with this opinion.
VACATED AND REMANDED
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THACKER, Circuit Judge, concurring:
I concur in the thorough majority opinion given that the “burden at the pleading
stage” is “minimal.” Carlton & Harris Chiropractic, Inc., v. PDR Network, LLC (“PDR
I”), 883 F.3d at 474 (Thacker, J., dissenting). Moreover, as I recognized in my 2018
dissenting opinion, “[b]ecause the TCPA is a remedial statute, it ‘should be liberally
construed and . . . interpreted . . . in a manner tending to discourage attempted evasions by
wrongdoers.’” PDR I, 883 F.3d at 474 (Thacker, J., dissenting) (quoting Scarborough v.
Atl. Coast Line R. Co., 178 F.2d 253, 258 (4th Cir. 1949); Gager v. Dell Fin. Servs., LLC,
727 F.3d 265, 271 (3d Cir. 2013) (“The TCPA is a remedial statute that was passed to
protect consumers . . .”)). However, I write separately to express my view that this lawsuit
pushes the outer limits of that “minimal” burden and liberal construction.
I agree that because of the low pleading bar, this case remains alive, but in my view,
the prognosis is not good.