Matthew N. Fulton, D.D.S., P.C. v. Enclarity, Inc.

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 18a0247p.06

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

MATTHEW N. FULTON, D.D.S., P.C., individually and ┐
as the representative of a class of similarly situated │
persons, │
Plaintiff-Appellant, │
│
> No. 17-1380
v. │
│
│
ENCLARITY, INC.; LEXISNEXIS RISK SOLUTIONS, INC.; │
LEXISNEXIS RISK SOLUTIONS GA, INC.; LEXISNEXIS │
RISK SOLUTIONS FL, INC.; JOHN DOES 1–12, │
Defendants-Appellees. │
┘

Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 2:16-cv-13777—Denise Page Hood, Chief District Judge.

Decided and Filed: November 2, 2018

Before: GIBBONS, WHITE, and STRANCH, Circuit Judges

_________________

COUNSEL

ON BRIEF: Phillip A. Bock, David M. Oppenheim, BOCK, HATCH, LEWIS
& OPPENHEIM, LLC, Chicago, Illinois, for Appellant. Tiffany Cheung, Benjamin F. Patterson,
MORRISON & FOERSTER LLP, San Francisco, California, Joseph R. Palmore, Bryan J.
Leitch, MORRISON & FOERSTER LLP, Washington, D.C., for Appellees.

STRANCH, J., delivered the opinion of the court in which WHITE, J., joined.
GIBBONS, J. (pg. 11), delivered a separate dissenting opinion.
 No. 17-1380 Fulton v. Enclarity, Inc. Page 2

_________________

OPINION
_________________

JANE B. STRANCH, Circuit Judge. Plaintiff Matthew N. Fulton, DDS, P.C., a dental
practice in Linden, Michigan, brings this suit on behalf of itself and others similarly situated.
Fulton alleges that it received a fax from Defendants in September 2016 that was an unsolicited
advertisement under the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227, but that
failed to include the requisite opt-out provision. Arguing that the fax did not qualify as an
advertisement under the TCPA, Defendants moved to dismiss the complaint. The district court
granted the motion. Applying the standards governing dismissal of a complaint for failure to
state a claim, we find that Fulton has plausibly alleged that the fax was an unsolicited
advertisement insofar as it alleged that the fax served as a pretext to send Fulton additional
marketing materials. Accordingly, we REVERSE and REMAND this case for additional
proceedings consistent with this opinion.

I. BACKGROUND

This lawsuit stems from a fax Fulton’s dental practice received on September 7, 2016.1
The fax provided in pertinent part:

Re: Fax Number Verification for Delivery of Patient PHI (Internal ID: 34290748)
The purpose of this Fax Verification Request is to help preserve the privacy and
security of your patients’ Protected Health Information (“PHI”), as defined by the
Health Insurance Portability and Accountability Act (“HIPAA”). LexisNexis is
seeking your cooperation to verify or update your information. We validate and
update the fax in our system so our clients can use them for clinical summaries,
prescription renewals, and other sensitive communications. Verifying the practice
address, phone number[,] and your secure fax number(s) for this location will
minimize the potential privacy risks that could arise from information sent to an
unsecured location. As part of our effort to assure that the [sic] transmission of
PHI, it is vital to verify the information for Dr. Matthew Norman Fulton, DDS is
accurate. This information will be verified once each year.

1This action was filed by Fulton’s eponymous dental practice, not by Fulton as an individual.
 No. 17-1380 Fulton v. Enclarity, Inc. Page 3

(R. 1-2 at PageID 32) The fax then provided space for recipients either to validate the contact
information listed in the fax’s heading or to update their contact information. It also had a
signature line and room for comments. The fax ended by providing a phone number and by
incorporating a website of Frequently Asked Questions (FAQs) with the inclusion of the
following Universal Resource Locator (URL): http://www.enclarity.com/providerfaqs.php. The
fax did not contain an opt-out notice.

Fulton attached the LexisNexis Provider FAQs as an exhibit to the complaint. The FAQs
indicate that the “system” referred to in the fax is the Master Provider Referential Database.
Defendants explain that providers’ contact information will be licensed to their “customer base,”
which is comprised of “health insurance plans, preferred provider organizations, pharmacy
network companies, pharmacy benefit managers, property and casualty insurance carriers, retail
pharmacies, government entities, as well as life sciences companies (pharmaceutical and medical
device manufacturers).” (R. 1-3 at PageID 35) According to the FAQs, Defendants “have
compiled the largest, most accurate database of medical provider business and professional
demographic data in the United States.” (Id. at PageID 36) The FAQs also indicate what will
happen to providers’ verified contact information:

Our customers use provider information in a variety of ways, including
communicating patient prescription data, validating provider identity for claims
payments, reimbursing providers for medical bills, updating provider directories,
renewing prescriptions, researching health care practitioners to invite them to
become part of a provider network, sending important notifications, such as
product recalls, and other uses.

(Id. at PageID 37) Validating one’s contact information, the FAQs state, will “help to drive
more business to you.” (Id. at PageID 40)

Other portions of Defendants’ website promote the advantages of using Defendants’
“ProviderLookup” product, which is their “Web-based, real-time provider information search
service” that uses the information in the Master Provider Referential Database. (R. 1-4 at
PageID 43) In other words, the contact information gathered by faxes like the one Fulton
received is used to build the Master Provider Referential Database, which Defendants sell to
their customer base through ProviderLookup.
 No. 17-1380 Fulton v. Enclarity, Inc. Page 4

Fulton filed a two-count class action complaint in October 2016. Count I asserted that
the fax violated the TCPA, and Count II asserted a state law conversion claim. Fulton named as
Defendants Enclarity, Inc., LexisNexis Risk Solutions, Inc., LexisNexis Risk Solutions GA, Inc.,
LexisNexis Risk Solutions FL, Inc., and John Does 1–12 (collectively referred to herein as
Defendants). The complaint included the fax itself, as well as printouts from Defendants’
referenced website, including the FAQs, a provider lookup form, Defendants’ privacy policy,
and Defendants’ terms and conditions. Fulton alleged that the fax was a pretext to obtain both
“participation in Defendants’ proprietary database” and “consent . . . to send additional
marketing faxes to recipients.” (R. 1 at PageID 5) Fulton alleged that both “Defendants and
third parties will use the information to contact the recipients regarding products, services,
competitions and promotions.” (Id. at PageID 13)

Fulton also contended that the fax was “a pretext to increase awareness and use of
Defendants’ proprietary database service and increase traffic to Defendants’ website.” (Id.)
According to Fulton, “Defendants consolidate healthcare provider contact information into their
proprietary Master Provider Referential Database, a commercially available product or service
that Defendants sell or lease to their subscribers and licensees.” (Id. at PageID 8) The complaint
set forth class allegations, including that Defendants sent the same fax that Fulton received to at
least 39 other similarly situated individuals.

Defendants responded to the complaint by filing a motion to dismiss for failure to state a
claim pursuant to Federal Rule of Civil Procedure 12(b)(6). They argued that the fax did not
meet the TCPA’s definition of an advertisement and therefore was not required to have an opt-
out provision. The district court agreed. It found that “[n]othing mentioned in the fax is
available to be bought or sold,” and concluded that the fax “lack[ed] the commercial components
inherent in ads.” Matthew N. Fulton, D.D.S., P.C. v. Enclarity, Inc., No. 16-13777, 2017 WL
783499, at *3 (E.D. Mich. Mar. 1, 2017) (citations and internal quotation marks omitted). The
court also found that even if Defendants might “profit from verifying Plaintiff’s contact
information to third parties, there is no allegation or argument that Defendants are advertising—
or will advertise—any goods or services to Plaintiff.” Id. The district court disregarded the
attachments to the complaint, on the basis that this court’s decision in Sandusky Wellness
 No. 17-1380 Fulton v. Enclarity, Inc. Page 5

Center., LLC v. Medco Health Solutions, Inc., 788 F.3d 218, 221 (6th Cir. 2015), constrained its
analysis to the four corners of the fax. Id. After dismissing Fulton’s TCPA claim with prejudice,
the district court determined that the state law conversion claim belonged in state court and
dismissed it without prejudice. Id. at *5.

II. DISCUSSION

A. Standard of Review

We review de novo the grant of a motion to dismiss under Rule 12(b)(6). Keys v.
Humana, Inc., 684 F.3d 605, 608 (6th Cir. 2012). Courts must “construe the complaint in the
light most favorable to the plaintiff[] [and] accept all well-pleaded factual allegations as true.”
Hill v. Snyder, 878 F.3d 193, 203 (6th Cir. 2017). To survive a motion to dismiss, a complaint
must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible
on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible
when a plaintiff “pleads factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009).

B. The Sandusky Decision

We begin by clarifying this court’s decision in Sandusky, 788 F.3d 218. The district
court’s opinion is founded upon its interpretation of Sandusky, which it understood as compelling
its holding that the TCPA claim fails unless the commercial nature of the fax is evident from the
face of the fax. The district court also adopted the Defendants’ argument that Sandusky requires
a fax to “propose a commercial exchange between the sender and the recipient” to trigger TCPA
coverage. These holdings reflect an improper understanding of Sandusky and impose undue
restrictions on TCPA claims.

Sandusky, a summary judgment decision, addressed two faxes sent to a chiropractor by
Medco Health Solutions, a benefit manager that acted “as an intermediary between health plan
sponsors (often employers) and prescription drug companies.” 788 F.3d at 220. The faxes
contained notifications of certain drugs included in Medco’s “formulary,” the list of drugs
 No. 17-1380 Fulton v. Enclarity, Inc. Page 6

available to some of the chiropractor’s patients through healthcare plans offered by one of
Medco’s sponsor-clients. Id. The chiropractor brought suit under the TCPA, alleging that the
faxes were unsolicited advertisements. Applying summary judgment standards, we concluded
that “[t]he undisputed facts in the record . . . show that each [fax] merely informed [the plaintiff]
which drugs its patients might prefer, irrespective of Medco’s financial considerations.” Id. at
221. After examining the record, Sandusky found that the faxes were “not sent with hopes to
make a profit, directly or indirectly, from [the plaintiff] or others similarly situated” and no
“record evidence show[ed] that Medco hope[d] to attract clients or customers by sending the
faxes.” Id. at 222. Instead, we determined that those faxes had a “purely informational” and
“non-pecuniary” purpose and were sent as part of “a paid service already rendered not to [the
plaintiff] but to Medco’s clients.” Id. Summarizing the applicable TCPA test, Sandusky held
that to qualify as an unsolicited advertisement under the TCPA, a fax “must promote goods or
services that are for sale, and the sender must have profit as an aim.” Id. at 223–24. Because the
faxes Medco sent did not meet this definition, the TCPA was not implicated.

The plaintiff in Sandusky also asked that the faxes be interpreted in the context of
Medco’s previous business, a mail-order pharmacy, and Medco’s history of noncompliance with
state laws when operating that pharmacy. Id. at 225. We declined to factor in this “extraneous
and speculative down-the-stream evidence” for the purpose of determining whether “Medco
might financially benefit from these faxes several locks down the stream of commerce.” Id.
Sandusky stands for the proposition that in this situation, an “ancillary, remote, and hypothetical
economic benefit later on does not convert a noncommercial, informational communication into
a commercial solicitation.” Id. at 225. But nowhere does Sandusky confine a court’s
consideration of TCPA claims to the face of the challenged fax. To the contrary, Sandusky
repeatedly surveyed “the record evidence” for proof of a financial benefit to Medco and, in so
doing, went beyond the faces of the two faxes. Id.; see also id. at 222 (reviewing the record
evidence). Sandusky also acknowledged that a fax could be an advertisement without overtly
offering a product or service for sale, such as offers for free seminars that turn out to be pretext
for a later solicitation. Id. at 225 (citing Rules and Regulations Implementing the Telephone
Consumer Protection Act of 1991; Junk Fax Prevention Act of 2005, 71 Fed. Reg. 25,967,
25,973 (May 3, 2006)). Finding a fax to be pretext for a subsequent advertising opportunity
 No. 17-1380 Fulton v. Enclarity, Inc. Page 7

would require looking to what came after the fax. A court could not possibly resolve a claim that
a fax was pretextual if it confined its evaluation to the fax itself.

Sandusky thus does not entail the two requirements imposed by the district court: that the
fax must propose a direct commercial transaction between the sender and the recipient and that
courts are constrained to examining only the face of the fax. In contravention of such
requirements, Sandusky recognizes that the fax “need not be an explicit sale offer” and that the
“best ads” are sometimes not “so overt,” and then concludes that TCPA coverage is accorded
where the fax is “an indirect commercial solicitation, or pretext for” such a solicitation.” Id. at
225. This understanding of the TCPA is buttressed by the text of the statute itself, which
likewise lacks the requirements imposed by the district court. See 47 U.S.C. § 227.

This clarification of Sandusky governs our analysis. The district court misconstrued
Sandusky when it disregarded the exhibits attached to Fulton’s complaint. The exhibits are part
of the record, and we may consider them when evaluating Fulton’s TCPA claim. And we may
do so without converting Defendants’ motion to dismiss into one for summary judgment.
Commercial Money Ctr., Inc. v. Ill. Union Ins. Co., 508 F.3d 327, 335–36 (6th Cir. 2007)
(explaining that courts may consider documents “referred to in the pleadings” and “integral to
the claims . . . without converting a motion to dismiss into one for summary judgment”). Under
this circuit’s precedent, “documents attached to the pleadings become part of the pleadings and
may be considered on a motion to dismiss.” Id. (citing Fed. R. Civ. P. 10(c)). Indeed,
Defendants do not challenge the authenticity of Fulton’s exhibits, having conceded that their
contents may be accepted as facts. (R. 18 at PageID 126–27) Our review of Defendants’ motion
to dismiss properly includes the exhibits Fulton attached to the complaint.

C. Unsolicited Faxes Under the TCPA

The TCPA prohibits sending a fax that is an “unsolicited advertisement” unless, among
other requirements, the fax has a satisfactory opt-out notice. See 47 U.S.C. § 227(b)(1)(C).2

2In 1991, Congress passed and President George H.W. Bush signed the Telephone Consumer Protection
Act. See Pub. L. No. 102-243, 105 Stat. 2394 (1991) (codified as amended at 47 U.S.C. § 227). In 2005, Congress
passed and President George W. Bush signed the Junk Fax Prevention Act, which amended the 1991 Act. See Pub.
 No. 17-1380 Fulton v. Enclarity, Inc. Page 8

The TCPA creates a private right of action for recipients of unsolicited advertisements, which
provides for statutory damages of $500 per violation and for injunctive relief to prevent future
violations. Id. § 227(b)(3). The parties do not dispute that the fax Defendants sent to Fulton was
unsolicited and lacked an opt-out provision. The issue is whether the fax qualified as an
advertisement within the meaning of the TCPA.

Whether a fax constitutes an unsolicited advertisement is a question of law. See
Sandusky, 788 F.3d at 221. The TCPA defines an 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, in writing
or otherwise.” 47 U.S.C. § 227(a)(5). As we acknowledged in Sandusky, the TCPA covers faxes
that serve as “pretext for a commercial solicitation.” 788 F.3d at 225. The Federal
Communications Commission (FCC) has promulgated a rule defining unsolicited advertisements
and explaining pretextual faxes:

The Commission concludes that facsimile messages that promote goods or
services even at no cost, such as free magazine subscriptions, catalogs, or free
consultations or seminars, are unsolicited advertisements under the TCPA’s
definition. In many instances, “free” seminars serve as a pretext to advertise
commercial products and services. Similarly, “free” publications are often part of
an overall marketing campaign to sell property, goods, or services. For instance,
while the publication itself may be offered at no cost to the fascimile recipient, the
products promoted within the publication are often commercially available.
Based on this, it is reasonable to presume that such messages describe the “quality
of any property, goods, or services.” Therefore, facsimile communications
regarding such free goods and services, if not purely “transactional,” would
require the sender to obtain the recipient’s permission beforehand, in the absence
of an [established business relationship].

71 Fed. Reg. at 25973. According to Fulton’s complaint, providing verified contact information
paves the way for Defendants’ customers to “send additional marketing faxes to recipients.”
(R. 1 at PageID 5) This allegation finds some support in the FAQs, which confirm that
Defendants’ customers use the system to “invite [providers] to become part of a provider
network” and “send[] important notifications,” among “other uses.” (R. 1-3 at PageID 37) The

L. No. 109-21, 119 Stat. 359 (2005) (codified at 47 U.S.C. § 227). For simplicity, we refer to the combined
amended legislation as the TCPA.
 No. 17-1380 Fulton v. Enclarity, Inc. Page 9

potential for future advertising is also implied by Defendants’ assertion that verifying contact
information will “drive more business to” providers. (Id. at PageID 40) Defendants have not
contested this allegation.

The Second Circuit recently considered whether a TCPA plaintiff who claimed that a fax
was pretextual had satisfied the Rule 12(b)(6) pleading standard. See Physicians Healthsource,
Inc. v. Boehringer Ingelheim Pharm., Inc., 847 F.3d 92 (2d Cir. 2017). In Boehringer, a medical
office received a fax inviting a doctor to a free dinner meeting to discuss certain health
conditions, which was sponsored by the defendant, a pharmaceutical company. Id. at 93. The
defendant had created a drug to treat those health conditions but could not legally market its
treatment until it had received approval from the Federal Drug Administration. Id. at 94. The
district court reviewed the FCC’s rule, acknowledged that it tracks the language of the statute,
then dismissed the complaint on the basis that plaintiffs were required “to show that the fax has a
commercial pretext—i.e., ‘that the defendant advertised, or planned to advertise, its products or
services at the seminar.’” Id. at 95 (quoting Physicians Healthsource, Inc. v. Boehringer
Ingelheim Pharm., Inc., No. 3:14-CV-405, 2015 WL 144728, at * 3 (D. Conn. Jan. 12, 2015)).
The Second Circuit reversed, emphasizing that at the motion to dismiss phase, a plaintiff need
only plausibly allege a commercial pretext, not actually show it, and noting that a requirement of
more specificity would “impede the purposes of the TCPA.” Id. at 95–96. Even though the free
dinner meeting would not feature discussion of the defendant’s drug, the Second Circuit found
sufficient the allegation that the defendant sent a fax on a subject that “relate[d] to [its] products
or services,” which led to “a plausible conclusion that the fax had the commercial purpose of
promoting those products or services.” Id. at 95.

The decision in Boehringer centered on the alleged “commercial nexus” between the free
dinner offered in the fax and the defendant’s “business, i.e., its property, products, or services.”
Id. at 96. According to Fulton, that same nexus exists here: The fax solicits information to
verify its system of provider information, which Defendants make commercially available to
other health care organizations, who may subject Fulton to future unsolicited advertising.

Taking the complaint’s allegations as true and drawing all inferences in Fulton’s favor, as
we must at the motion to dismiss stage, we find that Fulton has adequately alleged that the fax
 No. 17-1380 Fulton v. Enclarity, Inc. Page 10

Fulton received was an unsolicited advertisement because it served as a commercial pretext for
future advertising opportunities. Fulton has therefore stated a plausible TCPA claim under the
fax-as-pretext theory. Because this conclusion is sufficient to warrant reversing and remanding
the case, we need not reach Fulton’s alternative theory that the fax was an advertisement because
Defendants sent it with a profit motive.

D. Fulton’s State Law Claim

After dismissing Fulton’s TCPA claim, the district court dismissed Fulton’s state law
conversion claim. The district court concluded that “[b]ecause no federal law claim remains
before the Court, and because this case is in its preliminary stages, the court concludes that the
litigation of Plaintiff’s state law claim would most appropriately be conducted in state court.”
Fulton, 2017 WL 783499, at *5. Because Fulton stated a TCPA claim over which the district
court had original jurisdiction, Fulton’s conversion claim also remains before the district court.

III. CONCLUSION

For the foregoing reasons, we REVERSE the judgment in favor of Defendants and
REMAND Fulton’s TCPA and conversion claims for further proceedings consistent with this
opinion.
 No. 17-1380 Fulton v. Enclarity, Inc. Page 11

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DISSENT
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JULIA SMITH GIBBONS, Circuit Judge, dissenting. I agree with the majority’s
analysis of Sandusky’s import and its assessment of the district court’s errors. But I disagree
with its legal conclusion that the fax at issue was an unsolicited advertisement under TCPA.

The majority holds that Fulton has plausibly alleged that the fax was an unsolicited
advertisement, because “it alleged that the fax served as a pretext to send Fulton additional
marketing materials.” (Majority at 2.) However, I respectfully disagree on this point. In its
complaint, Fulton alleges that if it updated its contact information as requested by the fax, it
would then have agreed to Enclarity’s privacy policy, which in turn would have allowed
Enclarity to send promotional material for other products and services. But, as Enclarity refutes,
this argument is highly speculative. There are no alleged facts suggesting that Enclarity would
have used, or even intended to use, this fax as a stepping stone to future solicitations of Fulton.
Moreover, as Enclarity points out, Fulton is able to manage any of its communications
preferences and opt out of receiving any future faxes from Enclarity. A conclusory allegation
stating that Enclarity sent this request for information as a pretext to advertise is not sufficient to
survive a motion to dismiss. See Ashcroft v. Iqbal, 556 U.S. 662 (2009) (stating that “a
complaint must contain sufficient factual matter,” and that it will not suffice “if it tenders ‘naked
assertion[s]’ devoid of ‘further factual enhancement’” (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 557 (2007))).

Thus, I believe the fax was not an advertisement under the TCPA because its primary
purpose was to improve the service and not to solicit business or sales from, or through, Fulton.
Accordingly, we should affirm the district court’s decision based on alternative reasoning.