When Opportunity Knocks: Paid Market Research Survey Offers and the TCPA

The Telephone Consumer Protection Act of 1991 (TCPA), as amended by the Junk Fax Prevention Act of 2005 (JFPA), prohibits the use of “any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement.” 47 U.S.C. § 227(b)(1)(C). The TCPA defines “unsolicited advertisement” as “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person’s prior express invitation or permission.” 47 U.S.C. § 227(a)(5). Federal Communications Commission (FCC) regulations implementing the TCPA contain an identical definition of “unsolicited advertisement.” 47 C.F.R. § 64.1200(f)(16).

Among the many TCPA-related issues that courts across the country have faced in recent years is one that recently divided the U.S. Courts of Appeals for the Second and Third Circuits: Does an unsolicited faxed invitation to participate in a market research survey in exchange for money constitute an “unsolicited advertisement” under the TCPA?

A split panel of the Third Circuit, in Fischbein v. Olson Research Group, Inc., 959 F.3d 559 (3d Cir. 2020), ruled that it does. Early last month, in Bruce Katz, M.D., P.C. v. Focus Forward, LLC, No. 21-1224-cv (2d Cir. Jan. 6, 2022), the Second Circuit reached the opposite conclusion and found that such an invitation does not constitute an unsolicited advertisement. Notably, in its decision, the Second Circuit specifically rejected the Third Circuit’s analysis in Fischbein.

Despite the decline in the overall use of fax machines, the particular question answered by the two circuit courts remains relevant today because there are some industries that continue to rely on those devices (e.g., healthcare professionals, in large part because of patient privacy concerns). The circuit courts’ decisions also are important because the TCPA can be applied not just to unsolicited faxes but also to unsolicited calls, voicemails, text messages and other online communications methods. Put differently, opportunity can knock in the form of an invitation to participate in a market research survey in exchange for money in a variety of ways that plaintiffs might believe implicate and violate the TCPA – now, though, in the Second Circuit, they would be wrong.

The Third Circuit’s Decision

The Third Circuit decision came in a consolidated appeal of two cases. One case was brought by Robert W. Mauthe M.D., P.C., a professional corporation that operated a medical practice in Pennsylvania, after he allegedly received five faxes from ITG Market Research, a company that provided data to healthcare providers to aid in their decision-making processes.

Three of the faxes offered $200 in exchange for an hour of Mauthe’s time participating in a telephone survey about catheter usage in spinal cord injury patients. The two other faxes offered him $60 for taking a 25-minute internet survey on neurological movement disorders. Both sets of faxes stated that “[t]his message is not a solicitation or advertisement for purchase/sale of any products and/or services from ITG Market Research.”

The other case was brought by Dr. Richard E. Fischbein, a psychiatrist with a private practice in Pennsylvania, after he received a fax from Olson Research Group, Inc., a marketing research firm, offering him $150 in exchange for his participation in a study on the management of disorders in neurological patients.

The defendants characterized the proposed payments as “honorariums” or “gifts,” and two district courts in the Eastern District of Pennsylvania dismissed the plaintiffs’ complaints. The Third Circuit, however, reversed. It ruled that any fax announcing the availability of an opportunity for the recipient to exchange goods or services for compensation is “material advertising the commercial availability or quality of any property, goods, or services” within the meaning of the TCPA. In the Third Circuit’s opinion, a fax offering the opportunity to sell is “just as commercial in character as a fax offering the recipient the opportunity to buy property, goods, or services.”

The Third Circuit reasoned that it is the “offer of payment to the recipients” that transforms the solicitation of responses to market surveys into advertisements. Citing the Encyclopedia Britannica’s definition of “commercial transaction,” the circuit court concluded that an offer of payment in exchange for participation in a market survey is a commercial transaction, so a fax highlighting the availability of that transaction is “an advertisement under the TCPA.”

The Second Circuit’s Opinion

The Second Circuit case began when Bruce Katz, M.D., P.C., a professional corporation providing medical services and doing business as Juva Skin and Laser Center, alleged that Focus Forward, LLC, a market research company that conducted market surveys, had sent it two unsolicited faxes seeking participants in market research surveys.

One fax was addressed to the attention of “Nurse Practitioners” and the second was addressed to “Nurses & Physician Assistants.” Both faxes explained that Focus Forward was “currently conducting a market research study” and “offer[ed] an honorarium of $150 for [the recipient’s] participation in a . . . telephone interview.”

After Katz filed a putative class action alleging violations of the TCPA and seeking both injunctive relief and statutory damages, Focus Forward moved to dismiss, arguing that an unsolicited faxed invitation to participate in a market research survey does not constitute an “unsolicited advertisement” under 47 U.S.C. § 227(b)(1)(C). The U.S. District Court for the Southern District of New York agreed and granted the motion to dismiss. Focus Forward appealed to the Second Circuit, which affirmed.

In its decision, the Second Circuit explained that, according to the language of the TCPA, “unsolicited advertisements” are only those materials “advertising the commercial availability or quality of any property, goods, or services.” Faxes seeking a recipient’s participation in a survey “plainly do not advertise the availability of any one of those three things” and, therefore, cannot be “advertisements” under the TCPA.

The Second Circuit pointed out that the faxes did not advertise the “availability” of $150. In any event, it continued, the money was not “property” under the TCPA, observing that the word “property” does not appear to include money as the word “property” is used in the TCPA. Moreover, the Second Circuit continued, a meaning of property that excludes the money that might be used to purchase other “property, goods, or services” also accorded with the Congressional findings of the TCPA, which noted the harms caused by the use of the telephone “to market goods and services” to homes and businesses. In the Second Circuit’s opinion, the definitions of “telephone solicitation” and “unsolicited advertisement” both should be read in the context of these findings, which militated against defining “property” so expansively as to include offers of money to consumers.

The Second Circuit said that the faxes could not reasonably be construed as advertising the availability of a service, and it emphasized that it disagreed with the majority opinion in Fischbein on precisely this point. The Second Circuit noted that the majority in Fischbein had relied on an encyclopedia definition of what constituted a “commercial transaction” to declare that “an offer of payment . . . transforms the . . . market surveys into advertisements.” However, the Second Circuit said, the Third Circuit should have focused on the definition of “advertisement” that the TCPA and FCC regulations provide. In relying on the encyclopedia’s definition, according to the Second Circuit, the Third Circuit opinion “effectively rewr[ote]” the TCPA to prohibit communications that advertise “the availability of an opportunity . . . to exchange goods or services.”

In the Second Circuit’s view, the TCPA does not prohibit communications advertising the availability of such “an opportunity” and does not prohibit communications advertising the availability of transactions that are “commercial in character,” as the Fischbein majority suggested. Rather, the TCPA specifically prohibits communications advertising the “availability . . . of any property, goods, or services.” Agreeing with the dissent in Fischbein, the Second Circuit decided that faxes seeking survey participation from a recipient communicate the exact opposite of availability, stating a need for something not readily available to the sender of the faxes.

The Second Circuit also noted that the position that the faxes are not advertisements found persuasive support both in the legislative history of the TCPA and in the FCC’s implementation of that law. Before the JFPA extended the TCPA to include faxes, the House Committee on Energy and Commerce, in its recommendation that the TCPA be enacted, said that “the Committee does not intend the term ‘telephone solicitation’ to include public opinion polling, consumer or market surveys, or other survey research conducted by telephone,” and explained that “such research has generated relatively few complaints” from consumers. In regulations implementing the TCPA the year after its enactment, the FCC excluded “research, market surveys, political polling or similar activities” from liability under the statute, the Second Circuit observed.

The Second Circuit added that even a rule adopted by the FCC creating liability for “any surveys that serve as a pretext to an advertisement” implied that not all surveys are pretexts for advertisements and, therefore, that not all surveys are subject to liability under the TCPA. The Second Circuit found that nothing about the surveys in Katz suggested that they served as a “pretext” for some other advertisement, and it concluded that the text of the TCPA, the legislative history, and the FCC’s regulations implementing the TCPA all support the conclusion that a faxed invitation to participate in a market research survey in exchange for money does not constitute an “advertisement” under the TCPA.

Conclusion

As Katz and Fischbein demonstrate, there is a clear division in the circuits on the issue. Moreover, the Third Circuit is not without support among the circuits. For example, the U.S. Court of Appeals for the Sixth Circuit reversed dismissal of a complaint because it concluded that it “plausibly alleged” that the fax at issue in that case served as a pretext to send additional marketing material. Matthew N. Fulton, D.D.S., P.C. v. Enclarity, Inc., 962 F.3d 882 (6th Cir. 2020). Fulton followed remand by the U.S. Supreme Court based on its decision in PDR Network, LLC v. Carlton & Harris Chiropractic, Inc., 139 S.Ct. 20151 (2019). Notably, PDR Network concerned whether a fax that does not directly offer to sell a product is an advertisement under the TCPA, but was remanded for further consideration under the TCPA and the Administrative Orders Review Act. Given the split in the circuits and PDR Network’s failure to reach a determination on the merits, it is likely that further consideration by the Supreme Court is needed.

In the interim, the Katz decision puts to rest in the Second Circuit any question about the TCPA’s application to an unsolicited communication to participate in a market research survey in exchange for money.

Reprinted with permission from the February 14, 2022, issue of the New York Law Journal^©, ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.