The 7th Circuit recently issued a decision in Smith v. First Hospital Laboratories, Inc., holding that in some “narrow situations” a fax offering to buy a product or service might be considered an advertisement under the TCPA if the fax also refers to a related offer to sell another product or service. 2023 WL 509070, *6 (7th Cir. 2023).
Smith is a decision driven by its particular facts. The plaintiff, a chiropractor1, received two unsolicited faxes from First Hospital Laboratories (FHL), a company that provides health monitoring and screening services through a network of medical providers who act as independent contractors. Id. at *1. The faxes invited plaintiff to join FHL’s network of preferred medical providers. Id. The faxes also stated that FHL would pay plaintiff a fixed rate for each service he rendered to one of FHL’s clients. Id. FHL would refer clients to the plaintiff only if he agreed to allow FHL to invoice the clients directly for the services and neither attempted to obtain more than the fixed rate nor disclosed to the clients the fixed rates that FHL was paying the plaintiff for the services. Id. at *4. The clear implication was that FHL would profit by charging the clients more than the fixed rate it was paying the plaintiff to render the services. Id.
The plaintiff sued FHL, alleging that the faxes were unsolicited advertisements that violated the TCPA. Id. at *1. The district court granted FHL’s motion to dismiss, finding that the faxes were not advertisements because the faxes merely conveyed FHL’s offer to buy services from the plaintiff as a hired contractor. Id. at *2. The 7th Circuit reversed, holding that the faxes could be considered advertisements because they promoted FHL’s network of preferred medical providers and, in effect, offered to sell the plaintiff access to the network in exchange for a fee – specifically “a cut” of the fees collected from each client. Id. at *4.
The Court did not depart from the standard definition of a fax advertisement as “a fax that promotes the sale of a good, service, or property, with profit as an aim, by drawing attention to the fact that the good, service, or property is available for purchase or of a desirable quality.” Id. at *2. FHL contended this definition could only cover promotions offering to sell, not purchase, goods, services, or property. Id. at *3. But the 7th Circuit reasoned that “[i]n some narrow situations a fax offering to buy products from or to do business with the recipient may also amount to an offer to sell services to that same recipient.” Id. (emphasis added). The particular details of FHL’s offer were critical to the Court’s analysis. Importantly, had the fax “merely offered to add [plaintiff’s] information to a list of providers” it would be “difficult to [] conclude that [FHL] had engaged in advertising.” Id. at *4. But because FHL “offered to sell [plaintiff] access to its network of preferred providers in exchange for a fee – specifically, a portion of the underlying client payments,” the Court viewed this as an offer of services, likening this arrangement to lead-generation or brokerage services. Id.
The 7th Circuit’s decision signals to businesses that the TCPA’s restrictions on unsolicited fax advertisements cover faxes couched as a call to purchase goods, services, or property, where the faxes discuss a nested service that is offered for sale. Id. at *5. But the 7th Circuit cautioned readers “not to overread what we are saying,” id. at *6, emphasizing the “narrow circumstances” in the case.
While the 7th Circuit’s decision in Smith shows that a court may find that a fax promotes a product or service for sale within the context of an offer to buy another product or service, the Court’s Ambassador Animal Hospital v. Elanco Animal Health decision confirms that the fundamental tenets of what is considered an advertisement in the 7th Circuit have not been altered. 2023 WL 4699507 (7th Cir. 2023). In Ambassador, the court held that two faxes, sent by Elanco, inviting recipients to free educational dinners and continuing education programs were not unsolicited advertisements. Id. at *2.
The faxes in Ambassador did not mention any specific products or services offered by Elanco. Id. They simply invited recipients to attend free educational dinners and continuing education programs. Id. The court found that the faxes were informational rather than promotional in nature. Id. The 7th Circuit emphasized that the “text of the TCPA creates an objective standard narrowly focused on the content of the faxed document;” or stated differently, the subjective motivations behind the fax and the later conduct of the sender (for example, promotional activity at the dinner program) are irrelevant in determining whether the fax is an advertisement. Id. at *3 (emphasis added). Although a business may derive downstream benefits in terms of sales, if the fax itself does not promote products or services for sale, the fax does not “perform the advertising” required for it to be covered by the TCPA. Id. at *2.
The different outcomes in Smith and Ambassador highlight the importance of considering the specific content of a fax when determining whether it is an advertisement. While fundamentally the definition of “advertisement” under the TCPA has not changed, the 7th Circuit reminds us that courts are not afraid to interpret an indirect or embedded presentment of services for sale as promotional content.
[1] Dr. Thalman originally instituted this action. While the appeal was pending, he passed away and Paula Smith, executor of his estate, assumed Dr. Thalman’s position in the lawsuit. To avoid confusion, both Dr. Thalman and Smith are referred to as “the plaintiff” here.
