I have handled
defense of alleged email “spamming” cases in both state and federal
courts. Recently, the United States
Court of Appeals for the Fourth Circuit rendered an important opinion in regard
to the reach of court’s jurisdiction in these cases: Unspam Technologies v. Chernuk.
In Unspam Technologies v. Chernuk, the
Fourth Circuit upheld the U.S. District Court for the Eastern District of
Virginia’s dismissal of foreign banks that were alleged to have profited from a
spamming conspiracy.
The plaintiffs
in this case were a company formed for the purpose of pursuing enforcement of
Internet laws, and an Arlington, Virginia resident who claimed that he himself
was the victim of a spam conspiracy. The two plaintiffs specifically were
seeking to redress a global cyber-crime conspiracy “to use popular credit card
processing systems (particularly the Visa network) to collect funds from the
sale of illegal counterfeit prescription drugs over the Internet to American
consumers.” They alleged that consumers in the U.S., such as the individual
plaintiff, responded to email advertisements for prescription drugs and paid
for the drugs with credit cards. The Internet “pharmacists” then presented the
credit card transactions to Internet Payment Service Providers, which in turn presented
them to foreign banks participating in the international Visa network. The
banks collected on the charges from the consumers’ accounts through the Visa
network, but ultimately, the pharmacists never filled the orders for the
prescription drugs or filled them with counterfeit drugs.
The plaintiffs
argued that the frequency and nature of such transactions supported their claim
as to the existence of a global conspiracy that violated U.S. and Virginia law.
Plaintiffs agreed to the dismissal of one of the pharmacist defendants, and
failed to properly serve the other. The only defendants remaining on appeal
were foreign banks alleged to be integral to the conspiracy in that they were “responsible
for the vast majority of this illegal business extending over a number of
years” because they processed the largest number of transactions submitted to
the Visa network by the fraudulent Internet pharmacists. The plaintiffs asserted
that these banks, although headquartered outside the United States, could be
sued in the United States for knowingly participating in a conspiracy that both
depended on critical resources within the United States and caused widespread
harm to American consumers. Plaintiffs further alleged that because the banks
were part of a global conspiracy, any single defendant’s constitutionally
sufficient contacts with Virginia would subject every coconspirator to personal
jurisdiction in Virginia.
To justify
personal jurisdiction over the foreign banks, the plaintiffs contended that the
Internet “pharmacists” deliberately transmitted spam emails over the Internet,
seeking to sell prescription drugs and aiming at email addresses that had been
“harvested” from web pages, including addresses of persons in Virginia, such as
the individual plaintiff. They argued that, based on this contact with
Virginia, the district court had jurisdiction over the pharmacists under Virginia’s
long arm statute and thus over the pharmacists’ coconspirators.
Plaintiffs
asserted that the court should apply a “conspiracy theory of personal
jurisdiction,” and thereby keep the foreign banks in the case. The court noted,
however, that conspiracy requires a “common plan,” and there were no
allegations that the banks’ processing of the transactions were designed to
achieve the illegal ends of the fraudulent pharmacists.
In cases involving
Internet activity, the Fourth Circuit previously adopted a three-part inquiry
to determine whether a defendant is subject to jurisdiction in a state because
of its electronic transmissions to that state. As set forth in a 2002 Fourth Circuit
decision, ALS Scan v. Digital Serv.
Consultants, 293 F.3d 707, the inquiry considers:
1) the extent to
which the defendant purposely availed itself of the privilege of conducting
activities in the state;
2) whether the
plaintiffs’ claims arise out of those activities directed at the state; and
3) whether the
exercise of personal jurisdiction would be constitutionally reasonable.
Plaintiffs
failed to show any sufficient connection between the foreign banks and Virginia.
Not one of the banks directed its business to Virginia or aimed its commercial
efforts at customers in Virginia, and there was no indication that any of the banks
acted in such a way as to subject itself to the sovereign power of a court in
Virginia. Finally, there was no evidence that any drug transactions involving
the plaintiffs were connected by intermediaries to these foreign banks. There
was no legal basis for the court to exercise jurisdiction over the foreign
banks and to do so would be unconstitutional.
