Junk-Fax Companies Await Decision of Appeals Court

Send

Junk-Fax Companies Await Decision of Appeals Court

11/27/2006

Denver Business Journal

Attorneys in a federal court appeal that could put junk-fax collection companies out of business made oral arguments on Nov. 15.

Oral arguments are the last major step in the appeal, and a court decision could come in February or March 2007, attorneys said.

The 2005 appeals case, called USA Fax Law Center Inc. vs. iHire Inc., is being heard by the 10th U.S. Circuit Court of Appeals in Denver. The case includes Consumer Crusade Inc.'s appeal of a lower federal court decision in its junk-fax suit against iHire.

The appeal's main issue is whether recipients of so-called "junk faxes" may assign, or turn over, the faxes to companies such as USA Fax Law, also called US Fax Law Center Inc., and Consumer Crusade for collection of damages. Both companies are based in Englewood.

Junk faxes are unsolicited fax advertisements sent without the recipient's permission, and are illegal by federal and Colorado law. The laws were designed to protect consumers from marketing companies, or so-called "fax blasters," that send huge numbers of fax ads.

The appeals court decision could be precedent setting with far-reaching implications in junk-fax cases in other states. The appeals decision also will have a major impact on many junk-fax cases being heard in Colorado state courts, because state court judges have decided to hold off their own decisions until the federal appeals court rules.

Two recent state appeals court decisions regarding the assignability of junk faxes already have said they can't be assigned.

Companies such as USA Fax Law and Consumer Crusade claim they are trying to put an end to junk faxes and help recipients collect damages.

The companies pay fax recipients roughly $25 per fax, if they collect damages, and try to collect as much as $1,500 per fax in or outside of court. The businesses often seek thousands of dollars in damages, and sometimes millions, in cases involving multiple faxes.

"[Assigning faxes] is the only practical remedy in a state like Colorado, which discourages class actions," said Andrew Quiat, president, CEO and attorney for USA Fax Law. "It's the only practical way for small businesses to enforce actions. ... They don't have the resources to go to court themselves."

Defense attorneys contend the junk-fax laws weren't created to allow businesses such as USA Fax Law and Consumer Crusade to make money.

"In my argument, I wanted to make clear what's at stake in this case and what's not," said Brandee Caswell, an attorney at Faegre & Benson LLC's Denver office representing iHire in the appeal. "What's not at stake is the right of the individual consumer to go to court. What is at stake in these cases is the ability of junk-fax litigation businesses to continue in business."

U.S. District Court Judge Lewis Babcock dismissed the US Fax Law and Consumer Crusade cases against iHire in 2005, ruling that junk faxes can't be assigned by law. Babcock said individuals and businesses that receive alleged junk faxes can sue for damages on their own, but they can't transfer the faxes to third parties.