Business Litigation - New Case on CAN-SPAM's Preemption of State Anti-Spam Law Claims

Another case in the burgeoning case law in regard to CAN-SPAM’s preemption of state law claims for alleged spamming activity has been decided. In Kleffman v. Vonage Holdings Corp., decided on May 23, 2007 by the United States District Court for the Central District of California, the Court held that a plaintiff’s claims that he received 11 emails advertising Vonage’s telephone service in violation of the California Business and Professions Code Section 17529.5 were preempted by CAN-SPAM.

Specifically, the Court held that Kleffman’s claims were “clearly preempted” because “He does not allege a traditional tort theory at all, or even that he was at any point misle[d] by any of the eleven Vonage emails.”

The decision is based on reasoning similar to that set forth in the case of Omega World Travel v. Mummagraphics see earlier post here a 2006 decision by the United States Court of Appeals for the Fourth Circuit (which is the Federal Appeals Court for, inter alia, Maryland and Virginia). Even though the Kleffman Court’s opinion relied on the same underlying authorities as the Mummagraphics opinion, the Court distinguished Mummagraphics and seemed to try and limit its holding. The Kleffman case is now on appeal to the United States Court of Appeals for the Ninth Circuit. A copy of the Court’s opinion will be made available soon.

Interesting Defense Issues Under the Maryland Anti-Spam Act - MCEMA - the Impropriety of Suing "John Doe" Defendants

Another issue that is being litigated in cases under Maryland’s Anti-Spam Act, MCEMA, is whether a plaintiff in such cases can sue “John Doe” defendants, or other place-holder defendants. Plaintiffs in these cases often claim that they do not know the true identity of the party responsible for the email and sue unknown defendants as “John Doe” or “Bulk E-mailers 1-600.”

Attempts to sue unknown defendants under the name “John Doe” is not permitted under Maryland law. The Court of Special Appeals in Nam v. Montgomery County, 127 Md. App. 172 (1999), held that:

Pleadings against fictitious persons are often called “John Doe” pleadings. There is generally no authority to proceed against a fictitious party in the absence of statute or rule. 59 Am.Jur.2d Parties § 16 (1987, 1998 Cumm. Supp.) While some states by statute or rule authorize John Doe pleadings and then the subsequent substitution of the person's true name when discovered, Maryland is not one of them. Although Maryland does not recognize “John Doe” pleadings directly, we do permit liberal amendment of pleadings to add a party or correct the misnomer of a party.

Because it is impermissible to bring actions against fictitious persons in Maryland, doing so does not preserve the statute of limitations (the deadline to commence a lawsuit) against any unknown defendants. Moreover, the doctrine of “relation back” does not act to preserve claims against unknown defendants. In Locklear v. Bergman & Beving AB, 457 F.3d 363 (4th Cir. 2006), the Fourth Circuit affirmed the District Court’s dismissal of an amended complaint on limitations grounds. The Fourth Circuit held:

Although Rule 15(c)(3)(B) speaks broadly of a “mistake concerning the identity of the proper party,” we have, in analyzing the scope of this rule, distinguished between mistake due to a lack of knowledge and mistake due to a misnomer. In so doing, we have not viewed lack of knowledge of the proper party to be sued as a “mistake” as that term is used in Rule 15(c)(3)(B). In the principal case on point, Western Contracting Corp. v. Bechtel Corp,we adopted the Seventh Circuit's holding that Rule 15(c)(2) permits an amendment to relate back where that party is chargeable with knowledge of the mistake, but it does not permit relation back where, as here, there is a lack of knowledge of the proper party. 885 F.2d 1196, 1201 (4th Cir.1989)(quoting Wood v. Worachek,618 F.2d 1225, 1230 (7th Cir.1980)) (internal citations omitted).

We have also noted that “Rule 15 has its limits, and courts properly exercise caution when reviewing an application of the rule which would increase a defendant's exposure to liability.” Intown Properties Management, Inc. v. Wheaton Van Lines, Inc., 271 F.3d 164, 170 (4th Cir.2001); see also Rennie v. Omniflight Helicopters, Inc., No. 97-1524, 1998 WL 743678 4th Cir. Oct.23, 1998). Rule 15, moreover, must be applied especially cautiously when an amendment that “drags a new defendant into a case” is proposed. Intown Properties, 271 F.3d at 170.

Under the reasoning in Locklear, the fact that a plaintiff in an MCEMA case or any other case previously sued “John Doe” in its original Complaint does not toll the statute of limitations against previously unknown defendants. As a result, anytime you are faced with defending a case where “John Doe” is sued, it would be appropriate to move to dismiss claims against all such fictitious defendants.

Interesting Defense Issues Under the Maryland Anti-Spam Statute - MCEMA - Excessive Statutory Damages

Another interesting legal issue yet to be decided under the Maryland Anti-Spam Act, MCEMA, is whether the statute’s damages provision is enforceable in light of the “due process” clause of the Fourteenth Amendment to the United States Constitution. The due process clause of the Fourteenth Amendment provides that: “Nor shall any State deprive any person of life, liberty, or property, without due process of law.”

MCEMA Section 14-3003, fixes statutory damages at $1,000.00 per electronic mail received by an interactive service provider, and $500.00 per electronic mail received by an ordinary recipient. Maryland law recognizes “that a defendant also enjoys an additional constitutional right, under the Due Process Clause of the Fourteenth Amendment, not to be subjected to an excessive punitive damages award.” Darcars Motors of Silver Spring, Inc. v. Borzym, 818 Md.App. 1159, 1186 (2003), citing, inter alia, BMW of North America v. Gore, 517 U.S. 559, 116 S.Ct. 1589 (1996).

The United States Supreme Court in the BMW v. Gore case held that the “guide posts” for considering the constitutionality of punitive damages under the 14th Amendment include an assessment of “(1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the award imposed in comparable cases.” Considering those “guide-posts” in some cases under MCEMA, the “degree of reprehensibility,” is fairly benign. Plaintiffs often contend that a defendant merely assisted in the transmission of unsolicited electronic mail – not particularly outrageous conduct warranting extremely harsh punishment. Reviewing the “disparity of actual harm when compared to the potential punitive damage award” as required by Gore shows a complete lack of relationship between actual harm and the punitive award. That is, MCEMA does not require any showing of actual harm suffered by anyone.

The Gore “comparable cases” component is instructive in showing how outrageously excessive the damages award can be in cases under MCEMA. Under Maryland Code Annotated Criminal Law Section 3-805.1(e)(2), the Attorney General is allowed to bring a civil action in cases of unsolicited commercial electronic mail and can claim only between $2.00 and $8.00 per electronic mail received by the “victim” of such electronic mail. Even under CAN-SPAM which, as shown in the preceding post has been held to preempt state statutes similar to MCEMA, the damages allowed are far more limited than the damages authorized under the Maryland Act. Under CAN-SPAM, 15 U.S.C. §7706(g), if an “Internet access service” brings a civil action, it may seek only actual damages, or $250.00 per e-mail that has false or misleading header or “from” line information, and $25.00 per e-mail that otherwise violates that Act (including e-mail that has a misleading “subject” line). The Act then allows for “aggravated” damages (of up to three (3) times the statutory damages ($750.00 or $75.00) depending on the character of the e-mail), and for the reduction of damages under certain circumstances.

Remarkably, under well settled Maryland law, a victim of an accident caused by a drunk driver cannot obtain punitive damages without proof of the specific intent to injure the particular individual who is injured. See, e.g. Owens-Illinois, Inc. v. Zenobia, 325 Md. 420, 450-463, 601 A.2d 633, 647-654 (1992) (overruling a long line of cases which, in certain ill-defined types of tort actions, permitted the recovery of punitive damages on an "implied malice" basis). Under MCEMA, however, an entity that provides assistance in the transmission of electronic mail, whether or not it has actual knowledge of the electronic mail or its destination in Maryland, is exposed to being hauled into Court in Maryland to face severe punitive damages whether or not there are actual damages suffered by anyone.

Because MCEMA may subject out-of-state persons and entities to these damages, without any requirement that those persons knew they were sending mail into Maryland or even any requirement of actual damages, MCEMA defendants should argue that MCEMA violates the due process clause of the 14th Amendment, rendering its enforcement unconstitutional.