US Fax Law Ctr., Inc., v. iHire, Inc.: Fax Law Violations Are Not Assignable

A Colorado federal court has considered whether a group could bring a lawsuit on behalf of companies who had received unsolicited advertising faxes from the same entity.

US Fax Law Center, Inc. ("USFLC") received 143 "assignments" from companies who had received "junk faxes" sent by iHire, Inc. ("Company"). USFLC alleged that the faxes sent by the Company violated the Telephone Consumer Protection Act ("Act"), and sought statutory damages totaling $478,000 plus costs, based on the Company's alleged willful violations of the Act. The Company filed a motion with the court arguing that the USFLC's lawsuit should be dismissed because claims for statutory damages are not assignable under Colorado law. USFLC opposed this motion.

The United States District Court for the District of Colorado agreed that these claims were not assignable and so the USFLC had no basis to bring a lawsuit for Act violations against the Company. The Act provides a private right of action to individuals who receive an unsolicited fax containing advertisements, unless there is an established business relationship between the parties (the FCC has proposed changing the way this section of the Act is enforced- click here to read more). The Act allows a party to recover up to $500 in damages per fax and also allows an award of treble damages for willful violations of the Act.

The Act is silent on whether its private right of action is assignable to third parties and so the court looked to Colorado law to see if these rights were assignable. In Colorado, the test for assignability is whether the cause of action would survive to the party’s executors or administrators if the party passed away. A state statute explicitly bars claims upon a party's death for slander, libel, and for certain damages in a tort action for personal injury. Since statutory damage claims are not barred by the applicable state's survival statute, USFLC argued that its lawsuit could proceed.

The Company argued that personal torts which are not based on injury to property do not survive the life of the individual claiming injury. The Company argued that Act claims sounded in tort and were predicated upon a personal injury, like an invasion of privacy tort claim. The court found that invasion of privacy claims are not assignable to a third party. Since the Act was designed to protect a consumer's residential privacy, the court found that Act claims are analogous to an invasion of privacy.

The Company also argued that statutes which are penal in nature are not assignable absent statutory language to the contrary. There are four requirements in Colorado for a statute to be considered penal in nature: first, the statute must create a new cause of action; second, the statute must not require a proof of actual damages in order for a party to recover; third, the statute must impose a penalty in excess of the actual damages; and finally, the statute must serve a "public interest" by deterring certain behavior. Looking at the Act, the court found that it passed all four levels of the test and so could be considered penal in nature. Thus, the claims of Act violations were also not assignable under Colorado law because the Act is a statute which is penal in nature.

Based on the above analysis, the court ruled that Act claims are not assignable. Since USFLC never received any of the faxes that served as the basis of its lawsuit, USFLC did not have standing to bring a lawsuit against the Company for violations of the Act. Thus, the court dismissed USFLC's Act claims.

US Fax Law Ctr., Inc., v. iHire, Inc., 362 F.Supp.2d 1248 (D.Colo. 2005)