On May 28, 2019, the United States Court of Appeals for the Third Circuit affirmed the District Court’s decision to grant summary judgment in favor of Defendants Optum, Inc. and OptumInsight, Inc. related entities (“Defendants”), who sent an unsolicited fax to Robert W. Mauthe M.D. P.C. (“Plaintiff”), a health care provider. Robert W. Mauthe, M.D., P.C. v. Optum Inc., No. 18-2894, 2019 WL 2262706 (3d Cir. May 28, 2019).

The Defendants maintain a national database of healthcare providers, containing general data about providers, including their contact information, demographics, specialties, education, and related data. Id. at *1.  Defendants market, sell, and license their database “to health care, insurance, and pharmaceutical companies, who use it to update their provider directories, identify potential providers to fill gaps in their network of providers, and validate information when processing insurance claims.” Ibid.

Plaintiff’s information was already in Defendants’ database.  But, in order to update and verify Plaintiff’s information in their database, Defendants sent Plaintiff an unsolicited fax requesting him to respond and correct any outdated or inaccurate information. Ibid.  The fax also stated that “[t]here is no cost to you to participate in this data maintenance initiative. This is not an attempt to sell you anything.” Ibid. 

In the District Court, Plaintiff alleged that the unsolicited fax Defendants sent him violated the TCPA because it was an advertisement. Ibid.  Defendants moved for summary judgment and the District Court granted their motion on the TCPA claim. Ibid.  Plaintiff appealed.

On appeal, Plaintiff made two arguments—(1) the fax was an unsolicited advertisement that the TCPA prohibits, and (2) “although he was not a purchaser of defendants’ products or services, defendants violated the TCPA because they had a profit motive in sending him the fax so that the fax should be regarded as an advertisement.” Id. at *2.  The court refers to Plaintiff’s second argument as “third-party based liability.”

The court quickly dispatched with Plaintiff’s first argument, analyzing the contents of the fax and concluding that “there is no basis on which defendants can be held to have violated the TCPA on the basis of the fax if the meaning of the advertisement is viewed in a conventional way.” Ibid.

However, Plaintiff’s second argument required a bit more analysis.  First, the court set forth the required elements of a TCPA third-party based liability claim: 

[A] plaintiff must show that the fax: (1) sought to promote or enhance the quality or quantity of a product or services being sold commercially; (2) was reasonably calculated to increase the profits of the sender; and (3) directly or indirectly encouraged the recipient to influence the purchasing decisions of a third party.

Id. at *3.  The court specifically stated that having a profit motive is not enough.  For Plaintiff to show that Defendants tried to make a sale, “there must be a nexus between the fax and the purchasing decisions of an ultimate purchaser whether the recipient of the fax or a third party.” Ibid. 

Next, the court articulated the third-party based liability standard:

[W]hether the fax was somehow intended to influence a potential buyer’s decision in making a purchase, irrespective of whether the sender sent the fax to the potential buyer or to a third party and must have been intended to or at least be capable of influencing a buyer’s purchasing decision.

Ibid.  In applying the facts of this case to the standard, the court found that Plaintiff’s “claim does not survive our standard for third-party based liability or any other theory of liability under the TCPA.” Id. at *4.

In reaching that conclusion, the court likened the situation in this case to the exemption under the TCPA’s prohibition on artificially prescribed calls of calls conducting research, market surveys, political polling or similar activities that do not involve solicitation. Id. at *3. 

The court reasoned that, although Defendants sent the fax intending to obtain information that would enhance the quality of their services, and ultimately increase their profits by keeping their database updated, the fax “did not attempt to influence the purchasing decisions of any potential buyer, whether a recipient of a fax or a third party.” Ibid.  Nor did Defendants’ fax encourage Plaintiff to influence “the purchasing decisions or those of a third party.” Ibid.  Therefore, the court upheld the District Court’s conclusion that Defendants’ fax was not an “advertisement” under the TCPA.

As more of an aside, the court also affirmed the District Court’s decision that the fax was not a pretext to more commercial solicitation. Ibid.  The court noted that it has not and does not endorse the pretext theory of liability under the TCPA, but even if such a claim was viable, it would also fail because there was no evidence that Defendants “intended to send Mauthe any future faxes, let alone any more advertisements.” Ibid.

Third-party based liability for unsolicited faxes adds an interesting wrinkle to the TCPA’s prohibition on sending such faxes.  Businesses that engage in this type of communication with potential customers need to be aware that, not only can they be liable to the person or entity receiving the unsolicited fax for directly advertising products or services to them, but they could also be liable to the recipient of the fax if the fax directly or indirectly encouraged the recipient to influence the purchasing decisions of a third party.