The 4th Circuit held that offering a free eBook could violate the TCPA’s prohibition on “unsolicited advertisements.”
PDR Network publishes the Physicians’ Desk Reference, which is “a compilation of medical prescribing information for certain prescription drugs“ most often used by medical practitioners. In 2013, PDR Network sent an unsolicited fax offering a free eBook of the Physicians’ Desk Reference to the chiropractic office of Carlton & Harris Chiropractic, Inc. The fax provided a link to “reserve” a copy of the eBook and contained bullet points calling attention to its appealing features – its digital format and it being the same as the hard-copy version.
Carlton & Harris Chiropractic filed a class action lawsuit alleging that the fax was a violation of the TCPA’s prohibition on unsolicited advertisements. The case kicked around in the courts for a number of years – twice going to the 4th Circuit Court of Appeals and to the U.S. Supreme Court. After years of litigating, the plaintiff was allowed to file an amended complaint and PDR Network again moved for dismissal. On February 8, 2022, the district court granted PDR Network’s motion to dismiss finding that the fax was not an “advertisement” under the TCPA because it offered the eBook for free and not for sale.
The 4th Circuit agreed with the district court that the TCPA’s definition of “advertisement” is limited to faxes that are commercial in nature. The Court pointed out that non-commercial offers of free goods and services are not advertisements under the TCPA, such as a fax from a non-profit alerting potential beneficiaries of their eligibility for free assistance. Disagreeing with the district court, however, the 4th Circuit declined to rule that a fax offering an item for free is not commercial in nature. “Nothing in the text of the TCPA or in general usage limits the ‘concept of commercial’ to direct sales.”
The issue then is whether the PDR Network’s fax is commercial in nature. The plaintiff relied on two theories to argue that the fax was commercial in nature – (1) the commission theory and (2) the pretext theory.
Plaintiff’s commission theory alleges that PDR Network receives money from pharmaceutical companies whose drugs are listed in the eBook and that the amount of money PDR Network receives is based on how many copies of the eBook it can distribute to medical practitioners. Thus, PDR Network profits when its fax persuades a medical practitioner to accept the free eBook. The Court noted that it was the first court of appeals to consider a commission theory such as this.
The Court found that PDR Network’s business is distribution of the eBook and it operates on the money it earns when a fax solicitation succeeds in placing a copy of its eBook with a medical practitioner. There is a straightforward “commercial nexus” between the fax and PDR Network’s business. However, that profit motive alone does not automatically make the fax commercial in nature. A purely informational fax (i.e. industry news articles, legislative updates) would not be an “unsolicited advertisement” even if the sender hoped to profit “through branding, goodwill or other indirect effects.” In this case, plaintiff has alleged that there is a profit (commission) and a sales pitch touting the virtues of the eBook in the fax. The Court held that this combination of profit and a sales pitch makes the fax sufficiently commercial to qualify as an “advertisement” under the TCPA.
Plaintiff’s pretext theory alleges that the offering of the free eBook was a pretext to future advertising. Plaintiff argued that the fax contained an opt-out notice and instructions on how to not receive future fax transmissions from PDR including “relevant information about healthcare products and services from PDR.” Plaintiff reasoned that since the fax refers to future communications about healthcare products and services, and those products and services are commercially available for sale; therefore, the offer of a free eBook is a “pretext” for future commercial advertising. The Court found that the pretext theory was a viable theory and endorsed by other courts, but in this case, the pretext allegation, based on the opt-out notice, did not create the underlying commercial nexus.
The 4th Circuit vacated and remanded the case to the district court to determine whether the fax was commercial in nature under the plaintiff’s commission theory.
Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, No. 22-1279, 2023 WL 5729236, at *1 (4th Cir. Sept. 6, 2023)