OCEAN CITY – A local man is fighting to save his beachfront home after a crushing legal award of $12.5 million in damages. He said it’s over sending a single fax to a company in Pope County, Ark.
Gene Kalsky was recently in Superior Court in Cape May County, trying to keep his house in the Gardens section of Ocean City from going up for a sheriff’s sale.
“It’s my year-round residence,” Kalsky said in a recent interview. “I saved my whole life for it. It’s on the beach in Ocean City. It’s probably worth $3 million.”
The matter came down to a 1990s law known as the Telephone Consumer Protection Act (TCPA). It was aimed primarily at keeping telemarketers from calling at dinnertime. The federal law allows for civil penalties for commercial calls or faxes made without the recipient’s permission.
Kalsky’s wholesale pipe and plumbing business, Gen-Kal Pipe and Steel Corp. in Mount Laurel, regularly sends faxes listing specials.
According to Kalsky, he’s followed the law; including reaching out to customers to make sure they still want his faxes. The faxes go through a computer program sent to current and previous customers as well as potential customers around the country. That used to include M.S. Wholesale Plumbing.
Kalsky said he’d sent faxes to that number for 10 years without a problem. That changed in 2015, when the company filed a lawsuit alleging a TCPA violation.
According to Kalsky, he wrote back saying he did nothing wrong. He didn’t have an attorney at the initial hearing. He didn’t travel more than 1,000 miles to Pope County, Ark. to answer the charges in person. That may end up being an incredibly expensive decision.
One Fax to 25,000
That single fax from Gen-Kal Pipe was brought into evidence in the Arkansas Third Circuit Court. There was a judgment of $500 for violating the TCPA, which states one may only send commercial faxes to those who have agreed to receive them and who have been given an opportunity to opt out.
Where the judgment reaches $12.5 million gets a little complicated. According to Kalsky, he initially sent a response to the suit out of Arkansas, denying that he did anything wrong. But he failed to respond to a request that he admit to sending at least 25,000 faxes to Arkansas residents.
The court took that as an admission that he had, indeed, sent at least that many faxes; $500 times 25,000 equals $12.5 million, a calculation confirmed in court papers.
Facing that kind of judgment, Gen-Kal filed for bankruptcy protection under Chapter 11. But the judgment also held him personally responsible. The plaintiffs went after his personal assets. The house is set for a sheriff’s sale July 25, to partially satisfy the judgement.
Kalsky’s attorneys have asked for that sale to be delayed while the appeal goes forward in Arkansas. Meanwhile, Kalsky has decided to appeal to the public.
“I don’t know where else to go. I’m fighting for my life here,” he said.
Arkansas, New Jersey, D.C. and Points Between
Russellville, Ark. is a small town on the banks of the Arkansas River about an hour’s drive west of Little Rock, where Route 40 runs along the river valley between the Ozark and Ouachita national forests.
It’s the county seat of Pope County, and the site of M.S. Wholesale Plumbing, the plaintiff in the case.
The owner declined to be interviewed for this story, forwarding questions to his attorney, James Streett.
Streett declined to comment as well.
“It is our practice to refrain from giving any statements regarding ongoing cases so as not to prejudice the rights of the parties or the judicial process,” he wrote in an emailed response.
However, he provided a transcript of a September 2017 hearing before Judge Ken D. Corker, the circuit judge who heard the matter. The transcript seems to bear out Kalsky’s versions of events.
There is a single fax from him in evidence, and a single litigant listed in a class action suit that proposes tens of thousands of other potential plaintiffs receiving similar faxes.
In October 2017, Corker denied a motion to set aside the $12.5 million judgement. In his denial, he stated that the defendant responded to the initial complaint, filed Dec. 31, 2015, and so knew of the matter.
But Kalsky did not appear at the hearing in Arkansas and did not reply to a motion for summary judgment.
The judge stated in his ruling that the motion to set aside the judgment was not filed until July 14 of last year, 190 days after the summary judgment ruling.
In Arkansas, that filing was supposed to take place within 90 days of the first judgment. Corker denied the request.
By this point, Kalsky had hired attorneys from the Sanford Law Firm in Little Rock, Ark. to represent him. At the September hearing, they argued that the plaintiff failed to demonstrate there really were 25,000 more faxes sent than the one put into evidence, beyond Kalsky’s failure to deny it.
They also questioned other legal aspects of the case. For instance, under Arkansas law, a corporation must be represented by an attorney in court.
According to the transcript, attorney Chris Burks is careful not to suggest that the court or Streett have done anything wrong.
He argued that the judgment rests on a false conclusion – that Kalsky’s company sent 25,000 faxes in violation of the TCPA. He also argues that because M.S. Plumbing was a Gen-Kal customer, even the one instance likely does not meet the standard for a violation.
In the 500-plus-page transcript, Burks praises Streett’s skill as a lawyer, while at one point, the judge criticized Kalsky for not hiring a lawyer in-state before the initial judgment. Burks tells the court that Gen-Kal’s accounts have been frozen.
“My clients had to lay off a bunch of people. They’ve seized all of his inventory and assets,” Burks told the court.
Kalsky also hired a New Jersey attorney to help keep his house off the auction block and a Washington, D.C.-based attorney Andrew Klein, who is seeking relief through the Federal Communications Commission.
In a filing in May to the FCC, Klein stated that neither Gen-Kal nor Kalsky as an individual responded to the complaint and described it as predatory litigation by a serial litigant.
“Through a series of truly disconcerting due process violations and conspicuous legal errors, the court in rural Pope County, Ark. imposed a baseless, crippling $12.5-million judgment against both Gen-Kal and Gene Kalsky, jointly and severally,” Klein wrote to FCC Secretary Marlene Dortch.
Cottage Industry in Lawsuits
Reporters for both Forbes and Fortune have recently written about the rise of TCPA lawsuits. Last year, Don Reisinger wrote in Fortune that even as the fax machine nears extinction, fax-related lawsuits have skyrocketed, propelled by the potential of big payouts.
Citing a Wall Street Journal report, he wrote that 44 lawsuits were filed in one year relating to spam faxes a decade ago, spiking to nearly 5,000 a year in 2016, with the trend indicating more growth to come.
“It’s the poster child for abusive class action litigation,” said Harold Kim, the executive vice president for the U.S. Chamber Institute for Legal Reform.
He did not want to comment on Kalsky’s case, but instead agreed to talk about the Telephone Consumer Protection Act in general terms.
Approved in 1991, the TCPA looked to tackle a problem, Kim said, the constant barrage of calls from telemarketers. It was an informed, bipartisan decision to address something that was a persistent nuisance for residents around the country.
“The problem is the statute has not been amended since the 1990s,” Kim said.
Those were still the days of phones on the kitchen wall, pagers and answering machines. The game-changing Nokia 6110 mobile phone was years away. The law doesn’t address texting because it just wasn’t a factor, yet courts are being asked to apply a law from decades ago to commercial texts.
Kim’s organization released a report last year describing TCPA lawsuits as quickly expanding, overburdening courts and impacting every industry.
A growth in class action suits means bigger and bigger awards, and bigger and bigger attorney fees.
In the report, the Institute for Legal Reform argued that the law should be reformed to go after fraudulent calls – think “Rachel from card member services” – rather than real companies trying to do legitimate business.
“I will tell you there are bad robo-callers out there,” Kim said.
Scammers and spammers use cloned numbers to call from offshore systems. Some actively seek to rip off the unwary with claims their lights will be shut off, or a grandson is in prison, or the IRS is on the way. They are not trying to sell wholesale plumbing supplies.
“They are purposefully invading the privacy of Americans. They’re not trying to legitimately make calls,” Kim said. His group proposes updating the law to address new technology, capping damage awards and reforming how class action lawsuits proceed, among other recommendations.
The most recent hearing was July 12 in front of Judge Christopher Gibson in Cape May County Superior Court.
In a recent interview, Kalsky was awaiting the judge’s decision on postponing the sheriff’s sale.
In Arkansas, Kalsky’s appeal won’t be heard until the end of the year, and as Klein pointed out, once the house is sold they won’t be able to get it back if the court rules in their favor.
Klein said he’s also appealing the enforcement of the Arkansas ruling in New Jersey, saying there’s no legal basis to enforce the judgment in this state.
Meanwhile, Kalsky is out money for attorney fees, his company is in Chapter 11, and he’s worried about his home, over what his attorney calls a frivolous legal action.
If they win on the Arkansas appeal, he said, there’s a possibility they can seek payback for the attorney fees from the plaintiff.
“We’re trying to see that justice is done. This has been a tremendous injustice,” Klein said.
To contact Bill Barlow, email firstname.lastname@example.org.