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$12M Penalty in Fax Case Will Stand

4 min read

The $12.5 million class-action judgment against a New Jersey man and his business will stand after the Arkansas Supreme Court decided last month not to review the case.

Eugene Kalsky, owner of Gen-Kal Pipe & Steel Corp. of Mount Laurel, New Jersey, had asked the state Supreme Court in March to review the case after the Arkansas Court of Appeals upheld the judgment from Pope County Circuit Court.

“The judgment at issue here is shocking,” Kalsky’s attorney Tim Cullen of Little Rock said in the petition to the state Supreme Court. “A crippling $12.5 million judgment has been entered against a small New Jersey business and its president, … as a result of a single fax advertisement sent to” M.S. Wholesale Plumbing Inc. of Russeville.

M.S. Wholesale accused Gen-Kal of failing to include a specific opt-out notice on fax advertisements in violation of the federal Telephone Consumer Protection Act. Kalsky, who didn’t hire a lawyer for the Circuit Court case, failed to answer a request for admission that asked him to admit to sending 25,000 faxes. Since Kalsky didn’t respond, it was assumed to be true. The fine for sending a fax that doesn’t meet TCPA guidelines is $500 per fax sent. That figure multiplied by 25,000 totals $12.5 million. (Kalsky later said in a podcast about the case that he had sent out more than 2,000 faxes to companies in Arkansas in 2015.)

SEE: Single Fax to Russellville Leads to $12.5M Judgment on New Jersey Pipe Company

Associate Justice Josephine Hart would have granted the review, according to the order denying the review.

Meanwhile, the state Court of Appeals has set no date for oral arguments in another multimillion-dollar judgment related to the TCPA. In that case, also filed by M.S. Wholesale, Westfax Inc. of Centennial, Colorado, is appealing a $21.13 million judgment by Pope County Circuit Court Judge Dennis Sutterfield.

M.S. Wholesale’s attorneys are James Streett of the Streett Law Firm in Russellville and Joe P. Leniski Jr. of Branstetter Stranch & Jennings of Nashville, Tennessee. In federal court in May, Streett, Leniski and attorney Ronald Marron of San Diego filed a lawsuit seeking class-action status for their client against Walmart Inc. The plaintiff alleged Walmart violated the TCPA by sending unsolicited text messages. Walmart hadn’t filed an answer as of Wednesday.

Streett told Arkansas Business last week that he doesn’t intend to make TCPA cases a major part of his practice. But he said his firm reviews all TCPA complaints, including those involving robocalls.

“I practice in a smaller community and people really get angry about this stuff,” he said.

Not all of the complaints his firm receives, however, result in a trip to the courthouse. “Even with ones that we pursue, a lot of times they can be resolved without ever filing a lawsuit.”

Streett said the collection efforts against Kalsky and his company are on hold while a suit Kalsky filed in New Jersey state court is pending. Kalsky asked the New Jersey court not to enforce the judgment.

“It’s obviously a constitutional question about how one state handles the other state’s decision-making,” Streett said.

Kalsky didn’t return a call for comment.

In April, Gen-Kal’s Chapter 11 bankruptcy reorganization, which was filed as a result of the judgment, was thrown out of U.S. Bankruptcy Court in New Jersey without the company’s debts being discharged.

“I find that this bankruptcy is proceeding in bad faith, and that the filing of the petition is in bad faith,” Judge Andrew Altenburg Jr. said, according to a transcript of a Feb. 14 bankruptcy proceeding.

He said Gen-Kal used the bankruptcy case “simply to stay enforcement of an Arkansas judgment.”

Altenburg said the only reason Gen-Kal filed for bankruptcy reorganization was because of the $12.5 million judgment. But when the company submitted a plan for reorganization, which Altenburg has to approve, it didn’t address the claim, showing “a complete lack of good faith on the debtor’s part.”

Gen-Kal and Kalsky were ordered to pay M.S. Wholesale $28,600 for failing to comply with a consent order for mediation with M.S. Wholesale in an attempt to negotiate a settlement.

Streett said that he thinks the judgments act as a deterrent to discourage companies from blasting faxes. A company can use “some low-budget software,” purchase a leads list from an offshore agency and hit send to distribute 1 million faxes, he said.

“It’s too easy to do without a deterrent,” Streett said. “And that’s certainly part of the goal and why we’re handling some of these.”

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