For businesses that use faxes to sell goods or services, recent lawsuits seeking relief based on the Telephone Consumer Protection Act (“TCPA”), also known as the “Junk Fax Law,” have become a cause for concern. Congress passed the TCPA, in 1991 to provide, among other things, a private right of action to consumers that receive “unsolicited advertisements” via fax. Unsolicited advertisement is defined as “any material advertising the commercial availability or quality of any property, goods or services transmitted to any person without that person’s prior express invitation or permission.” The TCPA permits any person to bring an action to recover damages in the amount of $500 for each unsolicited fax transmission. A court may award treble damages if it finds a “willful or knowing” violation occurred.

Although the TCPA is a federal act, Congress vested exclusive jurisdiction for its enforcement in the state courts. Certainly, Congress did not wish to burden the federal district courts with what could potentially be thousands of $500 lawsuits. The intent of the Act was to permit the suits in small claims courts. Thus, the risk for any company was merely $1,500 per each violation. In the last several years, however, the use of the private right of action provision of the TCPA has grown, and plaintiffs attorneys have sought to expand recoveries using class action lawsuits under the statute and applying the statute to e-mail “spam.”

For example, an Arizona court in ESI Ergonomic Solutions, L.L.C v. United Artists Theatre Circuit, Inc., specifically held that Congress had intended to allow for the pursuit of class actions under the statute and explicitly rejected the potential for “ruinous or annihilating” damages based on a large class size as a consideration. This decision may very well have driven the $650,000 settlement of a similar class action brought in Texas against the Dallas Mavericks last fall. This use of class actions under the TCPA can expand the reach of the Act from a few hundred dollars to a few hundred thousand dollars or more.

As if the risk for large damages awards against businesses was not enough, anti-spam zealots have recently succeeded in receiving an award of damages by arguing for an expansion of the TCPA to e-mail spam. Earlier this year, a Michigan man brought suit in small claims court arguing that spam was prohibited by the TCPA. Reinertson essentially argued that his computer is also a fax machine and that e-mail is no different from a fax. The court agreed and he was awarded $576 in damages. Given the fact that spam e-mail drastically outnumbers faxes, this decision exponentially increases the number of lawsuits possible under the TCPA.

While class actions and spam cases under the TCPA are still few and far between, development of these theories is alarming. Companies that advertise or solicit business via mass fax or e-mail need to be aware of the TCPA and the full economic consequences of the statute.