Physicians Healthsource v. A-S Medication Solutions: Fax Consent Must Be Explicit and Does Not Transfer With a Customer List

The bottom line: prior express permission for fax ads must explicitly cover advertisements on an ongoing basis, the sender bears the burden of proving it, and permission given to one company does not transfer to a buyer.

Background

In March 2009, A-S Medication Solutions, LLC (AMS) bought part of Allscripts, Inc.'s business and gained access to a customer database with fax numbers. In February 2010, at the direction of its CEO, Walter Hoff, AMS faxed an advertisement for a new service to 15,666 numbers, of which it successfully delivered the ad to 11,422, including Physicians Healthsource, Inc. AMS never sought permission. Hoff testified he believed AMS "didn't need to." The fax included no opt-out notice.

The district court certified a class, granted summary judgment on liability against AMS and Hoff jointly, entered judgment of $5,709,000 (11,418 faxes times $500), and approved a distribution plan.

The decision

Judge Flaum wrote for a panel with Judges Manion and Kanne.

1. Burden of proof. Following the Ninth Circuit's True Health Chiropractic decision, the court held that prior express invitation or permission is an affirmative defense the sender must prove.
2. What permission requires. Relying on Federal Communications Commission (FCC) guidance, the court held that consent may be ongoing, but the consumer "must affirmatively and explicitly give the advertiser permission to send it fax advertisements on an ongoing basis." Applying that rule:

• Allscripts' general practice of seeking permission said nothing about any customer.
• A failure to check an opt-out box is a "negative option" and does not count.
• General consent to receive faxes is not consent to fax ads.
• Statements that someone would have consented are after the fact and insufficient.
• Consent to receive "product information" after a purchase is not consent to advertisements.

3. No transfer of permission. Construing the TCPA as a remedial statute, the court held that permission is not transferable. Allowing a company to pass consent to another company "could eviscerate the entire statutory scheme." A buyer could instead rely on the established business relationship (EBR) safe harbor, but only if its faxes include the required opt-out notice, which AMS omitted. The court distinguished this from a situation where a recipient has consented to faxes from a defined group of senders.
4. Entry of judgment. Once liability is found and the class seeks only statutory damages, judgment may be entered as soon as plaintiffs establish the number of faxes and the numbers they went to. AMS's own fax log proved that.
5. Distribution plan. AMS had a due process interest only in having at least one person with standing to collect for each fax. The plan, which provided for notice by mail and by fax to the same numbers and required class members to verify their information, was sufficient.

Why it matters

This is one of the most cited decisions on fax consent. It sets a demanding standard for proving permission and closes the door on relying on a seller's consents after an acquisition.

Practical takeaways

1. Obtain explicit, written permission to send fax advertisements, not just "information."
2. After acquiring a customer list, rely on the EBR safe harbor with a compliant opt-out notice, or get new consent.
3. Never treat a failure to opt out as consent.
4. Remember that individual executives who direct fax campaigns can be held personally liable.

Read the Seventh Circuit's opinion in Physicians Healthsource v. A-S Medication Solutions.