Gorss Motels v. Lands' End: Franchise Agreements Can Supply Prior Express Permission for Supplier Fax Ads

The bottom line: consent to receive fax advertisements may be derived from the overall context of an agreement if the permission is clear and unmistakable.

Background

Gorss Motels, Inc. operated a Super 8 motel as a Wyndham Hotel Group franchisee. Its 2014 franchise agreement said Wyndham "may offer optional assistance to you with purchasing items used at or in the Facility" and that "[o]ur affiliates may offer this service on our behalf." An accompanying disclosure noted that a Wyndham affiliate, Worldwide Sourcing Solutions, Inc. (WSSI), would offer goods and services from approved suppliers and Wyndham would earn commissions. Gorss provided its fax number to Wyndham several times and, over the years, received thousands of pages of supplier fax ads without objecting.

Lands' End became an approved supplier in October 2014. Wyndham proposed a fax campaign, edited Lands' End's draft and caused it to be sent through vendors. Gorss received faxes in January 2015, June 2015 and May 2016. None had a TCPA-compliant opt-out notice. After selling its motel, Gorss filed class actions against more than twenty Wyndham-approved suppliers.

The decision

Judge Lynch wrote for a panel including Judges Cabranes and Carney.

1. Standing. Receiving unsolicited fax ads causes nuisance, privacy invasion and use of the fax machine, paper and ink. Those injuries occur on receipt, whether or not the sender has a defense. The court rejected the argument that Gorss lacked standing because it collected faxes with an eye toward litigation.
2. Permission was given. Courts require that express permission be "clearly and unmistakably granted," a standard that aligns with the view of the Federal Communications Commission (FCC) that the recipient must understand that by providing a fax number it consents to receiving fax advertisements. Gorss did not "merely" provide a fax number. It agreed to purchasing offers from Wyndham and its affiliates, gave its number in the same agreement and knew, based on experience, that the offers would come by fax. The court analogized to its decision in Latner v. Mount Sinai Health System, Inc., and found support in Third and Eleventh Circuit rulings, including an earlier Gorss case.
3. A-S Medication distinguished. Gorss relied on the Seventh Circuit's Physicians Healthsource v. A-S Medication Solutions. The court said that case involved a buyer that never sought permission and tried to use consents obtained by a seller. Even under the Seventh Circuit's test, Gorss explicitly agreed to ongoing fax ads. To the extent the reasoning conflicts, the court declined to follow it.
4. The permission covered these faxes. Wyndham proposed, edited and distributed the faxes and would earn commissions, so to find it uninvolved would be "artificial." More importantly, the arrangement was precisely what Gorss had agreed to.

The court did not decide whether solicited fax ads require an opt-out notice, noting that the D.C. Circuit invalidated that FCC rule in Bais Yaakov of Spring Valley v. FCC.

Why it matters

Taken together with Gorss Motels v. Brigadoon Fitness in the Seventh Circuit and Gorss Motels v. Safemark Systems in the Eleventh, this decision shows that franchise and vendor program terms may overcome junk fax claims. It also highlights a difference in tone between circuits on how explicit consent must be.

Practical takeaways

1. Draft franchise and vendor agreements to clearly state that partners may send promotional faxes.
2. Maintain records regarding when and why recipients provided fax numbers.
3. Document prior course of dealing, including past faxes and lack of objection.
4. Include compliant opt-out notices. They preserve the safe harbor if consent is disputed.

Read the Second Circuit's opinion in Gorss Motels v. Lands' End.