One Minnesota small-business owner is learning the hard way just how dangerous—and costly—it can be to break government rules.
Doug Walburg and his Mariposa Publishing legal directory business could end up paying $16 million to $48 million in lawsuit damages due to a faxed advertisement that one of the company’s sales staff sent to a Missouri attorney in 2007, according to a recent story in the Star Tribune of Minneapolis.
The St. Louis-area lawyer, Michael Nack, sued Walburg in federal court because the fax did not include an opt-out clause as required by Federal Communications Commission “junk-fax” rules. Nack’s lawyer, Max Margulis, discovered that Walburg’s business had sent nearly 33,000 such faxes without the clause.
The federal regulations stipulate that a business that breaks the rules faces damages of $500 per fax, or $1,500 if the lack of an opt-out clause was intentional.
A federal district court judge dismissed the case, but an appeals court reinstated it amid a brief from the FCC supportive of the lawsuit. Walburg has petitioned the United States Supreme Court to hear the case, according to RealClearPolicy.com. He will find out later this month whether the top court will hear it.
Walburg claims the regulation is draconian because it will force him to shut down his business, which generates $1 million a year in revenue, over a fax that it says Nack originally agreed to receive. Margulis, Nack’s lawyer, says Walburg needs to pay for wastefully consuming time on other businesses’ fax machines by not including an opt-out clause on his faxes.
Walburg’s case begs a question: Even though Mariposa broke the rules, should the penalties be so huge that they destroy his business?
The National Federation of Independent Business is holding up the case as the poster child for class-action lawsuits that have gotten out of control and harm businesses. It’s encouraging the Supreme Court to take up the case.
“This fits pretty high on the outrage meter,” Karen Harned, executive director of NFIB’s Small Business Legal Center, told the Star Tribune. “This is a harassment tool that puts you in the position of presumed guilty until you’ve shown your innocence.”
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