Faxed Ads Cost Hooters $12 Million

After his one-man office had been faxed a series of advertisements for a Hooters restaurant, Georgia attorney Sam G. Nicholson was not hungry. He was annoyed.

Then Nicholson came upon an article in Lawyer's Weekly about an obscure federal law that prohibits sending advertising by fax without permission. Soon he was spearheading a class-action lawsuit against Hooters of Augusta, the restaurant being advertised.

The lawsuit was filed in 1995, but took six years to come before a jury. On March 21, the Augusta jury returned the verdict: that the restaurant had "willfully or knowingly" faxed unsolicited advertisements and should pay damages up to $11.9 million.

In April, the judge in the case awarded the full amount to Nicholson and the 1,320 other plaintiffs, who claimed to have received six faxes each.

Triple Damages Awarded

Following the terms of the "junk fax" provision in the Telephone Consumer Protection Act of 1991, the judge awarded $500 per violation, then tripled the total on grounds that it was a flagrant violation. The provision requires advertisers to get prior consent before faxing an ad.

After lawyers' fees, each plaintiff will receive around $6,000. As the class representative, Nicholson will get $15,000. The lawyers will get $4 million for their services.

Hooters Appeals

The restaurant is owned by Hooters of America, a national chain based in Atlanta that is known for its busty waitresses in orange shorts.

Hooters has appealed the award, which observers believe is the largest ever under the federal junk fax provision. The judgment has prompted Hooters of Augusta to file for bankruptcy.

"This is not a legitimate consumer protection case," Hooters officials said in a statement to Good Morning America. "Congress never intended that a lawyer representing a single plaintiff could use this statute to recover on behalf of a thousand or more people who have never raised any complaint to drive a local business into bankruptcy and obtain a $4 million fee."

Fax Also Advertised Other Businesses

The suit originally named both Hooters and Value-Fax of Augusta, the now-defunct faxing company hired by Hooters. Under federal law, the advertiser is the culpable party.

Nicholson told Good Morning America he tried to get in touch with Value-Fax, but was unable to. "It may have stopped it from coming to me, but it wouldn't have stopped them from sending it to 1,300 or 1,500 other people just in the Augusta area."

There were other local businesses that were advertised on the same fax as the Hooters ads, but Nicholson said he felt that those small businesses might not have known it was illegal, while Hooters should have known.

The case has gained attention from lawyers, marketing executives and consumer advocates nationwide, who view it as a growing effort to curtail many types of advertising, including telemarketing and mass e-mail advertising.