7th Circuit: Class certification properly denied in motel franchisee’s suit against vendor

A class certification under the Telephone Consumer Protection Act was properly denied against a motel franchisee who sued a fitness equipment vendor, the 7th Circuit Court of Appeals has ruled.

Gorss Motels Inc. operated a Super 8 Motel as a franchisee of Wyndham Hotel Group LLC under a franchise agreement signed in 1988. Gorss agreed in that contract to furnish the facility in accordance with Wyndham’s standards and to purchase supplies and furnishings from Wyndham or its approved vendors.

Brigadoon Fitness Inc. sold fitness equipment to hotels and was an approved vendor for Wyndham franchisees. Brigadoon was subject to a sourcing agreement with Worldwide Sourcing Solutions Inc., a wholly-owned subsidiary of Wyndham Worldwide Corp and an affiliate of Wyndham.

Under the agreement, Brigadoon sold equipment to Wyndham franchisees through marketing programs and was periodically provided contact information for Wyndham franchisees, including Gorss.

Issues began when Gorss received a fax from Brigadoon on April 17, 2013, advertising its fitness equipment and offering a special deal on certain purchases. The fax was part of a large transmission to more than 10,000 recipients, formulated by Brigadoon from a variety of sources that included fax numbers from the sourcing agreement, among others.

Gorss sued Brigadoon under the Telephone Consumer Protection Act and sought to certify a class under Rule 23(b)(3) of all recipients of the fax advertisement. The Indiana Northern District Court declined, however, finding Gorss failed to meet its burden of demonstrating that common issues of fact predominated.

Gorss moved for reconsideration, but the court concluded that sorting out which of the recipients had engaged in conduct that met the definition of “soliciting” fax advertisements would require assessment on a case-by-case basis. It then declined to certify the modified class.

On appeal, Gorss alleged the district court:

  • Improperly denied class certification without requiring Brigadoon to identify any member of the proposed class that provided express prior permission.
  • Applied an erroneous “implied consent” standard for “prior express invitation or permission” to receive fax advertisements under the act rather than employing the standard announced in Physicians Healthsource, Inc. v. A-S Medication Solutions, LLC, 950 3d 959 (7th Cir. 2020).
  • Erred in denying certification of the smaller proposed “Wyndham-only” class by treating permission to receive fax advertisements as transferrable.

The 7th Circuit affirmed, finding the district court did not abuse its discretion in denying certification on the ground that Gorss failed to carry its burden of demonstrating predominance.

Additionally, the appellate panel found that the district court did not rely on an incorrect understanding of the legal standard for “prior express permission” when it analyzed the predominance issue.

“In short, Brigadoon’s claim of permission was not speculative, vague or unsupported; it was based on a multitude of contracts, relationships, memberships and personal contacts, evidence sufficient for the district court to conclude that class-wide analysis of the permission issue would not be feasible,” Circuit Judge Ilana Rovner wrote.

On the final issue, the 7th Circuit found no legal error.

“At the class certification stage, it was not Brigadoon’s burden to prove the merits of its permission defense, which it supported with a viable theory and specific evidence. Rather, it was the plaintiff’s burden to demonstrate that common issues of law or fact would predominate when resolving the question of permission later, at the merits stage. The district court did not abuse its discretion in finding that Gorss failed to meet that burden,” Rovner concluded.

The case is Gorss Motels, Inc. v. Brigadoon Fitness, Inc. and Brigadoon Financial, Inc., 21-1358.

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