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A $4.2M mistake? Lawyer is liable for faxing 'mundane advice' to accountants, 7th Circuit says

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An Illinois lawyer who faxed newsletters to more than 200 accountants with “mundane advice” along with his specialties and contact information could be on the hook for millions of dollars in damages as a result of a federal appeals court ruling.

Lawyer Gregory Turza violated federal law banning unsolicited fax advertisements that contain no opt-out provision, according to the Chicago-based 7th U.S. Circuit Court of Appeals. The ABA/BNA Manual on Lawyers’ Professional Conduct has a summary of the Aug. 26 decision by Judge Frank Easterbrook, which contains a Superman reference and considers the irony of a marketing fax that turned into a costly mistake.

A lower court had ordered Turza to pay statutory damages of $500 for each of his 8,430 faxes, for a total of about $4.2 million. Easterbrook vacated the remedial order, however, because of issues surrounding money that is unclaimed by class members and the lower court’s decision to award any overage to the Legal Assistance Foundation of Chicago.

The faxes were prepared by a marketing firm and dispatched to accountants deemed potential clients by Turza. According to Easterbrook, “The faxes bear the masthead The ‘Daily Plan-It,’ but they were not produced by Perry White’s editorial staff and came every other week rather than daily.” The dispatches “produced more business—but not for Turza,” Easterbrook said.

On appeal, Turza contended that the faxes were not advertisements since only about 25 percent of the content alerted clients to the availability of his services, and it was incidental to the business advice. The 7th Circuit disagreed.

“That 75 percent of the page is not an ad does not detract from the fact that the fax contains an advertisement,” the court said. “The plug for Turza’s services was not incidental to a message that would have been sent anyway; promotion or marketing was the reason these faxes were transmitted.”

The appeals court vacated the $4.2 million remedial order, however, citing questions about distribution of the award and the court’s failure to solicit argument from litigants. “Turza has not ponied up the fund and may be unable to do so,” Easterbrook wrote, and so it is premature to decide how to distribute any unclaimed money.

Turza should be required to pay damages to a court registry or third-party administrator, the court said, and if there is money left over, the court should reconsider how the money will be applied. The appeals court said unclaimed money should be used for the benefit of the class, to the extent that it is feasible, and said the Legal Assistance Foundation does not benefit accountants. “The Foundation is a worthy organization,” Easterbrook said, “but many courts have expressed skepticism about using the residue of class actions to make contributions to judges’ favorite charities.”